India's internet economy poised for long-term expansion, says brokerage

India's internet economy is expected to sustain its growth momentum over the long term, driven by rising digital adoption and increasing transaction volumes. A recent analysis by Morgan Stanley highlights significant headroom for expansion across online food delivery, e-commerce, and logistics, with improving scale likely to support profitability.

The brokerage notes that Indian internet stocks have already rebounded strongly, with the India Internet market-cap index climbing about 20 per cent from its early-June low. This compares with a 6 per cent rise in the Nifty 50 over the same period, and the index has outperformed the benchmark by roughly 18 per cent in the last four months.

In the food delivery segment, Morgan Stanley projects gross order value (GOV) to reach around Rs 2 trillion by FY31. Online food delivery penetration is expected to rise from 15 per cent in FY26 to 20 per cent, with emerging opportunities in affordable delivery where lower order values are offset by reduced overhead costs.

The e-commerce logistics market also shows substantial room for growth. E-commerce shipments, excluding grocery, are estimated to climb to 15-16 billion by FY30, with per-capita shipments still far below levels in the US and China. Increasing outsourcing to third-party logistics (3PL) providers is expected to benefit companies like Shadowfax and Delhivery.

Shadowfax's share of the e-commerce shipment market has grown from 8 per cent in FY22 to around 28-30 per cent in FY26, with a projected 3PL market share of about 34 per cent by FY29 in the base case. The firm is expected to grow revenue at a 28 per cent compound annual growth rate (CAGR) between FY26 and FY29, compared with 18 per cent for Delhivery. Express parcels are likely to remain the largest revenue contributor for both companies.

For e-commerce platforms, user engagement and monetisation are key drivers. Morgan Stanley expects Meesho's orders per active buyer to rise to around 16 by FY29, supported by improving logistics spreads and advertising revenue, which should bolster contribution margins.