Swiggy and Eternal pick different fights

**Akshara** (0:04)
In today's episode, we'll break down two important stories. First, we'll talk about Swiggy and Eternal picking different fights, and then we'll talk about the hurdles forming in the Indian dairy sector.
Welcome back to The Daily Brief by Zerodha, where we cut through the noise to help you understand what's actually happening in the most important stories from business and markets. If you're listening to this on your commute, on a walk or at the gym, you can also find The Daily Brief as an audio podcast on Spotify, Apple Podcasts or wherever you listen to your podcasts. If you prefer reading, check out the newsletter using the link in the description.
I'm your host Akshara and today is Monday, 10th August. Coming to the first story.
On Eternal's latest earnings call, BlinkIt CEO Albinder Dhinca was asked about competition and gave an unusually flat answer. This was the hardest quarter BlinkIt has faced. There were many more players in the market, he said, and every one of them was more aggressive. And he wasn't over-selling it. BigBasket's co-founder Hari Menon stepped down as CEO after publicly admitting he had spent too long in denial about 10-minute delivery, a misread that eventually forced the company to pivot its entire model. Flipkart has pushed Flipkart minutes past 1,000 dark stores, and DMod, which has built its entire reputation on making customers drive to the store, is now leaning harder on DMod-ready. Reliance is running Geomod deliveries out of its existing store network, Zepto filed its DRHP and then pulled it back over valuation, and smaller, stranger entrants keep appearing, like First Club, a members-only grocery app in Bengaluru, selling on the promise of clean labels. Swiggy's CEO Shriharsha Majeti counted 7 or 8 active players, and that's the backdrop for everything that follows. Because until recently, the two listed companies in this fight responded to pressure in somewhat the same way. But reading their June quarter results side by side, that symmetry seems to be gone. They are now answering the same question with two different bets.
Let's start with the caveat. Because without it, the headline numbers are actively misleading. Now Eternal reported consolidated adjusted revenue of roughly Rs 20,600 crore, up 173% from about Rs 7,500 crore a year ago. But almost none of that is real growth. Last year, BlinkIt shifted to an inventory-led model, meaning it now buys stock, owns it, and sells it directly to customers rather than taking a cut on someone else's sale. So when you own the goods, you book the entire value of the sale as revenue instead of just your commission. And the same volume of business suddenly shows up several times larger. Strip the accounting change out, and BlinkIt's like-for-like quick commerce revenue grew 117%, which is still remarkable, but it's a different number entirely.
Now Swiggy, which has not made that shift, reported consolidated adjusted revenue of about Rs 7,100 crore, up 34% from roughly Rs 5,300 crore. Nearly half of that total isn't consumer business at all, but a low-margin B2B distribution arm that Eternal has no real equivalent of. So for one more quarter, the top lines of these two companies simply cannot be compared. And the same problem runs through the operating metrics. So Eternal reports net order value, which strips out delivery charges, platform fees, and platform-funded discounts. And Swiggy reports gross order value, which includes user delivery charges, platform fees and taxes, and his gross of discounts the platform itself funded. Now, what does compare cleanly is profit and cash. Eternal's net profit came in at Rs 92 crore, nearly three and a half times the Rs 25 crore it made a year ago. And it ended the quarter sitting on Rs 18,300 crore, having added Rs 316 crore during the three months. Now, Swiggy is still loss-making, but the loss is shrinking fast, down to roughly Rs 719 crore from about Rs 1200 crore in the same quarter last year. It ended with Rs 14,000 crore having burned Rs 686 crore, largely on capital expenditure and working capital. So, the core business is settled, and boringly so. Zomato's food delivery NOV grew 20.1%, throwing off about Rs 600 crore in segment abidda. So, this abidda, as a percentage of NOV, inched up from 5.5% to 5.6%.
Now, Swiggy's food delivery GOV grew 17.4%, with segment-adjusted abidda of about Rs 219 crore at 3.1% of GOV, a seasonal dip from 3.3% the previous quarter.
So, both are profitable, both are compounding, and nobody is seriously arguing about whether restaurant delivery works as a business anymore. But what the industry is arguing about is whether the same model works at price points where restaurant delivery might not. For example, Rapido's Only charges restaurants no commission and no platform fee, making its money instead on a small delivery charge. In 4 or 5 months, it's taken roughly 7% of the Bengaluru food delivery market, helped along by restaurants that were already unhappy with what the incumbents charged them. And Flipkart is joining from around August 15th at a 10% commission, routed largely through ONDC, the government-backed open protocol that lets buyers and sellers on different apps transact with each other. Now, Swiggy's answer to this is toying. A separate cheap meals experiment, now live in 50 cities, designed to win budget customers without dragging down the economics of the main app. Its platform innovation segment, which houses these experiments, saw losses widen to Rs. 131 crore from Rs. 58 crore, most of it the cost of shutting down Snack, its 15-minute food delivery service built on micro kitchens. The numbers didn't work, so it was killed. And that's roughly what a competitive response looks like when you run it as a portfolio of bets.