In FY25, Lenskart reported a web revenue of Rs 297 crore on income of Rs 6,652 crore. On paper, that’s a turnaround story. Nevertheless, the reported revenue features a one-time achieve of Rs 167 crore linked to its acquisition of Owndays, a Singapore-based eyewear retailer.
After adjusting for this distinctive merchandise, the normalized revenue stands nearer to Rs 130 crore, translating to a modest web margin of simply 1.96%, in comparison with the reported 4.24%. In Q1FY26, Lenskart posted a revenue of Rs 55.6 crore on income of Rs 1,940 crore, with a margin of two.8%, barely higher, however nonetheless skinny for a corporation valued at tens of 1000’s of crores.
The difficulty shouldn’t be confined to Lenskart. City Firm, one other consumer-tech startup, reported a Rs 7 crore revenue within the quarter earlier than its IPO submitting, after years of losses. However in its first earnings after itemizing, it swung again to a Rs 59 crore loss.
Equally, Pine Labs, a fintech participant, has been narrowing losses through the years, from Rs 341.9 crore in FY24 to Rs 145.5 crore in FY25, however its revenue of Rs 4.8 crore in Q1 FY26 got here after a number of quarters of volatility. Analysts say these numbers could not but replicate a totally secure enterprise mannequin.
Nitin Jain, Senior Analysis Analyst at Bonanza, famous that, for Groww, quarterly revenue development typically hides changes. “Headline revenue is flattered by one-offs like reversal of incentive payouts. Once you strip these out, underlying revenue really declined by round 25% within the newest quarter.”Analysts say the problem shouldn’t be about legality, however sustainability.In line with Shruti Jain, Chief Technique Officer at Arihant Capital Markets, it’s common for startups to “flip worthwhile” simply earlier than an IPO, typically by means of accounting changes or timing of sure bills.
“It has change into a standard follow for start-ups to indicate profitability proper earlier than the IPO. Nevertheless, if the accounting changes are inside Indian requirements, correctly disclosed, and backed by auditors and service provider bankers, Sebi’s arms are restricted,” Jain stated.
She added that disclosure and transparency stay the authorized requirements, not whether or not the revenue itself is sustainable. “It’s as much as traders to learn the monetary statements rigorously. The issue is, most retail traders depend on gray market premium (GMP) and market frenzy, quite than understanding what triggered the sudden turnaround.”
Accounting income might be regarding
Vinit Bolinjkar, Head of Analysis at Ventura Securities, believes this sample of last-minute income is turning into widespread and dangerous. “The pattern of Indian digital startups exhibiting minor income earlier than IPOs, typically as a result of one-off positive factors, is widespread and raises investor considerations. These accounting-driven income might be regarding, as they don’t replicate sustainable enterprise earnings,” he stated.
Bolinjkar cautioned that whereas these income are disclosed, they’ll nonetheless create an overoptimistic view amongst retail traders. “Traders ought to give attention to money flows and core operations quite than headline income. Sturdy development and governance transparency are what really matter for long-term worth.”
Veteran investor Sandip Sabharwal in his sharp criticism questioned this pattern. “The whole IPO story is turning into murky due to a whole lack of transparency,” he stated. “Many firms report income within the final quarter or the final 12 months earlier than they arrive for an IPO after being in losses for years. It’s a sample. Then, the IPO pricing is absurd, and it nonetheless will get lapped up by institutional traders,” Sabharwal famous.
What ought to traders do?
For retail traders, the largest problem is distinguishing between an actual turnaround and a monetary facelift. One-off objects, equivalent to asset gross sales, fair-value changes, or accounting positive factors, could make firms look worthwhile quickly.
Khushi Mistry, Analysis Analyst at Bonanza, says traders should look past the headlines. “Whereas one-off positive factors earlier than IPOs are normally disclosed and thus technically fantastic, they continue to be a crimson flag. These income ought to immediate deeper scrutiny into earnings high quality and the corporate’s true worth proposition,” she stated.
She added that higher investor training and stronger post-listing governance are wanted. “Regulation alone can not guarantee prudence and that traders should shift focus from short-term itemizing positive factors to long-term enterprise efficiency.”
A number of current listings that got here at aggressive valuations have struggled post-IPO. Analysts stated a revenue earlier than an IPO doesn’t robotically make an organization investment-worthy. What issues is whether or not the enterprise can maintain these income by means of constant money era, enhancing margins, and scalable operations.
Disclaimer: Inquiries to a few of these firms quoted within the story went unanswered.
(Disclaimer: Suggestions, recommendations, views and opinions given by the specialists are their very own. These don’t signify the views of Financial Instances)
