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In a letter to shareholders yesterday, Eternal CEO Albinder Dhindsa flagged a potential moderation in its quick commerce unit Blinkit as the business scales, even as its profitability continues to improve. The platform recently reported its second straight quarter of positive adjusted Ebitda (earnings before interest, taxes, depreciation and amortisation).
Rival Instamart is also expected to report slower growth for the January-March period as it sharpens its focus on margins. Analysts say this changing stance could intensify scrutiny on IPO-bound Zepto’s path to profitability, even as it works to contain its burn.
ETtech decodes market leader Blinkit’s shift in focus and what it could mean for the industry.
Q4 performance
Blinkit reported its second consecutive quarter of operating profit with an adjusted Ebitda of Rs 37 crore, compared with a loss of Rs 178 crore a year earlier. In the October-December quarter, it had posted an operating profit of Rs 4 crore. This is because the company’s contribution margins have remained stable while fixed costs have come down.
Also read: Eternal Q4 revenue, profit surge on Blinkit boost
In the January-March period, Blinkit’s net order value (NOV) rose 95% year-on-year (YoY) to Rs 14,386 crore, at the upper end of brokerage estimates of 67-99% growth.
After adding 216 new dark stores in the March quarter, the platform has 2,243 stores with 17 million square feet of space. It has over 409 million monthly active riders.
What else did the CEO say?
In the letter, Dhindsa said that between FY23 and FY26, Blinkit's NOV grew at a CAGR (compound annual growth rate) of 104%. “Over the next three years, NOV growth CAGR should easily be north of 60%. That translates to the business growing to over 4x its current scale in three years,” he added.
The company has retained its target of having 3,000 stores by FY27.
“This 60% growth will come will on the back of assortment expansion, geographical expansion, as well as demand intensification in our cities of presence today, and we might also get into newer cities,” said Akshant Goyal, CFO, Eternal, in the analysts’ call.
The shift comes amid rising pressure from public market investors for quick commerce firms to rein in cash burn and prioritise profitability after aggressive spending in the past few quarters.
Also Read: Eternal targets $20 billion in B2C NOV by FY28; $1 billion in adjusted Ebitda by FY29: Deepinder Goyal
Will this impact its market share?
Blinkit’s slowdown comes alongside intensifying competition, with Amazon and Flipkart stepping up their presence in the segment.
Flipkart Minutes is adding 100 stores per month since March to reach 1,100-1,200 stores by June this year, on par with Zepto and Swiggy. Amazon India has announced an investment of Rs 2,800 crore in order to scale Amazon Now’s footprint to 1,000 stores soon.
“Blinkit’s growth moderation is because they want to focus on profitability. Despite forecasting a growth rate of 60%, they're won’t be losing market share,” said Karan Taurani, EVP, Elara Securities.
“Competitors like Zepto and Instamart, on a GMV basis, may not be able to gain market share,” he added.
What does it mean for the industry?
ET reported earlier this month that both Blinkit and Instamart are expected to report moderation in growth in the January-March quarter to focus on margin improvement.
“Apart from Blinkit, other quick commerce players are reporting losses. It’s the only one making money per order. As the industry focuses on profitability, it’s likely to add pressure on Zepto’s margins ahead of its IPO,” said Satish Meena, founder, Datum Intelligence.
Also read: Zomato founder Deepinder Goyal downplays impact of LPG shortage on business
ET reported on April 14 that Zepto had reduced its quarterly burn to Rs 850-900 crore in the January-March period, down from roughly Rs 1,200-1,300 crore a few quarters ago. This was driven by lower per-order costs and a pullback in network expansion.
Rival Instamart is also expected to report slower growth for the January-March period as it sharpens its focus on margins. Analysts say this changing stance could intensify scrutiny on IPO-bound Zepto’s path to profitability, even as it works to contain its burn.
ETtech decodes market leader Blinkit’s shift in focus and what it could mean for the industry.
Q4 performance
Blinkit reported its second consecutive quarter of operating profit with an adjusted Ebitda of Rs 37 crore, compared with a loss of Rs 178 crore a year earlier. In the October-December quarter, it had posted an operating profit of Rs 4 crore. This is because the company’s contribution margins have remained stable while fixed costs have come down.
Also read: Eternal Q4 revenue, profit surge on Blinkit boost
In the January-March period, Blinkit’s net order value (NOV) rose 95% year-on-year (YoY) to Rs 14,386 crore, at the upper end of brokerage estimates of 67-99% growth.
After adding 216 new dark stores in the March quarter, the platform has 2,243 stores with 17 million square feet of space. It has over 409 million monthly active riders.
What else did the CEO say?
In the letter, Dhindsa said that between FY23 and FY26, Blinkit's NOV grew at a CAGR (compound annual growth rate) of 104%. “Over the next three years, NOV growth CAGR should easily be north of 60%. That translates to the business growing to over 4x its current scale in three years,” he added.
The company has retained its target of having 3,000 stores by FY27.
“This 60% growth will come will on the back of assortment expansion, geographical expansion, as well as demand intensification in our cities of presence today, and we might also get into newer cities,” said Akshant Goyal, CFO, Eternal, in the analysts’ call.
The shift comes amid rising pressure from public market investors for quick commerce firms to rein in cash burn and prioritise profitability after aggressive spending in the past few quarters.
Also Read: Eternal targets $20 billion in B2C NOV by FY28; $1 billion in adjusted Ebitda by FY29: Deepinder Goyal
Will this impact its market share?
Blinkit’s slowdown comes alongside intensifying competition, with Amazon and Flipkart stepping up their presence in the segment.
Flipkart Minutes is adding 100 stores per month since March to reach 1,100-1,200 stores by June this year, on par with Zepto and Swiggy. Amazon India has announced an investment of Rs 2,800 crore in order to scale Amazon Now’s footprint to 1,000 stores soon.
“Blinkit’s growth moderation is because they want to focus on profitability. Despite forecasting a growth rate of 60%, they're won’t be losing market share,” said Karan Taurani, EVP, Elara Securities.
“Competitors like Zepto and Instamart, on a GMV basis, may not be able to gain market share,” he added.
What does it mean for the industry?
ET reported earlier this month that both Blinkit and Instamart are expected to report moderation in growth in the January-March quarter to focus on margin improvement.
“Apart from Blinkit, other quick commerce players are reporting losses. It’s the only one making money per order. As the industry focuses on profitability, it’s likely to add pressure on Zepto’s margins ahead of its IPO,” said Satish Meena, founder, Datum Intelligence.
Also read: Zomato founder Deepinder Goyal downplays impact of LPG shortage on business
ET reported on April 14 that Zepto had reduced its quarterly burn to Rs 850-900 crore in the January-March period, down from roughly Rs 1,200-1,300 crore a few quarters ago. This was driven by lower per-order costs and a pullback in network expansion.
