Eternal Ltd — Q2 FY25 earnings call

Call held 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

  • 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

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

Key financials

  1. Blinkit GOV Growth YoY 120%
  2. Blinkit AOV ₹660
  3. Blinkit New Stores in Quarter 152 stores
  4. Blinkit New Warehouses 7 warehouses
  5. Capex ₹214 Cr
  6. Delhi NCR Share of Blinkit 40%

What they filed

Q1 FY27: revenue up 182.0%, net profit up 268.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue4,799 5,405 5,833 7,167 13,590 +183%16,315 +202%17,292 +196%20,211 +182%
EBITDA226 162 72 115 239 +6%368 +127%486 +575%594 +417%
Net profit176 59 39 25 65 −63%102 +73%174 +346%92 +268%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Segment breakdown

  • Blinkit (Quick Commerce)
    120% YoY Growth152 stores Stores Added₹660 AOV
  • Food Delivery
    20% GOV Growth Guidance (CAGR)
  • Going Out (District)
    — Status

Guidance & targets

Quick Commerce

  • Adjusted EBITDA Margin Quick Commerce · Long term · High confidence 4-5% long-term
    the guidance we've given on margins is that we believe this business can reach 4% to 5% (Adjusted EBITDA margin). With every passing quarter, that seems more realistic and achievable to us.

    — Akshant Goyal

  • Store Count Quick Commerce · FY25-FY27 · High confidence 1,000 by March 2025; 2,000 by December 2026
    broadly, yes, we are on track to achieve the 1,000 stores by March-25 and 2,000 stores by December-26, as per our guidance

    — Akshant Goyal

Capital

  • QIP Fundraise Capital · Near term · Medium confidence Up to $1 billion
    The board has passed an enabling resolution to raise up to $1 billion, which is also subject to shareholder approval.

    — Akshant Goyal

Risks & concerns

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

    high

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

    Both acknowledged

  • Contribution margin stagnation due to rapid store expansion

    medium

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

    Management acknowledged

  • Macro consumption slowdown in urban India

    low

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

    Analyst downplayed

  • Tax liability on treasury income as unabsorbed depreciation exhausted

    low

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

    Analyst acknowledged

Areas of evasion (4)

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

Q&A highlights

3 direct
Blinkit geographic diversification beyond Delhi NCR Direct
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)

Quick commerce customer overlap with food delivery decreasing Direct
The overlap is decreasing over time because we're seeing that quick commerce is appealing to a much wider demographic than food delivery.

Validates that quick commerce is expanding TAM rather than cannibalizing food delivery, reducing internal competition concerns

Asked by Vijit Jain (Citigroup)

QIP fundraise purpose and competitive positioning Direct
We're not raising money to start discounting more... The fundraise is purely to strengthen the balance sheet, and for nothing else.

Clarifies that capital raise is defensive balance sheet strengthening, not a signal of impending price war

Asked by Sudheer Guntupalli (Kotak AMC)

1 min read 4 chapters

Detailed narrative

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.

$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.

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.

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.

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