, the parent company of food delivery major
Zomato and quick-commerce platform
Blinkit, have surged nearly 30% since the end of March, mirroring the exuberance in India’s broader market. But with a staggering price-to-earnings ratio of 480 and profitability still some distance away in its fast-growing verticals, investors are now asking the key question: can this rally endure?The optimism around Eternal is largely rooted in Blinkit, its
quick commerce arm that has posted triple-digit annual growth and is fast expanding its footprint. “The Indian retail industry is a trillion dollar industry in terms of size, but it is still largely unorganised,” said Kunal Vora, Head of India Equity Research at BNP Paribas. “We have seen a modern trade making some inroads, but it has still been restricted to top cities… what we saw with quick commerce is very strong growth over the last couple of years driven by the dark stores which provide convenience.”
Vora noted that Blinkit achieved EBITDA breakeven in the first half of FY25, and BNP Paribas expects the company to break even at the EBITDA level in FY27. “What we have seen subsequently is a land grab phase… it is really about chasing and getting the first mover advantage.”
That first-mover push is also evident in Blinkit’s aggressive dark store expansion. Blinkit opened 294 new stores in the fourth quarter of FY25, significantly ahead of its peers. The company has advanced its target of 2,000 stores to December 2025, a move seen as strategic amid intensifying competition.
While Blinkit’s gross order value rose 21% quarter-on-quarter in Q4FY25 to Rs 94.2 billion, and contribution margin improved to 3.1%, adjusted EBITDA margin fell to -1.9% from -1.3% in Q3.
Nomura said that “aggressive store addition and intense competition leading to high marketing costs will likely keep profitability subdued in FY26.”
However,
JM Financial remains optimistic. “We strongly believe Blinkit is on track to turn Adj. EBITDA break-even by 3QFY26,” the brokerage said in its June note. It added that signs of rational competition, rising average order values (AOVs), and slower store additions should support margin improvement going forward.
JM Financial also noted that Blinkit’s losses are already narrowing, from Rs 1.8 billion in Q4FY25 to an estimated Rs 1.5 billion in Q1FY26. In contrast, rival
Swiggy’s Instamart losses are expected to expand in the same period.
Despite intensifying rivalry, Eternal is being consistently favoured over its closest competitor Swiggy. “Eternal is a clear market leader (in GOV/revenue terms) across all its operating business segments,” JM Financial said. “Moreover, it is the only major hyperlocal delivery company in the country that… is currently generating free cash flows, without having compromised on topline growth.”
Bank of America Securities echoed this view after recent ground checks, saying, “We return more optimistic on Blinkit’s (Zomato’s quick com) competitive positioning given strong execution.” The brokerage pointed out that Blinkit continues to add more dark stores while other players like Swiggy, Zepto and BigBasket have started to slow down. BofA said, “We expect this to help Zomato show better quick com growth vs peers.”
Even in Tier 2 cities, Blinkit is reportedly gaining traction, with some dark stores hitting 1,000 daily orders within six to nine weeks. “This is driven, not due to convenience or value, but mainly due to better selection,” BofA said.
Zomato’s core food delivery business has remained resilient. Gross order value in Q4FY25 was down 1.4% quarter-on-quarter but up 16% year-on-year, with contribution margin improving to 8.6% and adjusted EBITDA margin at 5.5%. Zomato expects 17% year-on-year GOV growth in FY26, slightly lower than 20% in FY25.
JM Financial expects Eternal’s food delivery GOV to rise 9% quarter-on-quarter in Q1FY26, boosted by summer seasonality, IPL, and consumer behaviour. The brokerage estimates Eternal’s adjusted EBITDA margin to improve 10 basis points to 4.5% in Q1.
Bank of America noted, “Food delivery growth is not slowing further but holding well… both platforms are focusing on improving margins and looking to invest more in the high growth quick-com business.”
Despite the optimism, analysts remain cautious about sustainability. Nomura has cut its target price on Eternal to Rs 280 from Rs 290, citing “lower near-term profitability in QC.” While the company is not burning cash at the EBITDA level, Nomura warns that prolonged losses in quick commerce remain a risk.
Bank of America raised its target price on Zomato to Rs 270 from Rs 245 after lowering its WACC and projecting reduced competition in the near term. However, it maintained a 'neutral' rating, pointing out that “competition is likely to be high in next 6–12 months as most platforms remain aggressive on market share gains.”
BNP Paribas sees FY26 as a peak-loss year for the quick commerce sector but expects profitability to improve thereafter. “We expect that the model in the case of food delivery… will be replicated. Having said that, this is going to be a more competitive industry,” Vora said. “Right now, it is more a question of just getting the size and we expect margins to follow.”
The rally in Eternal’s stock price may suggest that markets are pricing in a brighter future. But the fundamentals, especially in quick commerce, remain demanding. Blinkit’s adjusted EBITDA margin is still in the red, new store additions are being closely watched, and long-term profitability is uncertain in a crowded market.
As Kunal Vora puts it, “I would not judge them by immediate profitability… we expect margins to follow.” Whether Eternal can reclaim its all-time high of over Rs 300 and stay there will likely depend on how quickly that promise materialises.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
