Eternal has raised the stakes on its long-term quick commerce strategy. Blinkit’s steady-state capital expenditure assumption per store, including warehousing, has increased to Rs 2.5 crore from Rs 1 crore a year ago, reflecting investments in larger dark stores, a deeper product assortment and advanced warehousing technology, the company said in its Q1FY27 shareholder letter. It also raised its long-term adjusted Ebitda margin guidance to 6% of net order value (NOV), the upper end of its earlier 5-6% range.
Together, the moves make the same argument: growth bought with capital compounds; growth bought with discounts does not. It is a bet placed while Zepto, Amazon Now and Flipkart Minutes continue to be aggressive on discounting.
Blinkit shifts focus from discounts to infrastructure
“Pricing-led growth requires sustained cash burn, and leads quick commerce companies into a systemic trap they can’t easily walk out of,” group chief executive Albinder Singh Dhindsa said in the letter.
Unlike e-commerce, he told analysts, discounts in quick commerce cannot be withdrawn gradually because customers acquired through subsidies tend to leave once the incentives disappear. Citing Blinkit’s own experience, Dhindsa said the company was third or fourth in several southern markets two years ago but emerged as the market leader only after shifting its focus from discounting to infrastructure. He described the June quarter as the peak of competitive intensity Blinkit has faced, but said the current pattern — largely centred on grocery discounts and delivery fee subsidies — has become predictable, with limited room for rivals to intensify spending without sharply increasing losses.
Satish Meena, advisor at Datum Intelligence, echoed that view. “If a customer is looking for a discount, he or she has so many options. So they will switch. That cost is your sunk cost, it’s gone.”
The strategy is showing in margins. Blinkit’s adjusted Ebitda margin improved for a fifth straight quarter to 0.6% of NOV from 0.3%, turning a Rs 162 crore loss a year earlier into a Rs 102 crore profit. NOV grew 86.2% to Rs 17,132 crore and the company added 200 net stores to reach 2,443.
Contribution margin slips in near term
The near-term cost shows up in contribution margin, which slipped about 10 basis points to 5.3%. Per-order contribution fell to about Rs 27.40 from Rs 28.55, even as adjusted Ebitda per order more than doubled to about Rs 3.08 from Rs 1.35. CFO Akshant Goyal blamed state minimum wage increases and new larger stores contributing less while they ramp, adding that year-on-year is fairer: contribution is up from 3.9% of NOV.
Under the revised assumptions, a store requires Rs 2.5 crore of capital and Rs 11 lakh of NOV a day, up from Rs 7 lakh. Blinkit is at Rs 8.27 lakh. Net average order value has fallen for two straight quarters, to Rs 518, and Dhindsa told analysts not to expect it to rise, calling it an outcome of category mix as lower-ticket SKUs are added. The company is counting on volumes instead, listing demand densification alongside assortment and geographic expansion as its three growth pillars. Orders per store per day rose to about 1,600 from roughly 1,460 in March, and monthly ordering frequency improved to 3.47 from 3.36, its first increase in three quarters. At the current order value, Rs 11 lakh a day would take about 2,120 orders per store, a third more than Blinkit does now, and the volume needed for the 41.7% pre-tax return on capital it has projected.
Where that demand comes from is harder. Dhindsa said most growth still comes from existing cities, but the top eight are close to built out, and the next 30 are thinner markets with lower densities and baskets, analysts said.
Eternal’s other businesses remain in investment mode. Losses in the Others segment, housing Bistro, Nugget and Greening India, widened to Rs 94 crore from Rs 64 crore on Nugget investment, which Goyal declined to budget, calling it the cost of experimentation. District remained loss-making at Rs 65 crore, and group capex rose to Rs 711 crore from Rs 494 crore. Analysts said Eternal is better placed to absorb this, with food delivery and quick commerce profitable.
Brokerages were split on the bet. Jefferies raised its target to Rs 415 from Rs 400, saying the quarter showed quality growth matters more than chasing share, and Citi to Rs 385 from Rs 360, arguing discounting alone cannot disrupt Blinkit. Nuvama kept its buy call but cut its target to Rs 360 from Rs 380 and lowered FY27 and FY28 Ebitda estimates by 17% and 16%, noting the strategy needs higher capex. Macquarie stayed underperform at Rs 190, saying valuations already price in optimistic assumptions.
Eternal closed at Rs 287.10 on the NSE on Thursday, up 0.95% from previous close, after touching an intraday high of Rs 296.15.
