Eternal's Blinkit expansion accelerates as mature-city profitability supports quick commerce growth

Investment View and Recommendation

Motilal Oswal Financial Services Limited’s October 21, 2026 results update on Eternal retains a Buy rating and a Rs 420 target price. The broker views Eternal’s food delivery business as stable and sees Blinkit offering a long runway to benefit from the structural shift in retail, grocery and e-commerce.

Although quick-commerce competition remains intense, Motilal Oswal believes it is becoming more predictable and that the business model has become established, with a clearer path to structurally higher margins.

Q2 FY27 Financial Performance

Eternal reported Q2 FY27 net revenue of Rs 24,100 crore, up 19.4 per cent quarter on quarter and 77.6 per cent year on year. This was ahead of Motilal Oswal’s expected growth of 11.7 per cent quarter on quarter and 66.1 per cent year on year.

Food delivery NOV was broadly in line with expectations, while Blinkit NOV was close to the broker’s estimate. Food delivery adjusted EBITDA margin as a proportion of NOV declined 10 basis points sequentially to 5.5 per cent, below the 5.9 per cent forecast. Blinkit’s contribution margin was unchanged sequentially at 5.3 per cent, while its adjusted EBITDA margin was 0.9 per cent against the 1.1 per cent forecast.

The consolidated EBITDA miss was due to a higher loss in the Others segment. The PAT miss was primarily caused by an effective tax rate of about 61 per cent after the standalone parent exhausted carried-forward tax shields. Motilal Oswal expects profitable standalone-entity earnings to be taxed at the full rate going forward.

Food Delivery Growth and Margins

Management reiterated a long-term food delivery NOV growth target of more than 20 per cent annually. Motilal Oswal forecasts approximately 20 per cent year-on-year food delivery NOV growth in FY27 and FY28.

The broker expects food delivery margins to remain broadly range-bound over the next one to two years because incremental profitability will be reinvested in market expansion, customer additions and order frequency.

Blinkit Growth and Profitability

Blinkit is expected to accelerate growth from Q3 FY27 as new dark stores open and mature. Management raised the FY27-end dark-store target to 3,500 from 3,000 earlier and indicated a target of about 5,000 stores by FY28-end.

Motilal Oswal models Blinkit NOV growth of 86 per cent in FY27 and 74 per cent in FY28. It highlights Blinkit’s assortment intelligence, category breadth and execution as supporting customer acquisition and store paybacks.

• Mature cities generate adjusted EBITDA margins above 5 per cent.
• Cities contributing about 70 per cent of NOV are adjusted EBITDA positive.
• Cities representing about 96 per cent of NOV are contribution positive.

New-store ramp-up can weigh on margins, although mature-store and mature-city profitability is expected to offset this impact.

Other Businesses and Strategic Initiatives

District is targeted by management to achieve adjusted EBITDA breakeven within four to six quarters from January 2026. Hyperpure revenue rose 22.7 per cent year on year, while its restaurant count increased to 85,000 from 62,000. Its adjusted EBITDA margin improved to 0.9 per cent from negative 0.5 per cent a year earlier.

Dark.ai remains an early-stage, privacy-focused AI investment, with monetisation and investment requirements to be assessed after launch. Motilal Oswal notes that District has higher exposure to agentic-commerce disintermediation because its underlying tables and tickets can be accessed independently of the platform.

Estimate Changes and Valuation

Motilal Oswal revised FY27 and FY28 revenue estimates higher by 5.5 per cent and 14.4 per cent, respectively, but cut EBITDA estimates by 12.2 per cent and 14.6 per cent. FY27 and FY28 PAT estimates were reduced by 56.6 per cent and 44.7 per cent, reflecting higher taxes and lower margin assumptions.

The Rs 420 target price is based on a sum-of-the-parts valuation applying 35 times EV to EBITDA for food delivery and 60 times for quick commerce, alongside values for other businesses and cash.

Principal Risks

• Sustained competitive intensity.
• Margin pressure from rapid store expansion and reinvestment.
• Higher taxation.
• Uncertainty around the scale and returns from early-stage AI initiatives.