Eternal Ltd, formerly known as Zomato, has made headlines today as its stock price surged by 2.14% to ₹239.31 on the National Stock Exchange (NSE) during early trading hours on May 5, 2025. Opening at ₹234.50, the stock quickly gained momentum, reflecting ongoing optimism in the digital and consumption sectors.
The key stock data as of 9:45 AM IST reveals a previous close of ₹234.29, with a day's high of ₹239.70 and a low of ₹232.93. The market capitalization now stands at ₹2.17 lakh crore, with a price-to-earnings ratio of 412.60. However, the dividend yield remains unavailable, and the stock has fluctuated between ₹146.30 and ₹304.70 over the past year.
Analysts attribute the stock's rise to several factors, including a surge in buying interest from retail and momentum investors, and a positive outlook for the digital sector. The market is particularly excited about potential new revenue channels and global partnerships that may emerge in the delivery or ad-tech sectors. Technical analysts note that a move above ₹238 is seen as bullish, with a short-term target set at ₹250.
Support levels for the stock are identified at ₹232 and ₹225, while resistance is expected between ₹242 and ₹248. The short-term bias remains bullish as long as the stock stays above ₹235. Overall, the momentum outlook is positive, especially with a breakout confirmation anticipated above ₹240.
Despite the stock's positive performance, Eternal Ltd faces challenges in its core business operations. The company's food delivery segment has experienced a linear drop in growth rates throughout fiscal year 2025 (FY25). The net order value (NOV) growth for the March quarter (Q4FY25) was reported at 14% year-on-year, significantly lower than the 27% growth seen in the first quarter of FY25.
Management pointed to several reasons for this slowdown, including a dip in discretionary spending among consumers and a temporary shortage of delivery partners. Additionally, the company made the controversial decision to delist 19,000 restaurants due to hygiene concerns and misleading business practices. The leap year also played a role, as Q4FY24 had one extra day, which affected growth figures.
In a bid to streamline operations, Zomato has opted to discontinue its 10-minute food delivery service, known as ‘Quick’. This decision was driven by inadequate restaurant density and insufficient kitchen infrastructure. Similarly, the company is shutting down its homely meals service, ‘Everyday’, citing difficulties in scaling beyond office locations.
On a brighter note, Eternal's quick-commerce arm, Blinkit, has been rapidly expanding, adding an all-time high of 294 stores in just one quarter, bringing the total to 1,301 stores by the end of Q4FY25. This expansion has had a positive impact on NOV and average monthly transacting users, which increased sequentially by 22% and 29%, reaching ₹7,362 crore and 13.7 million users, respectively.
However, this growth comes at a cost. The adjusted EBITDA loss for Blinkit widened to ₹178 crore from ₹103 crore in Q3FY25, despite the contribution margin showing signs of recovery. Blinkit’s contribution margin, which reflects sales minus variable costs, increased sequentially by 10 basis points to 3.9% of NOV in Q4FY25.
Looking ahead, Blinkit is considering a shift from a marketplace model to an inventory-owned model, which could provide a competitive edge in profitability. Currently, Eternal's foreign shareholding stands at 44.8% as of March, with plans to cap it at 49.5%. This is noteworthy because competitors like Swiggy, Zepto, Amazon, and Flipkart have higher foreign shareholdings, limiting their ability to own inventory.
Management estimates that transitioning to an inventory-owned model would require approximately ₹1,000 crore in additional working capital, which represents about 5% of FY25 NOV. This figure is relatively modest, especially considering that the company raised ₹8,500 crore through a qualified institutional placement in Q3FY25.
Despite these developments, some analysts express caution regarding the current stock valuations, which trade at 79 times estimated FY27 earnings per share based on Bloomberg consensus. Eternal's management remains committed to pursuing growth, which may push profitability further down the line, especially in the face of intensifying competition.
With a focus on long-term strategies, investors are advised to maintain a patient outlook when considering Eternal Ltd’s stock prospects. As the company navigates its challenges and opportunities, the market will be watching closely for updates on profitability roadmaps, cost control measures, and any shifts in its operational strategies.
As the digital landscape continues to evolve, Eternal Ltd’s journey reflects the broader trends in the food delivery and quick-commerce sectors, where innovation and adaptability will be key to success. Investors and consumers alike will be keen to see how the company leverages its strengths and addresses its weaknesses in the coming months.
