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Eternal Ltd, the parent company of Zomato and Blinkit, has achieved a significant milestone, surpassing a market capitalization of Rs 3 lakh crore. This remarkable feat was propelled by exceptionally strong June-quarter results, particularly from its quick-commerce division, Blinkit, coupled with positive management statements that instilled confidence among analysts. The surge in Eternal’s market value enabled it to outstrip several established Nifty 50 companies, including Wipro, Tata Motors, JSW Steel, Nestle India, and Asian Paints. This performance underscores the growing investor confidence in Eternal's strategic direction and the burgeoning potential of the quick-commerce market in India. Blinkit’s success has been a key driver, with its net order value (NOV) exceeding that of its parent company, Zomato. Analysts have responded positively, revising their target prices upwards and upgrading their recommendations for Eternal's stock. Jefferies, in particular, shifted its stance to 'Buy,' setting a new target of Rs 400, the highest on the Street, acknowledging its previous overestimation of the competition risks. This change in sentiment reflects the market's recognition of Blinkit's exceptional performance and its potential to drive future growth for Eternal. Furthermore, the shift in management commentary from a cautious tone to a more confident one has played a crucial role in bolstering investor confidence. This newfound optimism is attributed to Blinkit's impressive first-quarter results, where it demonstrated substantial year-over-year growth and margin improvement. Emkay Global, another brokerage firm, also increased its target price for Eternal, maintaining its 'Buy' recommendation. These positive revisions from leading analysts indicate a growing consensus that Eternal is well-positioned to capitalize on the expanding quick-commerce market and deliver strong returns for its investors. However, it's important to note that not all analysts share the same level of optimism. Macquarie, for example, maintains an 'Underperform' rating with a significantly lower target price, expressing concerns about the implied Blinkit valuation given unproven economics and heightened competition in the sector. This dissenting view serves as a reminder that the quick-commerce market is still evolving and faces significant challenges, including intense competition and the need to achieve sustainable profitability. Therefore, while Eternal's recent performance is undoubtedly impressive, it's crucial for investors to carefully consider the potential risks and uncertainties before making investment decisions.
The strategic direction of Eternal is undergoing a notable shift, particularly within its quick-commerce (QCom) business. The company is gradually transitioning from its current marketplace model to an inventory ownership model, a move that is expected to drive margin expansion. Emkay Global estimates that this transition will result in approximately 100 basis points of margin improvement, although it will require an increase in net working capital. This strategic shift is aimed at enhancing control over product quality, availability, and delivery speed, ultimately improving the overall customer experience. By taking ownership of inventory, Eternal can better manage its supply chain, reduce reliance on third-party vendors, and ensure that customers receive their orders promptly and accurately. However, this transition also entails certain risks, including the need to invest in storage facilities, manage inventory levels effectively, and potentially bear the costs of obsolescence. The success of this strategy will depend on Eternal's ability to efficiently manage its inventory, optimize its logistics network, and maintain strong relationships with its suppliers. Furthermore, the company must carefully balance the potential benefits of increased control with the increased capital requirements associated with owning inventory. Another key aspect of Eternal's strategic focus is achieving financial sustainability for Blinkit. Nomura projects that Blinkit will break even at the adjusted EBITDA level in the fourth quarter of fiscal year 2026. This projection is based on the assumption that Blinkit will continue to rationalize its marketing spends and focus on improving operational efficiency. While Blinkit has demonstrated impressive growth in recent quarters, it still faces the challenge of achieving sustainable profitability. The quick-commerce market is highly competitive, and Blinkit must continue to innovate and differentiate itself from its rivals to maintain its market share and attract new customers. Moreover, the company must carefully manage its costs and ensure that its revenue growth outpaces its expense growth. Achieving break-even at the adjusted EBITDA level would be a significant milestone for Blinkit and would demonstrate its ability to generate sustainable profits. However, it's important to note that this projection is subject to various uncertainties, including changes in consumer demand, competitive pressures, and macroeconomic conditions.
Despite the overall positive sentiment surrounding Eternal's recent performance, some analysts remain cautious about the company's long-term prospects. Macquarie, for instance, maintains an 'Underperform' rating with a Rs 150 target price, citing concerns about the implied Blinkit valuation of $15 billion at current share prices. Macquarie argues that this valuation is not justified given the unproven economics of the quick-commerce market and the intense competition in the sector. The brokerage believes that Blinkit faces significant challenges in achieving sustainable profitability and that its current valuation reflects excessive optimism. Furthermore, Macquarie is concerned about the potential for increased competition in the quick-commerce market, as new players enter the market and existing players expand their operations. This increased competition could put pressure on Blinkit's margins and make it more difficult for the company to achieve its growth targets. Macquarie's dissenting view highlights the inherent risks and uncertainties associated with investing in the quick-commerce market. While Blinkit has demonstrated impressive growth in recent quarters, it still faces the challenge of proving its long-term viability and justifying its lofty valuation. Investors should carefully consider these risks before making investment decisions and should not rely solely on the opinions of analysts who are bullish on the stock. The performance of Eternal's shares has been strong, recording a 33% increase over the previous 12 months and a 7% gain in 2025. This strong performance reflects the growing investor confidence in the company's strategic direction and the potential of the quick-commerce market. However, it's important to remember that past performance is not necessarily indicative of future results. The quick-commerce market is still evolving, and Eternal faces significant challenges in maintaining its growth momentum and achieving sustainable profitability. Therefore, investors should carefully monitor the company's performance and adjust their investment strategies accordingly. The surpassing of several prominent Nifty 50 constituents in market capitalization further demonstrates the impressive growth that Eternal has experienced. However, market capitalization is just one metric to consider when evaluating a company's value. Investors should also consider other factors, such as revenue growth, profitability, and cash flow, before making investment decisions. In conclusion, Eternal's recent performance has been impressive, but investors should carefully consider the potential risks and uncertainties before investing in the stock.