India's Eternal expects faster Blinkit growth as quarterly profit nearly doubles

Oct 21 (Reuters) - India's Eternal (ETEA.NS), opens new tab expects growth in Blinkit, its quick-commerce business, to accelerate from the December quarter, as the company bets on a more stable competitive environment to expand faster without hurting margins.

"We don't expect there to be a short-term margin reduction on account of accelerated store addition," Chief Financial Officer Akshant Goyal said on a post-earnings call on Wednesday.

Eternal and rival Swiggy (SWIG.NS), opens new tab have been rapidly expanding their ⁠networks of small warehouses, known as dark stores, as the segment has emerged as a key growth driver for both companies even as spending on expansion and competition have put profitability in focus.

Blinkit's net order value (NOV) rose 79.3% year-on-year to 209.40 billion rupees ($2.22 billion), while adjusted operating profit rose to 1.84 billion rupees from 1.02 billion rupees in the previous quarter.

Its adjusted EBITDA margin improved to 0.9% of its NOV from 0.6% sequentially.

Competition has become more predictable after intensifying over the past year, giving Eternal the confidence to expand faster, according to Goyal.

The ⁠company expects to have more than 3,500 Blinkit stores by March 2027 and about 5,000 by March 2028, up from 2,751 at September-end, with most additions in smaller cities.

Eternal's overall revenue rose 77.6% to 241.38 billion rupees, beating analyst estimates of 239.21 billion rupees.

Consolidated net profit nearly doubled to 1.25 billion rupees ⁠but missed analysts' average estimate of 2.71 billion rupees, according to LSEG data.

Eternal expects margins at Zomato, its food-delivery business, to stay broadly flat over the next one to two years as ⁠it invests in customer acquisition and increasing order frequency, prioritising growth, Goyal said.

Zomato's NOV rose 21.5% to 114.45 billion rupees, while adjusted operating profit increased 25% year-on-year to ⁠6.27 billion rupees. Adjusted EBITDA margin fell to 5.5% of NOV sequentially.

Separately, Eternal unveiled Dark.ai, a privacy-focused AI service it hopes to launch globally by the end of 2026.

($1 = 94.4600 Indian rupees)

Rewrites throughout with comments from analyst call

Reporting by Surbhi Misra in Bengaluru; Editing by Harikrishnan Nair and Janane Venkatraman