Why mutual funds are backing Lenskart’s ₹70,000 crore IPO despite steep valuation

The IPO, which opened on 31 October and closes on 4 November, comprises a fresh issue of ₹2,150 crore and an offer-for-sale of ₹5,128 crore. Lenskart raised ₹3,268 crore from 147 anchor investors ahead of the offer, including foreign institutions such as the Government of Singapore, T Rowe Price, BlackRock, Fidelity, Goldman Sachs, JP Morgan, Nomura and Norway’s Government Pension Fund Global.

Domestic participants included SBI Mutual Fund, HDFC Mutual Fund, Axis Mutual Fund, ICICI Prudential Mutual Fund and HDFC Pension Fund.

Lenskart reported revenue of ₹6,652.5 crore in FY25, up sharply from the previous fiscal year, swinging to a net profit of ₹295.6 crore from a net loss in FY24. Ebitda came in at ₹971.1 crore, with a margin of 14.7%.

What fund managers say

In a note, DSP Mutual Fund explained its rationale for participating in Lenskart’s anchor book. “We have always been selective in participating in IPOs—and that discipline will remain unchanged. Having said this, we invest when we have conviction across four dimensions: strong and scalable business, trustworthy promoters, demonstrated execution, valuations,” DSP MF’s note said.

“It is rare to find all four perfectly aligned at the same time. In the case of Lenskart, we like the first three very much. On valuations, we believe businesses associated with retail, e-commerce are trading expensive, including this specific business. Further, we do not usually take cash calls in most of our funds,” the note said.

“In this specific case, we have trimmed a slower-growing, similarly-expensive position to make room for this investment. When valuations are stretched, we size our positions responsibly. In short: there is nothing new in our approach while evaluating Lenskart,” it added.

Several domestic mutual funds have participated in the anchor book, alongside alternate investment funds.

Another fund manager at an alternate investment fund (AIF), requesting anonymity, said, “The business model is solid. The unit economics are strong—the company is making good Ebitda (earnings before interest, taxes, depreciation and amortization) and generating profits that will eventually percolate down to the bottom-line. As the business scales further, profitability will only improve. It’s not easy to recreate this business model. There is both scale and size—effectively creating a franchise.”

“If you look at history in the US markets, expensive businesses doesn’t necessarily mean they can’t generate value for the investors. Think of Tesla—back in 2020, it was trading at 100x earnings, and even from there, it went up 10x,” the AIF fund manager said.

He added that valuations and price-to-earnings multiple may not be the only metrics. “When a business has genuine growth and a strong model, valuations can get justified over time. On a forward-looking EV/Ebitda-basis, the business is being valued at 70-times, which is comparable to some of the other new-age listed consumer companies,” he pointed out.

The AIF participated in the Lenskart anchor book.

EV/Ebitda (Enterprise Value to Ebitda) measures how expensive or cheap a company is relative to its operating profits. It’s used because it captures the firm’s total value—including debt—and compares it to core earnings.

Among India’s new-age consumer-tech peers, FSN E-Commerce Ventures (Nykaa) offers a telling comparison: after sharp volatility following its 2021 listing, the stock now trades about 35% above its adjusted IPO price and commands a one-year forward EV/Ebitda of 70–80x, or over 800 times its trailing FY25 earnings.

However, another mutual fund manager, requesting anonymity, said that execution of the business strategy would be critical to how much value the company is able to generate over the long term.

“The business has a large TAM (total addressable market). There is no challenge of creating a new market as a large market is already existing. It is a classic story of taking market share from unorganized players; using your financial power to sustain the earnings pressure to gain market share,” the second fund manager said.

A pension fund manager who didn’t want to quoted explained that diversification, growth potential and management are some of the things from a long term standpoint that are important while picking up a company to invest in.

The depth of institutional participation—both foreign and domestic—suggests fund managers see Lenskart not merely as an eyewear retailer but as a scalable consumer-tech franchise. The company’s profitability turnaround and proven execution record are being weighed more heavily than near-term valuation multiples, a sign of confidence in its long-term growth story.

What investment advisors say

Not everyone believes investors should read too much into fund houses’ enthusiasm. “Investors should not just get swayed by their fund’s decision to invest in Lenskart, but how much portion of the portfolio has been invested is what needs to be looked at. Usually, fund houses take smaller bets in IPO, just to get participation,” said Shyam Shekhar, founder of Chennai-based wealth management firm ithought Financial Consulting.

“Investors should not exit or enter a fund just because of a single stock buying or selling decision. Firstly, investors should acknowledge that the reason they have opted for a mutual fund is because they don’t have the required skill-set to analyse stocks and take buy and sell decisions. Once that decision-making has been delegated to the fund manager, investors should avoid analysing the fund manager’s stock decisions. Instead, they should track their fund’s overall returns, which is driven by the cumulative portfolio. Fund managers don’t just buy a stock for short-term gains, but often take decisions basis a long-term view,” explained Vishal Dhawan, founder of Plan Ahead Wealth Advisors.

Don’t take the decision to exit your fund just because it has invested in Lenskart. Check whether it is a small or large exposure of the fund. You can assess this by seeing the fund’s investments in the anchor book and the fund’s overall assets under management (available in the fund’s factsheet) to make an informed guess.

With inputs from Deepti Bhaskaran