From Food to Fortune? The Zomato (Eternal) Story — And the Questions Investors Should Ask

Prologue: When Share Prices Defy Gravity

Once upon a time in the stock market, share prices danced to the tune of profits. Profits up? Share price up. Profits down? Share price down. Simple. Predictable. Sensible.

But lately, the market seems to be playing to a different beat. We’ve entered an era where a company can report a 90% drop in net profit, and its stock price can still jump 16% in just two days.

Sounds unbelievable? That’s exactly what happened with Zomato — now rebranded as Eternal.

The Numbers That Raise Eyebrows

On 21 July, Eternal (Zomato) announced its Q1 results:

The most striking part? That ₹25 crore "profit" wasn’t actually from selling pizzas, biryanis, or groceries — it was mainly from interest earned on fixed deposits made using IPO/QIP/VC funds. Strip that out, and Eternal was sitting on a ₹210 crore loss from operations.

From Dining Table to Boardroom: The Backstory

Zomato’s story began in 2008, when Deepinder Goyal and Pankaj Chaddah launched “Foodiebay” — a simple restaurant menu listing platform. It was born from a relatable pain point: Deepinder, then a Bain & Company employee, noticed his colleagues constantly rummaging for restaurant menus.

By 2010, the startup was rebranded to Zomato, expanded internationally, and quickly became synonymous with restaurant discovery in India.

But scaling a “just menus” business had limits. The real money (and market share) was in food delivery. By 2015, Zomato jumped into the delivery space — a battlefield already crowded by Swiggy, Foodpanda, TinyOwl, and Uber Eats. Through aggressive marketing, heavy discounts, and expanding logistics, Zomato fought its way to the top.

The Business Today — Four Engines, One Profit Maker

Eternal’s current empire runs on four key business segments:

The catch? Only food delivery is profitable. Everything else bleeds money. And the one profitable segment is showing signs of stagnation — revenue hasn’t moved much in a year.

Blinkit: The Star and the Question Mark

Blinkit, Zomato’s quick commerce arm, is stealing the headlines — and perhaps driving the stock price excitement.

• Net Order Value: ₹9,000 crore, surpassing food delivery for the first time

• Store Expansion: +243 stores in one quarter (total 1,154)

• Revenue: ₹2,400 crore this quarter vs ₹942 crore last year

Yet, Blinkit still posted a ₹42 crore loss. And there’s an operational twist:

• Originally asset-light (third-party sellers list, Blinkit delivers)

• Now shifting to inventory-led (Blinkit buys stock, holds it, sells directly)

• This creates a cannibalisation risk — hurting Hyperpure’s B2B sales, as former Hyperpure buyers (who resold via Blinkit) may be cut out.

Threats on the Horizon

While Eternal enjoys a dominant market position, the clouds are forming:

1. Rapido’s Entry into Food Delivery
   Plans to charge restaurants a flat ₹25–₹40 per order instead of a commission. This could tempt restaurants away from Zomato, squeezing margins in its only profitable segment.

2. Blinkit-Hyperpure Conflict
   Inventory-led Blinkit risks undercutting Hyperpure’s customer base.

3. Founder Focus Drift
   Deepinder Goyal, the face of the company, has been gradually reducing his stake and is reportedly working on a new low-cost regional airline venture. Founder attention split between multiple ventures can spell trouble (see: Ola’s diversification struggles).

4. Leadership Rotation Policy
   Eternal plans to rotate its food delivery CEO every two years “to keep things fresh”. While it may spark innovation, frequent leadership changes can disrupt operational consistency.

The Valuation Conundrum

At ~₹300/share, Eternal commands a market cap of nearly ₹3 lakh crore and a PE ratio above 900.

Let’s do a reality check:

Even in aggressive growth scenarios, Eternal’s valuation looks priced for perfection. One slip — whether in growth or margins — and the PE can look stretched beyond comfort.

Why the Stock Still Rises

So, why is the market rewarding a company with shrinking operational profits?

1. Growth Narrative — Investors are betting Blinkit will become the next big money-spinner like food delivery once was.

2. Sector Monopoly — Eternal is seen as a duopoly with Swiggy, and duopolies often attract “premium” valuations.

3. Liquidity & Hype — Strong retail participation and social media buzz keep the sentiment buoyant.

4. FOMO Investing — Many retail investors jump in simply because “it’s going up”.

Lessons for Investors

Eternal’s journey offers a few timeless investing reminders:

• Separate Hype from Numbers: Revenue growth is not the same as profit growth. Sustainable profits matter.

• Watch Segment Mix: If the profit engine stagnates, new growth segments must not just grow — they must eventually make money.

• Beware of Cannibalisation: Expanding into adjacencies can sometimes eat into existing profitable lines.

• Valuation Discipline: Even great businesses can be bad investments if bought at sky-high valuations.

The Human Side of the Story

It’s worth remembering that companies like Eternal touch millions of lives daily — from delivery partners braving traffic and weather, to small restaurants that survive on platform orders, to customers who have built habits around “10-minute groceries” and “30-minute dinners”.

The challenge for Eternal is not just to keep growing, but to grow responsibly and profitably, without burning out its ecosystem.

Closing Thoughts

Eternal, if executes everything right, can enjoy Amazon moment. Multi-fold rise over many years. Today, Eternal is dealing in commodities that have thinner margin - tomorrow it may venture into high margin businesses such as expensive watches, cars etc. Eternal’s story is a fascinating cocktail of ambition, innovation, and risk. It has moved far beyond its origins as a restaurant discovery site to become a sprawling multi-segment platform.

If you are an investor in Eternal - you must watch quarterly revenue numbers, growth prospects and if there is a change in management’s focus. I bet most of the mutual fund and PMS manager keep sharp eye on the numbers so should you.

If you need help planning your investment portfolio - be it mutual funds or stocks, you can reply to this email and we can schedule a call to discuss in detail.

Warm regards,

Tejas Lakhani
Chartered Accountant