Eternal Ltd ( Zomato) Q3 FY26 Results : Operating Performance and Capital Implications

Executive summary: performance versus expectations

Eternal Limited reported Q3 FY26 results that exceeded consensus estimates across consolidated revenue, EBITDA, and PAT. The outperformance was primarily driven by stronger-than-expected profitability in the Quick Commerce segment.

• Consolidated revenue: ₹16,315 cr
  (consensus range \~₹15,885–16,224 cr)
• Consolidated EBITDA: ₹368 cr
  (consensus range \~₹292–333 cr)
• Consolidated PAT: ₹102 cr
  (street average \~₹69 cr; upper-end estimates \~₹110–115 cr)
• Quick Commerce segment result: ₹202 cr profit
  (most analyst models had assumed breakeven to losses)

Revenue composition and business mix

Revenue from operations increased 201.8% YoY to ₹16,315 cr, reflecting the transition of Quick Commerce to an inventory-led model where gross sales are recognized as revenue.

Segment revenue mix:

• Quick Commerce: ₹12,256 cr (75.1% of consolidated revenue)
• India Food Delivery: ₹2,676 cr (+29.1% YoY)
• Hyperpure (B2B): ₹1,070 cr
• Going Out: ₹300 cr

Quick Commerce revenue exceeded implied analyst expectations (\~₹12,000 cr), while Food Delivery continued steady growth despite the change in group revenue composition.

Profitability and margins

• EBITDA: ₹368 cr (+127% YoY; +54% QoQ)
• EBITDA margin: 2.25%
  (3.00% in Q3 FY25; 1.76% in Q2 FY26)

The YoY margin compression reflects the higher share of Quick Commerce in consolidated revenue. Operating leverage remains visible as costs scaled slower than revenue.

Segment results

Quick Commerce

• Segment profit: ₹202 cr
• Turnaround from losses in the prior year
• Profitability achieved at materially higher scale

India Food Delivery

• Segment profit: ₹547 cr (+26.6% YoY)
• Continues to provide stable and predictable earnings

Hyperpure

• Revenue decline linked to reduced third-party seller dependence
• Segment profitability turned positive

Going Out

• Segment loss: ₹114 cr
• Deterioration from a ₹15 cr loss YoY
• Likely driven by integration costs, amortization, and structurally lower margins

Cost structure and operating leverage

• Purchases of stock-in-trade: ₹10,076 cr (+567% YoY)
• Change in inventory: (₹290) cr, indicating higher closing inventory
• Delivery expenses: +63.9% YoY
• Advertisement and promotion: +79.9% YoY

The increase in cost lines is consistent with the inventory-led Quick Commerce model. Cost growth remained lower than revenue growth.

Working capital and cash conversion

The inventory-led model has structurally increased working capital requirements.

Key implications:

• Inventory is now a material balance-sheet item
• Cash outflows precede revenue realization
• Scale growth increases capital employed

Future performance will depend on inventory turnover, shrinkage control, and payable management. These factors will directly influence cash generation and returns.

Return profile and capital efficiency

The group’s return characteristics have shifted toward:

• Lower operating margins
• Higher capital intensity
• Greater dependence on asset velocity

Return on capital will be determined by throughput efficiency rather than incremental take-rate expansion. Valuation frameworks need to reflect this change.

Nine-month performance context

Despite strong Q3 performance, 9M FY26 PAT declined YoY due to:

• Losses incurred in earlier quarters during Quick Commerce scale-up
• Mark-to-market losses recorded in OCI
• Losses from the “Going Out” segment

Quarterly run-rate profitability provides a clearer view of current operating economics than trailing nine-month aggregates.

Comprehensive income and balance-sheet volatility

Total comprehensive income for the quarter was negative ₹130 cr, driven by a ₹242 cr mark-to-market loss on equity instruments classified under OCI. This does not affect operating cash flows.

Regulatory exposure

GST-related litigations on delivery charges aggregate to ₹441+ cr, excluding interest and penalties. The company continues to contest these claims. The exposure remains material relative to quarterly profitability.

Management update

Deepinder Goyal resigned as MD & CEO and transitioned to Vice Chairman & Director. Albinder Dhindsa was appointed Group CEO. No changes were announced to ownership structure, capital allocation priorities, or operating strategy.

Closing observations

• Quick Commerce has become the dominant revenue and profit driver.
• Food Delivery remains the most stable earnings segment.
• Capital intensity and working capital discipline are now central to return outcomes.
• The “Going Out” segment requires closer monitoring from a capital allocation perspective.

This quarter materially alters how Eternal’s earnings, balance sheet, and returns should be evaluated going forward.

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