At first glance, it seems Lenskart has turned the corner from a loss-making startup to a profitable consumer-tech brand. But a closer look at its financial statements shows that part of this profit jump didn’t come from selling more eyewear or expanding stores — it stemmed from an accounting adjustment linked to its 2022 acquisition of the Japanese eyewear chain Owndays Inc.
The accounting twist behind the profit surge
The company’s books show a Rs 167 crore “FVTPL gain” related to the revaluation of deferred payments from the Owndays acquisition.
Simply put, FVTPL (Fair Value Through Profit or Loss) is an accounting rule that requires companies to periodically revalue certain assets or liabilities at their current market value. If the value of a liability falls, it gets recorded as a profit — even though no cash actually changes hands.
Analysts said when the expected payment linked to the Owndays deal was revalued lower, the difference appeared as a gain, inflating FY25 profits. It’s a one-time, non-cash boost that flatters the bottom line.
“After adjusting for the one-time gain, the true profit is closer to Rs 130 crore for FY25, which implies a net margin of just 1.9% — far below what the headline figure suggests,” said Abhinav Tiwari, Research Analyst at Bonanza Portfolio.This makes the price-to-earnings (P/E) multiple shoot up to nearly 535 times normalized earnings at the upper price band of Rs 402 per share — leaving significant room for caution, Tiwari added, implying that much of the optimism is already priced in.“Investors are essentially being asked to pay premium tech valuations for a retail business with single-digit margins,” he said.
Beyond valuation concerns, other risks remain. Promoters are selling Rs 1,100 crore worth of shares through the offer for sale (OFS), indicating limited near-term confidence and an attempt to monetize holdings at elevated valuations.
That said, Lenskart’s core business remains solid. The company operates over 2,500 stores, enjoys 70% gross margins, and runs one of India’s most efficient omni-channel retail networks, integrating online ordering with offline fitting.
However, the shift from strong sales to thin profits suggests costs and scale efficiencies are still catching up. In the June 2025 quarter, Lenskart reported a profit of Rs 61 crore on revenue of Rs 1,940 crore, aided by a smaller Rs 5.5 crore accounting gain. Adjusted for that, its real profit margin stood just under 3%.
“While this shows incremental operational improvement, profitability remains thin relative to the company’s premium IPO valuation,” Tiwari said.
Abhishek Jain of Arihant Capital believes the long-term story remains intact as India’s eyewear market is expected to triple by 2032, driven by rising screen time and fashion-conscious consumers.
“The company has built a brand moat, but the IPO valuations already capture much of this optimism,” he added.
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)
