How Lenskart Used FVTPL to Inflate Profits Before IPO?

Lenskart’s ₹300 Crore Profit: Real or Reimagined? Let’s Break It Down

Did you know that Lenskart showed a profit of ₹300 crore, but nearly ₹170 crore of it wasn’t from selling specs?

Nope — it came from a clever accounting move called FVTPL (Fair Value Through Profit or Loss).

Sounds like jargon? Let’s make it simple. Imagine you’re promised ₹1,000 crore by Bill Gates next month. You haven’t received it yet, but you still feel richer. That’s what FVTPL does — it marks future expected profits as current income. 🧐

In this blog, we break down:

• What FVTPL really is

• How Lenskart used it to "cook" (legally!) their books

• Why many big companies like Amazon & PolicyBazaar do it

• Should you trust such inflated profit numbers?

Let’s dig in. 🕵️

🔍 What is FVTPL — and Why Should You Care?

FVTPL stands for Fair Value Through Profit or Loss. It’s an accounting method where investments are revalued at their current market value, and any gain or loss is recorded in the P&L (Profit & Loss) — even if you haven’t sold the asset yet.

Here’s an example:

• You buy shares in a startup for ₹10 crore.

• A year later, the market values it at ₹50 crore.

• Under FVTPL, you can show ₹40 crore as profit — even though you didn’t sell those shares.

You “feel” richer — but are you really? That’s the game.

This is widely accepted under accounting norms, but many investors find it misleading because it doesn’t reflect real cash flow.

🧠 So What Did Lenskart Actually Do?

In 2022, Lenskart acquired a company from Japan called 'Days', which manufactures premium eyewear frames using advanced tech.

Fast forward to 2025 — when Lenskart was prepping for an IPO — they re-evaluated how much they'd need to pay for full control of Days. Turns out, they would pay ₹167 crore less than earlier estimated.

💥 Boom! That ₹167 crore was shown as a profit on their books using FVTPL.

This alone inflated their profit by more than 50%. Out of ₹300 crore reported, ₹170 crore was not from selling glasses but from revaluation gains.

🔲 [Insert Image: Indian finance analyst reviewing inflated P&L statement on dual monitors, modern office background, soft lighting]

📈 Why Do Companies Use FVTPL?

FVTPL isn’t illegal. It’s a globally accepted method — but it’s controversial when used during IPOs or fundraising to make the company look more profitable than it is.

Companies use it to:

• Show strong profitability to investors

• Increase valuation in IPOs or VC rounds

• Offset actual losses with "paper profits"

Here’s a list of known users:

• Amazon: Revalued stakes in startups

• Policy Bazaar: Reflected fair value gains pre-IPO

• Info Edge (Naukri.com): Revalued investments in Zomato, etc.

💡 Is This Ethical or Misleading?

That’s the million-dollar question.

✅ From an accounting standpoint: It’s allowed.

❌ From a retail investor’s lens: It can be misleading.

Imagine thinking a company made ₹300 crore from operations — but actually, half of that is from revaluation of past deals.

Investors must look at “cash flow from operations”, not just “net profit”.

It’s like someone telling you they’re rich because their apartment value might go up in 5 years. Feels hollow, right?

🧾 What It Means for You as an Investor or Professional

If you're:

• A retail investor 👉 always read the footnotes in financial statements

• A finance professional 👉 learn these accounting methods to advise your clients better

• An entrepreneur 👉 don’t fall for vanity numbers; understand the real profitability

📊 FVTPL isn’t always bad. It’s just one tool in the accounting toolkit — use it wisely, understand it deeply.

🧮 Final Thought — "Paper Profits" Aren't Real Profits

Lenskart’s example shows how balance sheets can look amazing on paper, while ground reality might be quite different.

It doesn’t mean the company is lying — just that numbers need decoding. Always ask: “Where did this profit come from?”

And hey — if you’re dealing with complicated books, acquisitions, or need smart and legal ways to manage your financials...

🧾 Shunyatax Global says that financial clarity starts with informed decisions.
We provide end-to-end bookkeeping, auditing services, and investment planning for individuals and businesses.

🚀 Start your journey with us today:
👉 📞 Shunyatax Confidential Advisory Services
👉 🌐 Shunyatax Global Services
👉 📧 Email Us