Eternal Ltd , formerly known as Zomato, reported a mixed bag of results for the second quarter, with substantial revenue growth overshadowed by a decline in profitability. The food delivery giant's strategic shifts and expansion efforts have yielded significant top-line growth but at the cost of near-term margins.

Revenue Soars, Profits Dip

Eternal Ltd's consolidated revenue from operations surged nearly threefold to Rs 13,590.00 crore in Q2, significantly beating analyst estimates of Rs 8,665.00 crore. This remarkable growth was primarily driven by the company's transition to an inventory-led model in its quick commerce segment, Blinkit.

However, the company's net profit declined by 63% to Rs 65.00 crore, down from Rs 176.00 crore in the same quarter last year. The profit decline was attributed to higher inventory costs and compressed EBITDA margins, which fell to 1.8% from 4.7% in the previous year.

Segment Performance

The quick commerce segment, Blinkit, emerged as the star performer with a staggering 756.00% year-on-year growth. Food delivery maintained steady growth at 23.00%, while the Going Out segment (dining and entertainment) grew by 24.00%. Hyperpure, the B2B supplies segment, saw a decline due to the shift in the quick commerce business model.

Strategic Shifts and Investments

Eternal Ltd has been aggressively expanding its quick commerce operations. The company added 272 new dark stores during the quarter, bringing the total to 1,816. Management expects to reach 2,100 stores by December 2025, indicating continued focus on this high-growth segment.

The company has also made strategic investments in marketing and customer acquisition, with marketing spends in Q2 up approximately 4 times year-on-year and 1.4 times quarter-on-quarter.

Analyst Opinions

Brokerage opinions remain divided on Eternal Ltd's performance and outlook:

• Bank of America, UBS, Emkay, and Nuvama maintained Buy ratings with target prices between Rs 400.00-430.00, citing strong revenue growth and positive guidance for quick commerce expansion.
• Macquarie, however, maintained an Underperform rating with a Rs 200.00 target price, expressing concerns over rising competitive intensity and questioning the sustainability of profitability given the company's high valuation multiples.

Management Commentary

Deepinder Goyal, Managing Director and CEO, commented on the results: "While our revenue growth has been strong, we are consciously investing in market share growth and expansion. We believe these investments will drive long-term value creation, even if they impact near-term profitability."

The management expects Blinkit to achieve 100% growth over the next 1-2 years, underlining the company's bullish stance on the quick commerce segment.

Outlook

As Eternal Ltd continues its aggressive expansion in the quick commerce space and maintains steady growth in its core food delivery business, investors will be closely watching how the company balances growth with profitability. The coming quarters will be crucial in determining whether the company's strategic investments translate into sustainable long-term value creation.

Investors should note that while the top-line growth is impressive, the decline in profitability and margins warrants careful consideration. The company's ability to improve operational efficiency and achieve economies of scale in its rapidly growing segments will be key factors to monitor in the future.

Eternal (formerly Zomato Limited) has reported no deviation in the utilization of proceeds from its qualified institutions placement (QIP), according to the company's monitoring agency report for the quarter ended September 30. The report, issued by ICRA Limited, details the allocation and usage of the Rs 8,436.12 crore net proceeds raised through the QIP in November.

Allocation of Funds

The QIP proceeds have been allocated across four key areas:

Utilization Progress

As of September 30, Eternal has utilized Rs 2,945.61 crore of the total funds, with Rs 5,490.51 crore remaining unutilized. The company has deployed the unutilized proceeds in various instruments, including:

• Fixed deposits
• Government securities
• Liquid funds

These investments are yielding returns ranging from 5.75% to 8.14%.

Project Timelines

The company reports that all projects related to the QIP proceeds remain on schedule, with completion timelines extending from FY26 to FY28.

Monitoring Agency's Statement

ICRA Limited, the appointed monitoring agency, has confirmed that there has been no deviation from the stated objects of the issue. This assessment aligns with the company's commitment to transparent and efficient use of the raised capital.

Investor Implications

For investors, the report provides reassurance that Eternal is managing the substantial QIP proceeds in line with its stated intentions. The diversified allocation of funds across operational expansion, marketing, and technology development suggests a balanced approach to growth.

The investment of unutilized funds in a range of instruments demonstrates prudent financial management, ensuring that idle capital continues to generate returns while awaiting deployment.

Bistro by Blinkit Business Transfer

In a separate development, Eternal announced that its wholly owned subsidiaries Blink Commerce Private Limited (BCPL) and Blinkit Foods Limited (BFL) have entered into a business transfer agreement. The Bistro by Blinkit quick food service business will be transferred from BCPL to BFL for INR 57 crores through a slump sale on a going concern basis.

Key details of the transfer include:

• The transfer is part of internal restructuring aimed at developing the quick food service business under BFL.
• The Bistro Business generated revenue of INR 0.20 crore in FY 2024-25, representing 0.005% of BCPL's revenue and 0.002% of Eternal's standalone revenue.
• The business has a net worth of INR 16 crore as of March 31.
• The agreement was signed on October 16, with completion expected within 30 days.
• BFL was incorporated on August 18, specifically to engage in quick food service business under the Bistro by Blinkit brand.
• The transaction is classified as a related party transaction conducted at arm's length.

As Eternal continues to execute its growth strategy and internal restructuring, stakeholders will likely keep a close eye on the impact of these investments and organizational changes on the company's market position and financial performance in the coming quarters.