Eternal Ltd. Q1 FY27 Earnings Call Summary

Revenue

Margin

Demand

Guidance

Tone

Metrics raised 3

Blinkit long-term adjusted EBITDA margin guidance raised to ~6% (from prior 5-6% range)
Blinkit long-term EBIT margin target set at ~4% including ESOP and depreciation (new target; no prior explicit target stated)
Blinkit per-store capex planning target raised to ₹2.5 crore (from ₹1 crore, both inclusive of warehousing)

Metrics cut 1

Blinkit steady-state net working capital target reduced to 12 days (from initial ~18-day estimate; currently 14 days)

Event Participants

Executives

3 Akshant Goyal, Albinder Singh Dhindsa, Kunal Swarup

Analysts

13 Abhisek Banerjee, Aditya Soman, Aditya Suresh, Ankur Rudra, Ashwin Mehta, Garima Mishra, Gaurav Malhotra, Jignanshu Gor, Manish Adukia, Swapnil Potdukhe, Vijit Jain, Vivek Maheshwari, Yogesh Aggarwal

Financials & KPIs

Note: This transcript covers only the Q&A session; the earnings release/letter with consolidated P&L and balance sheet figures was not included in the transcript. All metrics below are as discussed on the call.

Metric	Reported	Commentary
Blinkit MTUs	30+ million	Comfortably above 30 million; MTU additions accelerated despite lower marketing spend, driven by new-user conversion and frequency growth
Blinkit order volume growth	+21% QoQ	Strong Q1 FY27 growth; consistent with historical Q1-to-Q2 QoQ momentum (analysts noted a typical 18-20% band and 26% in Q1 FY26)
Blinkit NAOV	Declined for 2 consecutive quarters; flat YoY	Competitive price-matching and mix shifts weigh on basket size; expected range-bound with a seasonal Q3 uptick; management treats NAOV as an outcome, not a target
Blinkit long-term adjusted EBITDA margin	~6%	Raised from the earlier 5-6% guidance; visibility driven by higher capex per store, larger store sizes and efficiency gains
Blinkit long-term EBIT margin	~4%	GAAP EBIT including ESOP expenses and depreciation
Blinkit inventory losses	1.8% of NOV	Largely perishables-driven; netted off within gross profit/COGS; asymptotic - no material improvement expected
Blinkit net working capital	14 days (current); 12 days (steady-state)	Down from the initial 18-day estimate; reduction driven by lower inventory days via replenishment and supply-chain throughput
Blinkit capex	~₹700 crore (Q1 FY27); ₹2.5 crore per store	~200 stores added in Q1; per-store capex up from ₹1 crore (both inclusive of warehousing); warehousing investment is lumpy
New store productivity	2,100-2,200 orders per day	Larger store formats drive throughput; additional capex also enhances supply-chain efficiency beyond store-level output
Trade payables	+~₹1,650 crore QoQ	Scale-driven trade payables plus fluctuating expense payables; no deliberate stretching of brand payment terms

Geographic & Segment Commentary

Blinkit (Quick Commerce): Most growth is coming from existing cities rather than new geographic expansion; non-metro cities are growing faster off smaller bases. Competitive intensity is concentrated in top-tier city groceries, causing some share shift in tier 1 markets, though growth there remains robust. Existing stores are being upgraded to larger, optimal properties as a regular exercise to capture higher throughput.
Food Delivery: Monthly transacting customer additions are accelerating every quarter, driven by both new-user growth and faster ATU-to-MTU conversion; Bistro is excluded from all food delivery disclosures. Share has been defended against Toing and Ownly via targeted price competitiveness, including cutting Gold free-delivery eligibility to ₹99 from ₹199. Monthly active restaurant count dipped slightly due to the LPG situation.
Bistro: Adding ~10 kitchens per quarter on a cautious expansion path; older kitchens are showing meaningful progress in throughput, assortment mix, menu pricing and operational infrastructure. Management will accelerate expansion only once unit economics are proven, following the same playbook used to build Blinkit.
District (Going-out): Operating across five categories with dine-out and movies as the largest contributors; retail stores and events are promising but early-stage. The customer base is smaller than food delivery/quick commerce and will remain in far fewer cities, with NAOVs reflecting a higher-spending customer set.
Nugget (Enterprise AI): Enterprise AI product business in "stealth mode" with good traction; expenses are largely manpower. Management will share more details in coming quarters.

Company-Specific & Strategic Commentary

Competitive Intensity & Discounting: Q1 FY27 was the peak of competitive intensity seen to date; competition has become more predictable, with most activity in grocery subsidies on products and delivery fees. Management views discount-led growth as a systemic trap with no path to recover customers when subsidies are pulled, citing its own earlier failures in southern markets where infrastructure investment—not discounting—ultimately drove market leadership.
Long-term Margin Guidance Raised: Blinkit long-term adjusted EBITDA margin guidance raised to ~6% from the 5-6% range; EBIT margin of ~4% includes ESOP and depreciation. Higher capex per store and efficiency gains provide the visibility to sustain these margins.
Capex & ROCE Framework: Per-store capex raised 150% to ₹2.5 crore from ₹1 crore (both including warehousing); larger stores and warehouses improve supply-chain efficiency. Management is open to individual metrics moving (capex, NOV per store, margins) as long as the ROCE math remains healthy.
Pricing & Value Strategy: Scale benefits are passed to customers as sustainable price reductions indexed to long-term cost positions, not temporary discounts; this is distinct from peers' subsidy-led acquisition and allows gradual penetration of more price-sensitive cohorts.
Working Capital & Inventory: Net working capital reduced from 18 days to 14 days (12-day steady-state) via lower inventory days; inventory losses of 1.8% of NOV are treated as cost of goods and are expected to remain asymptotic.
Portfolio Expansion: Gourmet stores are being added in tier 1 cities (either larger stores housing premium assortment or standalone formats, depending on real estate). Bistro and Nugget remain early-stage bets with deliberate, confidence-based expansion pacing.

Guidance & Outlook

Metric	Guidance / Outlook	Commentary
Blinkit adjusted EBITDA margin	~6% long-term	Raised from 5-6%; management expects to land at the higher end of the earlier range; underpinned by larger-store economics and supply-chain efficiency
Blinkit EBIT margin	~4% long-term	Includes ESOP expenses and depreciation
Blinkit net working capital	12 days steady-state	From 14 days currently; achievable through lower inventory days driven by replenishment and throughput
Blinkit NAOV	Range-bound	Seasonal uptick possible in Q3; no meaningful NAOV expansion expected as frequency growth and low-NAOV assortment offset inflationary pull
Competitive intensity	Expected to moderate	June was at or near the peak; current subsidy levels are unsustainable for competitors, reducing pressure to price-match
Blinkit Q2 FY27 volume growth	No guidance	Management declined to comment on Q2 volume growth expectations
Bistro expansion	~10 kitchens per quarter	Cautious pace until older kitchens prove throughput and profitability; acceleration possible later
Nugget disclosure	2-4 quarters away	More details once the product thesis strengthens; enterprise AI market is evolving

Risks & Constraints

Risk	Context
Competitive subsidy pressure	Q1 FY27 saw peak competitive intensity, with rivals subsidizing groceries and delivery fees, forcing some price-matching that has pressured NAOV. Management expects intensity to moderate as sustained discounting balloons competitor losses, but the timing of any pullback is uncertain.
Cost inflation	Multiple states raised minimum wages in Q1, increasing the cost of doing business and dampening the flow-through of take-rate gains into contribution margin. Q1 seasonality (summer last-mile costs) added further pressure.
NAOV stagnation	NAOV is expected to remain range-bound as new assortment skews to low-ticket items and higher-frequency customers order smaller carts; this limits basket-size-driven growth, though wallet share can still grow via frequency.
Larger-store execution	Capex per store has risen 150% while NOV per store is only expected ~60% higher; new larger stores start with lower contribution. Returns depend on throughput ramp-up and ROCE discipline, including expansion into smaller cities.
Supply-side disruptions	The LPG situation reduced the active restaurant count in food delivery in Q1; macro events can intermittently impair supply and growth.
One-off tax refunds	OCF benefited from a non-structural income tax refund on ambiguous expense deductions; similar one-offs may recur but nothing is structural.

Q&A Highlights

Long-term margin guidance raise

Question: What gives confidence to raise quick commerce long-term margin guidance to 6%, especially with competitive intensity? (Gaurav Malhotra, Axis)
Answer: Increased capex per store, larger store sizes and efficiency gains provide higher margin visibility; the company now expects to end at the higher end of the earlier 5-6% range. (Akshant Goyal)

Competitive intensity peak and MTU growth strategy

Question: Was Q1 the peak of competitive intensity? Elaborate on why pricing-led growth becomes a systemic trap. (Vivek Maheshwari, Jefferies)
Answer: Q1 FY27 was the peak of competitive intensity seen to date, but competition has become predictable—mostly subsidies on products and delivery fees. Discount-led growth is a trap: customers acquired on subsidies leave when subsidies are withdrawn, with no recovery path. Management's own southern-market experience showed discounting failed initially while infrastructure investment built lasting leadership. (Albinder Singh Dhindsa, Akshant Goyal)
Question: Can MTUs double from 30+ million without increasing discounting? (Vivek Maheshwari, Jefferies)
Answer: The platform reinvests efficiency gains into sustainable price competitiveness, gradually tapping more price-sensitive cohorts as scale grows. Competitor discounting is expected to ease, reducing the need to price-match; any future price reductions will be a choice to pass on scale benefits, not a competitive response. (Albinder Singh Dhindsa, Akshant Goyal)

NAOV decline and outlook

Question: Why has NAOV declined for two consecutive quarters, and what was the impact of the delayed monsoon? (Aditya Soman, CLSA)
Answer: NAOV is flat YoY after accounting for seasonality; competitive price-matching and mix shifts drove the recent dip. NAOV is an outcome—NOV and margins are what matter—and is expected to remain in the current range with a seasonal uptick in Q3. (Albinder Singh Dhindsa, Akshant Goyal)

Contribution flow-through, Q2 volume guidance and capex reconciliation

Question: Why isn't take-rate improvement flowing to contribution margin? Should Q2 mirror the historical 18-20% QoQ volume growth? Also, ~200 stores at ₹2.5 crore each implies less than the ~₹700 crore actual capex—how to reconcile? (Swapnil Potdukhe, JM Financial)
Answer: Q1 contribution absorbed minimum wage hikes in several states, earlier-stage larger stores, and seasonally higher summer last-mile costs; YoY, a large part of take-rate gains has translated into contribution growth. No Q2 volume guidance was given. Warehousing capex is lumpy and included in the per-store metric; over a 6-9 month view, capex per store is lower than ₹2.5 crore, which is a long-term planning number. (Albinder Singh Dhindsa, Akshant Goyal)

Why discounting is less effective in quick commerce

Question: Is discounting less effective in quick commerce than in e-commerce because of habit formation, or is there more to it? (Vijit Jain, Citi)
Answer: The fundamental difference is store size: limited shelf space means heavily discounted low-margin categories crowd out assortment and availability, whereas e-commerce warehouses can support wide discounted catalogues. This structural constraint makes subsidy-led growth less durable in quick commerce. (Akshant Goyal)

Food delivery competitive response

Question: How has Eternal responded to Toing and Ownly, and has it lost share given lower customer fees? (Ankur Rudra, JP Morgan)
Answer: The company is price-competitive in markets where these platforms spend aggressively, which has been sufficient to defend share. One measure: Gold free-delivery eligibility was cut to ₹99 from ₹199, reducing costs for low-value orders. (Akshant Goyal)

Working capital, tax refund and Nugget

Question: What drove working capital from 18 to 12 days? Is the OCF tax reversal sustainable? What is Nugget? (Abhisek Banerjee, ICICI)
Answer: Working capital reduction is mainly lower inventory days from better replenishment and supply-chain throughput; the ₹1 crore vs ₹2.5 crore per-store capex figures are comparable (both include warehousing). The tax refund is a one-off on ambiguous expense deductions—not structural. Nugget is an enterprise AI product business in stealth mode with largely manpower costs; more disclosure will come in future quarters. (Akshant Goyal, Kunal Swarup)

Capex vs NOV per store, NAOV vs wallet share, and ROCE

Question: How to reconcile capex per store up 150% with NOV per store up only 60%? Why shouldn't NAOV rise with assortment expansion? What is current ROCE? (Manish Adukia, Goldman Sachs; Aditya Suresh, Macquarie)
Answer: Capex builds supply-chain efficiency beyond the store and supports market expansion into smaller cities, where NOV per store is lower but can still be profitable at ~6% margins; the governing framework is ROCE, and management is open to individual metrics moving as long as returns hold. NAOV and wallet share are different: new assortment skews low-ticket and frequent customers order smaller carts, netting NAOV flat even as wallet share grows. Current ROCE is nil given negative EBIT margins; ROCE is a forward-looking investment framework. (Albinder Singh Dhindsa, Akshant Goyal)

District business overview

Question: Are dine-out and movies the largest District categories, and how does the user base compare with food delivery? (Garima Mishra, Kotak)
Answer: Yes, dine-out and movies are the largest; retail stores and events are promising but early. District has a smaller customer base than food delivery/quick commerce and will operate in far fewer cities, with NAOVs reflecting a higher-spending customer set. (Kunal Swarup, Akshant Goyal)

Payables increase and restaurant count decline

Question: What drove the ~₹1,650 crore increase in payables, and why did the restaurant count fall? (Ashwin Mehta, Ambit)
Answer: Trade payables rose with business scale and expense payables fluctuated; the company is not deliberately stretching brand payment terms. The dip in monthly active restaurants was due to the LPG situation taking some restaurants offline. (Kunal Swarup, Akshant Goyal)

Key Takeaway

Eternal Ltd. (formerly Zomato) reported Q1 FY27 with Blinkit order volumes up 21% QoQ, MTUs comfortably above 30 million, and ~200 stores added on ~₹700 crore of capex. Management raised long-term Blinkit adjusted EBITDA margin guidance to ~6% (from 5-6%) with ~4% EBIT margin including ESOP and depreciation, citing larger stores and higher per-store capex (₹2.5 crore vs ₹1 crore). Q1 marked the peak of competitive intensity, with management expecting subsidy-led rivalry to moderate and viewing discount-led growth as a systemic trap. Working capital is at 14 days (12-day steady-state), inventory losses at 1.8% of NOV, and NAOV is expected to stay range-bound. Food delivery MTU additions accelerated, with share defended against Toing and Ownly, while Bistro, District and Nugget remain early-stage. Watch items include minimum wage cost inflation, larger-store ramp execution, and competitor subsidy behavior.