Brands
Eternal Limited is India’s Amazon in the making
MUMBAI: Zomato, India’s dual-headed monster of food delivery and quick commerce, is marching towards profitability at a clip that puts its global peers to shame. The company, which operates the Blinkit quick commerce platform alongside its core food business, is outpacing Amazon’s historical growth trajectory and deserves the hefty valuation premium it commands, said Karan Taurani at Elara Securities’ signature theme series webinar on Friday.
Taurani’s “Internet on Eternal” playbook:a deep dive into platform valuation methodology:compares Zomato to Amazon on a 30-year lifecycle basis. The verdict: Zomato is roughly in its 17th year of operation, precisely where Amazon sat when it finally hit breakeven profitability. But unlike Amazon in 2005, Zomato is growing revenue at 46 per cent compound annual growth versus Amazon’s 22 per cent at the same stage. That speed differential justifies Zomato trading at 4.9 times forward enterprise value-to-sales, compared with Amazon’s 2.3 times back then:a 60-70 per cent premium that investors have been questioning.
India’s e-commerce landscape is in the throes of a violent disruption, and Zomato sits at the epicentre. Quick commerce:delivering groceries, gadgets and guacamole in under 10 minutes:is cannibalising traditional online retail and forcing behemoths like Amazon and Flipkart to scramble. What COVID-19 sparked, quick commerce is turbocharging: online retail penetration has doubled from 3.5 per cent to seven per cent of total retail in just five years. Analysts reckon it could hit 13-14 per cent within the decade, with quick commerce the battering ram smashing through the doors.
Zomato’s food delivery arm has already reached steady-state profitability of four to 4.5 per cent EBITDA as a percentage of gross order value, and five per cent-plus as a percentage of net order value. The worst, Taurani insists, is behind the company. Blinkit, still bleeding cash, will follow suit:and faster than legacy e-commerce players managed. Flipkart, operating in India for 10-12 years, still posts EBITDA losses of over Rs1,000cr annually. Myntra only broke even last year. Quick commerce will crack profitability quicker, Taurani argues, because the customer habit of ordering online already exists, and advertising revenue:a “big lever”:offers margin upside that pure e-commerce lacked.
The growth rates tell the story. India’s overall e-commerce market has slowed from a galloping 25-30 per cent annually to a more pedestrian 15-18 per cent. But quick commerce platforms are tearing along at 50-60 per cent compound annual growth rates, grabbing market share with startling speed. They account for just seven to eight per cent of India’s e-commerce pie today. That is about to change, and fast.
Behind the growth lies a simple insight: Indians will pay for speed. Amazon Fresh, launched half a decade ago to crack India’s grocery market, flopped spectacularly because consumers would not wait for slotted delivery. Quick commerce changed the equation overnight. Categories like groceries:stuck at a miserable two per cent online penetration compared with 10-15 per cent globally:are suddenly ripe for plunder. So are general merchandise, stationery, beauty products and mobile accessories: precisely the sort of items people used to nip to the corner shop for.
Zomato’s dual platform gives it unmatched reach. Food delivery appeals to a narrower use case; Blinkit can hawk small appliances, apparel, accessories and everything in between. Taurani pegs Blinkit’s total addressable market at 60 per cent of India’s entire e-commerce market:a TAM that includes FMCG, grocery and general merchandise categories worth tens of billions of dollars. The kirana channel, with its 13-14m corner shops, remains dominant. Quick commerce replicates that proximity edge via dark stores:micro-warehouses scattered across cities:while offering selection no corner shop can match.
The model is not cheap. Take rates:the commission and advertising revenue platforms extract from brands:range from 15 per cent for large FMCG companies to a punishing 40 per cent for smaller direct-to-consumer brands. That includes discounts of 10-15 per cent, platform commissions of 12-14 per cent, and advertising spend of seven to eight per cent. For D2C brands, it is a Faustian bargain: quick commerce offers unmatched reach and AI-driven micro-targeting that delivers returns dwarfing traditional media, but at a price that makes modern trade look merciful.
Large brands, meanwhile, are hedging their bets. Quick commerce accounts for just one per cent of revenue for most big consumer goods firms on a pan-India basis:two to three per cent for the overall market:limiting their bargaining power vis-à-vis platforms. But advertising on these platforms delivers returns that dwarf social media, video or traditional channels. Brands are shifting ad budgets accordingly, even as they fret about ceding control to platform overlords.
Taurani’s intrinsic valuation, using discounted cash flow analysis, pegs Zomato’s food business at Rs 1,35,000 cr and Blinkit at Rs 2,00,001 cr, implying 54 times FY28 EBITDA for the food arm. The math assumes food delivery user penetration triples from 0.76 per cent of India’s population today to 3.5 per cent over the next decade, still well shy of the 5.5 per cent global average for platforms like DoorDash, Meituan and Uber Eats. For Blinkit, assumptions are bolder: user penetration could hit eight to 10 per cent of the population, driven by expanding non-metro markets and the platform’s vastly wider use case versus food delivery.
Dark stores are spreading, but their economics remain murky outside metro markets. Non-metro cities generate 40-50 per cent lower throughput per dark store, forcing platforms to cherry-pick locations carefully. The current count: 8,000-10,000 dark stores nationwide. That could explode if smaller cities adopt quick commerce at metro-like rates, but metro markets took three to four years to hit critical mass. Non-metros could take double that.
Regulatory risk looms. A draft code of conduct bill proposes welfare contributions pegged at either two per cent of platform revenue or five per cent of gig worker payouts, whichever is higher. For Zomato and Swiggy, that translates to Rs200-250cr annually:they already pay around Rs100cr. The incremental hit: Rs2-3 per order, likely passed to customers. Taurani reckons Zomato, with fatter margins and a more affluent customer base, can weather this better than Swiggy. The bill has been tabled but not implemented; timelines stretch four to six months. Southern states like Karnataka, Telangana and Tamil Nadu are pushing for higher payouts, sparking gig worker strikes in December and late December. Platforms refused to negotiate, waiting for legal clarity. The strikes barely dented order volumes; platforms simply paid Rs100-150 incentives that day versus the usual Rs90-200 during festive periods.
Of one crore gig workers in India, 25-30 lakh work in food tech and quick commerce. The December strike mobilised just two lakh workers:less than 10 per cent of the segment. Platforms are playing a waiting game: once the bill is law, workers’ bargaining power collapses.
Competition is heating up. E-commerce giants are muscling into quick commerce, but their DNA is wrong. Flipkart is burning cash on aggressive discounting; Amazon is focused on execution, not price wars. Quick commerce and e-commerce operate on fundamentally different lead-time models:10 minutes versus one to two days. Unless e-commerce players grab 10-12 per cent of the quick commerce market, they pose no existential threat. Over the past 12 months, Blinkit and Instamart have held 80 per cent-plus market share.
The wildcard is foreign competition. China’s Meituan, the quick commerce titan, is reportedly eyeing India. Its advantages: digital-first DNA and food delivery experience, which involves shorter lead times than traditional e-commerce. Its handicaps: late entry into a land-grab business that rewards hyper-local knowledge of micro-markets, plus potential foreign ownership restrictions that could hobble its one-party inventory model. Incumbents like Blinkit and Zepto, competing on execution rather than discounts, may have moats deep enough to fend off interlopers. Zepto’s price-led strategy, Taurani notes, is “not sustainable”.
Nykaa offers a cautionary tale. It is growing gross merchandise value at 27-28 per cent, but core beauty and personal care growth is sub-25 per cent once the B2B business is stripped out. Quick commerce has dented its margins, not its growth, because Nykaa’s own quick commerce push is protecting market share. The stock trades at a “hefty premium”; analysts reckon it is a hold at current levels, buyable only on dips at 30 per cent growth sustainability.
Zomato is in the 15th-to-17th-year window where internet platforms cross into steady profitability. Global peers took 14-15 years to hit breakeven, then another five to 10 years to reach mature margins. Zomato’s food business is there; Blinkit will arrive in three to five years. On a steady-state basis, Taurani forecasts Zomato EBITDA margins of five to seven per cent within five years:short of Amazon’s double-digit margins, which include AWS, but respectable for a pure consumer tech play.
The EV-to-sales methodology works for companies still scaling towards profitability; once margins stabilise, valuation pivots to PE or EV-EBITDA multiples. Zomato’s food arm is ready for that shift. Blinkit needs another few years. For now, investors are betting on a land grab that pays off in a $1trn retail market where online penetration is still in the single digits. The bonfire of cash is still burning. How long it lasts:and whether Zomato emerges as India’s true Amazon:is the Rs 2,85,000cr question.