In FY25, Lenskart reported a internet 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 acquire 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 internet 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 an organization valued at tens of hundreds of crores.
The problem isn’t 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 over time, 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 might not but replicate a totally steady 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. While you strip these out, underlying revenue truly declined by round 25% within the newest quarter.”Analysts say the problem isn’t about legality, however sustainability.Based on Shruti Jain, Chief Technique Officer at Arihant Capital Markets, it’s commonplace for startups to “flip worthwhile” simply earlier than an IPO, typically by means of accounting changes or timing of sure bills.
“It has turn out to be a standard follow for start-ups to point out 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 palms are restricted,” Jain mentioned.
She added that disclosure and transparency stay the authorized requirements, not whether or not the revenue itself is sustainable. “It’s as much as buyers to learn the monetary statements fastidiously. The issue is, most retail buyers depend on gray market premium (GMP) and market frenzy, somewhat than understanding what triggered the sudden turnaround.”
Accounting earnings could be regarding
Vinit Bolinjkar, Head of Analysis at Ventura Securities, believes this sample of last-minute earnings is turning into widespread and dangerous. “The pattern of Indian digital startups exhibiting minor earnings earlier than IPOs, typically on account of one-off good points, is widespread and raises investor issues. These accounting-driven earnings could be regarding, as they don’t replicate sustainable enterprise earnings,” he mentioned.
Bolinjkar cautioned that whereas these earnings are disclosed, they’ll nonetheless create an overoptimistic view amongst retail buyers. “Buyers ought to give attention to money flows and core operations somewhat than headline earnings. Sturdy development and governance transparency are what actually 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 mentioned. “Many firms report earnings within the final quarter or the final yr 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 buyers,” Sabharwal famous.
What ought to buyers do?
For retail buyers, the largest problem is distinguishing between an actual turnaround and a monetary facelift. One-off gadgets, equivalent to asset gross sales, fair-value changes, or accounting good points, could make firms look worthwhile briefly.
Khushi Mistry, Analysis Analyst at Bonanza, says buyers should look past the headlines. “Whereas one-off good points earlier than IPOs are often disclosed and thus technically positive, they continue to be a purple flag. These earnings ought to immediate deeper scrutiny into earnings high quality and the corporate’s true worth proposition,” she mentioned.
She added that higher investor training and stronger post-listing governance are wanted. “Regulation alone can not guarantee prudence and that buyers should shift focus from short-term itemizing good points to long-term enterprise efficiency.”
A number of latest listings that got here at aggressive valuations have struggled post-IPO. Analysts mentioned 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 earnings by means of constant money era, bettering 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 consultants are their very own. These don’t characterize the views of Financial Instances)
