Jul 4, 2025
Shares of Eternal, the parent company of food delivery giant Zomato and quick-commerce platform Blinkit, have seen a remarkable surge since the end of March, reflecting the broader market's exuberance. But with a staggering earnings ratio of 480 and profitability still a distance away for its fast-growing ventures, investors are naturally asking: can this rally endure?
Blinkit: The Engine of Optimism
The current optimism surrounding Eternal largely stems from Blinkit, its quick-commerce arm. This segment has been a star performer, posting triple-digit annual growth and rapidly expanding its footprint across India.
"The Indian retail industry is a trillion-dollar industry in size, but it is still largely unorganised," notes Kunal Vora, Head of Research at BNP Paribas. "We have seen modern trade making 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 convenience it provides."
Vora highlights that Blinkit achieved EBITDA breakeven in the first quarter of FY25, and BNP Paribas anticipates the company will reach EBIT breakeven by FY27. This aggressive "land grab" phase, focused on securing first-mover advantage, is evident in Blinkit's rapid dark store expansion. The company opened 294 new stores in Q4 FY25, significantly outpacing its rivals, and has even advanced its target for total stores to December 2025.
Margin Headwinds, But Breakeven in Sight
While Blinkit's gross order value (GOV) rose a healthy 21% quarter-on-quarter in Q4 FY25 to Rs 94.2 billion, and its contribution margin improved to 3.1%, adjusted EBITDA margin dipped slightly to -1.9% from -1.3% in Q3. Nomura cautions that "aggressive store addition and intense competition leading to high marketing costs" could keep profitability subdued in FY26.
However, JM Financial remains optimistic, strongly believing Blinkit is "on track to turn Adj. EBITDA break-even by 3QFY26." They point to signs of rational competition, rising average order values (AOVs), and a slower pace of store additions as factors that should support margin improvement. Encouragingly, Blinkit's losses are already narrowing, from Rs 2.5 billion in Q4 FY25 to an estimated Rs 1.5 billion in Q1 FY26. In contrast, Swiggy's Instamart losses are expected to expand in the same period.
Eternal Remains a Top Pick for Brokerages
Despite the intensifying rivalry, Eternal consistently receives favorable ratings compared to its closest competitor, Swiggy. JM Financial highlights that "Eternal is a clear market leader (in GOV terms) across all its operating business segments." They also commend Eternal as "the only major hyperlocal delivery company in the country that… is currently generating free cash flows, without having compromised topline growth."
Bank of America Securities echoes this sentiment, becoming "more optimistic on Blinkit’s (Zomato’s quick commerce) competitive positioning given strong execution." They note that Blinkit continues to add more dark stores while other players like Zepto and BigBasket are slowing down, which "will help Zomato show better quick com growth vs peers." Even in Tier 2 cities, Blinkit is gaining traction, with new stores hitting 1,000 daily orders within six to nine weeks, primarily due to better selection.
Food Delivery Stabilizes, Offers Margin Cushion
Eternal's core Zomato food delivery business has remained resilient. While GOV in Q4 FY25 was down 1.4% quarter-on-quarter, it was up a solid 16% year-on-year, with the contribution margin improving to 8.6%. Zomato anticipates 17% year-on-year GOV growth in FY26.
JM Financial expects Eternal's food delivery GOV to rise 9% quarter-on-quarter in Q1 FY26, boosted by summer seasonality, IPL, and consumer behavior. They estimate Eternal’s adjusted EBITDA margin to improve 40 basis points to 4.5% in Q1. Bank of America also notes that "food delivery growth is not slowing further [and is] holding well," with both platforms focusing on improving margins to invest more in the high-growth quick-commerce business.
Growth, Yes—But at What Cost?
Despite the pervasive optimism, some analysts remain cautious about sustainability. Nomura has cut its target price on Eternal, citing "near-term profitability in QC." While Eternal isn't burning cash at the EBITDA level, Nomura warns that prolonged losses in quick commerce pose a risk.
Bank of America, while raising its target price on Zomato, maintained a 'neutral' rating, pointing out that "competition is likely to be high in next 6–12 months as most platforms remain focused on market share gains."
BNP Paribas sees FY26 as a peak-loss year for quick commerce, with profitability expected to improve thereafter. "We expect that the mature case of food delivery… will be replicated," says Kunal Vora. "Having said that, this is a more competitive industry. Right now, it is more a question of getting the size and we expect margins to follow."
A Long Road to the Rs 300 Mark
The recent rally in Eternal's stock price suggests markets are pricing in a brighter future. However, the fundamentals, especially in quick commerce, are demanding. Blinkit's adjusted EBITDA margin is still in the red, dark store additions are being closely watched, and long-term profitability in a crowded market remains a key challenge.
As Kunal Vora aptly puts it, "I would not judge them by immediate profits, expect margins to follow." Whether Eternal can reclaim its all-time high of over Rs 300 and sustain it will largely depend on how quickly this profitability materializes.