Eternal Ltd Q4 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Manish Adukia - Goldman Sachs - Analyst : My first question is on the competition in Quick Commerce, which you -- so do you expect it to intensify in the future, particularly from delivery platforms. Now the question here is, is that an expectation? Or are you already seeing that play out? And where is this higher competition showing up? I understand higher marketing costs, but your take rate, your contribution margins are both quite stable quarter on quarter. So does that mean that there's been almost no impact so far or any meaningful impact so far of competition on either user fee or store rental cost or, let's say, store-level employees costs, et cetera. I'd love to get your thoughts on that. That's my first question, please.

Question: Manish Adukia - Goldman Sachs - Analyst : Right. And again, in the shareholder letters, you specifically talked about next-day delivery platform, would you expect competition to intensify, but some current commerce platforms, how have the trends been in the last two, three months? Has competition continued to increase? Has it been stable? Has it reduced? Would love to see the dynamics between Quick Commerce versus next-day delivery how is that moving on competition?

Question: Manish Adukia - Goldman Sachs - Analyst : Understood. And just last question on this one. I mean, in terms of just the stores, which have continued to remain our rollouts have remained elevated about 300 stores in the quarter. Have there been any meaningful challenges from a store rollout perspective? I guess, from a competition landscape, whether it's in terms of, I don't know, like finding stores in the right locations or just the inflation and rental costs there? Has that been meaningful or that's been more manageable?

Question: Manish Adukia - Goldman Sachs - Analyst : And right now, Akshant, you would have very limited visibility on June quarter from a margin profile perspective like the shareholder gets better or worse that at this point in time, we don't have visibility on.

Question: Manish Adukia - Goldman Sachs - Analyst : Just my second question on food delivery, if I may. Of course, like your guidance remains 20% plus. In the quarter, we have 16% year-over-year growth and you explained to what's driven that slowdown. But again, like why 20%? I mean, again, when you say 20% guidance, what is driving confidence that 20% is the right number? And when you talk about those three things, affordability, assortment and low delivery timeline, I mean, at least as a consumer or an outside, it feels like they are all moving in the opposite direction of where they should, right? I mean, you obviously said in the shareholder letter that there was a Zomato quick experiment didn't work as well as you would have liked. From an affordability standpoint, the prices between aggregators and what restaurants have their menu probably has continued to widen. So I'm just trying to think in the near term is 20% like a realistic number at all to assume? Or is that like a much longer path to get to that 20% number?

Question: Aditya Soman - CLSA - Analyst : Sir, two questions. So firstly, in terms of business stores that you've added, can you give us a sense of how many have come in new cities and then just an extension of that on the cities you are present here today? And second question on Zomato Every Day. Now -- but this was one attempt to address the affordability and sort of frequency of fuels, but it seems like you are shutting the business down. So can you give us a sense of what we already didn't work out with that business? And is there another similar business or something along those lines that are tracking? Maybe does Zomato best fit in that gap?

Question: Aditya Soman - CLSA - Analyst : Understand. And just in terms of the first in terms of city additions. Would it be fair to say that, let's say, the team taken for these new stores to hit breakeven remains unchanged more or less in line with the average? Or is there any difference in the cities?

Question: Swapnil Potdukhe - JM Financial - Analyst : My first question is on Quick Commerce. So one of your competitors seems to have mentioned that the numbers include subscription fees and ad income. But your definition does not seem to include that. What I can understand why subscription fee may not be included in your numbers, but I wanted to understand how do you report ad income? And what percentage of your take on GOB maybe or whichever way you want, will be coming from ad income and customer fees?

Question: Swapnil Potdukhe - JM Financial - Analyst : And okay, that's great. On customer fees, the delivery fees and handling fees and other fees like that?

Question: Swapnil Potdukhe - JM Financial - Analyst : Got it. Got it. And second question is on your recent changes in your reporting GOB to NOB, right? So I do understand that Blinkit level, the difference is around 22% odd. But just wanted to get a sense on category-wise, how big a difference could be there between F&V, packaged grocery or some other general merchandise, the difference between GOB to NOB in those categories?

Question: Swapnil Potdukhe - JM Financial - Analyst : Okay. Any numbers you would like to call out on this side? Or --?

Question: Swapnil Potdukhe - JM Financial - Analyst : Got it. Got it. And the next question is on your recent plans to get the shareholder approval to lock in the foreign ownership. Now -- just wanted to get a sense as to the -- what would be the inventory days in this model? I presume basis, the numbers we have given that would be 15 to 16 days of inventory, if you were to do it completely on your own balance sheet. But how do you see those inventory-related investments going forward, especially if you start doing low ordering frequency categories like electronics, white goods. I mean is there a chance that this 15, 16 days can go closer to 20, 25 days kind of inventory?

Question: Swapnil Potdukhe - JM Financial - Analyst : Okay. But just to get a sense as to how much improvement can you see on the commission side, if you were to do the -- you see what to completely to move inventory model?

Question: Swapnil Potdukhe - JM Financial - Analyst : And just a last one on the food delivery side. So there have been some thoughts about Rapido trying to disrupt the food delivery business model, where you right now work on the commission-based model but they plan to introduce subscriptions. Are you by any chance evaluate implement this idea yourself? Are there any pros on cons? Or is it too early to think about it? I mean, just a sense as to what your thoughts are if this idea picks up?

Question: Sachin Salgaonkar - BofA Global Research - Analyst : A few questions. Firstly, what -- how do you guys look at your market share as your statement in the shareholder letter saying that we'll aggressively look to grow our market share in Quick Commerce, are you able to maintain? Are you able to gain your market share basis, your understanding in last one to two quarters?

Question: Sachin Salgaonkar - BofA Global Research - Analyst : Got it. Second question, Blinkit clearly has a slight different approach in Quick Commerce as compared to the traditional Quick Commerce competitors. And I'm saying that because you guys don't have private labels. You don't -- you guys don't have the super saver or the MAX saver in front of your competitors. Any particular reason why you guys are not doing it? Is it economics? Is it something else?

Question: Sachin Salgaonkar - BofA Global Research - Analyst : Got it. Third question, as you're expanding into Tier 2, Tier 3 cities, how do you look at the appetite and the ability of consumers to pay out here? And I'm saying that because in food, we face this problem where we had to shut down business in a few cities and come back. Do you see a good appetite in demand for quick commerce services right now?

Question: Sachin Salgaonkar - BofA Global Research - Analyst : Got it. And last question, a bit of clarification on numbers. I do see in EBITDA, there is an other losses suddenly became INR16 crore versus close to INR1 crore-odd number in last quarter. Anything specific which is going out here in experiments perspective, which has led to use loss in this quarter?

Question: Sachin Salgaonkar - BofA Global Research - Analyst : Got it. Akshant, I thought Bistro might sit in food, but you guys are looking to keep it separate right now.

Question: Sachin Salgaonkar - BofA Global Research - Analyst : Got it. So logically, this is the way the losses could remain high for some point as and how you experiment, right?

Question: Sachin Salgaonkar - BofA Global Research - Analyst : Got it. And lastly, other income has increased from INR252 crore to INR368 crore. Is it treasury? Is it something else which has led to this increase?

Question: Aditya Suresh - Macquarie Research - Analyst : So Albinder for you maybe on Blinkit. This quarter, I thought it was really interesting that contribution margin was maintained. The loss expansion is more to the adjusted levels. You're going to more the incentive spend and is it right? So as we -- just reflecting your comments on competition for the next few quarters or maybe if I just expand it as well, in the face of competition, could we expect contribution margin to drop? Or should we expect contribution margin to be flat?

Question: Aditya Suresh - Macquarie Research - Analyst : Got it. And just in terms of the prior state in the first half when you were at the breakeven position, would it be fair to say that maybe back in the path towards breakeven only once competition settles? Or do you see any other levers here to kind of pull to get us back on the trajectory even as competition is expanding?

Question: Aditya Suresh - Macquarie Research - Analyst : I appreciate that. And on food delivery, would transacting users be a primary kind of growth vector for the next couple of years? Or are you looking to drive more through frequency?

Question: Gaurav Rateria - Morgan Stanley - Analyst : Congrats on good execution. A couple of questions. On your comment on competition intensifying in Quick Commerce. So far, our investments were focused on growing network of stores, increasing assortment while not necessarily focusing a lot on subsidies. And now you have talked about growing aggressively market share. So any change in priorities from investment point of view?

Question: Gaurav Rateria - Morgan Stanley - Analyst : Got it. Any color that we can get on your SSG growth in the top cities, if not quantification, some qualification or comments on how has it been trending over the last few quarters? Any signs of slowdown or is still trending on the upward direction?

Question: Gaurav Rateria - Morgan Stanley - Analyst : Got it. My third question is on your comment around the shortage of the last mile workers, which may have impacted the overall food delivery business. I'm just trying to understand like over longer term, how are you going to be solving for that and unless a material increase in supply happens, it will be a constrained factor for growth, both for food delivery and quick commerce or is structurally the cost of last mile can go up compared to what it is today?

Question: Gaurav Rateria - Morgan Stanley - Analyst : Okay. Last question, why there's a decline in the going out business? And are the investments going to remain elevated in this segment? At what point in time do you think you will have to taper off the investments and this business moves towards steady-state profitability?

Question: Vijit Jain - Citi - Analyst : So my first question on the food delivery. Now that you've shut down the quick thing and one of the three growth vectors you've called out here is delivery timelines. As you know, one of the mechanisms to grow the food delivery business and the other was affordability, where you obviously shut down every day. So specifically to the delivery timeline thing, what is the path to lowering that going forward in the medium term now that you think the quick model didn't work?

Question: Vijit Jain - Citi - Analyst : Got it. So if I understand it right, the kitchen infrastructure side improvements is really hard to do in -- with restaurant partners and in a very quick timeframe. And whatever you could do on the delivery fleet optimization, where you place them those kinds of improvements you would. Is that a fair understanding? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 11:30AM, ETEA.NS - Q4 2025 Eternal Ltd Earnings Call

Question: Vijit Jain - Citi - Analyst : Great. Got it. My second question is on the Blinkit comment on competition, right? So if I look at these numbers, it looks to me like your new store ramps in terms of quarter one, GOB, quarter two GOB, that trajectory seems pretty similar. I mean, based on these numbers, it seems to me that it's probably pretty similar to what you've said before. And you've obviously had one of the best MTU growth quarters and contribution profit is the same QoQ in rupees per order, even though your AOV was lower. So in general, the competition has only really affected you in terms of ability to as those higher delivery fees?

Question: Vijit Jain - Citi - Analyst : Got it. And just one last question. The INR1,000 crore of working capital comment that you made. I just wanted to be clear that this is essentially 15 days of working capital, right? And I mean just based on that math, because it would be.

Question: Vijit Jain - Citi - Analyst : And I wanted to understand, you've talked about how business in quick commerce has in general. So as you grow into broader categories and go into these high-margin toys and all kinds of long-tail categories, right? How does that change how you think about the working capital? And this is including both the dark stores as well as your warehouses, right, in any case?

Question: Vijit Jain - Citi - Analyst : I see. So the INR1,000 crore comment is for the nonmarketplace business that you would do?

Question: Ankur Rudra - JPMorgan - Analyst : Just the first question on quick commerce, maybe a follow-up to the last question. Hyperpure is currently doing some of the non-restaurant business for Blinkit. Could you maybe highlight what is the level of working capital that's currently being deployed there?

Question: Ankur Rudra - JPMorgan - Analyst : Okay. In the quick commerce business, the MTC growth was quite nice, but you all keep -- you've referenced in your competition a lot in the letter in this call. Are you seeing any kind of loss of customer wallet share in existing areas where store density is going up because of competition? .

Question: Ankur Rudra - JPMorgan - Analyst : Okay. In terms of the NOB to GOB ratio, I noticed there was a slight uptake this quarter. Does that -- is that just seasonality? Or is that moderating subsidies in the ecosystem? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 11:30AM, ETEA.NS - Q4 2025 Eternal Ltd Earnings Call

Question: Ankur Rudra - JPMorgan - Analyst : Okay. Understood. Maybe just a couple of questions on food. Can you highlight whether this rider availability problem is will need a commission-based solution? Or is something else that you can do?

Question: Ankur Rudra - JPMorgan - Analyst : Okay. Typically, 1Q is usually strong for food delivery historically. Can you highlight if you've seen any meaningful seasonal pickup in April so far? And if that will help the YoY growth rate?

Question: Ankur Rudra - JPMorgan - Analyst : Okay. If I can squeeze one last question. I think I missed the answer to a prior question on private label. Why have you chosen not to do it? .

Question: Gaurav Malhotra - Axis Capital - Analyst : Just a couple of questions. So there are already three quick commerce players of reasonable size and scale and a couple of horizontals, like you mentioned also in train. So from your perspective, given these platform businesses with some sort of network effect, how many such players can potentially exist in the market like, say, in the medium term and not in the near term for sure, but at least in the medium term? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 11:30AM, ETEA.NS - Q4 2025 Eternal Ltd Earnings Call

Question: Gaurav Malhotra - Axis Capital - Analyst : Got it. And in terms of given the kind of expansion which you are doing and obviously, which the other players are also doing in terms of store expansion within the cities outside new cities. And this all expansion is coming at a time when there is generally the subsidies being offered. So what -- so how much of a demand overestimation you think is happening over here? There would be some bit, but any sense there is that a worry for you guys?

Question: Abhisek Banerjee - ICICI Securities - Analyst : So yes, first of all, congrats on a robust set of numbers and. So I have a few questions now you've spoken about competitive intensity impacting your COGS. So can you give us some idea of how much your last mile delivery costs go up YoY?

Question: Abhisek Banerjee - ICICI Securities - Analyst : Sure. You also spoke about your marketing spend is going up, right? So can you give some sense on what you spend on? Was it more performance marketing based or? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 01, 2025 / 11:30AM, ETEA.NS - Q4 2025 Eternal Ltd Earnings Call

Question: Abhisek Banerjee - ICICI Securities - Analyst : Okay. With regards to -- so one of the things that I saw that your other income is brought up, but your taxation has actually come down. And you have given that explanation for that? You've talked about some unabsorbed depreciation, which was set up here. But given a very significant INR30 crore and saving correct. Now is that something that would be recurring in nature? Or if you could just explain that portion a little more?

Question: Abhisek Banerjee - ICICI Securities - Analyst : Now with regards to this category, you mentioned that you want to privately. But you've also given some data regarding the non-restaurant B2B sales in -- Now in a scenario where you're moving out sellers, does this business not become a in the future?

Question: Abhisek Banerjee - ICICI Securities - Analyst : I mentioned. And just one last question. As you mentioned not to answer it, but my understanding was a lot of these competitors, the new entrant especially that you were talking about were actually trying to move some of the certain delivery customers into the quick commerce segment, right? Because there is a clearly you would be who want share otherwise. Is has something change to their, which is leading to this cautious return?

Question: Abhisek Banerjee - ICICI Securities - Analyst : So my understanding was that a lot of these new entrants for example, your Flipkart was just trying to move their existing grocery slotted delivery customers, two of quick commerce model, so that we don't -- they don't lose out for you in the longer run. But has something changed there? I mean, why are you becoming a little more cautious on this?