What Ancient Neanderthals Can Teach Us About India Internet Valuations
– One Year of DART Gauge* Learnings
Neanderthals are our long-lost cousins who, for a considerable period, competed with us (Homo Sapiens) for the dominance of this planet. Unlike humans, whose competitive advantage was persistence hunting – running down their prey, scientists now think that Neanderthals were quite the opposite. They were ambush hunters. Ambush hunters meticulously track their intended prey across its lairs and nests, observe its daily rituals and then spring their trap. Neanderthals’ success with this led to them being catapulted to apex predators in Eurasia, better than even cave lions and bears, for over 3.5 lakh years.
Why do I start here?
Because sometimes, the most powerful insights come from watching closely, waiting patiently, and tracking patterns that others might miss. That’s what we’ve tried to do over the past year with our proprietary tool DART Gauge—for measuring buyside demand in India Internet stocks, based on forward EBITDA multiples. (More here)
After a full year of observing the market through this lens, I want to share five learnings. This isn't just a story about valuation; it’s a story about behavior, expectations, and how markets are maturing.
Let’s jump in.
1. Valuations Are Mean-Reverting – With a high degree of accuracy
Here’s the big one: since April 2022, India Internet’s forward EBITDA multiples have hugged a mean of ~40x. Go above 45x or below 35x? The market pulls it back fast.
Chart 1: India Internet Valuations have shown a mean reverting behavior since FY23
Sources: CapitalIQ, Bloomberg, Company Filings; 1. Please refer to the end notes for more information on the construction of the DART Gauge
Let’s walk through three instances:
Mid-2022: Zomato’s lock-in expired, supply flooded the market, and valuations dipped below 35x. But by next quarter? Back in the zone.
Early 2023: Valuations dipped again but this time because prices weren’t reflecting the progress companies were making on reducing losses. Once FY23 results rolled in (Zomato, PB Fintech, Nykaa all showed EBITDA positivity), the rally was back.
Late 2023 to early 2024: A PayTM-specific issue (RBI regulatory risks) briefly dragged down the averages—but again, the market course-corrected by Q1FY25.
So, is this magic? Not really. It’s just better market understanding. Investors are getting smarter about where growth ends, and hype begins. Interestingly, even with all the ups and downs, the long-run expectations haven’t moved. That stability says something.
Oh and if you’re wondering about FY25’s mini roller coaster (quick commerce), even that was corrected by year-end. Our take? India Internet is a bit oversold heading into FY26. We’re expecting a bounce-back.
2. When One Falls, All Fall: Narrative > Fundamentals (Sometimes)
Ever noticed how sometimes the whole sector moves in unison, regardless of how individual companies are doing?
Chart 2: India Internet Stocks show phases of distinct narrative dominance
Sources: CapitalIQ, Bloomberg; 1: We define a High Co-Movement period as the one in which >70% of the stocks making up our DART Gauge move in the same direction for three consecutive trading days
We created a metric for this: "High Co-Movement Days", where over 70% of India Internet stocks^ show negative returns. These days usually pop up when something macro spooks the market.
A few key triggers:
Monetary shifts (tightening or easing liquidity flows into riskier assets)
Volatility spikes (geopolitical tensions)
Seasonal sentiment—Q3 (Oct–Dec) tends to be noisy due to festive spending expectations.
In FY25, narrative clearly dominated fundamentals. Nearly 60% of trading days saw herd-like behavior. Q2 and Q4 stood out: investors weren’t making stock-specific calls they were moving as a bloc.
3. It’s Still All About Zomato (and Quick Commerce)
Despite new listings like Swiggy and FirstCry, Zomato continues to dominate trading volumes. Food Delivery and Quick Commerce together account for about 60% of daily traded value in India Internet.
Chart 4: Food Delivery/Quick Commerce continues to dominate trading in India Internet
Sources: CapitalIQ, Bloomberg; 1. MTV share = (Monthly Traded Value for each stock)/ (Total Monthly Traded Value);
Chart 5: Zomato’s share in DTV2 has risen steadily since 2HFY23
Sources: CapitalIQ, Bloomberg; 2: DTV is defined as the Daily Traded Value delivered for each stock; 3. share of DTV = (stock’s DTV/DTV of all stocks making up the Gauge)
Why is that strange? Because other sectors (FinTech, Logistics, e-Classifieds) have similar free floats. But they just don’t attract the same buy-side excitement.
Even between Zomato and Swiggy, there’s a massive gap. Swiggy does ~70% of Zomato’s revenues, but only 20% of its traded value. Clearly, the market has chosen a favourite.
Zomato’s share of India Internet trading volumes has surged from 25% in Oct 2022 to 57% by end-FY25. Much of that, we think, is due to retail investor interest, driven by bullish reports forecasting quick commerce revenues overtaking food delivery. Swiggy, interestingly, hasn’t gotten the same analyst love.
4. Q4FY25 Was a Sell-Off. But Don’t Panic
Yes, Q4FY25 felt brutal. Around 75% of trading days saw negative returns. Flashbacks to FY22–23? Understandable.
Chart 6: Q4FY25 Sell-Off was nowhere as severe as seen in FY23
Sources: CapitalIQ, Bloomberg; 1: Defined as (Average Daily Traded Value delivered for all stocks/ Free market float of all stocks);
But let’s not overreact. Only 20% of free float changed hands in Q4FY25—half the turnover seen during the earlier correction.
So, what happened? Mostly intraday derivative activity—investors betting short, but not necessarily dumping their holdings. The data suggests that most institutional and retail players were simply watching from the sidelines.
Here’s the silver lining: Monthly traded value (MTV) hit $4.3B in Q4FY25—4x higher than 2HFY23. This is remarkable because the Q4FY25 was muted from a very recent perspective, but still much higher when we look back, say 2 years ago. Depth and diversity in participation cushion the sector against panic-driven collapses. As India Internet matures, we expect even more stability through FY26.
5. Analysts Are Getting Real About Profitability
Let’s talk about expectations.
Chart 7: Consensus has turned more sober on FD/QC Players’ NTM EBITDA expectations
Sources: CapitalIQ, Broker Reports; 1: Drawn from CapIQ NTM EBITDA and Revenue estimates 2: Steady State EBITDA margins used for Zomato, PB Fintech, Nykaa, PayTM, Honasa, FirstCry, Swiggy and Delhivery. Based on median analyst estimates for 2035 or later
Through FY24 and early FY25, forward EBITDA margin expectations for Quick Commerce and Food Delivery soared. But in 2HFY25, reality hit.
Steady-state margins (looking ahead to 2035+) have been cut back, especially for Zomato, Delhivery, Honasa, and Nykaa. Analysts now expect more moderate profitability, high teens at best, not the 20%+ once projected.
Why? Better understanding of cost structures and market dynamics. Quick Commerce may be growing fast, but it’s also expensive. Similarly, beauty/personal care players like Nykaa and Honasa are facing margin pressures as they scale.
In contrast, the more mature India Internet 1.0 cohort (e.g. JustDial, IndiaMART) saw upward revisions in EBITDA expectations—reflecting cost discipline. But that came at a cost: slower topline growth. These veterans of India Internet now look more like value picks.
So, Where Does This Leave Us?
A year into the DART Gauge and hence monitoring the India internet stocks very closely, we’re more convinced than ever that valuation is only one part of the story. If you want to understand India Internet, you need to pay attention to narratives, volatility, sentiment shifts, sectoral biases, and evolving expectations.
We’re just watching carefully—and trying to write it all down.
We’ll keep tracking India Internet monthly. If you’re curious about how buyside demand is shifting, stay tuned. Our Gauge is live, and the story’s still unfolding.
*DART Gauge is our proprietary measure of buy-side demand for India’s new age consumer internet stocks. You can consider it as the sector’s 1 year forward EBITDA multiple, as weighted by liquidity in the traded stocks. Higher (Lower) multiples indicate Expensive (Cheap) valuations.
^ Our cohort includes JustDial, IndiaMART, Matrimony, Infoedge, Car Trade, Nazara, Eternal/Zomato, Nykaa, PB Fintech, Delhivery, PayTM, Honasa, Swiggy, FirstCry