Eternal gains from Blinkit expansion as food delivery profitability continues to scale

Investment View and Valuation

Emkay Research’s October 22, 2026 result update on Eternal retains a BUY recommendation and raises its DCF-based target price by 5 per cent to Rs420.

The positive view is based primarily on Blinkit’s quick commerce execution, aggressive yet economically sustainable network expansion, and the scale and profitability of the Food Delivery business. Emkay believes Eternal is best placed to capture a large share of India’s quick commerce opportunity because of Blinkit’s sourcing, inventory management, category expansion, cash reserves and fulfilment network. It also views Zomato Food Delivery as a cash-generating business supported by a duopoly market structure and industry-leading margins.

Emkay’s Rs420 target price uses a DCF framework with a 13.36 per cent WACC. The valuation implies 35 times FY28E EV to EBITDA for Food Delivery and 1.89 times FY28E EV to NOV for quick commerce.

2QFY27 Financial Performance

Eternal’s 2QFY27 consolidated revenue was Rs2,413.8 crore, up 19.4 per cent quarter on quarter and 77.6 per cent year on year. Reported EBITDA was Rs75.2 crore, up 26.6 per cent quarter on quarter and 214.6 per cent year on year, while reported PAT was Rs12.5 crore.

Revenue was 2.0 per cent above Emkay’s estimate and reported EBITDA was 17.4 per cent above the broker’s estimate. The reported EBITDA margin expanded 18 basis points sequentially to 3.12 per cent.

Blinkit Quick Commerce: Faster Network Expansion

Blinkit quick commerce NOV rose 22.2 per cent quarter on quarter to Rs20,940 crore in 2QFY27, accelerating from 19.1 per cent growth in 1QFY27. Contribution margin remained stable at 5.3 per cent despite substantial dark-store additions, while adjusted EBITDA improved to Rs184 crore from Rs102 crore in 1QFY27.

Adjusted EBITDA margin rose 28 basis points sequentially to 0.88 per cent through operating leverage. Blinkit added 308 stores during the quarter, taking its count to 2,751. Management increased its March 2027 store target to more than 3,500 from 3,000 and targets 5,000 stores by March 2028.

Smaller-city stores are reportedly reaching orders-per-day ramp-up in a timeframe similar to metro stores, with net average order value at 85 to 90 per cent of metro levels. Mature cities already generate adjusted EBITDA margins above 5 per cent.

Management expects year-on-year quick commerce NOV growth to accelerate from 3QFY27 as store additions rise, without near-term margin dilution, followed by long-term margin expansion. It retained its FY29 adjusted EBITDA guidance of US$1 billion.

Emkay has increased Blinkit store, NOV and customer assumptions, but the faster network rollout reduces its FY27E and FY28E quick commerce adjusted EBITDA estimates by 17.5 per cent and 15.5 per cent respectively. The broker expects the larger scale to improve longer-term economics and has raised FY29E quick commerce adjusted EBITDA by 0.4 per cent.

Food Delivery, Going-Out and Hyperpure

Food Delivery

Food Delivery NOV grew 21.5 per cent year on year to Rs11,445 crore, while adjusted EBITDA rose 24.7 per cent year on year to Rs627 crore. Food Delivery adjusted EBITDA margin moderated 10 basis points quarter on quarter to 5.48 per cent as Eternal increased customer acquisition and frequency investments amid greater competitive intensity.

Management expects margins to remain broadly flat over the next one to two years while reinvesting where returns justify market expansion and absolute adjusted EBITDA growth. It believes the food delivery market can grow at more than 20 per cent CAGR over the long term.

Going-Out and Hyperpure

Going-Out NOV grew 58.0 per cent year on year to Rs3,259 crore, with an adjusted EBITDA loss of Rs64 crore. Management reiterated a target of breakeven within one to three quarters.

Hyperpure revenue increased 12.8 per cent year on year to Rs1,154 crore and adjusted EBITDA margin improved to 0.9 per cent.

Estimates and Forecasts

Emkay raised revenue estimates by 1.7 per cent, 3.3 per cent and 7.8 per cent for FY27E, FY28E and FY29E, respectively. However, consolidated EBITDA estimates were reduced by 11.6 per cent and 10.3 per cent for FY27E and FY28E before rising 1.0 per cent for FY29E. PAT estimates were cut materially because of higher depreciation and other costs linked to accelerated expansion.

Dark.ai and Key Risks

Eternal also announced dark.ai, a privacy-first AI assistant using frontier open-weight models on its own infrastructure. Emkay is neutral because monetisation, costs and the fit with Eternal’s existing businesses remain unclear. Management characterises dark.ai as a high-uncertainty opportunity that could become global, but may be discontinued if unsuccessful.

Key risks identified by Emkay are:

• Heightened competition and market-share erosion.
• Regulatory headwinds.
• Labour-availability headwinds.