Zomato, recently rebranded as Eternal, is making headlines not only for its food delivery services but also for the remarkable growth of its rapid delivery segment, Blinkit. This innovative venture has caught the attention of investors, prompting the brokerage firm Anand Rathi to uphold a ‘Buy’ rating on the stock, albeit with a revised target price set at ₹300. The firm highlights the company’s strategic vision and execution as pivotal amid intense market competition.

Blinkit’s Impressive Growth

Eternal’s quick commerce branch, Blinkit, is consistently surpassing market expectations. According to Anand Rathi’s latest report, the Gross Order Value (GOV) for Blinkit surged by 20.8% on a quarterly basis and an impressive 134% year-over-year. Notably, over the last two quarters, Blinkit has expanded its network by nearly 40%, launching 294 new dark stores and bringing its total to 1,301.

The brokerage expressed optimism, stating, “We believe losses have peaked and should taper ahead,” indicating a positive outlook for Blinkit’s future.

Traditional Food Delivery Faces Challenges

While Blinkit thrives, Eternal’s core food delivery division experienced a slight dip. The GOV in this segment fell by 1.4% from the previous quarter but still marked a 16% increase year-over-year. Anand Rathi attributes this downturn to temporary hurdles, including a sluggish market demand, a shortage of delivery partners, and the removal of approximately 19,000 restaurant partners from the platform.

Interestingly, February’s shorter month contributed to the decrease in volumes. The report notes, “Adjusting for this, NOV growth could have been higher by ~200bps compared to -3% q/q,” suggesting that the decline might have been overstated.

Strategic Withdrawals in Service Offerings

In a strategic pivot, Eternal has opted to discontinue its 10-minute delivery service known as “Zomato Quick” along with the Everyday home-cooked meal service. This decision stems from insufficient customer demand and challenges in achieving profitability. Nevertheless, the company maintains its ambitious goal of achieving 20% year-on-year growth in the food delivery segment, which reflects management’s confidence in its core operations.

The report emphasizes, “Despite high competition, the company has maintained its market share over the last few quarters,” showcasing Eternal’s resilience in a challenging environment.

Future Growth and Valuation Insights

Looking ahead, Anand Rathi forecasts substantial growth in both GOV and revenue, estimating a CAGR of 42.8% and 44.9% respectively between FY25 and FY27. The report anticipates GOV contributions from various segments: 15.7% from food delivery, a staggering 73.8% from quick commerce, and 40% from Hyperpure. This robust growth trajectory is expected to enhance Eternal’s take-rate, projected to rise from 18.8% in FY25 to 19% by FY27.

Despite an adjusted EBITDA loss widening to ₹1,780 crore in Q4, this figure fell short of market expectations. The brokerage stated, “We cut our FY26e/27e EBITDA by ~37.6%/~14% and maintain our Buy rating,” indicating continued confidence in the stock’s potential.

As Eternal navigates this dynamic landscape, its strategic decisions and innovative offerings position it well for future success. For more insights on the evolving food delivery market, consider exploring market trends and investor strategies.