Eternal Q1 Results: Blinkit’s Turnaround Powers Strong Earnings Growth

Eternal (Previously Zomato) reported a consolidated net profit of ₹92 crore in Q1 FY27, up 268% year-on-year but down 47% sequentially.

The sequential fall may make the quarter appear weak. However, Eternal’s operating performance improved. Adjusted EBITDA increased 223% year-on-year and 29% sequentially to a record ₹555 crore, while profit before tax also increased on both comparisons.

Net profit fell sequentially mainly because the company’s tax expense increased sharply. Meanwhile, Blinkit moved from a large loss last year to a meaningful profit while continuing to add stores, customers and orders.

What Businesses Does Eternal Operate?

Eternal operates through five main business segments.

Food delivery includes Zomato’s restaurant ordering and delivery business. Quick commerce includes Blinkit’s instant delivery operations.

Hyperpure supplies products to restaurants and other businesses. Going-out includes District’s dining, movie, event and activity-booking services.

The Others segment includes newer initiatives such as Bistro, Nugget and Greening India, along with community initiatives such as Feeding India and Blinkit’s ambulance service.

Food delivery, Blinkit and Hyperpure generated a combined adjusted EBITDA of ₹714 crore. District and the Others segment reported combined losses of ₹159 crore.

Therefore: ₹714 crore profit minus ₹159 crore losses = ₹555 crore consolidated adjusted EBITDA

Blinkit contributed ₹264 crore of the ₹383 crore year-on-year improvement in Eternal’s adjusted EBITDA, accounting for around 69% of the increase.

Food delivery remains Eternal’s largest profit generator. However, Blinkit is now adding to group earnings instead of consuming profits generated by Zomato.

Blinkit has also become Eternal’s largest consumer business by order value.

Blinkit contributed around 55% of Eternal’s total consumer NOV. However, food delivery generated ₹606 crore of adjusted EBITDA, nearly six times Blinkit’s ₹102 crore.

Blinkit is therefore the largest segment by consumer order value, while food delivery remains the largest by profit.

Why Did Eternal’s Net Profit Fall Sequentially?

Eternal’s profit before tax increased 19% sequentially to ₹272 crore. However, tax expense increased from ₹54 crore in the previous quarter to ₹180 crore in Q1 FY27.

Until FY26, Eternal mainly created tax provisions on other income, which largely consisted of treasury income. The company also had accumulated business losses from previous years that could be used to reduce taxable income.

Eternal expects the carried-forward losses in its standalone parent company to be fully utilised during FY27. As a result, it has started recognising tax on business income as well.

In simple terms, past losses had helped the company reduce its tax bill. As those losses get exhausted, a larger part of its earnings becomes taxable.

The sequential profit fall was therefore caused mainly by higher taxes, not weaker operations.

Eternal’s Blinkit, Hyperpure and going-out subsidiaries continue to carry accumulated losses that can be adjusted against their future profits.

Why Was This Blinkit’s Strongest Quarter?

Blinkit improved across growth, store productivity and profitability during Q1 FY27.

Blinkit’s NOV increased 86% year-on-year even though its average order value declined slightly.

Growth was driven by more customers, higher order volumes, additional stores and better store productivity rather than customers spending more per order.

Monthly transacting customers nearly doubled to 31.8 million, while orders increased to 331 million. Average NOV per store per day also improved to ₹8.27 lakh.

The biggest change was profitability. Blinkit moved from an adjusted EBITDA loss of ₹162 crore in Q1 FY26 to a profit of ₹102 crore while adding 899 stores over the year.

Blinkit’s gross profit reached ₹4,710 crore, with gross margin improving from 23.6% to 27.5% of NOV.

Contribution increased from ₹360 crore to ₹907 crore, while contribution margin improved from 3.9% to 5.3%. Contribution is calculated after deducting expenses such as delivery, warehousing, wastage, packaging, customer acquisition and payment charges.

Adjusted EBITDA margin improved from negative 1.8% to positive 0.6%, showing that Blinkit is beginning to spread its employee, technology and central costs across a larger order base.

However, contribution margin declined slightly from 5.4% in the previous quarter to 5.3%, suggesting that some of the gross-margin gains were absorbed by expansion and fulfilment costs.

Why Blinkit’s Revenue Growth Needs Context

Blinkit’s reported adjusted revenue increased 553% year-on-year to ₹15,664 crore. However, its underlying business did not become more than six times larger.

Blinkit has shifted from a marketplace model towards a first-party inventory model.

Under the marketplace model, another seller owned the products and Blinkit mainly recorded commissions and fees as revenue. Under the inventory model, Blinkit owns the products and records the full selling value as revenue.

This change makes reported revenue difficult to compare with last year.

On a like-for-like basis, Blinkit’s revenue increased 117% year-on-year. Eternal’s consolidated adjusted revenue increased 173% on a reported basis but 66% on a like-for-like basis.

Blinkit’s 86% NOV growth and 117% like-for-like revenue growth provide a clearer view of the underlying business.

Is Blinkit Becoming Too Capital Intensive?

Blinkit’s improving profitability comes with rising capital requirements.

Unlike food delivery, quick commerce requires stores, warehouses and inventory. Eternal operates around 19 million square feet of store and warehousing space across more than 300 cities.

The company has invested around ₹3,000 crore in capital expenditure over the past four years.

Eternal has also increased its estimated capex per Blinkit store, including warehousing, from ₹1 crore to ₹2.5 crore. This reflects larger stores, wider assortments and technology investments in warehouses.

Blinkit’s net working capital stood at ₹2,545 crore, equivalent to around 14 days of annualised NOV. The company also reported inventory losses equal to around 1.8% of NOV, including expiry, damage, pilferage and losses in transit.

Blinkit is therefore becoming a combination of a technology platform, retailer and supply-chain network rather than remaining an asset-light marketplace.

Can Blinkit Deliver Management’s 42% ROCE Estimate?

Eternal estimates that Blinkit can generate a pre-tax return on capital employed, or ROCE, of 41.7% under steady-state conditions.

ROCE shows how efficiently a business generates operating profit from the capital invested in it.

Management assumes that an average store can eventually generate ₹11 lakh of NOV per day, compared with the current ₹8.27 lakh.

At ₹11 lakh per day, annual NOV per store would be around ₹40 crore. The estimated ₹2.5 crore capex per store would equal around 6.3% of annual NOV.

Adding working capital equal to 3.3% of NOV takes total capital employed to 9.6% of NOV.

If Blinkit generates EBIT equal to 4% of NOV:

4% EBIT divided by 9.6% capital employed = 41.7% pre-tax ROCE

However, these are steady-state assumptions.

Blinkit’s adjusted EBITDA margin is currently 0.6%, compared with management’s assumption of 6%. Daily NOV per store must also increase from ₹8.27 lakh to ₹11 lakh.

The 41.7% ROCE is therefore a long-term target, not Blinkit’s current return.

Author’s Take

Eternal’s Q1 FY27 operating performance was considerably stronger than the sequential decline in net profit suggests.

Adjusted EBITDA increased from ₹172 crore to ₹555 crore year-on-year, while profit before tax increased from ₹88 crore to ₹272 crore. The sequential profit fall was mainly caused by higher taxes.

The biggest improvement came from Blinkit. The business moved from a ₹162 crore adjusted EBITDA loss to a ₹102 crore profit while nearly doubling its customers and orders.

However, Blinkit’s next phase will depend on capital efficiency. The business still needs to improve store productivity and margins substantially to achieve management’s steady-state ROCE assumptions.

Q1 FY27 showed that Blinkit can grow while improving profitability. The next challenge is proving that this growth can also generate strong returns on the capital invested in stores, warehouses and inventory.