Eternal Ltd, a food and grocery delivery platform, formerly Zomato, in its Q4 earnings call highlighted intensifying competition in quick commerce affecting margin expansion despite stable contribution margins. Food delivery growth slowed to 16% year-over-year against 20% plus guidance, with challenges in affordability, assortment, and delivery timelines. Management mentioned it’s expanding stores into smaller cities while maintaining market share without matching competitors’ subsidies. The company aims to improve food delivery times to 20-25 minutes rather than the unfeasible 10 minutes initially targeted. Company discontinued Zomato Every Day while preferring to partner with brands rather than creating private labels. Other key points included temporary rider supply constraints expected to resolve naturally and potential inventory model changes requiring approximately INR1000 crore in working capital.
Eternal reported a 78% year-on-year net profit drop in Q4 FY25, missing estimates due to high taxes and Blinkit’s expansion costs, adding 294 stores (total 1,301), with 40% underutilized. Revenue jumped 64% to INR5,833 crore, driven by Blinkit’s 122% growth and Hyperpure’s 93% rise, though food delivery lagged at 17% growth. Adjusted EBITDA fell 15% to INR165 crore, with margins at 1.2%. Rebranded to reflect its diversified portfolio, Eternal integrated Paytm’s ticketing, boosting net order value 53% to INR17,440 crore, but shut unprofitable ventures and faces an antitrust probe alongside Swiggy and Zepto.
Continue Reading: Unearth the Vital Insights from Eternal Ltd’s Earnings Call!
Financial/Operational Metrics:
- Revenue: INR5,833 crores, up 64% YoY.
- Net Income: INR39 crores, down 78% YoY.
- EPS: INR0.04, down 80% YoY.
- Operating Profit: INR97 crore, down 40%.
- Stores Added (Quick Commerce): 294 stores in Q4.
- Average Monthly Transacting Customers (Quick Commerce): Increased to 13.7 million from 10.6 million QoQ.
Outlook:
- Quick Commerce Store Target: Plans to reach 2,000 stores within 6–9 months.
Analyst Crossfire:
- Quick Commerce Competition & Food Delivery Growth Guidance (Manish Adukia – Goldman Sachs)? Competition has intensified, especially from new players and existing quick commerce platforms through aggressive discounting, marketing, and real estate expansion. This has suppressed margin expansion despite stable contribution margins. The 20% growth target is a long-term CAGR over 4–5 years, not an annual commitment. Growth is dependent on solving affordability, assortment, and delivery time challenges (Akshant Goyal – CFO).
- Zomato Everyday Shutdown & Store Rollout in New Cities (Aditya Soman – CLSA)? Zomato Everyday is being shut down not due to failure but limited scalability. While profitable in select markets, it won’t move the needle materially. Most new stores are opening in non-top-8 cities, with similar breakeven timelines as earlier markets (Akshant Goyal – CFO).
- Advertising & Customer Fees, Commission Model vs. Subscription Delivery (Swapnil Potdukhe – JM Financial)? Advertisement income (~4% of GOV) is excluded from GOV and NOV, while customer fees (~3%) are included as per definitions. The company is observing Rapido’s subscription-based delivery model but has no current plans to adopt it (Akshant Goyal – CFO).
- Quick Commerce Market Share & Tier 2/3 City Demand, Competition & Investment Priorities (Sutanu Ghosh – Bank of America)? Market share in quick commerce has been maintained despite intensified competition. The company sees strong adoption in smaller cities, prompting continued expansion. Despite intensifying competition in quick commerce, Zomato has not altered its investment priorities or adopted aggressive subsidies. Business performance remains resilient without needing course correction (Akshant Goyal – CFO).
- Delivery Worker Shortages & ‘Going Out’ Business Performance (Gaurav Rateria – Morgan Stanley)? Last-mile delivery pressure is viewed as temporary. The gig workforce is expected to catch up with demand over time without structural cost increases. The decline is seasonal. Year-on-year GOV is still up 100%, and losses (~2–2.5% of NOV) are expected to remain steady while investment continues over the next year (Akshant Goyal – CFO).
- Impact of Competition on Margins, Customer Retention Amid Competition (Vibhor Jain – Citigroup, Ankur Rudra – J.P. Morgan)? Competition is raising costs across last-mile delivery, marketing, and real estate. While contribution margins are flat QoQ, profitability would have been higher in a less competitive market. Despite new competitors, Zomato has not seen any loss of wallet share in areas with increasing store density (Akshant Goyal – CFO).
