Buy Eternal, hold Swiggy: Elara Capital weighs India internet sector

Brokerage firm Elara Capital has reaffirmed its stance on India’s consumer internet sector, identifying Eternal as a key valuation anchor while recommending an “accumulate” rating on Swiggy. In its latest research note, the brokerage set a target price (TP) of ₹415 for Eternal and ₹450 for Swiggy.

 

Eternal, Elara said, continues to outperform global peers at comparable stages of market evolution.  The brokerage highlighted that India’s e-commerce penetration remains at roughly 7 per cent as of calendar year 2024, placing the market at an inflection point similar to the early 2010s in the US and China. Using growth-adjusted EV/sales metrics and discounted cash flow (DCF) valuations, Elara Capital derives a blended valuation of around ₹400 per share for Eternal.

 

“Global e-commerce markets are typically dominated by a few scaled firms. Eternal, with its category leadership and Blinkit’s rapid horizontal expansion, is well-positioned to replicate this trend in India, providing high visibility for sustained growth,” the note stated.

Early maturity phase

Indian internet companies, Elara Capital said, as being in the early maturity phase, with growth in the range of 25–40 per cent, while gradually shifting focus toward profitability. By contrast, global leaders like Amazon and Meituan are in the maturity phase, where growth has normalised and valuations are primarily driven by profitability.

 

A historical analysis of global internet firms shows that Ebitda margins typically progress to 10–15 per cent beyond the early maturity phase.

Segmental analysis

For the food delivery segment, Elara Capital projects user penetration to rise from 1.4 per cent to 3.5 per cent of the population by FY36E, compared with 5.5 per cent among global peers. Monthly transacting user (MTU) growth is estimated at 9.1 per cent, with gross order value (GOV) growth of 13.7 per cent between FY25–36E, resulting in an adjusted Ebitda of 5.2 per cent of GOV.

 

For the quick commerce (QC) segment, users are expected to climb to 153 million by FY36E, with a CAGR of 37 per cent in net order volume (NOV) and an adjusted Ebitda of 4.4 per cent of NOV.

Eternal at an inflection point

Eternal, with 18–23 years of operations, the brokerage believes, is in the maturity phase where global e-commerce leaders historically transitioned from scale to sustained profitability. During a similar phase, Amazon (ex-AWS) delivered around 22.2 per cent revenue growth and traded at a median 2.3x EV/sales. Eternal is estimated to report a 46 per cent CAGR, translating to a growth-adjusted EV/sales multiple of 4.9x for FY28E.

 

“On a blended basis, combining key segment DCF and growth-adjusted EV/sales, we arrive at a valuation of ₹400 per share. Eternal remains our valuation anchor for India’s consumer internet names,” said the brokerage.

 

India’s e-commerce market outlook

 

Elara Capital believes India’s internet penetration in core consumer categories remains underpenetrated relative to the US and China, providing headroom for multi-year expansion. Eternal and Swiggy are expected to gain market share, supported by category leadership and horizontal expansion strategies. 

(Disclaimer: Target price and stock outlook has been suggested by Elara Capital. Views expressed are their own.)