Zomato Eternal Shares Rise Despite 78% Q4 Profit Drop

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Eternal Limited, the parent company of India’s leading food delivery and quick commerce platform Zomato, announced its financial results for the fourth quarter of fiscal year 2025 (Q4 FY25, January–March 2025) on May 1, 2025, revealing a 78% year-on-year (YoY) decline in consolidated net profit to ₹39 crore from ₹175 crore in Q4 FY24. Despite this significant profit drop, Eternal’s shares rose 0.58% to ₹232.50 on the National Stock Exchange (NSE) on April 30, 2025, and continued to gain traction post-results, driven by strong revenue growth and reaffirmed bullish outlooks from brokerages like Nuvama Wealth Management, JM Financial, and Kotak Institutional Equities. The company, which rebranded from Zomato to Eternal in March 2025, reported a 64% YoY surge in revenue to ₹5,833 crore, fueled by robust performances in its Blinkit, Hyperpure, and District segments. This article explores the factors behind the profit decline, the drivers of Eternal’s share price resilience, brokerage perspectives, and the broader implications for the company’s growth trajectory in India’s competitive tech landscape.

Q4 FY25 Financial Performance: A Tale of Growth and Challenges

Eternal’s Q4 FY25 results, disclosed in a regulatory filing with the Bombay Stock Exchange (BSE), painted a mixed picture. The company’s consolidated net profit plummeted 77.7% YoY to ₹39 crore from ₹175 crore in Q4 FY24, and declined 33.8% sequentially from ₹59 crore in Q3 FY25. This fell short of analyst expectations, with a group of six analysts polled by CNBC TV18 forecasting a profit of ₹72.2 crore, while three others projected losses ranging from ₹24.6 crore to ₹77.1 crore. The sharp profit decline was primarily attributed to a 68% YoY increase in total expenses, which soared to ₹6,104 crore from ₹3,636 crore in Q4 FY24, outpacing revenue growth.

Revenue from operations, however, surged 63.7% YoY to ₹5,833 crore from ₹3,562 crore, driven by strong performances across Eternal’s diversified portfolio. For the full fiscal year, revenue grew 67% to ₹20,243 crore from ₹12,114 crore, and annual net profit rose 139% to ₹697 crore from ₹291 crore, reflecting the company’s ability to scale despite short-term profitability pressures. Adjusted Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) declined 15% YoY to ₹165 crore in Q4 FY25, largely due to accelerated investments in Blinkit’s store network, though this was partially offset by improved margins in food delivery.

Segment-Wise Performance

Eternal’s operations span multiple segments, each contributing to its revenue growth:

• Food Delivery: The core Zomato platform, contributing 35% of Q4 revenue, saw revenue rise 17% YoY to ₹2,409 crore from ₹2,054 crore, with Gross Order Value (GOV) increasing 16% to ₹9,778 crore. The adjusted EBITDA margin for food delivery improved to 5.2% of Net Order Value (NOV) from 3.8% a year ago, reflecting operational efficiencies.
• Quick Commerce (Blinkit): Blinkit’s revenue soared 122% YoY to ₹1,709 crore, with GOV jumping 134% to ₹9,421 crore, driven by a 20% rise in order volumes and an increase in monthly transacting users from 10.6 million to 12.9 million. However, Blinkit’s EBITDA loss widened to ₹178 crore from ₹103 crore in Q3 FY25 due to aggressive store expansion, with 294 net new stores added in Q4, bringing the total to 1,301.
• Hyperpure: The B2B supplies arm reported a 93.4% YoY revenue increase to ₹1,840 crore, benefiting from expanded procurement solutions for restaurants.
• Going-Out (District): Revenue from the events and dining segment grew 146.2% YoY to ₹229 crore, with GOV rising 104% to ₹2,184 crore, driven by the District app’s scaling and the acquisition of Paytm’s entertainment ticketing business for ₹2,018 crore in August 2024.

The Net Order Value (NOV) for Eternal’s B2C businesses (food delivery, quick commerce, and going-out) grew 53% YoY to ₹17,440 crore, or 48% YoY excluding the Paytm acquisition, highlighting strong consumer demand.

Reasons Behind the Profit Decline

The 78% profit drop was driven by several factors:

1. Aggressive Blinkit Expansion: Eternal added 294 net new Blinkit stores and 1 million square feet of warehousing space in Q4 FY25, the highest-ever quarterly store addition, leading to underutilized capacity and higher operating costs. Blinkit’s contribution margin improved marginally from 3.8% to 3.9% of NOV, but the scale-up increased EBITDA losses.
2. Rising Expenses: Total expenses rose 68% YoY to ₹6,104 crore, with delivery and related charges accounting for 25% (₹1,552 crore), employee benefit costs surging 89% to ₹1,632 crore, and advertising and marketing expenses increasing 63% to ₹634 crore. A rise in current tax expenses to ₹74 crore further eroded profits.
3. Shutdown of Unprofitable Ventures: Eternal discontinued its Zomato Quick and Zomato Everyday services, citing no clear path to profitability, which incurred one-time costs.
4. Seasonal and Competitive Pressures: A 2% quarter-on-quarter (QoQ) decline in food delivery GOV, attributed to February’s fewer days, and a slight drop in Blinkit’s take-rate to 17.7% due to low-margin products and competitive pricing in new markets, impacted profitability.

Despite these challenges, Eternal’s management emphasized that the investments were strategic, aimed at capturing long-term market share in quick commerce and dining.

Why Did Eternal’s Shares Rise?

Despite the profit miss, Eternal’s shares gained 0.58% to ₹232.50 on April 30, 2025, and continued to rally post-results, closing at ₹232.52 on May 1. Several factors contributed to this resilience:

1. Robust Revenue Growth: The 64% YoY revenue surge to ₹5,833 crore, coupled with a 67% full-year revenue increase to ₹20,243 crore, signaled Eternal’s ability to scale across segments. The market rewarded the company’s diversified growth drivers, particularly Blinkit’s 122% revenue jump.
2. Brokerage Optimism: Brokerages reiterated bullish calls, focusing on Eternal’s long-term potential. Nuvama projected 66.2% YoY revenue growth and maintained a “Buy” rating, expecting Blinkit’s losses to narrow as stores mature. JM Financial forecasted moderate food delivery growth but highlighted Blinkit’s 17% GOV increase, retaining a positive outlook. Kotak estimated a ₹250 crore EBITDA loss for Blinkit but saw Eternal’s adjusted profit at ₹29.7 crore, emphasizing its market leadership.
3. Blinkit’s Growth Trajectory: Blinkit’s addition of 294 stores and plans to reach 2,000 stores by December 2025 were viewed as a bold bet on quick commerce, a high-growth segment. The marginal improvement in contribution margin to 3.9% reassured investors of future profitability.
4. Market Share Stability: CEO Deepinder Goyal noted that Eternal’s food delivery market share remained stable despite intense competition from Swiggy, with hopes of gaining share through improved customer experience.
5. Strategic Acquisitions: The acquisition of Paytm’s ticketing business bolstered Eternal’s going-out segment, contributing to a 104% GOV increase and positioning District as a key growth driver.

Investor sentiment on X reflected cautious optimism, with users like @ETNowSwadesh highlighting Blinkit’s store additions and @CNBCTV18Live noting revenue growth despite the profit drop. However, some expressed concerns about rising losses, with @MaduraiTrader questioning Blinkit’s path to profitability.

Brokerage Perspectives: A Bullish Consensus

Brokerages remained upbeat, focusing on Eternal’s diversified portfolio and long-term growth:

• Nuvama Wealth Management: Forecasted 66.2% YoY revenue growth to ₹5,921.3 crore but expected a net loss of ₹36.1 crore due to Blinkit’s ₹236 crore EBITDA loss. The firm maintained a “Buy” rating, citing food delivery’s ₹450 crore adjusted EBITDA and Blinkit’s scaling potential.
• JM Financial: Anticipated a 2% QoQ GOV decline in food delivery but a 17% GOV rise for Blinkit, driven by user growth. The brokerage highlighted Blinkit’s competitive challenges but remained positive on Eternal’s market position.
• Kotak Institutional Equities: Estimated an 83% YoY drop in adjusted profit to ₹29.7 crore, with Blinkit’s ₹250 crore EBITDA loss offsetting food delivery gains. Kotak reiterated a “Buy” rating, expecting mature Blinkit stores to drive profitability.
• CLSA: Raised its target price to ₹295, citing Eternal’s leadership in food delivery and quick commerce, with a projected 25% revenue CAGR over FY25–27.

The consensus among analysts, as per Moneycontrol, leaned toward “Buy,” with an average target price of ₹280, implying a 20% upside from ₹232.52. This optimism reflects confidence in Eternal’s ability to navigate short-term losses for long-term gains.

Critical Examination of the Narrative

While brokerages and management project confidence, a critical examination reveals potential risks:

1. Sustainability of Losses: Blinkit’s aggressive expansion, while strategic, has widened losses, with 40% of its 1,301 stores underutilized. The marginal 0.1% improvement in contribution margin suggests profitability remains elusive, raising questions about the timeline for breakeven.
2. Competitive Intensity: Swiggy’s focus on quick commerce and dining, coupled with its recent IPO, intensifies competition. Eternal’s stable food delivery market share, as noted by Goyal, may face pressure if Swiggy leverages IPO proceeds for aggressive pricing.
3. Expense Management: The 68% YoY expense increase, particularly in employee and marketing costs, outpaced revenue growth, indicating potential inefficiencies. Eternal spent ₹1.04 to earn each rupee of revenue in Q4 FY25, a concerning metric for profitability.
4. Regulatory and Hygiene Concerns: Eternal delisted 19,000 restaurants in Q4 for failing hygiene standards or misleading practices, which could impact customer trust if not managed transparently.
5. Valuation Risks: Trading at 10.5 times its book value and a market capitalization of ₹2.24 lakh crore, Eternal’s valuation is premium, with a low return on equity of -4.8% over three years. A failure to deliver on growth could trigger a correction.

Despite these risks, Eternal’s diversified revenue streams and leadership in quick commerce provide a buffer against competitive and operational challenges.

Market and Investor Reaction

Eternal’s share price resilience post-results reflects market confidence in its growth story. The stock hit a 52-week high of ₹304.50 on December 9, 2024, and a low of ₹146.85 on June 4, 2024, with a 20.4% return over the past year. On May 1, 2025, the stock traded at ₹232.52, up marginally, supported by positive brokerage reports. Technical indicators, such as a bullish crossover noted by Groww, suggest potential for further gains, with resistance at ₹240 and support at ₹225.web:1⁽web:5

Retail investor sentiment on X was mixed. Users like @FinancialXpress praised Eternal’s revenue growth and Blinkit’s scale-up, while @SrishtiSharma_ cautioned about rising losses, urging investors to monitor Blinkit’s profitability timeline. The stock’s one-year beta of 1.2 indicates moderate volatility, aligning with its high-growth profile.

Broader Industry Context

Eternal operates in India’s rapidly evolving tech and e-commerce sector, where food delivery and quick commerce are high-growth but fiercely competitive. Swiggy, backed by Prosus and Amazon India, are intensifying efforts in quick commerce, while D-Mart dominates offline retail. The quick commerce market is projected to grow at a 40% CAGR through 2030, driven by urban demand for convenience, but low margins and high logistics costs pose challenges.

Macroeconomic factors, such as the Reserve Bank of India’s interest rate cuts in 2025, have boosted consumer spending, benefiting Eternal. However, global market volatility, with the Dow Jones Industrial Average dropping 5.5% in April 2025, underscores external risks. Eternal’s ability to balance growth and profitability will be critical in maintaining its edge.

Implications for Investors

The share price rise despite the profit decline presents opportunities and risks:

1. Buying Opportunity: Long-term investors may view the current price as attractive, given brokerage targets of ₹280–₹295 and Eternal’s leadership in high-growth segments. The stock’s 20.4% one-year return supports this case.
2. Hold Strategy: Existing investors may hold, awaiting Blinkit’s store maturation and potential market share gains in food delivery. The Paytm acquisition’s impact on the going-out segment could drive upside.
3. Risk Considerations: Short-term investors should be cautious of Blinkit’s losses, competitive pressures, and valuation risks. Consulting a financial advisor, as advised by Zee Business, is recommended.

Conclusion

Eternal Limited’s Q4 FY25 results, marked by a 78% profit decline to ₹39 crore, reflect the costs of aggressive expansion in Blinkit and rising expenses, yet the company’s 64% revenue growth to ₹5,833 crore underscores its scaling potential. The share price rise, supported by bullish brokerage calls from Nuvama, JM Financial, and Kotak, highlights market confidence in Eternal’s diversified portfolio and leadership in food delivery and quick commerce. Blinkit’s 294 new stores and the Paytm ticketing acquisition position Eternal for long-term growth, but profitability challenges and competitive pressures warrant caution.

Investors must weigh Eternal’s premium valuation and short-term losses against its robust revenue trajectory and market dominance. The company’s strategic bets on quick commerce and dining, if executed well, could drive significant value, but prudent expense management and competitive resilience will be key. As Eternal navigates India’s dynamic tech landscape, its shares remain a compelling yet volatile opportunity for those with a long-term horizon.