Eternal Ltd Q2 FY2026 Concall Summary

Key Takeaways

• Blinkit MTU surged on marketing spend: New user additions jumped as elevated ad spend efficiently captured consumers entering the market, with CACs stable due to operating leverage on a wider geographic footprint.
• Quick commerce margins are a story of two halves: Gross margin expanded ~300 bps, largely from the 1P inventory model shift, but supply chain costs absorbed much of the gain; the net 1% accretion will take four to six quarters to fully realize.
• Food delivery growth remains sluggish: ~15% YoY growth is the FY26 expectation, with headwinds from soft discretionary demand and quick commerce cannibalization; a mid-quarter platform fee hike helped profitability but the full impact of a minimum order value change is still to come.
• The 20%+ food delivery target is a judgment call: Management acknowledged there is no basis for any specific number but maintained the longer-term view, while conceding that quick commerce growth must stay elevated for food delivery to see a meaningful improvement.
• What to watch next quarter: Whether elevated Blinkit marketing spend continues to convert into MTU growth at stable CACs, the pace of food delivery's slow uptick, and any update on the loss-making Bistro business.

Quick Commerce: Growth & Investment

• MTU addition accelerated because new consumers are entering the market and can be onboarded at reasonable marketing costs; the business is at ~1,800 stores with a wider geographical footprint, so the addressable market has expanded.
• Marketing spend is expected to stay elevated at least in the near term, with the outlook assuming competitive intensity remains constant; if that changes meaningfully, the outlook can change.
• Customer acquisition logic is driven by healthy CAC and LTV, not a fixed P&L budget; as long as the trend of new consumers entering the market continues, the company will keep investing to power more growth.
• Most new MTU additions are believed to be new to quick commerce in general, not coming from competitors; Eternal has the largest network of stores and is targeting the biggest geographies.
• Marketing spend and CAC may not decline even if peers spend less because taking 80-90% of overall segment growth does not guarantee the lowest CAC in digital marketing.
• Store expansion remains concentrated: more than 70-75% of store additions continue to be in the top 10 cities, and the number of stores in long-tail cities is really small.
• Tail city expansion costs are contained because most tail cities are serviced by warehouses that also serve large cities; the network design already accounts for backend warehousing cost, and Eternal has stayed away from locations where it does not make sense.
• SKU availability in tier 2/3 cities is multiple times lower than in larger cities because the supply chain depth needed to make products available must be built from scratch.

Akshant Goyal: "That's not really a milestone we are focused on. For us, the way we look at the business is that there are parts of the business which are more mature, which are already EBITDA positive... Eventually the Adjusted EBITDA that we report is a weighted average of these two parts of the business."

Quick Commerce: 1P Transition & Margin Mechanics

• The 80% revenue step change has already happened; moving from 80% to 90% will cause some dissonance in comparable revenue but the step jump is behind.
• The remaining 10% of inventory stays with sellers on products where a seller-driven model is operationally better; these are small products and SKUs that do not make sense to own directly.
• Margin gains from the 1P transition start immediately, as seen this quarter, but the full 1% margin accretion takes four to six quarters because it requires negotiating and signing contracts directly with brands, which cannot happen in one shot.
• The ~300 bps gross profit increase in QC is not solely from the business model change; there is meaningful margin expansion outside of that. The cost side increase is from supply chain costs moved from sellers to Eternal. No split was provided between business model change and other efficiency factors.
• First mile cost will not change the 100 bps benefit from the inventory model because the percentage of cost residing in first mile for brands is too small to make a significant dent.
• Supply chain costs (including first mile) went up, so the entire gain on top-line margin did not flow through to contribution margin; the net flow-through should eventually be 1%, part realized this quarter, with the balance flowing through in the next four to five quarters.
• All costs related to the inventory model change sit above contribution margin.
• NOV to GOV ratio declined due to a change in product mix (festivals like Rakhi in the JAS quarter); directionally, as the share of general merchandise and non-branded products grows, NOV becomes a smaller percentage of GOV, which is why NOV is considered more relevant than GOV.

Food Delivery: Growth & Profitability

• Growth pickup was limited while profitability improved because of an increase in platform fee mid-quarter, which was a reaction to competitor actions and not anticipated at the beginning of the quarter.
• Headwinds include soft discretionary demand in India; attempts to expand the market have been made but headwinds have been strong.
• Quick commerce expansion may have impacted food delivery growth; as long as quick commerce growth remains elevated, food delivery is unlikely to see meaningful improvement in growth trends.
• The minimum order value change was made in mid-August, so the full impact will appear in the December quarter; no silver bullet exists to accelerate growth beyond that, but the growth rate is expected to keep going up from here.
• Investment decisions are driven by customer acquisition cost and reactivation cost for dormant users, not by a specific P&L budget; spending stops when numbers do not make sense from an LTV/payback perspective.

Akshant Goyal: "Guidance cannot be always close to the current growth levels. Then it's not really a guidance. So, the reality is the current growth rate number, which is around 15%, but whether you give guidance of 10% or 20%, you will have no basis for that. It's a judgment call."

District, Bistro & Others

• District growth is expected around ~30% year-on-year, with profitability in percentage terms improving; absolute losses are expected to remain range bound around current levels of INR 50-60 crore per quarter.
• District guidance is at an annual level due to seasonality from events, concerts, movie releases, and IPL; quarterly comparisons may be volatile.
• FY27 should be better than FY26 in terms of District losses, with improvement expected in the next few quarters.
• Most losses in the Others segment are on account of expansion in the Bistro business (10-minute food delivery service); an update will be provided next quarter.

Store Expansion & Long-Term Footprint

• Current geographical footprint covers about 20% of the overall targetable retail market; most high-quality profits reside in the top 40% of the targetable market.
• Expansion will be conservative because the cost of supply chain expansion, building footprint, going deeper, and making more products available is substantial; a call will be taken once more and better information is available.
• The opportunity is large but how large is still unknown; it is a function of how many categories become big in quick commerce, how the business shapes up in smaller cities, and bandwidth/prioritization internally.
• Management may prioritize efficiency improvement so that the cost of expansion or the profits from expansion go up; guidance on the timeline to 3,000 stores has been slightly conservative to leave room to make changes.
• The store opening team can possibly open a lot more stores every quarter if opportunities to grow more rapidly are found over the next few months.

Akshant Goyal: "There may be a situation when, yes, the market is looking bigger and we have an opportunity to expand, and we have the cash, but we can take a call to prioritize, let's say efficiency improvement and, so that the cost of expansion or the profits we get from expansion goes up."

Customer Positioning & Competitive Dynamics

• Customer positioning is not framed as one way or the other: customers willing to pay a convenience fee value the service, and part of the value Eternal wants to provide is the confidence that it is the platform giving the best access to products at the best possible prices.
• Market share is tracked internally via sampling data, but management will not conjecture on numbers since competitors are private companies.
• Ad revenue saw no major bump in the last quarter; it is business as usual.

Albinder Singh Dhindsa: "We don't think of it as positioning it one way or the other. We have customers willing to pay us convenience fee because they value the service that we provide and part of the value that we also want to provide them, so that they continue to value us even more, is the confidence that we're also the platform which gives them the best access to products, at the best possible prices."

Guidance & Commitments

Key Metrics