Eternal eyes 100% inventory play for Blinkit to improve margins

Eternal Limited, the company formerly known as Zomato, is gearing up for a strategic shift in its quick commerce arm, Blinkit, by planning to own inventory directly—a move enabled by its recent transition to an Indian-owned and controlled company (IOCC), according to a shareholder letter released by the company

The move will strengthen its operations and improve margins as it faces increased competition from both established players and new entrants in the quick commerce space.

Eternal estimates that adopting a 100% inventory model would require less than Rs 1,000 crore in working capital. This amount is only about 5% of Blinkit's expected Net Order Value (NOV) of Rs 22,000 crore for FY25.

In response to a question on how a pure-play inventory model could be achieved with Rs 1,000 crore, Eternal’s CFO Akshant Goyal explained that in quick commerce, inventory moves quickly. As a result, the company expects that working capital investments, relative to the overall scale of the business, will remain relatively low.

The plan to keep inventory for BlinkIt comes on the back of its aggressive expansion in Q4 FY25, where it added 294 new stores and over 1 million sq ft of warehouse space, pushing its total store count to 1,301. However, such rapid growth led to widening EBITDA losses for Blinkit, from Rs 103 crore in Q3 to Rs 178 crore in Q4 of the last fiscal year (FY25).

Even as short-term losses rise, Eternal remains bullish on the long-term profitability of the quick commerce space. The company is not planning private labels for now, but hinted that inventory control could eventually nudge EBITDA margins beyond the 5-6% of NOV it currently targets.

The call to own inventory might sound obvious, and it should have enough data to back it considering the time for which Blinkit has been around. However, it does come with risks that may not be apparent right now. Eternal will hope that the extra discounts it wrings out from suppliers will cover those, but it should be prepared for a whole new level of friction as well in its search for higher margins. Suppliers will also be leery of going too far at risk of irritating other platforms that stay with the old model. For now, looking at the funding amounts being discussed, it's clear that the firm has a very focused list in mind, before expanding further. Whether that's due to the insights it has on turnover or an effort to hedge its bets, we will know soon enough.