Eternal Q1 Decoded: Why Quick Commerce Margins Missed Despite Strong Growth | Gaurang Shah

[00:00:00]I'm sure also joining us Goran. You've seen the numbers first for eternal. Uh The cotton quarter profitability has come down. The food delivery business on a proper quarter to quarter basis is up only 13% 13 odd percent. QC is okay.

[00:00:14]Commerce is up only 18.4% on a quarter to quarter basis.

[00:00:18]What's your first take?

[00:00:20]>> Well, so firstly with all disclosures in place as per SEBI's guidelines and good afternoon to all of you all. Uh blank disclosure we have a positive call on Zomato food delivery platform has not delivered. I think there are could be a couple of reasons. First could be the of course the reduction in the fees of gold membership. Point number one. Point number two, the kind of delivery uh pricing that was there earlier has been brought down to I think about 100 rupees if I'm not mistaken. Earlier it was about 190 or about 200. Uh because of that also there should be a hit.

[00:00:55]QC that is the quick [clears throat] commerce that has done well. This is where we expected the company to do well. And as per the last quarter's last financial year fourth quarter uh button given by the management, they are increasing the dark stores. They are going into tier two tier three cities.

[00:01:09]They are increasing their footprints.

[00:01:11]They're increasing their market share and thereby increasing their subscriber base as well. So possibly a little bit of more insight from the management as to why the food delivery platform has gone a little bit down would throw in a little bit of maybe they have put in a little bit of capital on the capex that they are planning as far as the dark stores are concerned. Overall [clears throat] we expect the uh company to do well over a longer period of time. And as I mentioned, we do have a positive call on Zomato.

[00:01:38]>> Mhm. In fact, food delivery has been you know has been a standout in terms of numbers from what I'm seeing it.

[00:01:46]Uh you've got adjusted revenue at 3,537 crore which is a 33% growth YOY. So you're seeing some some good numbers come in on the food delivery side of things.

[00:01:58]Uh when you're looking at even the food delivery margins, it's coming at 5.6% odd of NOV, which is the adjusted EBITDA number versus NOV. Quick commerce has delivered an NOV of around 17,132 crore, which is also strong. Uh and EBITDA is is adjusted EBITDA is around 0.6% at 264 crore. Uh Uh you know, Goran, just trying to understand therefore when I'm looking at the numbers, uh quick commerce the adjusted EBITDA number looks slightly softer, you reckon, versus what the expectation was.

[00:02:38]>> A mild softer, Harsh. I don't think that should be a big concern on uh this number as far as QC is concerned.

[00:02:44]And with the kind of stores that they're planning to open and the kind of presence that they're going to increase, my guess is that in the next two or three quarters, you should see incremental contribution coming in from QC that is quick commerce.

[00:02:57]>> Go across to Asheesha. Goran, please hold on. I'm going to quickly go across to Asheesha. She's here with a round up of the numbers to try and give us a better perspective. Asheesha, how are you reading the numbers?

[00:03:07]>> Well, yes, since we were talking about the segment-wise performance and Goran was just talking about the quick commerce segment, let's start with that itself. Where the revenue this time around has come in at 15,664 crore. That's for the quick commerce segment versus expectations of about 15,700 crore. So, a slight miss or we can say largely in line set of numbers.

[00:03:26]But yes, of course, store addition is another parameter to watch out for. Now, as far as the going out business is concerned, we were expecting 297. It has come in at 318. So, again, that is a positive. Food delivery business has been largely in line with what we were working with. And on a sequential basis, we have seen some growth for the food delivery business. 13% growth is what the company has reported for the food delivery business. And hyper hyper pure business is also reported a strong 6% growth sequentially. So, when we look at the numbers on a sequential basis and when we compare the numbers across business segments, most of them are largely in line. There is no major miss as such. Of course, on the bottom line, there is a miss and we'll try to understand what went wrong on the bottom line. But, on the revenue front, it looks largely in line with what we're working with. We of course are awaiting much more commentary that will come in from the con call later today in the evening.

[00:04:18]>> Just to add some color to the numbers which have come in on the the adjusted EBITDA in Q1 is around 172 crores and compared to that sorry, 555 crores versus 172 crores YOY.

[00:04:37]While on a quarter to quarter, it's gone up from 429 to 555 there.

[00:04:42]And you know, the treasury gain has been around 311 crores for them.

[00:04:48]The cash burn is around 486 crores.

[00:04:53]The surplus is 486 crores at the at the end of Q1 for them. So, the the surplus has gone up on a quarter to quarter basis for them in the in that sense. So, so that's something which is coming in and closing cash balance they're sitting on some 18,000 crores at the end of uh Q1.

[00:05:13]That's what some of the numbers which are coming in at this point in time.

[00:05:16]>> I'll in fact go straight back to Gaurang. Gaurang, how do you expect the margin clip to be and what do you what do you sense is leading to that margin miss?

[00:05:27]>> What I could guess of course I would be really waiting Harsha to listen to the bottom of the management.

[00:05:34]Possibly some kind of a one-off expense or a large part of CapEx that they're planning which they have mentioned over the last couple of quarters in terms of focus and trust on the QC that's with search. And believe me, Harsh, this was the business which they took over which the market did not expect to contribute the way it has started to contribute, but we remain extremely optimistic. So, I think a large investment or possibly in a pipeline kind of an investment going into the future. But yes, I would love to hear it from the management as the PC takes place later on in the day.

[00:06:07]>> Surely, it's food delivery all the way actually.

[00:06:10]621 crore of PBT contributed by food delivery versus the 549 crore they did same time last quarter.

[00:06:18]Obviously on a slightly smaller base, but on a 15% sequential higher base, they've done nearly 15 to 20% higher on that PBT number. So, that's contributed well.

[00:06:30]It's essentially quick commerce which has failed to to pick up or rather you've seen a decent pick up there as well in terms of PBT contribution.

[00:06:40]Another extra 100 crore of PBT contribution is what quick commerce has done in this quarter versus last.

[00:06:48]And on a on a base of around 2,400 crore of additional revenue which they've done on quick commerce. So, so broadly that's that's how it's shaping up. Stock now in the green.

[00:06:59]Just about in the green for Eternal.

[00:07:02]All right, Goran, thank you so much.

[00:07:04]We'll let you go on that note.

[00:07:06]Thank you.