Eternal's Profit Plunge Highlights Quick Commerce Crossroads in India

Eternal Limited (formerly Zomato), India’s leading food delivery giant, reported a stark 77.8% year-on-year drop in net profit to ₹390 million for Q4 FY2025, underscoring the financial toll of its aggressive expansion in quick commerce. The decline, driven by massive losses from its Blinkit dark-store venture, has ignited debate over whether the company’s bet on rapid growth in this high-stakes sector will pay off—or become a costly distraction.

The Profitability Crunch
Eternal’s top-line growth remains robust, with operating revenue surging 64% YoY to ₹5,833 crore. However, the numbers mask critical vulnerabilities. A staggering ₹368 crore of non-core revenue—from investments and other one-off gains—prevented the company from reporting a net loss. This dependency on non-operational income highlights the fragility of its core businesses.

Blinkit, the company’s quick commerce arm, is the primary culprit of the profit slide. Despite a 103% YoY revenue jump and 116% GMV growth, its adjusted Ebitda loss nearly doubled to ₹250 crore (per Kotak Securities). Analysts attribute this to underutilized dark stores, steep customer acquisition costs, and intense competition from rivals like Swiggy’s Instamart and Zepto.

Quick Commerce: A Race to Scale
Eternal has poured resources into Blinkit’s expansion, adding dark stores in 200+ cities and increasing capital expenditure by 242% YoY. While this has propelled Blinkit to a 46% market share in quick commerce (vs. 29% for Zepto and 25% for Swiggy Instamart), the operational costs are mounting.

• Store Utilization Woes: New stores in smaller cities face low order volumes, raising fixed costs per transaction.
• Margin Erosion: Blinkit’s contribution margin shrank to 2% due to competitive discounting and lower delivery fees in new markets.
• Competitor Pressure: Swiggy aims to reach 1,000 dark stores by March 2025, while Zepto targets 1,200 stores, further squeezing Blinkit’s margins.

Meanwhile, Eternal’s legacy food delivery segment (Zomato) grew 19% YoY in revenue but saw flat margins amid pricing wars. Hyperpure, its grocery unit, surged 114% YoY, but its growth hasn’t offset Blinkit’s losses.

Investor Crossroads
The question for shareholders is whether Blinkit’s market leadership justifies its financial toll. While it commands 46% of the quick commerce market, the sector itself is nascent and unprofitable. Analysts warn that without operational efficiencies—such as higher store utilization or reduced discounts—Blinkit’s losses could persist for years.

Conclusion: A Long Game with Short-Term Pain
Eternal’s Q4 results reveal a company at a pivotal juncture. Its aggressive expansion has cemented Blinkit’s position as India’s quick commerce leader, but the financial strain is undeniable. Key data points underscore the risks and opportunities:

• Market Share Gains: Blinkit’s dominance (46%) and Zomato’s food delivery leadership (58%) provide a solid foundation.
• Cost Challenges: A 242% YoY CapEx surge and ₹250 crore Ebitda loss for Blinkit signal a prolonged period of negative cash flow.
• Competitive Landscape: Rivals are matching Blinkit’s pace, with Swiggy and Zepto aggressively scaling their networks.

For investors, the calculus hinges on two factors:
1. Can Blinkit achieve scale efficiency? Reducing store underutilization and customer acquisition costs will be critical to turning margins positive.
2. Is the quick commerce market worth the investment? With India’s quick commerce sector projected to grow at 17% YoY through 2027, Blinkit’s first-mover advantage could eventually translate into sustainable profits—if Eternal can curb losses before capital runs dry.

In the near term, Eternal’s reliance on non-core revenue and deteriorating Ebitda margins pose risks to its stock valuation. However, its strategic dominance in two key delivery segments (food and groceries) positions it to capitalize on long-term trends. Investors willing to endure short-term pain for potential market leadership may find value here—but patience will be tested.