Buy Eternal Ltd For Target Rs 450 By JM Financial Services
We recently hosted Mr Akshant Goyal, CFO at Eternal, for a fire-side chat during our flagship annual investor conference. Blinkit (~50% share of B2C NOV) remains the primary growth engine for Eternal, he said, as there is enough scope for shift in consumer purchases from traditional ecommerce and offline commerce to quick commerce across tier 1/2+ cities. In fact, demand remains strong even in a relatively matured city like Delhi (70%+ YoY). It is likely that Blinkit’s MTU base eventually could be multi-fold that of Zomato as its use-cases are relatively non-discretionary. He believes Zomato (~40% salience) can deliver NOV CAGR of 20% over the medium term, albeit FY26 growth will be a bit modest at 15%+. He also sees District (~10% of NOV) gaining traction as it introduces services for which demand is more latent than obvious. On profitability in Blinkit, he said that it was just a matter of time, as some markets are already operating at 3%+ Adj. EBITDA margin (as % of NOV) despite high competitive pressures. In fact, he indicated that 5-6% sustainable margin guidance (over the long term) is achievable, as there is significant room for brand and customer monetisation, improvement in through-put per store as well as operating efficiencies. Overall, Mr Goyal emphasised that Eternal will continue to focus on making disciplined growth investments and aim to achieve sustainable profitability.
* Blinkit is more of a retail business than an internet business: Mr Goyal explained that in the run-up to the Blinkit M&A the team had realised that quick commerce could not be built only on the principles of a digital-first business. In fact, it helped that the team led by Mr Albinder Dhindsa (CEO, Blinkit) had several years of experience of operating a retail business (Grofers). Therefore, in the initial years, Blinkit focussed a lot on brand partnerships, demand forecasting, disciplined procurement, fixing the supply chain, building own warehousing capabilities and inventory rotation just like any retail business would, rather than generating demand basis heavy discounting and the promise of delivering orders in 10 minutes, unlike the competition. Over a period of time, this helped achieve high order fulfilment rates and customer satisfaction, which, in turn, drives loyalty even though the platform charges service fees on almost all orders.
* Blinkit’s MTUs likely to be multi-fold that of Zomato: Mr Goyal noted that Eternal across its three B2C platforms (Zomato, Blinkit and District) has 100mn annual transacting consumers. But, the overlap between Zomato and Blinkit is between ~35-40%. Further, as discretionary spends rise and Tier-2/3 markets evolve, the core driver of MTU expansion will be brand accessibility—where Blinkit’s deep assortment and instant availability of national brands position it to scale MTUs at a significantly faster clip than food delivery. Consequently, over a period of time, Blinkit’s MTUs would be multi-fold that of Zomato.
* Blinkit’s mature business already operating at 3%+ margin, achieving sustainable margins will not be a challenge: Mr Goyal mentioned that while on a weighted average basis Blinkit is today loss-making (-1.3% as % of NOV as of 2QFY26), the business is already making 3%+ Adj. EBITDA margin in some mature markets despite high competitive pressures. In these matured markets, the company is able to charge the consumers 6-7% as service fees and collect another 4-5% from brands in the form of ad income. Moreover, the daily store throughput in these markets is also significantly above the aggregate average (OPD of 1,470 in 2QFY26). This gives the management the confidence to say that the entire business will eventually turn profitable and also move towards sustainable profitability of 5-6% of NOV once other parts of the business (that are currently in an investment phase) mature. Margin expansion will largely be a function of brand and customer monetisation, improvement in through-put per store as well as operating efficiencies, as NAOVs are unlikely to expand meaningfully hereon.
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SEBI Registration Number is INM000010361
