Elara’s Karan Taurani on why investors are getting internet stocks wrong

At a time when Indian internet stocks are being scrutinised for lofty valuations and uncertain profitability timelines, Elara Capital’s latest Signature Theme Series webinar attempted to reset the conversation. 

Titled ‘Platform Valuation – The Internet on Eternal Playbook’, the session, led by Karan Taurani, executive vice president at Elara Capital, argued that most internet platforms are being judged too early in their lifecycle—especially in a market like India where digital adoption is still unfolding.

The core premise was simple but contrarian: internet companies should be valued over a 25–30 year lifecycle, not through the lens of near-term profitability alone.

The 30-year lens on internet businesses

According to Taurani, most global internet platforms follow a predictable lifecycle.

The first 10–15 years are capital-intensive, focused on customer acquisition, scale, and ecosystem building. During this phase, valuation benchmarks tend to lean on EV-to-sales multiples, rather than profits. Meaningful profitability typically emerges only in the later years, once platforms consolidate scale, pricing power, and operating leverage.

This framework, Taurani noted, is often ignored in Indian markets, where young internet companies are prematurely compared with mature global peers—despite India’s digital economy still being at a relatively early stage.

India’s e-commerce opportunity: still early, not saturated

To underline why long-term thinking matters, Taurani placed India’s internet story in a broader market context. India’s e-commerce penetration currently stands at around 7%, a sharp jump triggered during the Covid-19 pandemic, when online adoption accelerated across categories.

However, Elara believes this is only the first inflection point. The next phase could see e-commerce penetration nearly double—from 7% to 13–14% over the next few years—driven by structural shifts in consumer behaviour rather than just incremental growth.

Why Eternal needs a different valuation framework

Using Eternal, the technology company behind the Zomato food delivery app, Blinkit, Hyperpure, and District, as a case study, Elara argued that investors are misreading its current stage.

The platform, which spans food delivery, quick commerce and adjacent digital services, is still firmly in its investment-heavy phase—similar to where Amazon or Meituan were a decade ago.

Taurani highlighted that most global internet platforms have gone through extended periods of negative or thin margins, even as revenue and usage scaled rapidly. Applying traditional valuation frameworks too early, he said, leads to distorted conclusions.

Food delivery and quick commerce: structurally different businesses

One of the key sections of the presentation focused on food delivery and quick commerce, sectors that are often clubbed together but behave very differently.

Food delivery, Taurani pointed out, is a high-frequency, low-ticket business with long-term margin potential once order density improves. In contrast, quick commerce (Q-com) is still in a market creation phase, requiring sustained investments in dark stores, logistics and supply chains.

Crucially, Q-com is emerging as the biggest driver of the next e-commerce inflection in India. With 15–20 minute delivery, it is pulling traditionally offline categories—such as grocery, personal care and beauty, where online penetration remains in low single digits—into the digital ecosystem.

The implication: short-term margin pressures in quick commerce should not be read as structural weakness but as part of platform-building economics in a market that is still expanding.

Quick commerce and category expansion

Taurani noted that quick commerce is not just accelerating delivery times but also expanding the range of categories consumers are willing to buy online.

Products such as stationery, beauty and personal care, small electronics, accessories and even daily groceries—earlier dominated by kiranas and offline stores—are now increasingly being ordered online due to convenience.

This category expansion, Elara argued, is what differentiates India from more mature global e-commerce markets, where online penetration is already high and growth is incremental. In India, quick commerce could significantly lift both overall e-commerce growth rates and penetration levels.

EV/sales vs EV/EBITDA: where markets go wrong

A recurring theme in the session was the market’s discomfort with EV/sales-based valuation, especially in India.

Taurani argued that global internet leaders—including Amazon, Alibaba and Meituan—were valued on revenue multiples for long stretches before margins stabilised.

Attempting to force EV/EBITDA logic too early, he said, risks undervaluing platforms that are still scaling demand, logistics and merchant ecosystems—particularly in fast-evolving segments like quick commerce.

Lessons from global internet leaders

Elara’s report draws parallels between Indian platforms and global counterparts, stressing that:

• Scale precedes profitability, not the other way around
• Platforms with high engagement and repeat usage tend to monetise more effectively over time
• The real inflection point often comes well after investor patience has been tested

The presentation also cautioned against extrapolating short-term margin trends into long-term narratives, especially in categories that are still expanding the overall market.

A reset for internet stock narratives?

The broader takeaway from the webinar was less about defending any single stock and more about reframing how Indian internet businesses are analysed. 

Taurani suggested that with e-commerce penetration still in single digits and quick commerce reshaping consumption habits, India remains in the early innings of platform-led growth.

As public market scrutiny intensifies and capital becomes more selective, the “Internet on Eternal” playbook makes a case for patience—one that may not sit comfortably with quarterly-result-driven markets but aligns more closely with how global digital giants were built.