Eternal May See Outflow Of INR 3,235 Cr

SUMMARY

FTSE Russell’s decision to cut Zomato parent Eternal’s investability weighting in its indices may lead to an outflow of INR 3,235 Cr

The brokerage firm released its estimate after FTSE Russell reduced the investability weighting of Eternal in its indices to 49.5% from 82.7% earlier

The index provider cited Eternal’s decision to reduce foreign ownership in the company to 49.5% as the reason behind its move

Global index provider FTSE Russell’s decision to cut Zomato parent Eternal’s investability weighting in its indices may lead to an outflow of INR 3,235 Cr (about $379.8 Mn) from the stock, according to IIFL Capital.

The brokerage firm released its estimate after FTSE Russell reduced the investability weighting of Eternal in its indices to 49.5% from 82.7% earlier.

The index provider cited Eternal’s decision to reduce foreign ownership in the company to 49.5% as the reason behind its move.

While announcing its decision to cap foreign ownership last month, Eternal said that becoming an Indian-owned-and-controlled company (IOCC) will help its quick commerce vertical Blinkit transition to an inventory ownership model from the current marketplace model led by third-party sellers.

In its shareholders’ letter for Q4, Eternal CFO Akshant Goyal said that owning inventory is an “important” and “another concrete step towards making our business more resilient in the long-term”.

Notably, when an index like FTSE lowers a company’s weight, funds that follow the index must sell some of that company’s shares.

Meanwhile, according to a report by NDTV Profit, IIFL Capital also said that another index provider MSCI is set to cut Eternal’s weight in its May review. This may cause further outflows of $460 Mn (INR 3,917 Cr) after May 30, the brokerage added.

Shares of Zomato have gained 12.28% year to date.

On the financial front, Eternal’s consolidated profit after tax (PAT) plunged 77.8% to INR 39 Cr in Q4 FY25 from INR 175 Cr in the year-ago period. However, operating revenue increased 64% to INR 5,833 Cr from INR 3,562 Cr in the year-ago quarter.

The company narrowly avoided a quarterly loss on the back of an “other income” component of INR 368 Cr. Excluding it, Eternal’s loss before tax would have been about INR 271 Cr.

The company’s bottom line was once again hurt by its investments in Blinkit amid high competition in the quick commerce segment. While Blinkit’s top line grew 122% year-on-year (YoY) to INR 1,709 Cr and gross order value soared 134% YoY to INR 9,421 Cr in the March quarter, its adjusted EBITDA loss widened sharply to INR 178 Cr in Q4 from INR 37 Cr in the year-ago quarter. Sequentially, its adjusted EBITDA loss zoomed 73% from INR 103 Cr.

Blinkit added a record 294 dark stores in the quarter, taking the total count of such stores to 1,301.

Meanwhile, Eternal’s food delivery business continued to be sluggish. Zomato’s adjusted EBITDA rose 56% YoY to INR 428 Cr during the quarter but a mere 2% sequentially. Growth was hampered by a shortage of delivery partners, delisting of non-compliant restaurants, and some cannibalisation from the growing popularity of quick commerce, the company said.

Shares of Eternal ended yesterday’s trading session 3.60% higher at INR 237.45 on the BSE.