Eyewear E-commerce Unicorn - Lenskart recently declared its financial results for FY 22-23, and we had to ask, are we seeing it right?
With revenue of ₹37,880 Mn, the Softbank backed Startup recorded a y-o-y growth of a whopping 2.5 times, while maintaining a healthy EBITDA margin of 11%.
Why are we amazed?
In comparison, in the last 5 years, their revenue grew at a CAGR of 50% only.
The company's EBITDA margins have never been this good- 0% last year and 8% the year before. 5 years back the company had a negative gross margin of 36%.
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This made us wonder- what are they doing right? Let's break it down:
The big acquisition
In June'22, Lenskart bought a controlling stake in Japanese premium eyewear brand Owndays for $400Mn. This is the single largest contributor to the revenue jump. The company adds an ARR (Annual Recurring Revenue) of ₹18,000Mn - ₹20,000Mn to Lenskart's topline. What makes the acquisition special is that Owndays is also a profitable company, thereby contributing to the company's bottom-line as well.
Phygital model
Lenskart was one of the earliest E-commerce players to open offline stores, the first of which came up in 2010. Fast-forward to present day, the company boasts a network of more than 1,500 retail outlets, looking to grow at a pace of 400 stores per annum. As per some accounts, the offline stores contribute to around 35-40% of its overall revenue.
Growing presence in SEA, Japan and Middle-East
In his interview with Sumer Juneja (SoftBank), Bansal claimed that SEA (South-east Asia) region is 80% myopic (myopia is an eye condition in which far objects don’t appear clearly) while Korea and Hong Kong is 90% myopic. Lenskart is therefore aggressively pursuing growth in all these regions. In Singapore alone, the company has 70 stores already. Acquisition of Owndays added another 460 stores in Asia and India.
Owned manufacturing units allow to control costs and enjoy economies of scale
Since early days the company has maintained focus on gradually building its internal manufacturing capacity. Last year, the company opened up the world's largest automated eyewear factory in Bhiwadi, Rajasthan that is capable of producing 100Mn glasses annually. What's more, earlier this month, Bansal teased through a tweet that the company is looking to open its next mega factory in the outskirts of Bengaluru.
Selling in Bharat is future-proof
Bansal claims that more than 50% of their sale in India comes from Tier-II and Tier-III Cities. Bansal believes that this adds to their competitive edge as markets are likely to be more fragmented and consumers tend to be more brand-loyal outside metro cities.
In a day delivery of glasses
Which as per their internal survey has not been attempted by any other eye wear company globally. This gives them a strong competitive edge.
Pocket full of money
Lenskart has raised about $1.76Bn till date. When tech funding significantly plummeted by over 75% in 2022-2023, Lenskart still managed to raise close to $1Bn during this period. All of this money raised despite being profitable. Which means all the capital can be utilized to make healthy acquisitions, open up new stores and establish more manufacturing units.
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About 50% of the world need glasses. About 2.5Bn people globally don’t have glasses when they need them. According to WHO, this is the biggest ailment in the world. With 15,000 people globally and shipping close to 25Mn pairs a year, Bansal's vision is to deliver better vision to a billion people. The best way of achieving this, he says, is by obsessing over customer excellence and creating a work culture that allows people at Lenskart to take decisions in in multiple geographies with the same mindset.
Buuuuut, where does Lenskart stand vis-a-vis its peers?
We compared Lenskart with the other omni-channel e-commerce players in India to understand how good are its numbers. Turns out, if it wasn't for the thundering results of 22-23, it was falling well behind its peers. Here's the chart:
Here are some interesting insights on the chart:
BoAt Lifestyle that manufactures and sells multi-category electronic products fell behind Lenskart in 22-23 as its revenue growth plateaued to only 18% y-o-y. The company also reported its first ever negative EBITDA of ₹549Mn.
FirstCry power passed Nykaa in 22-23 in hopes of a bumper stock market listing. Its revenue grew by 2.3 times y-o-y. However, the company reported negative EBITDA of ₹1,642Mn after 2 years of reporting profitable.
In the Covid year of 20-21, all took flight, except Lenskart that reported muted growth. Possibly because of its heavy reliance on offline stores.
It is however fascinating to note that all the 4 above, being vertical e-commerce players have had a similar growth trajectory and all have managed to show some signs of profitability along the way. In comparison, Flipkart, which is one of the leading horizontal e-commerce players in India functions in a much larger scale (₹5,60,128Mn revenue in FY 22-23) but has never reported a profit (negative 8% EBITDA in FY 22-23). Which means, so far its been more rewarding trying to disrupt 1 particular market through e-commerce than trying to disrupt all the markets together...
This article is a part of the March'24 edition of our Startup Newsletter. Here's the complete publication:
