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    Eternal Ltd

    ETERNALGood
    Consumer Services·22 Oct 2024
    Management Summary

    Zomato's Q2 FY25 showed sustained momentum across segments with Blinkit growing over 120% YoY at full operational capacity. The company announced a $1 billion QIP enabling resolution primarily to strengthen the balance sheet amid competitive capital raises. Management reiterated the marketplace model for quick commerce, with no plans for private labels or inventory ownership. Food delivery showed resilience against macro consumption slowdown concerns, while the District going-out app was preparing for launch.

    Highlights

    8

    • Blinkit business growing 120-130% YoY, operating at full capacity for expansion

    • Blinkit opened 152 new dark stores and 7 new warehouses in Q2; capex INR 214 crore

    • Delhi NCR share of Blinkit business fell below 40% (from 47% few quarters ago)

    • Blinkit AOV at INR 660 in Q2; similar AOVs across top 7-8 cities

    • Board approved enabling resolution for up to $1 billion QIP fundraise

    • Food delivery GOV growth at 20%+ CAGR guidance; no visible consumption slowdown

    • Blinkit Adjusted EBITDA margin guidance of 4-5% long-term seems achievable

    • District (going-out) app about to launch with dining-out and entertainment ticketing

    Concerns

    1

    • Increasing competition from Flipkart Minutes, Zepto fundraise, and horizontal players

    Key financials

    Single quarter

    06 metrics
    1. 01Blinkit GOV Growth YoY120%
    2. 02Blinkit AOV₹660
    3. 03Blinkit New Stores in Quarter152 stores
    4. 04Blinkit New Warehouses7 warehouses
    5. 05Capex₹214 Cr

    Segment breakdown

    Blinkit (Quick Commerce)
    120% YoY Growth152 stores Stores Added660 INR AOV
    Food Delivery
    20% GOV Growth Guidance (CAGR)
    Going Out (District)
    — Status
    List

    Guidance & targets

    3
    CategoryTargetPriority
    Quick Commerce
    Adjusted EBITDA Margin
    4-5% long-term
    		High
    Quick Commerce
    Store Count
    1,000 by March 2025; 2,000 by December 2026
    		High
    Capital
    QIP Fundraise
    Up to $1 billion
    		Medium

    Risks & concerns

    8
    RiskSeverity

    Increasing competition from Flipkart Minutes, Zepto fundraise, and horizontal players

    Management acknowledged increasing competition but said they're focused on own business and operating at full capacity with 120%+ growth — Both acknowledged

    high

    Contribution margin stagnation due to rapid store expansion

    No contribution margin expansion in last 2-3 quarters due to fixed costs from new stores not yet fully operational — Management acknowledged

    medium

    Macro consumption slowdown in urban India

    Management said no visible impact on their business and tracking well in current quarter — Analyst downplayed

    low

    Tax liability on treasury income as unabsorbed depreciation exhausted

    Now paying tax on treasury income; operating income losses still being offset by carry-forward losses for a couple more years — Analyst acknowledged

    low

    Areas of Evasion(4)

    • Tier 2 city unit economics
    • SKUs per order
    • Detailed competitive data
    • District investment plans

    Q&A highlights

    3

    “by GOV, we believe we are the largest player in all the major metros outside of Chennai and Hyderabad”

    Delhi NCR dependence falling from 47% to <40% while maintaining market leadership in most metros demonstrates scalability beyond home market

    asked by Vivek Maheshwari (Jefferies)

    1 min read4 chapters

    Detailed Narrative

    01

    Blinkit Operating at Full Capacity with 120%+ Growth

    Blinkit grew over 120% YoY in Q2 FY25, adding 152 dark stores and 7 warehouses. Delhi NCR share fell below 40% as the company established GOV market leadership in all major metros except Chennai and Hyderabad. AOVs remained similar at INR 660 across top 7-8 cities, contrary to expectations of lower AOVs in non-Delhi markets.

    02

    $1 Billion QIP as Defensive Balance Sheet Move

    The board approved an enabling resolution for up to $1 billion fundraise via QIP, positioned purely as balance sheet strengthening amid competitive capital raises by Zepto and others. Management explicitly denied any connection between fundraise and discounting or strategy changes. The actual size will depend on market conditions and demand.

    03

    Quick Commerce Customer Base Broadening Beyond Food Delivery

    Customer overlap between Blinkit and food delivery is decreasing over time as quick commerce appeals to a wider demographic. Category expansion into beauty, electronics, and toys continues with SKU counts expected to keep increasing. Store throughput per store remains stable despite rapid additions, with new customers in Delhi NCR entering at comparable AOVs to existing customers.

    04

    Marketplace Model and No Private Labels Strategy Maintained

    Management reaffirmed commitment to marketplace model for Blinkit, noting FDI restrictions prevent inventory ownership under current shareholding structure. No plans for private labels or loyalty programs despite competitors having both. The company prefers to let brands handle product creation while focusing on platform operations and service quality.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.