Key Takeaways
- Eternal posted a 19.5% sequential revenue rise and a 62.5% jump in EBITDA, yet shares fell 9%.
- Blinkit’s store count grew to 2,027, missing its 2,100‑store target, lowering cash burn but also slowing market‑share capture.
- Analysts keep a Buy rating but trimmed 12‑month price targets by up to 14% amid margin‑erosion fears.
- Sector peers (Zomato, Swiggy, Amazon) are deepening discount wars, threatening Eternal’s profitability trajectory.
- Investors must weigh a near‑term profitability dip against a long‑term growth story targeting $1 billion revenue by 2027.
The Hook
You just watched Eternal tumble 9%, and the reason could hit your portfolio.
Why Eternal's Profit Surge Masks a Growing Cash‑Burn Risk
On paper, Eternal’s December quarter looks stellar: consolidated adjusted revenue climbed to ₹16,692 cr, a 19.5% sequential lift, while EBITDA surged 62.5% to ₹364 cr. Net profit leapt 57% sequentially, reaching ₹102 cr. The engine behind this acceleration is Blinkit, whose top‑line exploded from ₹1,399 cr to ₹12,256 cr – a near‑nine‑fold increase.
But the headline numbers conceal a critical trade‑off. The rapid revenue expansion was partially a by‑product of slower store roll‑out – 211 new Blinkit locations added, short of the 2,100‑store ambition. Fewer openings meant lower capital outlay and a sharper profit surprise, yet it also left the brand lagging in a market where speed and density are king. Analysts warn that the next quarter will demand an aggressive acceleration to meet the 3,000‑store target by March 2027, potentially reigniting cash burn.
In quick‑commerce, every new storefront incurs fixed costs – rent, labor, last‑mile logistics – that must be offset by order volume and gross margin. If Eternal pushes out 800‑plus stores in the next twelve months, the cash‑flow cushion from the current quarter’s modest burn could evaporate, compressing adjusted EBITDA margins.
Quick‑Commerce Landscape: Competitor Moves and Sector Land‑Grab
The Indian quick‑commerce arena is in a classic “land‑grab” phase. Zomato’s Hyperpure and Swiggy’s Instamart are pouring deep discounts, subsidising delivery fees, and even offering free groceries to win mindshare. These tactics depress unit economics but raise order frequency. Eternal’s peers are also expanding store networks at break‑neck speed, leveraging omnichannel models that blend online orders with physical micro‑fulfilment hubs.
Such aggressive pricing skews the competitive set toward a “winner‑takes‑most” outcome, where the victor sustains lower margins for a limited window before economies of scale restore profitability. Eternal’s current 5.4% adjusted EBITDA margin in its food‑delivery arm under the Zomato brand is respectable, yet the ‘going‑out’ segment still posts losses, indicating that the discount‑driven growth model is not yet fully stabilised.
Historical Parallel: Past Quick‑Commerce Rallies and Their Fallout
History offers a cautionary tale. In 2021, Swiggy’s rapid expansion in Tier‑2 cities delivered a 70% YoY revenue jump, but the company’s cash burn peaked at ₹8 bn, forcing a strategic pause and a subsequent margin‑recovery plan that took two fiscal years. Similarly, Zomato’s 2022 “Super‑Saver” campaign inflated order volume but slashed gross margins, leading to a 12% share price correction when investors reassessed the sustainability of deep discounts.
The pattern is clear: a profit‑surprise often precedes a cash‑burn spike as firms double‑down on network expansion. Eternal appears poised at the same inflection point.
Technical Insight: Decoding Adjusted EBITDA, Net Order Value, and Cash Burn
Adjusted EBITDA strips out non‑recurring items and depreciation, giving a clearer view of operating profitability. Eternal’s 62.5% EBITDA lift is impressive, yet it remains a small fraction of total revenue, underscoring the thinness of margins in a discount‑heavy market.
Net Order Value (NoV) measures the total value of orders processed, a key indicator of marketplace health. Eternal aims for a 100% YoY NoV growth – an ambitious target that will likely require aggressive pricing and marketing spend.
Cash Burn reflects the net cash outflow from operations. Accelerated store openings, marketing incentives, and inventory for Hyperpure will inflate this metric, potentially outpacing operating cash generation in the near term.
Investor Playbook: Bull vs Bear Scenarios for Eternal
Bull Case
- Successful acceleration to 3,000‑plus stores by March 2027, unlocking network effects and lower per‑order costs.
- Hyperpure scales, contributing >₹2 trn revenue and stabilising the B2B grocery margin at 4‑5%.
- Discount wars ease as competitors consolidate, allowing Eternal to improve adjusted EBITDA margin to >7%.
- Stock re‑ratings push the price target back toward ₹450‑₹470, delivering >80% upside from current levels.
Bear Case
- Store rollout stalls due to regulatory curbs or real‑estate bottlenecks, forcing Eternal to chase market share with deeper discounts.
- Cash burn outpaces operating cash flow, leading to higher debt levels and potential dilution.
- Margin compression pushes adjusted EBITDA below 4%, eroding profitability and prompting a target‑price cut below ₹300.
- Share price could slide another 15‑20% as investors price in a prolonged profitability lag.
In the balance, Eternal offers a high‑conviction play for those willing to weather short‑term volatility in exchange for exposure to India’s fastest‑growing quick‑commerce segment. Align your position size with your risk tolerance, and keep a close eye on store‑opening velocity, discount intensity, and cash‑burn trends over the next two quarters.