India’s e-commerce story enters mid-cycle, quick commerce set to speed it up: Elara Capital

India is entering a key phase in its digital retail story, with e-commerce penetration set to double over the next seven to eight years, according to Karan Taurani, EVP at Elara Capital. He said India is now moving from an early phase to a mid-cycle stage, similar to how the US and China scaled their internet and commerce ecosystems.

“We believe India is poised for this kind of an inflection,” Taurani said, explaining that penetration could rise from 7% to 14%. He noted that the growth will come not only from stronger logistics, better payment infrastructure and higher income levels, but also from two India-specific factors - quick commerce (QC) expansion and low online penetration in categories such as fashion, general merchandise and food.

Taurani said internet companies globally tend to reach profitability after 15 years of operations, as seen in Amazon and Alibaba. Many Indian consumer internet firms are currently in the 18-20-year cycle, where profitability improvements typically begin.

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He pointed out that food delivery companies in India have already reached “healthy earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins,” showing the transition into a more mature phase. Quick commerce, however, is still new but expected to grow fast. “QC will actually take a lesser time to attain profitability,” he said, adding that the business builds on existing e-commerce customers rather than creating a new category.

Some mature QC stores are already showing around 3–4% EBITDA margins, indicating steady traction.

Taurani highlighted that India’s e-commerce sector is more fragmented compared to the US and China. He expects three to five years of consolidation as larger players expand into quick commerce. After this phase, profitability may become a bigger focus, similar to what is now visible in food delivery.

Because current listed companies combine multiple business lines - e-commerce, food delivery, and quick commerce - investors often struggle with valuation. Taurani said the correct approach depends on the life stage of the business.

“For the first 15–18 years, one should look at growth,” he said, adding that profitability becomes the main driver only once categories mature and penetration rises.

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Elara Capital has used two valuation methods in its latest research: EV/Sales Benchmarking - mapped to Amazon’s valuation at the same 18–20-year stage and long-term DCF - based on category penetration and future profit potential

On food tech, he said India’s penetration of 1.4% is far below the global average of about 5.5%, leaving “clear room for convergence.” Quick commerce is expected to scale faster due to larger order value and more frequent use cases.

Taurani warned that valuations depend heavily on growth. “Growth is a big variable here,” he said. If revenue expansion slows from about 45% now to near 30%, it could lead to lower valuations. Profitability alone will not be enough - companies must also enter new markets and add new business lines to sustain premium pricing.

For the full interview, watch the accompanying video

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