Whalesbook
The Analyst's Endorsement
Eternal, the parent entity of Zomato and Blinkit, experienced a notable surge in its share price on February 3, briefly hitting the 10 percent upper circuit. This rally was catalyzed by Jefferies' decision to include the stock in its India model portfolio. The brokerage cited the recently inked India-US trade deal as a significant catalyst, suggesting it could alleviate foreign investor concerns and potentially reverse sustained outflows from Indian markets. This development saw Eternal replace Godrej Consumer Products in Jefferies' portfolio, highlighting Eternal's perceived strength in quick commerce and food delivery growth and margin improvements. The stock ultimately closed over 2 percent higher at Rs 278.50.
Leadership Transition Amidst High Valuation
Concurrent with the analyst upgrade, Albinder Singh Dhindsa assumed the role of Group CEO from February 1, succeeding founder Deepinder Goyal, who transitions to Vice Chairman. This leadership shift, with Dhindsa bringing his experience from Blinkit, signals a strategic focus on the quick commerce vertical, which is presented as Eternal's largest growth opportunity. However, this forward-looking optimism is juxtaposed against the company's lofty valuation. Eternal's Price-to-Earnings (P/E) ratio stands at an astronomical 1,139.03 as of February 2026. This multiple, far exceeding sector averages, indicates that the market has priced in substantial future growth, placing significant pressure on the company to deliver on its expansion and profitability targets.
Competitive Pressures and Segment Dynamics
The quick commerce and food delivery sectors are characterized by fierce competition. Blinkit, Eternal's quick commerce arm, has demonstrated impressive growth, with net order value (NOV) surging 121% year-on-year in Q3 FY26, contributing significantly to the company's overall revenue. Blinkit's revenue grew 155% to ₹2,400 crore in Q1FY26. In comparison, Swiggy's quick-commerce segment grew 76% to ₹1,016 crore in Q3 FY26, though its take rate and contribution margin faced pressure due to promotional expenses and intense rivalry. While Eternal's food delivery segment also saw growth, its pace has moderated compared to the rapid expansion in quick commerce, with revenue growth at 21% YoY in FY25. Despite Eternal's consolidated net profit of Rs 102 crore in Q3 FY26, a 73% year-on-year increase, the overall market is demanding consistent profitability and sustainable margin expansion from these capital-intensive operations.
Macroeconomic Tailwinds and Analyst Outlook
The broader macroeconomic environment offers supportive tailwinds. The India-US trade deal is anticipated to boost Indian equities and reverse foreign portfolio investor (FPI) outflows, which have been a persistent overhang. Sectors with high FPI ownership and those benefiting from reduced tariffs, such as textiles and chemicals, are poised to gain. The Indian e-commerce sector is projected to reach $345 billion by 2030, with online food delivery expected to hit $337.15 billion by 2034, underscoring the sector's vast potential. Analyst sentiment remains largely positive, with a significant majority maintaining 'buy' ratings and setting price targets well above current levels, despite the extreme P/E ratio. Goldman Sachs, for instance, maintains a 'Buy' rating with a target of ₹375, citing strong fundamentals in quick commerce. Eternal's recent crossing of the 25% foreign ownership threshold also positions it for potential inclusion in global indices, which could attract significant passive investment flows. Nevertheless, dissenting voices like Macquarie remain cautious, maintaining an 'Underperform' rating due to valuation concerns and sector competition.