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    Eternal Ltd

    ETERNALGood
    Consumer Services·20 Jan 2025
    Management Summary

    Zomato's Q3 FY25 was defined by Blinkit's accelerated expansion past the 1,000-store milestone ahead of schedule, while food delivery growth moderated in sync with broader urban consumption slowdown. Management was transparent about expected near-term loss increases as ~30%+ of the network remains new, but emphasized that mature store cohorts remain profitable with 6.4% contribution margins. The quarter saw peak competitive intensity in quick commerce with elevated marketing spend, particularly backloaded in November-December.

    Highlights

    8

    • Blinkit surpassed 1,000 dark stores ahead of March 2025 guidance, adding ~300 stores in 4-5 months

    • Top 50 mature Blinkit stores achieving 6.4% contribution margin

    • Blinkit AOV rose to over INR 700 (vs INR 660 in Q2), driven by festive season and electronics

    • 80% of Blinkit business still in top 8 cities; 20% of new store expansion from new cities

    • Blinkit losses expected to increase in absolute terms over next 1-2 quarters due to expansion

    • Food delivery saw broad-based slowdown in line with macro urban consumption moderation

    • Core Blinkit customer retention (Dec 2022 cohort) improved 1 ppt despite peak competitive quarter

    • Almost 100% of Blinkit losses attributed to expansion, not competition

    Concerns

    1

    • Blinkit losses to increase in absolute terms as 30%+ of network is new stores

    What Changed3

    vs Q4 FY25

    Tone shiftMixed → GoodGuidance items4 → 3 (-1)Risks discussed5 → 4 (-1)

    Key financials

    Single quarter

    05 metrics
    1. 01Blinkit Dark Stores1,000 stores
    2. 02Blinkit AOV₹700
    3. 03Top 50 Stores Contribution Margin6.4%
    4. 04Core Customer Delivery Fee20 INR per order
    5. 05Core Customer Retention (2yr cohort)40%

    Segment breakdown

    Blinkit (Quick Commerce)
    6.4% Top 50 Stores Contribution Margin1,000 stores Stores Crossed80% Top 8 Cities Share of Business
    Food Delivery
    — Growth Trend
    List

    Guidance & targets

    3
    CategoryTargetPriority
    Quick Commerce
    Store Expansion Target
    2,000 stores by end of calendar year 2025
    		High
    Quick Commerce
    Losses Trajectory
    Absolute losses expected to increase in next 1-2 quarters
    		High
    Food Delivery
    Adj EBITDA Margin Target
    5% in next few quarters
    		Medium

    Risks & concerns

    6
    RiskSeverity

    Blinkit losses to increase in absolute terms as 30%+ of network is new stores

    Management explicitly guided for increasing absolute losses in next 1-2 quarters as store additions run at 30%+ of network. No loss cap mindset; will expand as fast as possible. — Management acknowledged

    high

    Food delivery growth slowdown in line with macro urban consumption moderation

    Management acknowledged broad-based slowdown but refused to predict recovery timeline — Both acknowledged

    medium

    Real estate competition and cost inflation for dark stores

    Significant competition for same real estate in most cities; unusual run-up in rents and picker salaries expected to normalize — Both acknowledged

    medium

    Marketing spend escalation as competitive intensity peaks

    Marketing spend backloaded in Q3, expected to increase further with each new store addition. Digital marketing costs rising as more competitors target same customers. — Management acknowledged

    medium

    Areas of Evasion(2)

    • Specific city-level data
    • Competitive retention initiatives details

    Q&A highlights

    3

    “Almost 100% of the losses will be due to expansion... Unless something meaningfully changes with competition that we are unaware of today.”

    Critical insight that losses are self-inflicted investment, not competitive pressure, which is bullish for long-term unit economics

    asked by Manish Poddar (Invesco)

    1 min read4 chapters

    Detailed Narrative

    01

    Blinkit Crosses 1,000 Stores Ahead of Schedule

    Blinkit surpassed the 1,000 dark store milestone ahead of its March 2025 guidance, adding roughly 300 stores in 4-5 months. More than half of expansion continues in top 8 cities through densification, with 20% from new cities. Store breakeven timeline remains at 2-3 months. Management indicated no fixed budget for expansion and will scale as fast as organizationally possible.

    02

    Mature Store Economics Validate Long-Term Model

    Top 50 mature stores achieved 6.4% contribution margin, which management said is not the peak. Core customers (Dec 2022 cohort) showed 40% retention with 1 ppt improvement in the most competitive quarter in 2-3 years, paying INR 20 per order delivery fee. The top 300 stores maintained profitability without QoQ decline despite competition, with margin expansion paused rather than declining.

    03

    Food Delivery Slowdown Amid Macro Headwinds

    Food delivery growth moderated in line with broader urban consumption slowdown affecting multiple consumer companies. Management refused to predict recovery timing but expressed confidence in the 5% Adj EBITDA margin target for the near term. Quick food delivery initiatives including Bistro and less-than-15-minute restaurant delivery remain very nascent.

    04

    Marketplace Model Affirmed for Quick Commerce

    Management confirmed commitment to marketplace model for Blinkit with no plans to move to inventory-led model. Discounts remain nearly zero as a marketplace business. Ad income and delivery fees are the key revenue drivers beyond product commissions. Category expansion into electronics and general merchandise drove AOV increase but also widened the gap between MRP-based GOV and actual customer-paid values.

    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.