New Age Companies: Why are Zomato, Nykaa, Lenskart and other stocks trading high valuations?

New-age companies like Zomato, Nykaa, Paytm, Delhivery, Ixigo (Le Travenues) and Lenskart often trade at very high P/E ratios, even though their current profits don’t always justify those numbers.

Yet the market still values them far above traditional businesses. This gap between earnings and valuation leaves many investors wondering why these stocks stay so expensive, and here are the key reasons behind it.

Business Model Advantage

A major reason investors continue to value companies like Zomato, Nykaa, Paytm, Delhivery, Ixigo and Lenskart highly is their ability to scale rapidly and leverage network effects. As their user base grows, they attract more merchants, partners, and repeat customers, which drives higher revenue without a proportionate increase in costs. Even companies with significant physical operations, like Nykaa, Lenskart and Delhivery, benefit from improved operational efficiency as they expand, meaning that growth can translate into disproportionately higher future profits.

Massive Addressable Market 

Another key reason investors pay a premium for new-age companies is the size of the opportunity they operate in. India’s rapid digitisation, rising online shopping adoption, a young population with growing disposable income, and a gradual shift from unorganised to organised retail all point to a market that is still in its early stages. The sheer scale of potential customers and transactions gives these companies enormous room to grow, which makes their high valuations more understandable. Investors are essentially paying for the business they could become, not just what they are today.

Prioritising Growth Over Profits

For new-age companies traditional valuation metrics like P/E ratios often fail to capture their true potential. Many of these businesses are still in investment mode, focusing on capturing market share rather than maximising profits in the short term. Significant cash is reinvested into building scale, improving logistics, enhancing technology, and expanding customer reach. As a result, current profits may appear low or negative, but investors value them for their future earnings potential once these investments start paying off.

Market Leadership & Dominance Premium 

Another reason these new-age companies command high valuations is their position as market leaders in their respective segments. Zomato dominates food delivery, Nykaa leads in beauty e-commerce, and Lenskart holds a strong position in eyewear. Being at the top gives them advantages like lower customer acquisition costs over time, better margins and take rates, stronger negotiating power with vendors, and high brand recall among consumers. This market leadership creates a “dominance premium,” making investors willing to pay more for companies that have secured a clear edge over competitors.

Data & Customer Behaviour Advantage

By analysing buying patterns, repeat behaviour, purchase frequency, and customer preferences, companies can offer personalised recommendations, expand their own products, and sell more to existing customers. This helps them grow faster and earn more from each user, which is why investors value these businesses highly even if current profits are still limited.

-Manan Gangwar

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