Lenskart investors give thumbs up to growth over margin strategy
Lenskart Solutions' September-quarter (Q2FY27) performance would have been even stronger but for adverse currency movements. Investors, however, appear to be looking past these headwinds.
The stock hit an all-time high of ₹762.75 on Thursday, rising 6%. Consolidated revenue grew 32.5% year-on-year to ₹2,845 crore, while gross margin expanded 82 basis points to 69.98%. This was despite the Indian rupee depreciating about 16% year-on-year against the Chinese yuan, to an average of ₹14.2.
Currency remains a downside risk until Lenskart localizes more of its manufacturing, as a weaker rupee raises the cost of raw material imports from China. In Q2FY27, higher import costs significantly eroded the profitability gains from two key drivers: a sharp increase in in-house manufacturing of frames and lenses, which grew 71.7% and 52.2% year-on-year, respectively; and a 6.9% increase in average selling price in the India business.
Store productivity improved, with same-store sales growth (SSSG) in India at 20.8% year-on-year. International revenue grew 23% in constant currency, also largely driven by SSSG. Higher store productivity translated into operating leverage, helping Ebitda margin expand 274 basis points year-on-year to 13.8%.
This margin is calculated on a pre-Ind AS basis. Under Ind AS, lease costs are capitalized and depreciated over time rather than recognized upfront as regular expenses. Margins without applying Ind AS are therefore lower and offer a more conservative measure of profitability.
On the pre-Ind AS basis, consolidated Ebitda grew 65% to ₹392 crore. Lenskart has also chosen this basis for its long-term Ebitda margin target of 25%. While management has not specified a timeline for achieving this, Lenskart would not sacrifice growth for the sake of margin.
Lenskart has outlined several levers to improve margins, centred on owning its brands and integrating the entire value chain, from manufacturing to distribution. This includes spectacle lenses and frames, as well as the in-house fitting process. Its integrated Hyderabad facility, designed to produce 50 million eyewear units annually, is about 12 months away from becoming operational and should help deliver economies of scale.
The facility's planned capacity needs to be viewed against Lenskart's current manufacturing footprint. It currently produces 8 million spectacle lenses annually and 14.4 million frames on an annualized basis, using Q2FY27 production data. This capacity is spread across multiple locations in India, China and Thailand.
But valuations matter
Lenskart has a small share of India's eyewear market, leaving considerable room for expansion. The company sees potential to grow its store network to 10,000 from around 2,800 currently. However, new stores initially weigh on overall profitability until they achieve scale. India saw 143 new store openings in Q2FY27. Even if this pace accelerates, reaching the targeted network is likely to take several years.
Lenskart had 756 international stores at the end of Q2FY27. Unlike its India expansion, global growth does not have an explicit store target and will be measured, based on market requirements. The company commands a 25% volume market share in Singapore but has only a low single-digit share in other international markets, leaving significant headroom for penetration.
Lenskart has delivered a mouth-watering 61% return so far in 2026. But for new age companies, the debate is increasingly about valuations rather than growth prospects alone. On a two-year forward basis, or FY29, Lenskart trades at an enterprise value-to-Ebitda multiple of 30 times, the lowest among the three companies considered. This compares with 43 times for Nykaa and 33 times for Eternal, according to Bloomberg data.