Eternal – Zomato print-in-line; Blinkit beats expectations

Overall, B2C Net order Value (NoV) grew 55% YoY (15.7% QoQ) to reach INR 201.8bn in Q1FY26. Food delivery (FD) NoV growth at 13% (INR89.7bn) remained subdued (largely in-line), primarily impacted by sluggish discretionary demand, which led to an increase in restaurant-funded discounts. FD’s adj EBITDA Margin (EBITDAM) (as % of NoV) saw a QoQ decline of 20bps to 5%, largely attributable to seasonal factors such as elevated delivery partner incentives due to festive and weather-led shortages. Quick commerce (QC) continues to beat expectations (NoV up 25% QoQ to INR92bn vs HSIE’s forecast of INR90.9bn).

  In QC, adj. revenue grew 40.4% QoQ, outpacing NoV growth as take rates improved ~290bps QoQ to 26.1%. This narrowing of NoV-adj. revenue gap stems from company’s strategic shift to an inventory model. QC’s adj. EBITDAM improved by 66bps QoQ to -1.8% of NoV. This improvement was achieved despite continued investment in new store roll-outs and typical seasonal margin pressure. Consequently, adj. EBITDA losses narrowed QoQ to INR1.62bn (INR1.78bn in Q4FY25; HSIE forecast: INR1.8bn). Consolidated adj. EBITDA declined by 42.5% YoY to INR1.7bn (HSIE forecast: INR2.7bn) due to investment in its Going-out business and Bistro (10-min food delivery service). We’ve revised our Adj. EBITDA FY27/28 estimates by 40/35% to account for better margin build-up in Blinkit’s new inventory model. We maintain REDUCE on Eternal with an SOTP-based TP of INR285/sh (incl. 45x Jun-27 EV/EBITDA for FD; 2x Jun-27 NoV for Blinkit).

Sluggish demand weighed down FD growth: Zomato’s FD business continues to experience a slowdown in NoV growth, which rose 13.1% YoY to INR 89.7bn. NoV lagged GoV (Gross Order Value) due to increased restaurant-funded discounts in Q1. MTU grew 9.6% QoQ (+12.8% YoY) to 22.9mn. Take-rates (as % of NoV) improved 117bps YoY to 29.6%, leading to a 17.8% YoY rise in adj. revenue (INR26.6bn; in-line). While margins expanded YoY, they saw a QoQ decline, primarily due to seasonal factors like festival-related delivery partner shortages. CM/adj. EBITDAM (as % of NoV) improved by 140/110bps YoY to 9.9%/5% but declined QoQ by 40/20bps respectively. Adj. EBITDA grew 5.4% QoQ to INR 4.51bn (HSIE: INR 4.69bn). Management expects moderation in growth rates to have bottomed out and targets an NoV growth of 15%+ in FY26.

Blinkit continues to exceed expectations: Blinkit delivered a robust NoV growth of 25% QoQ (+127% YoY) to INR 92bn (HSIE: INR90.9bn), primarily anchored by expansion-led MTU growth. MTUs grew by 23.4% QoQ to 16.9mn (HSIE: 15.8mn), which in turn drove a 24.7% QoQ increase in order volume to ~177mn (HSIE: 163mn). AOV saw a modest 0.6% QoQ growth, settling at INR 669 (HSIE: INR 678). Adj. revenue grew 40.4% QoQ (higher than NoV growth) as take rates improved ~290bps QoQ to 26.1%. This narrowing of the gap between NoV and adj. revenue is an outcome of the company’s strategic decision to transition to an inventory model over the next 2-3 quarters—a move expected to yield ~100bps in margin improvement over time. CM (as % of NoV) remained relatively stable at 3.9%. However, adj. EBITDAM improved by 66bps QoQ to -1.8% of NoV. This improvement was achieved despite continued investment in new store roll-outs and typical seasonal margin pressure. Consequently, adj. EBITDA losses narrowed QoQ to INR1.62bn (INR1.78bn in Q4FY25; HSIE: INR1.8bn). Blinkit added 243 dark stores (net) in Q1 (store count: 1,544). The guidance of 2,000 dark stores by Dec-25 remains on track, with management also noting visibility for eventually reaching 3,000 stores.

Valuation and outlook: While food delivery business remains stable, long-term success hinges on scaling quick commerce profitably amidst competition. We’ve revised our Adj. EBITDA FY27/28 estimates by 40/35% to account for better margin build-up in Blinkit’s new inventory model. We maintain REDUCE on Eternal with an SOTP-based TP of INR285/sh.

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Source: HDFC Securities Institutional Equities