Veteran investor Shankar Sharma has stirred the pot in the ongoing debate surrounding Lenskart's valuation, defending the eyewear retailer's Rs 70,000 crore price tag ahead of its Initial Public Offering (IPO). Sharma's comments come amidst growing concerns over the company's high valuation multiples and skepticism from some market watchers.

Valuation Debate

Sharma, an early investor in tech giants Amazon and Apple, has labeled Lenskart's valuation a 'steal' compared to other recent high-profile IPOs. He argues that the company's valuation is favorable when juxtaposed with the debuts of other tech-based firms:

Despite Sharma's defense, market concerns persist regarding Lenskart's valuation metrics:

• Price-to-sales multiple: Exceeding 10x
• Price-to-earnings ratio: Approximately 230x

Market Reactions

The valuation debate has elicited varied responses from different market participants:

1. Organized Campaign: Sharma alleges an 'organised campaign' against Lenskart, suggesting coordinated efforts to criticize the company's valuation.

2. Management Response: Some market watchers have expressed dissatisfaction with how Lenskart's management has addressed valuation concerns.

3. Critic's Perspective: Quant Mutual Fund's Sandeep Tandon recently described the ongoing IPO activity, particularly referring to steep valuations, as 'stupidity'.

Investor Insights

Shankar Sharma, while vocal in his defense of Lenskart's valuation, has clarified that he does not own shares in the company. This disclosure adds an interesting dimension to the debate, as it suggests his stance is not influenced by personal financial interests in Lenskart.

The contrasting viewpoints surrounding Lenskart's valuation highlight the complex nature of IPO pricing in the current market environment, especially for tech-enabled businesses. As the IPO approaches, investors and market observers will be closely watching how this valuation debate unfolds and impacts the offering's reception in the market.

Sandeep Tandon, founder and CIO of Quant Mutual Fund, has voiced strong criticism against the high valuations being assigned to Initial Public Offerings (IPOs) in India. His concerns particularly focus on the upcoming IPO of Lenskart, a popular eyewear retailer.

Overvaluation Concerns

Tandon questioned the rationale behind Indian investors paying valuations that wouldn't be acceptable in U.S. markets. He pointed out a worrying trend:

• 60% of newly listed stocks in the past year are trading below their IPO prices
• IPOs are described as 'very expensive' with limited exit options
• Inexperienced retail investors are entering the market without understanding market cycles

Factors Driving High Valuations

Tandon attributes the inflated valuations to favorable demand-supply dynamics in the Indian market. These conditions are creating an environment where:

• Early investors may be tempted to exit
• Top talent might be incentivized to leave companies

International Interest

The willingness of the Indian market to pay premium valuations has not gone unnoticed internationally. Tandon cited Korea's interest in listing companies in India as evidence of this trend.

Implications for Investors

The criticism from a respected figure like Sandeep Tandon serves as a cautionary note for investors, especially those considering participation in upcoming IPOs. It underscores the importance of:

1. Careful evaluation of IPO valuations
2. Understanding market cycles
3. Considering the long-term prospects of newly listed companies

As the Indian IPO market continues to attract attention, both domestic and international, investors would do well to heed these warnings and approach new offerings with a discerning eye.