Eternal Ltd Q1 FY2025 Concall Summary

Key Takeaways

• Food delivery stays strong, Blinkit scales fast: Food delivery GOV grew 27-28% with broad-based demand, while Blinkit added 113 stores and is on track toward a 2,000-store target.
• Margins dipped on transient costs, not structural weakness: Contribution margin fell slightly due to a higher Gold mix and election/heat wave supply costs, both expected to partially reverse.
• Blinkit profitability is a conviction, not a promise: Management has "fair confidence" it can match or beat food delivery margins long-term, but near-term EBITDA could slip to breakeven if variables turn adverse.
• A new "Going-out" app signals the next platform bet: The District app will be a separate brand, built using Zomato's traffic to lower customer acquisition costs, mirroring the Blinkit playbook.
• What to watch next quarter: Whether the election/heat wave cost reversal actually lifts contribution margins, the pace of Blinkit's new-store ramp to 1,000 daily orders, and any early signals on the District app launch.

Food Delivery: Growth Engine & Margin Mechanics

• Broad-based volume growth: GOV growth is driven by order volumes, not just AOV, with expansion coming from both top-eight and non-top-eight cities. Supply sufficiency remains the key lever in mature markets.
• Gold mix is a margin drag: A higher share of Gold orders reduced customer delivery charges, the primary reason contribution margin dipped despite a take rate improvement.
• Transient cost headwinds: Elections and heat waves disrupted delivery supply, forcing incremental spending that also pressured margins. A partial reversal is expected going ahead.
• Platform fee is a live experiment: A convenience fee of Rs. 5-6 is now in place, up from near zero last year. Management is testing demand sensitivity and exploring dynamic options, with nothing cast in stone.
• South India market share normalized: Share in southern cities, historically a weak spot, is now very close to the national average after meaningful growth over the last 2-3 years.

Goyal: "We are already growing at 27-28%, right? So we're very close to that. We do believe there is a chance we can continue growing at that pace. However, the overall expectation from a longer-term perspective is still that we should at least grow at 20%."

Blinkit: Scaling the Quick-Commerce Engine

• Store expansion is the top priority: 113 stores opened this quarter, a significant number outside NCR, with a stated target of 2,000 stores. The only constraint is execution capability.
• New stores ramp predictably: It still takes two to three months for a new store to reach 1,000 orders a day, a consistent metric management tracks.
• Larger stores are the preference: The current pipeline of new locations skews larger than the existing average, though real estate availability dictates final size.
• SKU expansion is unlocking new demand: SKU count has grown from 5,000 to 25,000 over two years, with some new categories now contributing meaningfully to overall growth. There is no defined upper limit.
• Partner model is evolving: The company now funds store capex upfront for higher quality, with partners providing a bank guarantee instead. Partners must prove themselves with one store before getting more.
• Take rate has a multi-year runway: Benefits should accrue across gross margins, delivery fees, and ad income over a 3-4 year perspective, driven partly by a growing mix of higher-take-rate non-FMCG products.

Dhindsa: "We want to stick to, and we continue to stick to, delivering all of this assortment in ten minutes. That will always be our operating principle moving forward as well."

Blinkit Profitability: The Conviction vs. The Variables

• Long-term margin confidence: Management has "fair confidence" Blinkit can be as profitable as food delivery in margin terms, if not more, though the timeline depends on expansion pace and competitive intensity.
• Near-term EBITDA is not guaranteed: While the business is expected to remain profitable, management concedes that with many variables at play, a slip into the red "can happen, but it doesn't look likely right now."
• Fixed costs are largely flattish: Below the contribution line, corporate costs grew but marketing spend may have balanced it out, keeping fixed costs stable quarter-on-quarter.
• Store-level profitability is improving: Time to profitability for new stores has been decreasing as the network scales, the brand strengthens, and selection improves. Each store's journey is tracked individually.

Goyal: "At this point, we don't think that will happen, and that's why we have said that we believe the business will remain profitable. But of course, as you are saying, there are so many variables and factors at play here. So it's not like what you're saying cannot happen. It can, but it doesn't look likely right now."

New Bets: District App & Hyperpure

• District is the next Blinkit: The Going-out business will launch as a separate app and brand, using Zomato's traffic for lower customer acquisition cost, replicating the Blinkit separation strategy. Updates will be shared as execution progresses.
• Hyperpure is a growth experiment, not a profit center: The business runs close to breakeven while it focuses on discovering a larger TAM. It serves mid-level restaurants with high-quality, on-demand supply, not large QSR chains.
• Large QSR value proposition is still undefined: Management admits it needs to "think harder" to create a compelling offering for the rest of the restaurant industry beyond its current mid-market segment.

Capital Allocation & Balance Sheet

• Cash stays on the balance sheet: Management sees significant value in a strong balance sheet given multiple businesses and competition from well-capitalized private players. No distribution to shareholders is planned.
• Capex is scaling with Blinkit: The QoQ capex increase is driven by Blinkit store scale-up and, to a lesser extent, Hyperpure warehousing. The company now funds partner store capex upfront for quality control.
• No inorganic moves on the horizon: Nothing beyond what has already been shared in terms of investment opportunities.

Guidance & Commitments

Key Metrics