ETERNAL LIMITED — Q3 FY26

Eternal Ltd Q3 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=OtKHEkUBGa0 Published: 3 months ago

0:02 2 seconds Ladies and gentlemen, a very good evening and welcome to Eternal Limited's Q3 FI26 earnings conference call. From Eternals's management team, we have with 0:11 11 seconds us today Axan Goyel, Albinda Singh Dinsa and Kunal Surup. Before we begin, a few quick announcement for the attendees. 0:19 19 seconds Anything said on this call which reflects outlook for the future or which could be construed as a forward-looking statement may involve risks and 0:26 26 seconds uncertainties. Such statements or comments are not guarantees of future performance and actual results may differ from those statements. 0:35 35 seconds Additionally, please note that this earnings call is scheduled for a duration of 45 minutes and we will be starting directly with the Q&A section of the call. If you wish to ask a 0:44 44 seconds question, please use the raise hand feature available on your Zoom dashboard. You will announce your name on the call and unmute your line post which you can proceed with your 0:52 52 seconds question. You will wait for a minute while the question Q assembles. 1:12 1 minute, 12 seconds First question is from the line of Manish Adupia from Goldman Sachs. Please go ahead. 1:18 1 minute, 18 seconds Hi, good evening. Uh thank you so much for taking my questions and congratulations on a uh good quarter. Uh so my first question is on uh the 1:26 1 minute, 26 seconds quickcommerce margins or uh losses and congratulations on the break even there. 1:32 1 minute, 32 seconds Now in this quarter if you look at numbers your gross margin didn't really expand stole throughput was down about 6% QQ but despite that your contribution 1:40 1 minute, 40 seconds margin expanded 90 basis points a bit expanded about 130 basis points and all of this is while you say that the 1:47 1 minute, 47 seconds competition is irrational. Now if you assume competition remains irrational which is what you are assuming then why 1:54 1 minute, 54 seconds should directionally margins not continue to improve at the same pace as what you did in this quarter. would love to you know get your thoughts on that. 2:02 2 minutes, 2 seconds That's my first question please. Yeah. Hi hi Manish Ashant here. 2:08 2 minutes, 8 seconds [clears throat] 2:09 2 minutes, 9 seconds So I think yeah I mean like it's very hard to predict the uh the trajectory of margin I think which is what we've also mentioned in one of the questions in the 2:17 2 minutes, 17 seconds letter in the near term right so competition is not I mean the competition intensity even if it's high is not steady always right. So uh last 2:26 2 minutes, 26 seconds quarter we did see first half of the quarter being actually on our last conference call we mentioned that the competitive intensity is now easing off 2:34 2 minutes, 34 seconds and then it changed. So so I think the margins is a function of various things uh competitive intensity is one of it 2:42 2 minutes, 42 seconds and and even that within a quarter or even in a longer period you know the various variables is geography specific 2:49 2 minutes, 49 seconds and so on. So, so yes, I think directionally we say that uh margin should expand but we we we're not able 2:58 2 minutes, 58 seconds to confidently say that the pace of margin expansion will be same as what happened in the last quarter because the comparative intensity was high in the 3:05 3 minutes, 5 seconds last quarter and and therefore going forward should it should also be the same. So it's I think a multivariable problem with not a linear correlation with just just one variable. 3:15 3 minutes, 15 seconds No, appreciate that. Uh Akan, thank you. 3:16 3 minutes, 16 seconds Um so a follow on question then uh on competition one if you can maybe clarify quarteron quarter your store throughput was I 3:25 3 minutes, 25 seconds think down about 6 or 7% uh what explains that and maybe a related question so you're saying in previous 3:33 3 minutes, 33 seconds quarter you mentioned that uh you want to grow at 100% yi or expect to grow 100% yi at least for the next 1 to two years now you're saying that that 100% 3:41 3 minutes, 41 seconds yi growth is contingent upon competition not staying irrational. So I just wanted 3:49 3 minutes, 49 seconds to like tie up that guidance that you're saying that if competition is not irrational is only when you'll open 3500 to 4,000 stores and only then you'll 3:57 3 minutes, 57 seconds achieve 100% Y growth. Is that understanding correct? And my first question was just on store throughput. Yeah, broadly that is correct. 4:04 4 minutes, 4 seconds Uh see the way the competitive intensity affects us is you know in which form it comes right. So last quarter we saw a 4:12 4 minutes, 12 seconds lot of competitive intensity uh get amped up because a lot of competitors went to uh zero like lows and zero 4:20 4 minutes, 20 seconds delivery fees. Uh but we're also seeing a lot of uh discounting happen in the market. Uh so therefore it becomes a lot 4:27 4 minutes, 27 seconds more complex for us to also be able to say that you know which way the things will move and how we will have to respond. But broadly your uh what you've 4:35 4 minutes, 35 seconds said is is broadly correct and on store throughput Manish I think it's it's a function of uh the fact that our assortment is now expanding and and 4:43 4 minutes, 43 seconds I think it's possible therefore that you know there are quarters when some of the store expansion the driver of that is assortment 4:50 4 minutes, 50 seconds expansion which is not as fast moving as some of the uh main head SKUs. So, so I think uh over long-term we don't see 4:58 4 minutes, 58 seconds that as a concern and I think the fact that assortment is expanding is also reflecting in our margins which which were better last quarter despite the throughput uh being lower as you mentioned. 5:08 5 minutes, 8 seconds Got it. And just my last question on this topic. So your growth is good. You said like for like 130% YI you're 5:14 5 minutes, 14 seconds expanding margins. So where is competition showing up? I mean as of today it's not really impacting you. Is that the way to read it? 5:25 5 minutes, 25 seconds What needs to change for competition to start impacting your numbers? No. 5:29 5 minutes, 29 seconds So we are not saying that Manish. I think I mean there's always a way to look at things and one can argue that in absence of a rational competition that 5:37 5 minutes, 37 seconds we are pointing out things would have been much better than what they are today. Right? So that's also one perspective. Uh so so the competition is 5:45 5 minutes, 45 seconds impacting us but uh in terms of our outcomes and numbers but it may or may not impact the decisions that we take. 5:54 5 minutes, 54 seconds uh you know in in a particular quarter right so for example in the last quarter we didn't see uh these freebies impacting our our market share too much 6:03 6 minutes, 3 seconds and and hence we sort of sustained our pricing uh but as you might have seen last week we did uh drop our delivery 6:10 6 minutes, 10 seconds charges in some markets because we saw some impact right so so uh overall I think there's definitely an impact of competition and and it impacts our 6:19 6 minutes, 19 seconds margins it impacts our topline growth it impacts our uh store expansion plans and various other things. 6:26 6 minutes, 26 seconds Right. Just last question before I jump back in the queue. You've maintained your 3 billion NOV guidance for going 6:32 6 minutes, 32 seconds out in F30 which would imply north of 30% CAGGR over the next four years. Last quarter of course was about 20% growth. 6:41 6 minutes, 41 seconds So one, why is the growth as low as it is right now? And two, what explains that meaningful acceleration that is being built into your guidance? 6:49 6 minutes, 49 seconds Yeah. So, uh I think a large part of our growth here in this business is we are expecting going forward is going to be from market share growth. Right. I think 6:58 6 minutes, 58 seconds there are subsegments within district business like events and movies where we are a significantly smaller market player even now compared to our 7:07 7 minutes, 7 seconds competitors right so so for us to deliver 30% kagger over the next 3 four years it doesn't necessarily mean that the industry has to grow by that much. I 7:15 7 minutes, 15 seconds think a lot of it can also come from market share gains and that is what we are building into our plans right now. 7:20 7 minutes, 20 seconds Very helpful. Thanks a lot. I'll jump back in the queue. 7:24 7 minutes, 24 seconds Thank you. Next question is from the line of Ankor Rudra from JP Morgan. Please go ahead. 7:32 7 minutes, 32 seconds Hey, thank you. And again I see a quick break even here. Uh maybe to start with could you highlight uh whether the 7:40 7 minutes, 40 seconds slower growth in orders this time it slowed seems to have slowed a bit more than your headline uh revenues in the quickcommerce business and it again has 7:48 7 minutes, 48 seconds not been impacted by GST is that a reflection of the more aggressive uh stance from a competitive perspective 7:56 7 minutes, 56 seconds you lose some share to peers yes some of it is an impact of that angul 8:05 8 minutes, 5 seconds And in going forward, do you think this will normalize? 8:10 8 minutes, 10 seconds We have no idea. It depends on how the overall market behaves. 8:16 8 minutes, 16 seconds Got it. Uh maybe just a another followup on the previous question. Your addition has slowed down this time. It should 8:24 8 minutes, 24 seconds imply a better store vintage and the older store should ideally have better NOV per store. I think you made a comment about that. I'm just curious to 8:32 8 minutes, 32 seconds see why it's not coming up. why the or you know the NOV or throughput per store per day is not expanding if we see a better vintage. 8:40 8 minutes, 40 seconds Yes. So Ankur that's again a function as I mentioned that you know if you if if a lot of our store addition last not just last quarter but last two three quarters 8:47 8 minutes, 47 seconds has been towards assortment expansion and and as we know from further expand the assortment 8:54 8 minutes, 54 seconds uh the turnover of this uh the the long tail is is not that high as as what we started the business with. So there is 9:02 9 minutes, 2 seconds always that negative impact of assortment expansion on throughput that we will continue seeing in the business and I think in this quarter uh that's 9:09 9 minutes, 9 seconds resulted in a slight dip. I don't think we should read too much into that at this point. Uh you know we should bounce back and No 9:18 9 minutes, 18 seconds store which we believe will continue to grow. 9:20 9 minutes, 20 seconds Also part of the impact was on account of the GST change. 9:24 9 minutes, 24 seconds I think um that if in in absence of that u you know that 3% uh impact would have 9:31 9 minutes, 31 seconds been yeah yeah I saw that I was hoping it'll expand given the you know it slow down a bit but understand the answer just a 9:39 9 minutes, 39 seconds couple of points on the cash flows you know I can see that capex has gone up a bit this time despite uh you know fewer stores added versus last quarter and 9:47 9 minutes, 47 seconds also your working capital days seem to be expanding if you can comment on those two factors please. Yeah. So uh Anur as you mentioned in the letter I think what 9:55 9 minutes, 55 seconds we are our framework for thinking about capex and networking capital is ROC right and it's a young business uh uh we 10:04 10 minutes, 4 seconds don't have a playbook for uh for you know how much NWC is going to give us what kind of ROC etc. So we are being 10:12 10 minutes, 12 seconds open-minded and first principles on this. uh in the past we have uh uh shared some assumptions on what Epics 10:19 10 minutes, 19 seconds per store could be uh going forward and what our sort of networking capital is in the business could be. Uh broadly I 10:27 10 minutes, 27 seconds think we are hovering around the same range right now. Uh but you know especially on capex I think we think that uh it will go up on a per basis 10:36 10 minutes, 36 seconds going forward because there's a lot of automation opportunity here which will increase productivity. So even though uh 10:43 10 minutes, 43 seconds we might see capeex per store going uh going up over the next few quarters uh 10:50 10 minutes, 50 seconds we don't expect uh networking capital to be beyond that 18 days that we had shared earlier. So that should remain within the range and hence as a 10:58 10 minutes, 58 seconds consequence of that uh the ROC outcomes should still be north of 40%. I think that's what we are solving for. 11:08 11 minutes, 8 seconds Understood. Thank you investor. Thank you. 11:12 11 minutes, 12 seconds Thank you. Next question is from the line of siluki from JM Financial. Please go ahead. 11:20 11 minutes, 20 seconds Hi. Uh thanks for the opportunity and congrats on a breaking even in the quickcommerce business. Uh my first question is with respect to uh your uh 11:28 11 minutes, 28 seconds the uh contribution margin expansion that happened in Blinket. Uh so 90 basis points improvement. Uh this was despite 11:36 11 minutes, 36 seconds 20 basis points of take rates coming off. [snorts] uh where exactly if you can pinpoint uh did you see a meaningful improvement uh 11:44 11 minutes, 44 seconds or or the OP play out within the contribution uh expenses so between the take rate to contribution margin 11:52 11 minutes, 52 seconds expenses I think certainly it's mostly to do with the mix change there's impact of seasonality also over there and then 12:00 12 minutes some of the other factors also impact like how the what product mix we end up selling in in the quarter and the cost efficiencies I think most 12:08 12 minutes, 8 seconds of The benefit as you see are on the cost side below gross profit. So I think there's no one particular factor. I think it's largely operating leverage uh 12:17 12 minutes, 17 seconds which is resulting in lower costs uh and and some sort of uh higher productivity in the warehouses that we that's resulting in the increase in margins. 12:28 12 minutes, 28 seconds Got it. And going ahead uh given that you also mentioned that you have cut down your delivery fees in certain uh markets. So that in my opinion uh will 12:36 12 minutes, 36 seconds put some pressure on your uh take rates right uh so uh how much uh contribution margin expansion will realistically be 12:44 12 minutes, 44 seconds possible for us to uh sustain uh let's say uh in the next quarter or so so yeah for next quarter or even two I 12:52 12 minutes, 52 seconds we don't want to comment anything uh and I think I hope you'll appreciate that and we've mentioned that in the letter try to explain what are the uh various 13:02 13 minutes, 2 seconds reasons why this might be little volatile in the short term. So very hard uh to to talk about whether the margins 13:09 13 minutes, 9 seconds will expand at all or if they do by how much in the next quarter. 13:14 13 minutes, 14 seconds Okay. uh and I think longer term I mean just to add I think longer term in our letter we have mentioned that our confidence on margins 13:22 13 minutes, 22 seconds going to five to six% of NOV remains high and and we've shared data uh on couple of cities uh in our business 13:31 13 minutes, 31 seconds where we are already at 5% registered a bit margin right so so the way we think about margins is therefore therefore uh you know long-term uh we have extremely 13:40 13 minutes, 40 seconds high confidence on on the business model delivering the margins that we need to get to the ROC that I mentioned but in the short term we want to take the right 13:48 13 minutes, 48 seconds decisions for the business uh and that would mean uh taking a margin hit if we have to do that and we are open about that so we are not saying that that's 13:57 13 minutes, 57 seconds going to happen next quarter these decisions are going to be tactical and taken real time and hence uh a lot of it depends on how the market shapes up over 14:06 14 minutes, 6 seconds the next 3 6 months and that's why the unpredictability on on margin from here on Got it and and uh can you just clarify 14:14 14 minutes, 14 seconds because there have been a few changes in the labor code this time around and uh uh how much of those cost are already the 18 margins today uh and there were 14:23 14 minutes, 23 seconds I'm coming from there two two impacts essentially that uh I want to understand about one is the uh impact because of 14:31 14 minutes, 31 seconds the gig worker cost going up towards their social security benefits and secondly because of the uh changes on 14:38 14 minutes, 38 seconds the gratuitity side for some of the fixedterm contract uh labor uh So if you can just if if any of that is already in 14:46 14 minutes, 46 seconds the margin or going ahead, we will have to face that challenge. 14:50 14 minutes, 50 seconds So as we have mentioned in question 11, uh we don't think uh the new labor codes impact our long-term margin guidance. 14:58 14 minutes, 58 seconds That doesn't change. Uh as far as uh any potential impact on account of code on social security is concerned, we will 15:06 15 minutes, 6 seconds get to know that once the rules are operationalized and notified and and uh from what we know today, we think the 15:13 15 minutes, 13 seconds business will either be able to absorb that cost or we'll pass it on to customers. And uh on your second part on gratitude and leave in cashment, our 15:21 15 minutes, 21 seconds assessment is right now that there's no impact on our business on account of that. But again there are a few outstanding questions there uh that will 15:29 15 minutes, 29 seconds get more clarity over the next few days and if there is then then next quarter will reflect that but I don't expect that to be meaningful at all. 15:39 15 minutes, 39 seconds Got it. And just a last one on the going out side. I mean uh our previous uh thought process was that the losses in that business will be around 60 70 15:48 15 minutes, 48 seconds crores maybe quarterly wise. uh there has been a sudden jump in this particular quarter and uh against that we didn't have that kind of a growth as 15:56 15 minutes, 56 seconds well 20% y u uh uh is is there any scale up in investments that you had done and 16:02 16 minutes, 2 seconds that and that is going to sustain uh or like how should we look at that or was there a bunch up of some investments this quarter itself 16:10 16 minutes, 10 seconds yeah I think uh it's more the latter I think we we decided to launch district pass uh uh as a membership program which we initially did not plan for in this 16:18 16 minutes, 18 seconds quarter and a large part increase in losses is on account of rolling that out. Uh and I think that will not impact 16:26 16 minutes, 26 seconds the topline numbers in this quarter given the effect we'll be compounding over the next few months. Uh but we think it's the right step now and I 16:35 16 minutes, 35 seconds think it's going to drive multicategory usage on the app. So I think we'll keep evaluating you know whether we need to continue this investment or not. But 16:43 16 minutes, 43 seconds irrespective of that as we mentioned in question 13 we expect now the losses to come down sequentially for from here. 16:49 16 minutes, 49 seconds towards break even in the next four to six quarters. 16:54 16 minutes, 54 seconds Action very clear. Thanks a lot for taking my questions and all the best. Thank you. 17:00 17 minutes Thank you. Next question is from the line of Gimma Mishra from Kot Equities. Please go ahead. 17:07 17 minutes, 7 seconds Thank you so much for the opportunity. 17:09 17 minutes, 9 seconds Um first uh if I refer back to your second quarter letter, you had mentioned that uh for the blanket business GST cuts bring down basket pricing by 3%. 17:19 17 minutes, 19 seconds And this should help in higher demand. 17:21 17 minutes, 21 seconds Did this play out in the banner you had invisaged in 3Q? 17:26 17 minutes, 26 seconds I remarked uh some of it did but there were also supply challenges because of the transition. Uh so I think it'll become more clearer over the next few 17:34 17 minutes, 34 seconds quarters. It was not a resounding yes this quarter. 17:38 17 minutes, 38 seconds All right. Uh thanks for that and Albinder, congrats to you on your new role of group CEO. So do you continue to lead the blinket business or should we expect some internal leadership changes? 17:50 17 minutes, 50 seconds No GMA as we mentioned in the letter uh we continue to operate like we are operating. Uh I think still as a team Axan Deepi and I will continue to do 17:59 17 minutes, 59 seconds whatever we were doing uh including me uh leading the blinket business. So uh operationally nothing changes for us. 18:06 18 minutes, 6 seconds All right. Thank you and wish you the best. 18:10 18 minutes, 10 seconds Thank you. Next question is from the line of Goravia from Morgan Stanley. Please go ahead. 18:17 18 minutes, 17 seconds Hi, congrats on uh stellar performance this quarter. My first question is on your comment around u 100% plus growth 18:26 18 minutes, 26 seconds which would be possible with 3,500 uh plus stores uh which was probably earlier possible with 3,000 stores. Does 18:34 18 minutes, 34 seconds it mean that incrementally whatever stores that you are likely to add will carry the lower throughput than 18:42 18 minutes, 42 seconds what you were expecting earlier and is it because the competition has been aggressive in rolling out their own stores and hence the penetration of the 18:50 18 minutes, 50 seconds number of stores has increased substantially and which brings down the throughput for you. I got up. No, I think so. I think we never mentioned 18:59 18 minutes, 59 seconds that the 100% growth from here on will happen with just 3,000 stores. Uh we don't think that is uh likely although 19:08 19 minutes, 8 seconds possible. So you know for that to happen we will need to open more stores which is what we have mentioned here. 19:16 19 minutes, 16 seconds Okay. Okay. My second question is on your competitive intensity. Uh I guess you did allude to some tactical interventions that you may have done 19:24 19 minutes, 24 seconds during the quarter. Is it fair to say that if competition remains where it is right now, whatever interventions that 19:32 19 minutes, 32 seconds you are doing is sufficient for you to hold back to your market share and uh deliver whatever profitability you have 19:40 19 minutes, 40 seconds or there will be need for more interventions uh if the competition remains at the current levels. 19:46 19 minutes, 46 seconds Uh hi Gorav. I think u see competitive intensity also tends to uh go up uh over 19:54 19 minutes, 54 seconds time uh because uh the kind of uh competitive interventions that we are seeing they used they are usually lead 20:02 20 minutes, 2 seconds to lower ROI as you keep doing more and more of them. Uh so we will have to respond to a fairly fairly volatile 20:09 20 minutes, 9 seconds environment. Um I don't think we can just stay at an intervention and then like hope that the competition also stays at the same thing. I think people will change. They will be more 20:16 20 minutes, 16 seconds competitive and we'll have to also respond to that. 20:21 20 minutes, 21 seconds All right. My last question is on uh uh how to look at the break even on a cash flow basis in a quick commerce at the 20:29 20 minutes, 29 seconds steady state margin that you are talking about on uh quickcommerce business. Uh what would be that converting into from a free cash flow margin perspective? 20:40 20 minutes, 40 seconds Thank you. 20:43 20 minutes, 43 seconds I I think we we we've also laid out our view on how we think about return on capital here and and I think ROC of 40% 20:52 20 minutes, 52 seconds plus is how we think about I think his question is that what will what does that mean or free cash flow margins right free cash flow over 21:01 21 minutes, 1 second revenue yes yes yeah go we haven't haven't looked at that yet honestly so okay no problem 21:09 21 minutes, 9 seconds thank here. 21:15 21 minutes, 15 seconds Thank you. Next question is from the line of Gorav Malotra from Access Securities. Please go ahead. 21:21 21 minutes, 21 seconds Yeah. Hi. Uh thanks. Thanks for the opportunity. Congrats on a good set of numbers. Uh just couple of questions. Uh you know in the shareholder letter 21:29 21 minutes, 29 seconds mentioned that 90% you guys have shifted to inventory. So the remaining 10% which you said you will not shift what what is 21:37 21 minutes, 37 seconds the assortment there? Is it like electronics, slower moving goods, higher ESP items, you know, what what is the assortment of of that 10%. 21:47 21 minutes, 47 seconds Uh G, some of that is SKUs that we do want to keep on a marketplace model uh for uh different reasons. Uh some of 21:54 21 minutes, 54 seconds which are also related to they might be slower moving. Uh and in some cases there is a more vibrant seller ecosystem 22:02 22 minutes, 2 seconds for these SKUs which we think they do a better job of managing inventory and managing the back end then we would be able to do that. So that's broadly the 22:09 22 minutes, 9 seconds the kind of SKUs that that contribute to that number. 22:14 22 minutes, 14 seconds Got it. Got it. And uh just on on food uh on food delivery uh you know you you did take uh down the the delivery uh 22:22 22 minutes, 22 seconds charges. Um and we uh we are seeing some we are seeing obviously growth coming uh and and and picking up. But from here do 22:31 22 minutes, 31 seconds we expect growth to further accelerate or you know this is this it sort of will remain in this kind of ballpark. 22:42 22 minutes, 42 seconds So on the growth uh again uh we mentioned I think in respond to question 22:48 22 minutes, 48 seconds seven that uh long-term I think growth opportunities pretty high u given that some of our large cities are still 22:56 22 minutes, 56 seconds growing 50 to 100% year on year but sorry misunderstood your question was on food right? Yeah. Yeah. It was in food. 23:07 23 minutes, 7 seconds It was in food. 23:09 23 minutes, 9 seconds Yeah. So as of now as as we mentioned that uh you know we we expect the growth year growth to continue slowly trending 23:17 23 minutes, 17 seconds up towards 20% is what our current sense on the market is. Got it. Okay. Thank you. 23:25 23 minutes, 25 seconds Thank you. Next question is from the line of Sajin Salganker from Bank of America. Please go ahead. 23:33 23 minutes, 33 seconds Hi. Thanks for the opportunity and congrats on a great set of numbers. Uh first question is the move towards your inventory model. Uh you guys said in the 23:41 23 minutes, 41 seconds shareholder at a half of the 1 percentage point accretion has already happened. Should we expect the remaining uh half point to come uh in uh the next 23:50 23 minutes, 50 seconds 3 to 6 months and you know when you think about it could the benefit be more than 1 percentage point out here? 23:57 23 minutes, 57 seconds Yeah, Sachin. So, yeah, I think we should I think the full benefit should acrew more like in 6 to9 months and uh yeah, we don't think the benefit will be more than 1% that we mentioned. 24:08 24 minutes, 8 seconds Got it. Um second uh question is any broad sense in terms of uh the store additions what are happening in tier 2, 24:17 24 minutes, 17 seconds tier three city is the economics similar in uh top tier cities in terms of AOVs, OPDS and hence should margins be similar out here? 24:27 24 minutes, 27 seconds Sajin uh we're not providing any sort of breakup uh on to where we are opening stores but uh the contribution at the 24:34 24 minutes, 34 seconds contribution level uh the economics for us are fairly sim similar even though the headline numbers might be different uh depending on tier one or tier two. 24:43 24 minutes, 43 seconds Got it. And Albby my question was more on the long-term steady state margins. 24:47 24 minutes, 47 seconds So this should also be five to six% of NOV right in tier 2 tier three cities. Correct. 24:52 24 minutes, 52 seconds Got it. uh and every quarter you guys surprise us positively in terms of looking to add more stores. When we take 24:59 24 minutes, 59 seconds a 4 year five year view, how big could this entire quickcom or dark store uh stores be for the industry? Uh I you know is there room for continued growth? 25:09 25 minutes, 9 seconds Will the industry number be as around 10,000 would love to get your big picture thoughts on this one? 25:16 25 minutes, 16 seconds Sachin we are also finding out the depth of the market as we go along and we open more use cases. uh customers also indicate how they want to use the 25:24 25 minutes, 24 seconds platforms. Uh so right now we have a lot of vectors of growth whether it is geographic or assortment uh penetration 25:31 25 minutes, 31 seconds customer use cases which are also coming up. So we're also finding out as we go along. So uh you know whenever we know better we will sort of keep guiding to 25:40 25 minutes, 40 seconds what we think. Right now we think that uh in a the in in a rational market there should be headroom for us to add a 25:48 25 minutes, 48 seconds significantly higher number of stores uh in the near future. 25:52 25 minutes, 52 seconds Got it. And from a mix perspective uh right now where things stand is it 7030 mix where 70% of stores are still in top 26:00 26 minutes tier cities and 30% in tier 2 tier three or could that ratio change? 26:04 26 minutes, 4 seconds I don't think they're providing this pickup s. Got it. And my last question is uh generally trying to understand uh 26:12 26 minutes, 12 seconds in for example a place like Bangalore where every platform focusing on quick commerce is aggressive which perhaps not 26:20 26 minutes, 20 seconds be the case right now in a panindia basis. How are directional trends for market share and contribution margin for you guys? Are you maintaining that 26:29 26 minutes, 29 seconds share? Are you increasing share or you is there a bit of an impact out there? just broad direction. 26:35 26 minutes, 35 seconds So I think from what the information we have uh in most of the you know tier one markets which is the metros we have 26:42 26 minutes, 42 seconds largely maintained our share of NOV um and we know that there is now there is competition in almost all of the cities. 26:48 26 minutes, 48 seconds So uh that is the best information we have. 26:53 26 minutes, 53 seconds Got it. All the best for future. Thank you. Thank you. 26:57 26 minutes, 57 seconds Thank you. Next question is from the line of Dignore from Bernstein. Please go ahead. 27:04 27 minutes, 4 seconds Hi uh congratulations uh to Alvindra again on the on the position. Uh I had one question on uh just understanding 27:12 27 minutes, 12 seconds the growth that we have seen in MTUs especially on a dark store per store basis right our ad spends haven't for QC 27:21 27 minutes, 21 seconds when I look at the uh gross versus console versus standalone numbers we don't really have uh seem to have spent 27:28 27 minutes, 28 seconds a lot more on ad uh despite the competition uh so we seem to be getting a lot more organic uh users 27:37 27 minutes, 37 seconds what do you think is attributable to to this on a post basis continuing to get more users and not just AOE's 27:46 27 minutes, 46 seconds just assortment uh it's more related to assortment expansion uh but then that should ideally then 27:55 27 minutes, 55 seconds translate into and that's the second question into higher frequency of orders per customer right but that seems to have gone down so is there a replacement 28:03 28 minutes, 3 seconds happening uh so that's the circle I wasn't able to square frankly No, I think that's uh not as linear 28:10 28 minutes, 10 seconds relationship as you think. Uh if customers are coming to us through categories which are uh expansion categories, then the frequency node 28:18 28 minutes, 18 seconds doesn't necessarily go up because frequency driver categories are not the ones that might be entering through. 28:25 28 minutes, 25 seconds Okay. So they are coming for expansion but not necessarily doing the core transactions yet on this platform. 28:33 28 minutes, 33 seconds So the trajectory might be different for uh as we start as we expand assortment mode. 28:39 28 minutes, 39 seconds Understood. Great. Okay. Uh and uh just the second uh follow up on one of the questions I think Gara asked regarding u 28:46 28 minutes, 46 seconds uh leadership. So uh uh is the does the blinket plus food uh and other going out 28:53 28 minutes, 53 seconds or the entire leadership below uh the three of you remains as it is and there is no change. Is that the right way to think about it? Uh at least for now. 29:01 29 minutes, 1 second That's right. 29:02 29 minutes, 2 seconds Okay, great. All right. Yeah, that's it for me. Thank you and congratulations. 29:08 29 minutes, 8 seconds Thank you. Next question is from line of Abhishek Banerjee from ICICI securities. Please go ahead. 29:17 29 minutes, 17 seconds Hey. Hi. Uh congratulations on a great set of numbers. Uh just a couple of questions from my side. Uh so in the 29:26 29 minutes, 26 seconds letter you mentioned that KEX per stone will increase health. Why is that? Are we also moving to a megapod uh 29:32 29 minutes, 32 seconds structure? Uh it tends to be chunky and we make a lot of investment uh in the warehousing 29:39 29 minutes, 39 seconds infrastructure as well. Uh especially as we expand deeper and deeper into the country. So that would uh explain the increase in capex per store. Also we are 29:47 29 minutes, 47 seconds investing a lot more in automation now and also there is some increase in uh per store uh square foot size as you 29:54 29 minutes, 54 seconds mentioned but it may not be similar to what other competitors are doing but our in general our store size is uh going up every quarter. 30:03 30 minutes, 3 seconds So is that for more assortment or or any other reason? 30:08 30 minutes, 8 seconds Yes I mean for us the the I mean there's a it's a function of availability of real estate. It's a function of how we want the store design to be and and and 30:17 30 minutes, 17 seconds because of that I think there's a trend which is taking the store size up. So payex per square feet of space edition 30:24 30 minutes, 24 seconds is not going to go up as much as aex per store would understood. Uh now for broth you have 30:33 30 minutes, 33 seconds mentioned that you have seen some early signs of a product market fit. uh can you please elaborate on that and do I 30:41 30 minutes, 41 seconds mean uh what kind of scale up can we realistically you know think yeah so I think product market fit for 30:49 30 minutes, 49 seconds us when we say that we mean that one I think on customer side there is genuine value being created for which they come back come back to the platform and 30:57 30 minutes, 57 seconds transact and and then equally from an economic standpoint you know we start feeling and getting more comfort on this 31:06 31 minutes, 6 seconds business being able to make money especially given the AOVs are much lower here than uh what we see uh in the food 31:15 31 minutes, 15 seconds delivery business right so these are the two elements of product market fit uh the one on the demand side I think we were anyways fairly confident uh we knew 31:24 31 minutes, 24 seconds that few months ago when we opened the first few stores that customers are not coming here just for cheap food but we're solving uh a sort of unmet 31:33 31 minutes, 33 seconds customer demand here of quick snacky food uh which is higher quality uh at the right right price point. So I 31:40 31 minutes, 40 seconds think on that we had conviction early but I think as we continue to build the business we are building more conviction on economics as well and hence you know 31:49 31 minutes, 49 seconds at this point our plan is to continue investing uh in this business in a sort of 31:56 31 minutes, 56 seconds cautious way and and at some point uh you know like blinket if if we get extremely if it becomes extremely clear 32:04 32 minutes, 4 seconds that uh this is a profit-making business and margin visibility is high then we may accelerate that expansion as well Right. So we'll we'll keep uh all of you posted on uh on this every quarter. 32:15 32 minutes, 15 seconds So so for you this is uh you know convenience plus value both u well I 32:22 32 minutes, 22 seconds mean just try to compare with coin that has come out. Not just convenience and value, I think it's also uh assortment 32:31 32 minutes, 31 seconds menu, right? So I think it's uh there's a cuisine gap in the market which I think bro fills and and that is also why 32:38 32 minutes, 38 seconds we don't see this business cannibalizing the Zumato business, right? Wherever the we have these stores. Understood. 32:47 32 minutes, 47 seconds Uh and uh one last question from my side is uh you know in in the business that has mentioned that his share would uh 32:57 32 minutes, 57 seconds come back to the employee pool. Now uh what what kind of an expansion would the 33:03 33 minutes, 3 seconds pool uh you know then have and uh how do you kind of think you are set for I mean for for how much of a time period do you 33:12 33 minutes, 12 seconds think you do not need to do more grants? 33:17 33 minutes, 17 seconds No. So I think see the way it works is we have a esop pool which has uh which have which which has a large number of shares today. Okay, I think roughly 33:26 33 minutes, 26 seconds about I need to check the number but I think this is north of 20 cr shares. So so his ESOPS uh will will perhaps uh 33:35 33 minutes, 35 seconds expand that pool by another 3.3 crore shares right and uh the grant from this 33:42 33 minutes, 42 seconds pool is a function of you know the the board uh allocating ESOCs to different employees bases their performance etc. 33:51 33 minutes, 51 seconds Right? So grant is therefore the grants are not going to go up just because the pool size went up but because the pool 33:57 33 minutes, 57 seconds size went up you know we may not need to dilute for esops again for slightly longer than what we would have otherwise done. I think that's what we're trying 34:05 34 minutes, 5 seconds to say here and any visibility on you know how how much of an you have with something 34:14 34 minutes, 14 seconds um hard to say I think at least we we don't think we need any dilution in the near future at this point 34:23 34 minutes, 23 seconds okay thank you thank that will be all thank you next question is from the line 34:30 34 minutes, 30 seconds of punal war from BNP Pariba please go ahead Hello. Yeah, thanks. Uh you mentioned 34:39 34 minutes, 39 seconds that uh this quarter you had 211 net store edition. Did you close any stores uh during the quarter? 34:48 34 minutes, 48 seconds Yeah, canal just regular uh closures that happened for different reasons. Uh so that is it's net store edition. 34:55 34 minutes, 55 seconds Okay. So how higher will the gross number be versus the net number? because that could also explain the capex 35:03 35 minutes, 3 seconds closure rate is uh very low very low. Okay. Okay. Okay. And there has been rapid expansion over the last few quarters. Do you see a need to 35:10 35 minutes, 10 seconds review some of the stores and similarly there are cities which like I mean uh smaller cities do you think uh some of them you might need to exit or uh it all looks good. 35:20 35 minutes, 20 seconds It looks good. 35:21 35 minutes, 21 seconds Okay. Second is in terms of competition uh is it largely between the three quickcommerce players or is it the e-com players which have also expanded 35:29 35 minutes, 29 seconds physical retailers such as Geommart also are talking about almost 800 dark stores and 1.6 million daily orders. So are you 35:36 35 minutes, 36 seconds seeing any impact of like these players at least in the like tier to tier three cities? 35:42 35 minutes, 42 seconds See I think for us competition is everybody who's trying to gain a market share of the uh you know the eco online 35:49 35 minutes, 49 seconds buying pie. Uh so I think everybody's included but is there a increase in competition 35:56 35 minutes, 56 seconds with the other three players also now getting more aggressive? 36:00 36 minutes Yeah I think generally the competition across the board has gone up. 36:04 36 minutes, 4 seconds Okay fine. Lastly uh in blanket uh how much do cities beyond the top eight cities contribute? Uh and how is the 36:11 36 minutes, 11 seconds experience beyond the top cities? How many cities do you see a potential in? 36:16 36 minutes, 16 seconds Uh we are not disclosing that. Kunal mentioned that before also on the call. 36:20 36 minutes, 20 seconds Okay, okay, okay, okay. Okay, that's it from me. Thank you. Thank you. 36:27 36 minutes, 27 seconds Thank you. Next question is from the line of Nikl Chri from Noama. Please go ahead. 36:35 36 minutes, 35 seconds Yeah, thanks for the opportunity and uh congratulation on achieving break even in blinket and hyperapure. So, first 36:42 36 minutes, 42 seconds question uh is on 100% growth part. Last quarter uh you have mentioned that uh you can deliver 100% y growth for next 36:49 36 minutes, 49 seconds two years and if the opportunity size is so large which uh we believe ideally should be then why short-term change in 36:57 36 minutes, 57 seconds competitive intensity can derail it especially when you guys have already achieved break even you are talking about investing on market share gain 37:05 37 minutes, 5 seconds then what is stopping us from achieving this 100% growth what has changed basically in one quarter 37:12 37 minutes, 12 seconds n uh our viewpoint on this is that there is the competitive intensity is also depending on the kind of competition you see. Currently we feel that we are the 37:21 37 minutes, 21 seconds only ones who are meaningfully contributing to increasing the market size. Uh whereas the uh competitive intensity is mostly showing up in taking 37:29 37 minutes, 29 seconds share away u and that is why you will see that that pressure on on growth. Uh usually you will see much faster market 37:37 37 minutes, 37 seconds growth uh and then all the players are also gaining share but we're not seeing that kind of competition. 37:44 37 minutes, 44 seconds Got it. Uh thank you. Second is the behavior remain uh consistent across the player or is it more limited to 37:52 37 minutes, 52 seconds incoming? So what I meant to say is is new players like Amazon, Flipkart and Geommart is also resorting to this kind 37:59 37 minutes, 59 seconds of competition now or is it more limited to you know incumbent? 38:05 38 minutes, 5 seconds We wouldn't want to comment on on this question. I think you should you should find out and talk to others. Got it. The last one on food delivery. 38:12 38 minutes, 12 seconds Uh we saw some acceleration this time and also uh we are hearing positive commentary from uh consumer and consumption-driven companies in India. 38:21 38 minutes, 21 seconds Is it fair to say you are more comfortable in reaching let's say 20% growth in Fi 27 or maybe in two to three quarters. 38:30 38 minutes, 30 seconds So very hard to say uh Nikl I think these things keep changing uh for reasons which are beyond our control. So I think we don't want to venture and 38:38 38 minutes, 38 seconds take a guess here on how this moves. I think our business responds to growth in demand and it's a it's a asset light 38:45 38 minutes, 45 seconds bottle. So if the demand expands I you know we don't need unlike blinket we don't need to build infrastructure to service it right. So, so whatever is the 38:53 38 minutes, 53 seconds pace of growth of consumer demand in the country, I think we the business our job is to make sure that we're able to cater 39:00 39 minutes to it and and that largely uh our job there is to make sure that delivery partner supply uh matches the growth and 39:08 39 minutes, 8 seconds demand and and restaurants are able to respond to that uh in terms of uh capacity right so so yeah I think we 39:16 39 minutes, 16 seconds just stick to our job and uh you know very we don't want to take a guess on how this will grow from here in terms of growth rates. 39:23 39 minutes, 23 seconds Got it. Just last one on the leadership leadership transition. I think while you have uh clarified that uh currently 39:31 39 minutes, 31 seconds everyone is doing what they were doing but is it fair to say medium to long-term ultimately the goal is to transition more responsibility to uh 39:39 39 minutes, 39 seconds Albindar and Dependa may be taking more executive role. 39:44 39 minutes, 44 seconds That's not the plan, Nikl. I think uh Depender is as his letter mentions, he's going to continue to be involved in the way he was in the past and I think 39:53 39 minutes, 53 seconds there's a lot to be built at Eternal right now. Uh most of our businesses are young, including food delivery. 40:00 40 minutes So I think we have a long runway ahead and at this point we're all committed to continue building it. 40:05 40 minutes, 5 seconds Got it. Very helpful. Thanks a lot and good luck for coming period. Thank you. 40:10 40 minutes, 10 seconds Thank you. Ladies and gentlemen, in the interest of time, we will now take the last one to two questions. The next question is from the line of Vijay Jen from Cityroup. Please go ahead. 40:20 40 minutes, 20 seconds Yeah. Hi, thanks uh for the opportunity. 40:23 40 minutes, 23 seconds Um and congratulations Al Salvandra on the elevation to the CEO role and to the team for the break even. My first question um so you said earlier that 40:33 40 minutes, 33 seconds store sizes in general continue to go up every quarter. Uh I'm wondering as you densify in mature cities are store sizes 40:40 40 minutes, 40 seconds going up there as well and related question to that uh when you say automation in stores uh could you talk a little bit about uh which you know uh 40:49 40 minutes, 49 seconds where the automation will come uh in the stores uh that's my first question on the first one yes there is store size 40:57 40 minutes, 57 seconds is going up in uh across the board uh and on automation actually most of our automation is more related to our 41:05 41 minutes, 5 seconds overall supply chain so It's not just the stores. 41:09 41 minutes, 9 seconds Okay. Got it. Uh the the second question I had was you know I you mentioned earlier you talked about you know 41:16 41 minutes, 16 seconds assortment changes in uh as you know as business grows and matures. in terms of you know the metrics that you track um 41:24 41 minutes, 24 seconds is gross profits per square feet per day I know you've mentioned the metrics in the past is still the northstar and do 41:32 41 minutes, 32 seconds you care about you know maximizing order throughput per dark store per day in at all I I'm just trying to uh you know get 41:40 41 minutes, 40 seconds a sense on this because uh there are certain conversations that tend to focus too much on orders per do per day 41:48 41 minutes, 48 seconds uh vij we don't really have those kind of targets uh whether it is orders per day or uh you know sales per square foot uh I 41:56 41 minutes, 56 seconds think our uh our plan is to provide customers a better experience whatever allows us to do it and is good for the overall economics of the business that's the direction that we end up going in. 42:07 42 minutes, 7 seconds Got it. Thank you so much. Those are my questions. Thank you. 42:11 42 minutes, 11 seconds Thank you. We will now conclude this conference call. Thank you for joining us and you may now disconnect your lines.