Introduction:
Have you ever looked at a company’s financial report and thought, “Wait, this doesn’t add up”? Eternal’s recent Q4 FY25 earnings might leave you scratching your head too. Despite seeing a massive surge in revenue, their net profit took a nosedive, raising eyebrows across the finance world.
Is it all about growth at any cost, or are there deeper financial strategies at play here? Let’s unpack the story behind Eternal’s 78% profit decline and see what’s happening behind the shiny numbers.
The Big Picture: A Dramatic Drop in Profit
In the world of corporate earnings, a huge revenue boost typically signals good news. But when it comes to Eternal, things aren’t that straightforward. The company’s net profit for Q4 FY25 took a sharp 78% dive — from ₹175 crore last year to just ₹39 crore this quarter.
Despite a 64% year-on-year (YoY) growth in revenue, how did the profit shrink so drastically? Let’s explore the factors causing this surprising twist.
Eternal’s Revenue Growth — A Tale of Two Stories
On one hand, Eternal posted a solid 64% increase in revenue, reaching ₹5,833 crore for the quarter. That’s impressive. But before you rush to buy the stock, here’s the catch: despite the revenue spike, the company spent heavily in areas that didn’t immediately pay off. Here’s how:
- Increased Expenses: Total expenses shot up by 68% YoY, totaling ₹6,104 crore. Much of this increase was attributed to higher investments in Blinkit (Eternal’s quick commerce arm) and other infrastructure projects.
- Blinkit’s Growing Pains: Blinkit showed explosive growth, with a 122% YoY revenue jump. But with rapid expansion comes rapid spending. The quick commerce segment, though promising, required hefty financial investments that weighed heavily on profits.
Profit Slump Amidst Expanding Business: What’s the Real Story?
Eternal’s sharp decline in profit can be traced to one simple fact: investment overdrive. The company’s aggressive growth strategy, particularly in the quick commerce sector, led to an uptick in operational costs.
Here’s a breakdown of why their expenses ballooned:
- Infrastructure Overhaul: A large portion of the costs went into upgrading and scaling infrastructure for Blinkit and Eternal’s other verticals. While these investments are essential for long-term growth, they don’t always translate into short-term profits.
- Rising Operational Costs: A combination of logistics expenses, higher wages, and a more complex supply chain led to soaring costs. As these expenses surged, they ate into the profits — hence the steep 78% drop.
But Wait! There’s More to the Story: Eternal’s Cash Flow & Year-End Performance
Despite the disappointing quarterly profit, Eternal ended FY25 on a high note, with its full-year profit increasing by 50%. The company posted a solid ₹527 crore for the year, up from ₹351 crore in FY24. This shows that while Q4 wasn’t stellar, Eternal’s growth story remains intact over the longer term.
Even with the Q4 setback, Eternal’s cash balance was still substantial, standing at ₹18,824 crore by the end of March 2025. A slight dip from the previous quarter, but nothing that screams red flags for investors just yet.
The Food Delivery Business: Holding Steady Amidst the Chaos
One of the few segments that remained stable during Q4 was Eternal’s core food delivery business. This segment saw a modest 17.5% YoY growth in revenue, amounting to ₹2,409 crore for the quarter. However, there was a slight quarter-on-quarter (QoQ) decline of 1.3% in Gross Order Value (GOV), which can be attributed to:
- Sluggish Demand: There was a temporary slowdown in food orders due to competing demands for delivery personnel in other segments.
- Rising Competition: The competitive landscape for food delivery is heating up, with newer entrants offering packages that directly challenge Eternal’s dominance.
Blinkit: The Real Hero or a Risky Gamble?
While Eternal’s core business has its ups and downs, Blinkit is the real star of the show. The quick commerce arm posted an astounding 122% growth in revenue, bringing in ₹1,709 crore for the quarter. Blinkit’s GOV also grew 20.8% QoQ, signaling strong momentum.
However, the question remains: Is Blinkit sustainable? Rapid growth often brings challenges:
- Operational Strain: As Blinkit expands, the strain on infrastructure and resources increases. The company needs to balance growth with cost control to avoid a similar profit crisis in the future.
- Market Saturation: The risk of market saturation looms large as the quick commerce industry becomes increasingly competitive.
What Can Investors Learn from Eternal’s Earnings Report?
- Growth vs. Profit: Eternal’s story is a stark reminder that rapid growth, especially in emerging sectors like quick commerce, doesn’t always translate into immediate profits. It takes time for investments to yield returns.
- Cost Management is Key: The key takeaway here is that while revenue growth is important, managing costs effectively is just as crucial. Eternal’s heavy investments, while promising long-term growth, have weighed heavily on its quarterly profits.
- Diversification is a Double-Edged Sword: While Blinkit’s explosive growth is exciting, it also introduces risks if not managed properly. The challenge will be to balance diversification without overextending resources.
FAQ Section:
- Why did Eternal’s net profit decline despite higher revenue?
Eternal’s expenses grew significantly due to heavy investments in Blinkit and infrastructure. These costs outweighed the revenue boost, leading to a sharp profit decline. - Is Eternal’s business still growing despite the profit slump?
Yes, Eternal is still expanding, particularly in its quick commerce vertical, Blinkit, which saw a 122% increase in revenue. - Should investors be concerned about Eternal’s profit drop?
Not necessarily. While Q4 was tough, Eternal’s long-term strategy, including investments in Blinkit, suggests that the company is positioning itself for future growth. - How is the food delivery segment performing?
The food delivery segment is stable but faced some challenges due to rising competition and temporary sluggish demand.