Eternal well placed as price war unlikely in quick commerce sector

Eternal remains the leader and Blinkit has the best financials and the best unit economics

The quick commerce sector is likely to see intensified competition as Swiggy has recently raised more funds and Zepto is said to be preparing for an initial public offering (IPO). However, Eternal unit Blinkit remains the leader when it comes to financials and unit economics.

 

Competition is, and will continue to be, an important monitorable. But it may not lead to a price war. Eternal and Swiggy are listed concerns who would be reluctant to do this, while Zepto should also avoid this, as it would impact its financials and that could hurt valuations going into its listing.

 

Blinkit's losses stem from aggressive expansion, which is a strategic move. It could actually improve profitability quite quickly, but it opted for growth to try and take market share. Cuts in the goods and sales tax (GST) and festive seasonality have together led to discounts to liquidate inventory, which should normalise from the fourth quarter (Q4FY26). 

 

Among other quick commerce players, Amazon, Jiomart and Flipkart are all well-funded, but may be a little behind the curve. Amazon isn't seen as a quick commerce platform given its late entry, and its integrated app may inhibit adoption, going by Swiggy’s experience. Swiggy’s pivot to a standalone Instamart app indicates the issues. JioMart is focussed on smaller towns at the moment, avoiding direct competition at this instant in big population centres. Flipkart ramp-up has also been gradual so far. 

 

Food delivery growth has moderated to 16-17 per cent, which may lead to valuation downgrades. This could impact Eternal and Swiggy. But the long-term view may be that the food delivery market is underpenetrated — leader Eternal has 23 million transacting users, which is significantly less than the total addressable market. 

 

The third quarter may see sequential slowdown in quick commerce growth rates for every player, as competitive intensity leads to a smaller slice of pie for all. Blinkit could also suffer a base effect since the festive season started early and boosted Q2FY26 volume. The quarter-on-quarter (Q-O-Q) net order value growth in Q3FY26 could be in the low-teens, (up about 120 per cent  year-on-year [Y-o-Y]), around half the Q-o-Q growth in Q1FY26 and Q2FY26. But Blinkit’s profitability may soon improve on take-rate expansion, operating leverage, and benefits from the inventory-led model. Margins are likely to remain stable at 5.3 per cent as per cent of net order value, in line with Q2FY26. Despite a slowdown, Blinkit may still deliver a healthy 120 per cent net order value growth, which would be well above management guidance of 100 per cent. 

 

Other quick commerce players have losses that may be unsustainable as they aggressively expand store coverage and spend on marketing and promotion. Blinkit unit economics are much better with adjusted operating profit loss per order of ₹7 in Q2FY26 versus ₹84 for Instamart.  Apart from a superior supply chain, it has a large transacting user and stable ordering, with no drop in average order values or ordering frequency. 

 

Blinkit may be on course for break-even by Q1FY27 as it sees take-rate expansion, operating leverage from the expanded dark store and mother hub network, and margin benefits from the inventory-led model.

 

On the food delivery side, Zomato's net order value growth may bottom out, with sustainable growth in mid-high teens. Zomato may see sequential improvement in net order value growth trends Y-o-Y in Q3FY26, compared to 13-14 per cent Y-o-Y trend in Q1/Q2FY26 when it faced macro challenges. It could see gains in market share in an expanding food delivery market. Growth may come from changing consumer habits (increasing consumption of out-of-home cooked food), the addition of new restaurants and increased penetration. Margins are likely to be stable, within the range of 5-6 per cent of net order value, in a duopoly.

 

With the balance sheet showing net cash of over ₹18,000 crore, Eternal has an edge amid competitive intensity. The company continues to generate free cash flows at a consolidated level, excluding one-off working capital impact from inventory transition.

 

Analysts have cut earnings projections on the basis of near-term slowdown. But Eternal remains the clear leader in both food delivery and quick commerce. The stock had fallen 4 per cent in the last 12 months, while Swiggy shares have declined 32 per cent. The sector has underperformed the broader market in that time, since the Sensex is up 5.5 per cent.