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Time of India
03-07-2025
- Business
- Time of India
Eternal shares up 30% since March. Investors are feasting, but can Zomato's parent justify the appetite?
Shares of Eternal , the parent company of food delivery major Zomato and quick-commerce platform Blinkit , have surged nearly 30% since the end of March, mirroring the exuberance in India's broader market. But with a staggering price-to-earnings ratio of 480 and profitability still some distance away in its fast-growing verticals, investors are now asking the key question: can this rally endure? The optimism around Eternal is largely rooted in Blinkit, its quick commerce arm that has posted triple-digit annual growth and is fast expanding its footprint. 'The Indian retail industry is a trillion dollar industry in terms of size, but it is still largely unorganised,' said Kunal Vora, Head of India Equity Research at BNP Paribas. 'We have seen a modern trade making some inroads, but it has still been restricted to top cities… what we saw with quick commerce is very strong growth over the last couple of years driven by the dark stores which provide convenience.' Vora noted that Blinkit achieved EBITDA breakeven in the first half of FY25, and BNP Paribas expects the company to break even at the EBITDA level in FY27. 'What we have seen subsequently is a land grab phase… it is really about chasing and getting the first mover advantage.' That first-mover push is also evident in Blinkit's aggressive dark store expansion. Blinkit opened 294 new stores in the fourth quarter of FY25, significantly ahead of its peers. The company has advanced its target of 2,000 stores to December 2025, a move seen as strategic amid intensifying competition. Margin headwinds, but break-even in sight Live Events While Blinkit's gross order value rose 21% quarter-on-quarter in Q4FY25 to Rs 94.2 billion, and contribution margin improved to 3.1%, adjusted EBITDA margin fell to -1.9% from -1.3% in Q3. Nomura said that 'aggressive store addition and intense competition leading to high marketing costs will likely keep profitability subdued in FY26.' However, JM Financial remains optimistic. 'We strongly believe Blinkit is on track to turn Adj. EBITDA break-even by 3QFY26,' the brokerage said in its June note. It added that signs of rational competition, rising average order values (AOVs), and slower store additions should support margin improvement going forward. JM Financial also noted that Blinkit's losses are already narrowing, from Rs 1.8 billion in Q4FY25 to an estimated Rs 1.5 billion in Q1FY26. In contrast, rival Swiggy 's Instamart losses are expected to expand in the same period. Eternal remains top pick for brokerages Despite intensifying rivalry, Eternal is being consistently favoured over its closest competitor Swiggy. 'Eternal is a clear market leader (in GOV/revenue terms) across all its operating business segments,' JM Financial said. 'Moreover, it is the only major hyperlocal delivery company in the country that… is currently generating free cash flows, without having compromised on topline growth.' Bank of America Securities echoed this view after recent ground checks, saying, 'We return more optimistic on Blinkit's (Zomato's quick com) competitive positioning given strong execution.' The brokerage pointed out that Blinkit continues to add more dark stores while other players like Swiggy, Zepto and BigBasket have started to slow down. BofA said, 'We expect this to help Zomato show better quick com growth vs peers.' Even in Tier 2 cities, Blinkit is reportedly gaining traction, with some dark stores hitting 1,000 daily orders within six to nine weeks. 'This is driven, not due to convenience or value, but mainly due to better selection,' BofA said. Food delivery stabilises, offers margin cushion Zomato's core food delivery business has remained resilient. Gross order value in Q4FY25 was down 1.4% quarter-on-quarter but up 16% year-on-year, with contribution margin improving to 8.6% and adjusted EBITDA margin at 5.5%. Zomato expects 17% year-on-year GOV growth in FY26, slightly lower than 20% in FY25. JM Financial expects Eternal's food delivery GOV to rise 9% quarter-on-quarter in Q1FY26, boosted by summer seasonality, IPL, and consumer behaviour. The brokerage estimates Eternal's adjusted EBITDA margin to improve 10 basis points to 4.5% in Q1. Bank of America noted, 'Food delivery growth is not slowing further but holding well… both platforms are focusing on improving margins and looking to invest more in the high growth quick-com business.' Growth, yes—but at what cost? Despite the optimism, analysts remain cautious about sustainability. Nomura has cut its target price on Eternal to Rs 280 from Rs 290, citing 'lower near-term profitability in QC.' While the company is not burning cash at the EBITDA level, Nomura warns that prolonged losses in quick commerce remain a risk. Bank of America raised its target price on Zomato to Rs 270 from Rs 245 after lowering its WACC and projecting reduced competition in the near term. However, it maintained a 'neutral' rating, pointing out that 'competition is likely to be high in next 6–12 months as most platforms remain aggressive on market share gains.' BNP Paribas sees FY26 as a peak-loss year for the quick commerce sector but expects profitability to improve thereafter. 'We expect that the model in the case of food delivery… will be replicated. Having said that, this is going to be a more competitive industry,' Vora said. 'Right now, it is more a question of just getting the size and we expect margins to follow.' A long road to the Rs 300 mark The rally in Eternal's stock price may suggest that markets are pricing in a brighter future. But the fundamentals, especially in quick commerce, remain demanding. Blinkit's adjusted EBITDA margin is still in the red, new store additions are being closely watched, and long-term profitability is uncertain in a crowded market. As Kunal Vora puts it, 'I would not judge them by immediate profitability… we expect margins to follow.' Whether Eternal can reclaim its all-time high of over Rs 300 and stay there will likely depend on how quickly that promise materialises. Also read | Eternal and Swiggy will quadruple the size of the business over next 3 years, while keeping losses in check: Kunal Vora ( Disclaimer : Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
Economic Times
03-07-2025
- Business
- Economic Times
Eternal shares up 30% since March. Investors are feasting, but can Zomato's parent justify the appetite?
Eternal's shares have surged 30% since March, fueled by Blinkit's rapid growth and dark store expansion. While Blinkit aims for EBITDA breakeven by Q3FY26, aggressive competition and store additions may impact near-term profitability. Despite challenges, brokerages favor Eternal over Swiggy, citing market leadership and free cash flow generation, but analysts caution about long-term sustainability. Tired of too many ads? Remove Ads Margin headwinds, but break-even in sight Tired of too many ads? Remove Ads Eternal remains top pick for brokerages Food delivery stabilises, offers margin cushion Tired of too many ads? Remove Ads Growth, yes—but at what cost? A long road to the Rs 300 mark Shares of Eternal , the parent company of food delivery major Zomato and quick-commerce platform Blinkit , have surged nearly 30% since the end of March, mirroring the exuberance in India's broader market. But with a staggering price-to-earnings ratio of 480 and profitability still some distance away in its fast-growing verticals, investors are now asking the key question: can this rally endure?The optimism around Eternal is largely rooted in Blinkit, its quick commerce arm that has posted triple-digit annual growth and is fast expanding its footprint. 'The Indian retail industry is a trillion dollar industry in terms of size, but it is still largely unorganised,' said Kunal Vora, Head of India Equity Research at BNP Paribas. 'We have seen a modern trade making some inroads, but it has still been restricted to top cities… what we saw with quick commerce is very strong growth over the last couple of years driven by the dark stores which provide convenience.'Vora noted that Blinkit achieved EBITDA breakeven in the first half of FY25, and BNP Paribas expects the company to break even at the EBITDA level in FY27. 'What we have seen subsequently is a land grab phase… it is really about chasing and getting the first mover advantage.'That first-mover push is also evident in Blinkit's aggressive dark store expansion. Blinkit opened 294 new stores in the fourth quarter of FY25, significantly ahead of its peers. The company has advanced its target of 2,000 stores to December 2025, a move seen as strategic amid intensifying Blinkit's gross order value rose 21% quarter-on-quarter in Q4FY25 to Rs 94.2 billion, and contribution margin improved to 3.1%, adjusted EBITDA margin fell to -1.9% from -1.3% in Q3. Nomura said that 'aggressive store addition and intense competition leading to high marketing costs will likely keep profitability subdued in FY26.'However, JM Financial remains optimistic. 'We strongly believe Blinkit is on track to turn Adj. EBITDA break-even by 3QFY26,' the brokerage said in its June note. It added that signs of rational competition, rising average order values (AOVs), and slower store additions should support margin improvement going Financial also noted that Blinkit's losses are already narrowing, from Rs 1.8 billion in Q4FY25 to an estimated Rs 1.5 billion in Q1FY26. In contrast, rival Swiggy 's Instamart losses are expected to expand in the same intensifying rivalry, Eternal is being consistently favoured over its closest competitor Swiggy. 'Eternal is a clear market leader (in GOV/revenue terms) across all its operating business segments,' JM Financial said. 'Moreover, it is the only major hyperlocal delivery company in the country that… is currently generating free cash flows, without having compromised on topline growth.'Bank of America Securities echoed this view after recent ground checks, saying, 'We return more optimistic on Blinkit's (Zomato's quick com) competitive positioning given strong execution.' The brokerage pointed out that Blinkit continues to add more dark stores while other players like Swiggy, Zepto and BigBasket have started to slow down. BofA said, 'We expect this to help Zomato show better quick com growth vs peers.'Even in Tier 2 cities, Blinkit is reportedly gaining traction, with some dark stores hitting 1,000 daily orders within six to nine weeks. 'This is driven, not due to convenience or value, but mainly due to better selection,' BofA core food delivery business has remained resilient. Gross order value in Q4FY25 was down 1.4% quarter-on-quarter but up 16% year-on-year, with contribution margin improving to 8.6% and adjusted EBITDA margin at 5.5%. Zomato expects 17% year-on-year GOV growth in FY26, slightly lower than 20% in Financial expects Eternal's food delivery GOV to rise 9% quarter-on-quarter in Q1FY26, boosted by summer seasonality, IPL, and consumer behaviour. The brokerage estimates Eternal's adjusted EBITDA margin to improve 10 basis points to 4.5% in of America noted, 'Food delivery growth is not slowing further but holding well… both platforms are focusing on improving margins and looking to invest more in the high growth quick-com business.'Despite the optimism, analysts remain cautious about sustainability. Nomura has cut its target price on Eternal to Rs 280 from Rs 290, citing 'lower near-term profitability in QC.' While the company is not burning cash at the EBITDA level, Nomura warns that prolonged losses in quick commerce remain a of America raised its target price on Zomato to Rs 270 from Rs 245 after lowering its WACC and projecting reduced competition in the near term. However, it maintained a 'neutral' rating, pointing out that 'competition is likely to be high in next 6–12 months as most platforms remain aggressive on market share gains.'BNP Paribas sees FY26 as a peak-loss year for the quick commerce sector but expects profitability to improve thereafter. 'We expect that the model in the case of food delivery… will be replicated. Having said that, this is going to be a more competitive industry,' Vora said. 'Right now, it is more a question of just getting the size and we expect margins to follow.'The rally in Eternal's stock price may suggest that markets are pricing in a brighter future. But the fundamentals, especially in quick commerce, remain demanding. Blinkit's adjusted EBITDA margin is still in the red, new store additions are being closely watched, and long-term profitability is uncertain in a crowded Kunal Vora puts it, 'I would not judge them by immediate profitability… we expect margins to follow.' Whether Eternal can reclaim its all-time high of over Rs 300 and stay there will likely depend on how quickly that promise materialises.: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
Time of India
02-07-2025
- Business
- Time of India
Eternal and Swiffy will quadruple the size of the business over next 3 years, while keeping losses in check: Kunal Vora
Kunal Vora , Head of India Equity Research, BNP Paribas , says India's largely unorganized trillion-dollar retail sector, dominated by mom-and-pop stores, is witnessing a quick commerce boom. Driven by dark stores, companies like Eternal are achieving EBITDA breakeven. A land grab is underway, with major players investing heavily to gain first-mover advantage. Focus remains on strong growth while controlling EBITDA losses. In FY27, BNP Paribas expects Eternal quick commerce to get to breakeven at EBITDA level. In the case of Swiggy, it will take longer, about FY29 or FY30. Your report calls quick commerce a decadal opportunity. Help us understand what are the key factors that could determine who will win in this space over the next 5 to 10 years? Any important metrics other than the regular ones that you are tracking at the moment? Kunal Vora: The Indian retail industry is a trillion dollar industry in terms of size, but it is still largely unorganised. If I look at a category like grocery, more than 80% is still largely driven by 10 million mom-and-pop outlets. We have seen a modern trade making some inroads, but it has still been restricted to top cities and then we saw overall growth starting to stabilise in modern trade while e-commerce did not really make any meaningful dent when it came to the grocery segment. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Play War Thunder now for free War Thunder Play Now Undo What we saw with quick commerce is a very strong growth over the last couple of years driven by the dark stores which provide convenience; pricing also has been reasonable and consumers use them more frequently. Also, they were able to crack unit economics with Eternal getting to EBITDA breakeven in 1H of FY25. What we have seen subsequently is a land grab phase in which everyone started investing more aggressively. We have seen that happening in three quick commerce companies. But other retail and e-commerce companies are also looking at this opportunity very closely. They are also starting to invest. It is really about chasing and getting the first mover advantage and we believe that the near-term metric to judge them by will be ensuring that they maintain a very strong growth, while at the same time keeping the EBITDA losses in check. I would not judge them by immediate profitability even if over the next couple of years, they get scale. What we are expecting is just between the two companies which we cover – Eternal and Swiggy – where the net order value will increase from about $4 billion in FY25 to $16 billion by FY28. That is quadrupling the size of the business over the next three years, while keeping the losses in check. We expect that the model in the case of food delivery is initially getting the scale and then focus on profitability will be replicated. Having said that, this is going to be a more competitive industry. The size of the industry is much larger compared to what the food delivery industry is and it is going to remain competitive. Right now, it is more a question of just getting the size and we expect margins to follow. Live Events You Might Also Like: Quick commerce apps stack up extra fees to curb losses How do you see unit economics evolving across food delivery and quick commerce as the market matures? Kunal Vora: In the case of food delivery, we have already seen that happening. In food delivery, if I look at over the last three years, this industry was making about $20 billion in EBITDA losses. In FY25, we have seen about $20 billion EBITDA positive numbers. In case of quick commerce, we believe that going forward, FY26 will remain a year in which there will be peak losses, but beyond that in FY27, we expect Eternal to get to breakeven level at EBITDA level. In the case of Swiggy, we expect it to take longer about FY29 or FY30. In terms of margins, we expect the food delivery margins getting closer to 5% now and on average order value, while in case of quick commerce we expect to take longer, but about 5% is possible in the medium term. The report states that the food delivery is more resilient than the QSRs. Now, is this primarily due to the capex like models or are there consumer behaviour shifts that are driving this advantage? Kunal Vora: In our report, we have done an extensive comparison and benchmarking between food delivery and quick service restaurants – both spaces which we look at very closely now. What we see is that the Indian quick service restaurant industry has seen an increase in EBITDA but they have not been able to generate free cash flow because whatever increase in EBITDA they have seen, largely that is getting reinvested in capex. The big difference between the two is that in the case of food delivery, there is almost no capex, there is no working capital. So, whatever EBITDA they are able to generate is getting reinvested in another very large high growth opportunity which is quick commerce. So, that is a space which we prefer between the two. Even in terms of growth trends, over the last six years – FY19 to FY25 –, QSR industry has seen about 13% revenue CAGR, but that has been driven by 14% store CAGR and that is fairly capex intensive. You Might Also Like: Reinventing Retail: How local kirana stores are adapting to India's quick commerce boom Many of the companies like Jubilant FoodWorks, the capex was about 1-1.5 billion per annum in FY19, but that number is now about 7 billion in FY25. So, while we have not seen a meaningful increase in EITDA, the capex intensity has been fairly elevated in QSR industry and that is the reason we believe food delivery is a better place to be in. In terms of the audience that quick commerce caters to, help us understand how you expect quick commerce to evolve into a true mass market channel? Or will it remain an urban value proposition in the near future? Kunal Vora: In our projections, we see the quick commerce industry catering more to the affluent consumers by FY28. But once they achieve scale, they will be in a position to go mass market as well. For now, our expectation is about 40-45 million households will be spending about Rs 5,000 monthly on quick commerce that can be across various different categories. It can be home and personal care. It can be consumer electronics. There are various products which they can start adding. And beyond that, once they achieve scale, which is about $16 billion just between the two quick commerce companies, they will have many margin levers which can help them bring the cost down. The margin levers we are talking about would include better pricing power when it comes to negotiating with the brands. We expect the advisement revenue to come in because the kind of details which these companies will have over the household consumption patterns will be very valuable for the companies and also, we expect the average order per dark store will keep on increasing over the next few years. Some of these will help them achieve a better level of profitability and some of that can get passed on to the consumer. As the pricing becomes more competitive, they can start going beyond the affluent 40 million households and into the mass households. You Might Also Like: Shadowfax Technologies files confidential DRHP for Rs 2,500 crore IPO with Sebi In what ways might large incumbents in the entire retail space like Reliance or Amazon retail could reshape the competitive intensity we are seeing amid the listed space? Kunal Vora: This is still going to be an evolving space and we do not expect a quick result in terms of market consolidation the way we have seen that in food delivery happening in case of quick commerce soon. The way we are looking at this industry is that everybody will look at their own sweet spots and their own target markets. Larger e-commerce players will continue to focus on a much larger assortment. For quick commerce, what really works is fast moving items which the consumer needs, but it will not be able to cater to industries in which there is a wide assortment, like fashion is not something which they are like well positioned or footwear is not something which they are well positioned to do. So, they will be doing the fast moving items. E-commerce will have a much broader offering and they will not be delivering within 30 minutes. They will have a larger assortment while delivery times could be longer. In the case of physical retailers, it is going to be about the consumer footfalls and they will look more at scheduled deliveries. While they will look to bring the delivery times lower, at the same time they would not go into the dark store model wherein they are close to the consumers in every location. With the heavy focus on the dark store expansion, how should players balance the speed of scaling with profitability discipline? Kunal Vora: After Blinkit achieved EBITDA breakeven, there has been a big burst of dark store expansion. The number of dark stores have doubled in FY25 across most players. I expect FY26 to be a year in which there will be some consolidation while the heavy growth will still continue, and at the same time, we will not see doubling of store count and the focus will be on driving efficiencies to bring the EITDA losses to lower levels compared to what we see. FY26 could be the peak year. After that we expect the dark store additions to get normalised while the focus will be on driving consumers per dark store per day. What kind of impact could Rapido's entry have into the food delivery space? How sustainable could Rapido's model be in terms of their pricing? Kunal Vora : I would not comment on Rapido and what they can do. But if I look at the economics of this business, it makes it very difficult to breakeven at Rs 25 or Rs 50 because average rider will want about Rs 20,000-25,000 per month which is about Rs 1,000 per day and if he is working for 10 hours, you need at least Rs100 per hour, Rs 50 per delivery. So, if someone is looking at like Rs 25, Rs 50 pricing, that makes it very difficult to work out and it will require a lot of cash burn. Today Zomato and Swiggy between them carry about 1.5 billion orders annually and at that scale, we see variable cost per delivery for these players at about Rs 60 purely for delivery and about Rs 80 in total. So, to beat them in terms of unit economics is going to be a challenge. Till FY22-23, Swiggy itself with its large scale was still reporting about 15 billion of annual losses. So, it seems challenging for any new entrant to make any meaningful inroad. We continue to see this as a duopoly which will keep generating healthy cash flows.
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Business Standard
23-04-2025
- Business
- Business Standard
India's attractiveness increased lately with recovery in GDP: Kunal Vora
The situation on tariffs is still evolving, but India is relatively well placed due to its low merchandise export dependence Premium Sundar Sethuraman Mumbai Listen to This Article With US trade tariffs adding complexity, India's continued recovery in gross domestic product (GDP) growth and a recovery in earnings positions it favourably when compared with other global peers, says Kunal Vora, head of India Equity Research at BNP Paribas Bank. In an email interview with Sundar Sethuraman, Vora delves into the evolving landscape of foreign portfolio investor (FPI) flows into India, which until recently faced severe selling pressure due to high valuations and global uncertainties. Edited excerpts: FPI outflows have moderated. What's the outlook for foreign flows? India has been a well-liked market by the FPIs. India has received
