The spark came from Lenskart’s IPO, one of India’s most anticipated listings of 2025. The eyewear retailer, backed by marquee investors such as KKR and Temasek, is seeking a valuation of around Rs 70,000 crore at the upper price band of Rs 402 per share, which translates to 235 times its FY25 earnings. Groww, albeit not much in the limelight, is asking for Rs 60,000 crore, a 35x multiple of its FY25 earnings. Together, the two companies are seeking a market value of Rs 1.3 lakh crore.
On social media, investors and market veterans have been debating whether such lofty valuations are justified — or if India’s startup IPOs are crossing the line.
Eyebrows were also raised over Lenskart’s FY25 profit surge — from a Rs 10 crore loss to Rs 297 crore profit — was not entirely driven by its operations. A significant portion, about Rs 167 crore, came from an accounting revaluation gain related to its 2022 acquisition of the Japanese eyewear chain Owndays.
After removing this one-time gain, analysts estimate Lenskart’s real profit for FY25 at around Rs 130 crore, implying a modest 1.9% net margin — a far cry from the headline number.
Can Sebi do anything?
Many investors would like to know if Sebi can act as a rational actor for these overpriced IPOs. However, legal experts and analysts say the regulator’s hands are tied.Shruti Jain, Chief Strategy Officer at Arihant Capital Markets, explains that Sebi’s role is limited to ensuring disclosure and transparency, not determining valuations.Before the 1990s, India’s capital markets operated under what was called a “price-control” or “merit-based” regime, led by the Controller of Capital Issues (CCI). Under this system, companies could not freely decide the price or timing of their public issues. Every IPO — including the price, size, and timing — had to be approved by the CCI, which decided what was a “fair” valuation.
The idea was to protect investors from overpricing, but in practice it often slowed down fundraising, stifled innovation, and kept companies dependent on bureaucratic approvals.
Indian markets then moved to a disclosure-based regime, where the regulator’s job does not approve or decide IPO pricing. Instead, its job is to ensure companies make full and fair disclosures — about their business, risks, financials, and related-party transactions — so that investors can make informed choices.
“If the accounting adjustments are within Indian Accounting Standards, are disclosed properly in the financials, and are supported by auditors and merchant bankers, Sebi cannot interfere,” Jain said.
Sandeep Parekh, a veteran securities lawyer, told ETMarkets that a disclosure-based regime works better in the long run, because it allows the market forces to decide the pricing and not the other way around.
Valuation could be subjective
Sumit Agrawal, Senior Partner at Regstreet Law Advisors and a former Sebi officer says valuation is inherently subjective.
A valuation outcome is based on different metrics considered while evaluating a company. For instance, a merchant banker might assign a price for the company based on assets, while the other might consider past or future earnings and it can also be the case that there are other factors involved like future growth trajectory, liquidity in the market, etc.
Parekh in one of his earlier public statements noted that valuation of companies is neither a scientific constant nor is it easily calculable. “A company’s valuation is dependent upon internal and external forces at play. Internal factors include the past performance of the company and the expected performance in the future (which are just wild estimates as no human being has yet seen the future),” he had said.
Considering this, Agarwal notes that Sebi still has a role to play. “If there is a misstatement or omission, Sebi can take action against promoters and merchant bankers. But if everything is properly disclosed, the market decides the price.” In simple terms Sebi can ensure honesty in disclosures, not fairness in valuations.
Investors also need to play their part
Market experts say the bigger issue lies not with regulators, but with investors chasing hype. Many retail investors rarely read IPO prospectuses or financial statements, instead, they rely on grey market premiums (GMPs) or social media chatter.
“Most people buy IPOs based on GMP and headlines,” said Jain. “They don’t check what’s actually driving profits or margins.”
The market’s balancing act
Institutional investors, too, are treading carefully. Mutual funds and global funds that invested in Lenskart’s anchor round faced criticism online for backing a company perceived as overvalued.
In an unusual move, DSP Mutual Fund released a public statement to clarify its investment rationale. “We invest when we have conviction across four dimensions — a scalable business, trustworthy promoters, strong execution, and valuations,” DSP said.
That comment captures the sentiment across the market — the business could be decent, but the pricing is steep. The challenge for investors is separating hype from fundamentals — especially in an era where India’s startup IPOs are marketed as growth stories.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)