Eternal Ltd Q3 FY2024 Concall Summary

Key Takeaways

• Growth guidance raised sharply: Management now expects Adjusted Revenue growth to stay north of 50% over the next few quarters, up from a prior 40%+ base case, driven overwhelmingly by quick commerce.
• Quick commerce is the engine: Blinkit’s revenue doubled YoY while its fixed cost base grew only 18%, delivering clear operating leverage; the business is sticking to its breakeven plan.
• Food delivery steady, not spectacular: 10% sequential revenue growth with a ~70 bps commission rate improvement, but the quarter slightly undershot expectations and near-term margin guidance is a modest 4–5% adjusted EBITDA.
• Margins benefit from revenue levers, not cost cuts: Contribution margin expansion came from platform fees and ad revenue, not delivery cost savings; seasonal marketing spend will fade but tech infrastructure costs will persist.
• What to watch next quarter: Whether the >50% growth rate materializes as Q4 faces a sober seasonal comp without festivals and a World Cup, and whether Blinkit’s new-store economics hold as expansion accelerates inside the top 8 cities.

Growth Outlook & Guidance Raise

• The new number: Management’s base case is now 40%+ YoY Adjusted Revenue growth for the foreseeable future, with the next few quarters likely staying north of 50%. The upgrade is anchored in quick commerce momentum, not food delivery.
• No business-level quarterly guidance: The company will not break out growth expectations for individual businesses, citing seasonality and competition; growth profiles across businesses will not stay consistent quarter to quarter.
• Quick commerce vs macro: Quick commerce remains a tiny fraction of overall retail consumption, so its growth is driven by store coverage expansion and reaching new consumers, not by broader macro trends.
• Food delivery growth levers: MTC (monthly transacting customer) growth is expected to be a large driver, built on increasing the annual ordering frequency of the existing ATC base, a large portion of which currently transacts only 3–5 times a year.

Akshant Goyal: "Our base case guidance continues to remain that our Adjusted Revenue should grow at 40%+ year-on-year (YoY) for the foreseeable future. And it's possible that at least over the next few quarters, that remains north of 50%, that is what we wanted to say."

Quick Commerce (Blinkit)

• Store expansion strategy: The next 1,000 or more stores will land largely inside the top 8 cities, where the company says it remains under-indexed in almost every market, even the largest. New city experiments are underway but strategically limited while supply chain capabilities are built out with a long-term view.
• Cannibalization managed: New stores in existing micro markets do not hurt revenue because a store is added only when the existing one hits 50–60% utilization; the move is framed as a service-level improvement, not a zero-sum split.
• Store capacity ceiling keeps rising: Two years ago management thought the max was 2,500–3,000 orders per store per day; some stores now handle 4,500 orders in a day.
• Take rates driven by ads: Ad monetization has been the bigger driver of Blinkit’s take rate increase; product mix margins and handling or delivery fees have not improved significantly.
• AOV is an outcome, not a target: No guidance on where AOV heads; it depends on seasonality, festivals, and the categories added. Adding beauty, electronics, and home décor moves AOV, but the company will not disclose category mix.
• Breakeven commitment intact: Management is sticking with the quick commerce breakeven plan and expects capital consumption to come down dramatically.
• Growth prioritized over margin: If good-quality growth opportunities appear, the company will not shy away even if it leads to margin compression; new store expansion will dictate where margins land.

Albinder Singh Dhindsa: "If you had asked us two years ago, we used to think we could at max do 2,500 - 3,000 orders in a day in our stores. Now, we have stores that have done 4,500 orders in a day."

Food Delivery

• Revenue and take rates: Food delivery posted 10% sequential revenue growth. Gross take rate was slightly flattish to slightly higher sequentially, with platform fees up, ad income growing meaningfully, and commission revenue slightly up; on a net basis there was a slight decline due to Ind AS 115 adjustments.
• Commission rate improvement: Restaurant commission rates improved roughly 70 bps, per an analyst’s math. Cloud kitchen commissions are not very different from brick-and-mortar restaurants and sit broadly in a certain range.
• Supply mix shifting: The share of cloud kitchens in the overall mix has increased over the years; new supply addition is now largely cloud kitchens.
• Zomato Gold penetration rising: Gold-driven share of GOV/MTUs is now higher than the ~40% reported last quarter; the reduction in customer delivery charges from Gold will not be fully recovered by platform fee increases, as the objective is to maximize absolute profits, not per-order parity.
• Near-term margin guide: Adjusted EBITDA margin is guided to around 4–5% in the near term.

Margin Structure & Cost Drivers

• Contribution margin expansion: The increase was driven more by the revenue side (platform fee, ad revenue) than the cost side; AOV increases also feed into margins.
• Fixed cost increase in food delivery: Two factors were at play: seasonal marketing tied to the World Cup and festivals, which is not expected to stay elevated, and an increase in server and tech infrastructure costs, which will continue.
• Blinkit operating leverage: Revenue grew 100% YoY while the fixed cost base grew only 18% YoY, demonstrating clear leverage as the business scales.
• Growth vs margin philosophy: The company’s stance is that good-quality growth is the priority; if that comes at the cost of some margin compression, it is acceptable theoretically. So far, margin expansion has accompanied growth, but that may change as margins mature.

Akshant Goyal: "Idea is on good quality growth and if that comes at cost of some margin compression, then it's okay with us, theoretically speaking, but that hasn't happened so far, and we've been able to deliver margin expansion along with growth. At some point in the future, that might change as margins mature."

Capital Allocation & Other Businesses

• Cash will sit: No new plans for M&A, buyback, or dividends at this point; cash will compound on the balance sheet and a call will be taken down the line. Management explicitly deflected a question about whether M&A activity is the hidden reason for retaining cash.
• Hyperpure plant: A value-added food supplies plant for sauces and spreads is being set up, targeting B2B restaurant supply only, with no plan for own labels in quick commerce. Capex is not meaningful in the context of the overall business, and payback is expected to be very attractive; one facility will be tried before deciding on expansion.
• Going-out business: Monetization is deprioritized for now; the idea is to keep the business around breakeven and continue investing.
• Working capital profile: The broader business is negative working capital (marketplace model: receive revenue upfront, pay sellers with a lag); the only receivable is on advertising. Blinkit carries no meaningful working capital.

Guidance & Commitments

Key Metrics