Eternal shares up 4%; GS sees Rs 35 incremental per share value for Zomato; here's why
Eternal shares climbed 3.97 per cent to hit a high of Rs 243.45 on BSE. Goldman Sachs suggested 'Buy' and a target of Rs 310 on the stock.
- Apr 22, 2025,
- Updated Apr 22, 2025 10:07 AM IST
Foreign brokerage Goldman Sachs (GS) finds Eternal’s (erstwhile Zomato Ltd) proposal to cap foreign shareholding at 49.5 per cent as a significant strategic positive for Blinkit, even as it may result in outflows from indices such as MSCI and FTSE.
This is because the brokerage believe Blinkit’s steady state margins could potentially rise 100 basis points due to savings in commission paid to third-party sellers, in addition to any potential margin upside from Blinkit’s expanding assortment.
This alone could translate into 15-20 per cent higher FY30E Ebitda for Blinkit against the prevailing current estimates -- a Rs 35 incremental per share value for Zomato, Goldman Sachs said.
Zomato had $2.3 billion in cash at the end of December quarter. Goldman Sachs see this potential change as highly returns accretive, with incremental ROCE of 50 per cent-plus for Blinkit.
"From an EPS scenario, perspective, our scenario analysis implies this could be an additional Re 0.6/Rs 1.2 per share in FY27/FY30 for Zomato, or 17 per cent/9 per cent higher EPS versus our current estimates. We note that every 50 bps change in Blinkit’s EBITDA margin assumption would change our FY30E EPS estimate for Zomato by Rs0.6, all else equal," Goldman Sachs said.
Shares of Eternal climbed 3.97 per cent to hit a high of Rs 243.45 on BSE. Goldman Sachs suggested 'Buy' and a target of Rs 310 on the stock.
To be sure, a majority of Blinkit’s competitors are currently classified as foreign-owned/controlled entities under Indian laws. Regulations do not permit FDI (Foreign Direct Investment) in inventory-based model of ecommerce and such ecommerce marketplaces are not allowed to influence the sale price of goods or exercise control over inventory.
"Given this, we believe Zomato’s domestic ownership could give Blinkit a competitive advantage in India’s quick commerce space," Goldman Sachs said.
The foreign brokerage said sellers retain 100 bps commissions on Blinkit. Assuming transition to 1P over the next 12 months, its FY27 Blinkit Ebitda margin estimate of 1.4 per cent (as per cent of GOV) could increase to 2.5 per cent, all else equal.
Conversely, Blinkit may choose to pass on some of these benefits to the consumers in the form of lower pricing or lower user fee, which should help aid demand.
"If Blinkit were to transition its entire SKU to 1P, our math suggests Zomato’s FY26 inventory would be higher by $200 million (we assume c.15 days inventory turnover), though net working capital increase should be lower (potentially higher payables)," Goldman Sachs said.
Foreign brokerage Goldman Sachs (GS) finds Eternal’s (erstwhile Zomato Ltd) proposal to cap foreign shareholding at 49.5 per cent as a significant strategic positive for Blinkit, even as it may result in outflows from indices such as MSCI and FTSE.
This is because the brokerage believe Blinkit’s steady state margins could potentially rise 100 basis points due to savings in commission paid to third-party sellers, in addition to any potential margin upside from Blinkit’s expanding assortment.
This alone could translate into 15-20 per cent higher FY30E Ebitda for Blinkit against the prevailing current estimates -- a Rs 35 incremental per share value for Zomato, Goldman Sachs said.
Zomato had $2.3 billion in cash at the end of December quarter. Goldman Sachs see this potential change as highly returns accretive, with incremental ROCE of 50 per cent-plus for Blinkit.
"From an EPS scenario, perspective, our scenario analysis implies this could be an additional Re 0.6/Rs 1.2 per share in FY27/FY30 for Zomato, or 17 per cent/9 per cent higher EPS versus our current estimates. We note that every 50 bps change in Blinkit’s EBITDA margin assumption would change our FY30E EPS estimate for Zomato by Rs0.6, all else equal," Goldman Sachs said.
Shares of Eternal climbed 3.97 per cent to hit a high of Rs 243.45 on BSE. Goldman Sachs suggested 'Buy' and a target of Rs 310 on the stock.
To be sure, a majority of Blinkit’s competitors are currently classified as foreign-owned/controlled entities under Indian laws. Regulations do not permit FDI (Foreign Direct Investment) in inventory-based model of ecommerce and such ecommerce marketplaces are not allowed to influence the sale price of goods or exercise control over inventory.
"Given this, we believe Zomato’s domestic ownership could give Blinkit a competitive advantage in India’s quick commerce space," Goldman Sachs said.
The foreign brokerage said sellers retain 100 bps commissions on Blinkit. Assuming transition to 1P over the next 12 months, its FY27 Blinkit Ebitda margin estimate of 1.4 per cent (as per cent of GOV) could increase to 2.5 per cent, all else equal.
Conversely, Blinkit may choose to pass on some of these benefits to the consumers in the form of lower pricing or lower user fee, which should help aid demand.
"If Blinkit were to transition its entire SKU to 1P, our math suggests Zomato’s FY26 inventory would be higher by $200 million (we assume c.15 days inventory turnover), though net working capital increase should be lower (potentially higher payables)," Goldman Sachs said.