- Revenue exploded 202% YoY to ₹16,315 cr, yet the stock fell 9% after an intraday rally.
- Founder‑CEO Deepinder Goyal stepped down; Blinkit chief Albinder Dhindsa takes the helm.
- Brokerages cut EBITDA assumptions, citing an impending "dogfight" over discounts and order minimums.
- Target prices range from ₹360 to ₹415, implying upside of 27‑46% from today’s close.
- Sector rivals (Swiggy, Amazon) are accelerating store roll‑outs, pressuring margins.
You missed the fine print in Eternal’s Q3 report, and the market is punishing you.
Eternal Q3 Profit Explosion vs. a Sudden Stock Slide
Eternal reported a consolidated net profit of ₹102 cr for Q3 FY26, a 73% year‑on‑year rise. The headline number looks impressive, but it sits on a revenue base that surged from ₹5,405 cr to ₹16,315 cr – a 202% jump. Expenses climbed in tandem, reaching ₹16,493 cr, leaving the profit margin razor‑thin.
Investors initially cheered the earnings, pushing the share price to an intraday high of ₹305, the strongest level since December 2022. The rally evaporated within hours, and the stock closed at ₹276, a 9% decline from its peak. The disconnect reveals that the market is pricing in more than headline profit – it’s wary of the sustainability of such explosive growth.
Why Eternal's Margin Outlook Mirrors the Quick‑Commerce War
Quick commerce (QC) is a capital‑intensive battlefield. Companies fight for market share by slashing minimum order values, offering deep discounts, and expanding hyper‑local store networks. Motilal Oswal warns that these tactics will compress EBITDA, especially for Blinkit, which only just hit adjusted EBITDA breakeven. The brokerage trimmed its FY27/28 EBITDA assumptions by roughly 15% and lowered its target price to ₹360, down from ₹420, while still maintaining a "Buy" call. The implied upside of 27% from the current price reflects a belief that the market has over‑reacted to short‑term pressure.
Leadership Shuffle: CEO Exit and Its Strategic Signal
Founder and Group CEO Deepinder Goyal’s resignation could be read as a red flag, but analysts differ. Elara Capital argues the move is positive – Goyal will stay on as Vice Chairman, preserving strategic continuity while allowing a seasoned operator, Albinder Dhindsa, to run day‑to‑day execution. From a governance perspective, a clean leadership transition reduces execution risk. However, any perception of instability can amplify volatility, especially when the company is navigating a competitive maelstrom.
How Competitors Like Swiggy and Amazon Are Shaping the Battlefield
Swiggy’s "Super‑Mart" and Amazon’s hyper‑local delivery push are increasing the density of fulfillment hubs across Tier‑2 and Tier‑3 cities. This hyper‑competition forces Eternal to either double down on discounts or risk losing order volume. The sector’s unit economics reveal that each additional discount erodes gross margin by roughly 0.5‑1%, while the cost of opening a new Blinkit micro‑warehouse can exceed ₹2 cr. The net effect is a margin drag that can persist for several quarters, even if revenue continues to grow. Historically, similar price wars in 2022 saw delivery players sacrifice profitability to lock in customers. Those who survived (e.g., Zomato) later leveraged scale to negotiate better rates with restaurants and logistics partners, eventually restoring margins.
Historical Parallel: The 2022 Delivery Frenzy and Lessons Learned
In late 2021‑22, the Indian food‑delivery market witnessed a surge in discounting as firms chased the newly online consumer base. Revenue growth was double‑digit, but many players reported negative EBITDA. By mid‑2023, a consolidation of margins occurred as companies trimmed discounts, raised minimum orders, and focused on high‑margin premium offerings. Eternal appears to be at a similar inflection point. The current "land‑grab" phase may be necessary to secure a larger user base, but investors should monitor the timing of the transition from volume‑to‑profitability.
Investor Playbook: Bull vs. Bear Cases
Bull Case
- Revenue growth remains >150% YoY for the next two quarters, driven by Blinkit’s aggressive store rollout.
- Margin improvement as discount intensity eases and economies of scale lower per‑order logistics cost.
- Leadership continuity under Dhindsa and strategic oversight from Goyal keep execution on track.
- Target price upside of 30‑45% if EBITDA assumptions are revised upward in FY27.
Bear Case
- Competitive discount wars intensify, pushing adjusted EBITDA back into negative territory for 2026‑27.
- Higher capital outlays for micro‑warehouse expansion strain cash flow, leading to dilution or debt financing.
- Leadership change triggers execution hiccups, delaying product launches and market penetration.
- Target price revisions to ₹360 or lower, limiting upside to under 15%.
Investors should weigh the timing of margin recovery against the risk of an extended price‑war cycle. Position sizing and stop‑loss placement are critical in this volatile segment.