“Our teams are well prepared for this transition and we expect to start working with brands directly, without any disruption to the business,” Eternal wrote in its shareholder letter.
As a result of this transition, Eternal expects an EBITDA margin expansion of 1 percentage point over a period of time, although it did not disclose the exact timeline.
There will also be a shrinkage in Hyperpure’s non-restaurant business as most of the B2B buyers in that business have been sellers on the company’s Quick-Commerce platform.
Here’s how this move will impact Eternal’s financials:
- Quick Commerce revenue will become similar to Net Order Value going forward, which will result in an increase in the Quick Commerce revenue.
- Hyperpure revenue will decline as the non-restaurant business scales down.
- Net Working Capital (NWC) in the Quick Commerce business will increase, as the company begins to own inventory, which will be offset by the decline in Net Working Capital of Hyperpure.
- There will be no change to the Quick Commerce NOV and to Hyperpure’s restaurant business revenue or profitability.
3% of Eternal’s Net Order Value during the June quarter was already on its on inventory, which also explains why the Quick Commerce revenue grew faster than the Net Order Value of 155%. “We expect this share to increase sharply in the next quarter,” the shareholder letter stated.
In case Eternal manages to get to EBITDA margin between 5% to 6% on an adjusted basis, its Return on Capital Employed (RoCE) will be 40%.
Shares of Eternal ended 7.5% higher on Monday after the results announcement at ₹276.5.
