Can online eyewear retailer Lenskart meet its IPO goal in the next 3 years?
RoC data reveals that Lenskart suffered a loss in 2015-16. However, founder Peyush Bansal is eyeing Rs 600 crore business in 2017-18 and has announced plans for an IPO.
Last month, eyewear retailer Lenskart Founder Peyush Bansal announced plans to launch an IPO. He said Lenskart would launch an IPO in three years and is eyeing Rs 600 crore business in 2017-18. Curious to know how he would achieve it, I asked Peyush, “Why do you think Lenskart will go the IPO way in the coming three years and in which markets?”
“The market for IPO can only be India since our business caters to Indian consumers. In terms of deliberation on IPO, you can only predict these things. As long as there is a vision and a path, and we have enough clarity on what we want to do, there is assurance that the business will move in a certain way and be ready for the next leap.”
He added that Lenskart is creating value for consumers and is becoming the most preferred choice of eyewear for consumers across the country. He believes in three years the firm will have the right top line and bottom line to be able to do that.
Let’s start at the beginning
Peyush says Lenskart, which he founded in 2010, has never been in the difficult situation of cutting costs in business operations. They have always been economical in their spends. However, brand building, infrastructure, facilities and technology upgradation consumed a significant portion of the company’s overall budget.
“For us, it is about continuing to grow faster and gaining more and more market share by delivering outstanding consumer experience, in terms of service and products,” Peyush says.
Barely a year after its launch, the company raised $4 million from IDG Ventures in 2011. Subsequently, multiple marque investors made a beeline to betting high on the growth of Lenskart. Ronnie Screwvala-led Unilazer Ventures put in $10 million in February 2013, followed by several rounds of funds — $22 million in January 2015 from TPG Growth and TR Capital, Rs 400 crore in a Series D round from World Bank arm IFC, Ratan Tata and Infosys co-founder Kris Gopalakrisnan in May 2016. Existing investors TPG Growth and IDG Ventures also participated in a Series D round. Premji Invest put in Rs 200 crore in September 2016.
However, RoC data reveals that the total revenue of Lenskart in 2015-16 was Rs 143.2 crore and expenses were 152.7 crore, which means the company suffered a loss of Rs 9.5 crore. It’s wait and watch for all stakeholders until the IPO takes place.
Why venture into offline?
It was in 2014 that the online retailer took a step towards building an offline presence, given the increasing number of requests from consumers who still prefer trying products before buying.
The team believes that if Lenskart has to be synonymous with eyewear in India 50 percent of Indian consumers who wear spectacles should buy them from Lenskart. That requires a strong omni-channel presence, which is what led to the shift.
Lenskart currently receives 300,000 orders, both offline and online monthly.
According to India Brand Equity Foundation, India’s retail market is expected to grow at a CAGR of 10 percent to $1.6 trillion by 2026 from $641 billion in 2016. India's e-commerce market is expected to reach $220 billion in terms of gross merchandise value (GMV) and 530 million shoppers by 2025, which means the rest of the market will still be offline.
Even in the best case scenario, as people buy online, there will be a significant set of people who will buy at the stores. To be relevant and accessible, physical stores are needed. Lenskart also offers disruptive services like Free Home Eye check-up, 3D Try On, Free Home Trial and First Frame Free, among others.
Lenskart currently has 320 stores in about 90 cities, which include tier-1 and tier-2 cities. The stores are usually franchise stores; the franchisee spends close to Rs 20 lakh on each store as an initial investment and recovers the cost within two years. Before getting into a franchise deal, the firm does due diligence, checking educational background, interest, passion for consumers, receptiveness, etc.
Creating value proposition for the brand constantly is always conducive to growth. Lenskart in 2015 entered the premium segment with private label John Jacobs. Owned by Peyush Bansal along with Usha Singhal and Neetu Mittal, DealsKart Online Services, a franchise of Lenskart, runs and operates the stores of John Jacobs.
As reported by LiveMint in January this year, standalone brand John Jacobs targets 25-35-year-olds, selling them eyewear at an average price of Rs 4,000.
On the make-in-India path
Lenskart does not follow a marketplace model but manufactures products. The manufacturing facility is located in Delhi and the firm spends almost Rs 50-60 crore a year on research and development. About Rs 50 crore is earmarked for technology upgradation. As many as 400 people are employed at the plant. Raw material comes from India, Italy, Switzerland, China, Korea and Thailand, but all manufacturing is done in India.
According to Lenskart, the biggest investment so far is on the online mobile platform which has 3D capability. Their newly launched Lenskart Lite app has been built specifically for the bandwidth-strapped Indian consumer. The patented technology, 3D Try, enables online trials of eyewear on the Lenskart website and app.
The products range of Lenskart starts at around Rs 1,000 and goes up to Rs 20,000. The demography of the users is from 17 to 40 years.
Lenskart has a total of 1,000 employees and performs about 30,000 eye check-ups every month. Next year, Lenskart plans to open another 150 stores in pre-existing cities.
The change in the eyewear market
The Indian online eyewear market has witnessed a technological shift over the past few years, driven by the changing buying behavior of the consumers, increasing penetration of smartphones and the transition of eyewear manufacturers from unorganised to organised.
Some of the other major Indian eyewear brands include Kolkata-based GKB Opticals and Bengaluru-based Ben Franklin Opticians. Others on the market include Lenstrade, Lensdirect, Four Eyes Club, Glassic and Gorgeye.
Like other sectors, which have been shaken up by technology, the eyewear industry too is seeing a new wave of efforts to take on traditional giants in the business. Lenskart is hoping to ride that wave.