The shares of the Large-cap company, which specializes in a diversified portfolio of businesses including food delivery and dining-out services (via the Zomato brand), quick-commerce (through Blinkit), business-to-business (B2B) grocery supply services (Hyperpure), and dining-related experiences (District), have been in focus as they appear to be overvalued.
With a market capitalization of Rs. 3,10,355.28 crores on Monday, the shares of Eternal Limited jumped upto 2.6 percent, making a high of Rs. 322.50 per share compared to its previous close price of Rs. 314.20 per share.
Eternal Ltd, the parent company of well-known brands like Eternal and Blinkit, has quickly risen to become one of the most valuable companies in India. Its recent surge in stock price pushed its total market value (market capitalization) beyond that of established giants like Wipro and Tata Motors.
The company’s high valuation has raised questions among some investors, especially those who usually look for steady profits. Even though the company’s earnings are still small or uneven, its stock is valued very highly. That’s because today’s investors are not just looking at current profits; they’re focusing more on future growth, how the company is changing its industry, and its ability to grow big over time.
Here are several factors that suggest they are overvalued
High PE Ratio: Eternal Limited has a high price-to-earnings (PE) ratio of 1,038, which is significantly above the industry average PE ratio of 30.8. This indicates that the market is valuing the company at a premium compared to its peers.
High PS Ratio: In the e-commerce industry, Eternal has a P/S (Price-to-Sales) ratio of 13.04, while Swiggy with a P/S ratio of just 6.02. This suggests that Eternal’s stock is priced at more than double the value of Swiggy’s for each rupee of sales, which may indicate that Eternal is overvalued relative to its peer.
High EV/EBITDA: The company has an EV/EBITDA ratio of 174, which is extremely high by industry standards. This means investors are paying a large premium for the company’s operating earnings, suggesting the stock may be overvalued unless future earnings grow significantly.
High P/B Ratio: The stock is trading at 10.2 times its book value, meaning investors are paying over ten times what the company’s net assets are worth. This high ratio could mean the stock is overpriced, especially if the company’s assets or profits don’t grow fast enough to justify it.
Eternal (formerly Zomato) commands a high valuation primarily due to its dominant market leadership, diversified business model, and strong growth prospects in the Indian digital commerce sector.
As the top player in India’s online food delivery market with a good market share and a growing presence in quick commerce through Blinkit, Eternal has established a strong moat driven by scale, customer loyalty, and technology-led operations. This leadership gives investors confidence in its long-term growth potential despite historical volatility in stock performance.
Eternal is shifted from just being a food delivery company to offering a range of services, like quick-commerce, B2B restaurant supplies, and event ticketing. This puts them in a great position to meet changing consumer needs and make life easier in cities. By expanding into different areas of digital commerce, the company is raising expectations for future profits and growth.
Although Eternal is currently facing some challenges with profitability due to heavy investments in growth, investors are still willing to pay a premium because they believe the company has strong potential for future growth. The high valuation reflects the idea that there’s a lot of risk, but also a lot of potential reward. Investors are excited about Eternal’s ability to scale, innovate, and become a leader in the fast-changing food-tech and quick-commerce industries.
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Financials & Others
The company’s revenue rose by 70 percent from Rs. 4,206 crore to Rs. 7,167 crore in Q1FY25-26. Meanwhile, the Net profit declined from Rs. 253 crore to Rs. 25 crore during the same period.
From Q1FY25 to Q1FY26, the company saw strong growth across most segments. Food delivery rose by 18%, Quick Commerce surged by 155%, and B2B supplies (Hyperpure) increased by 89%. The “Going-out” segment grew by 118%, while the “Others” segment declined by 73.3%. Overall, the adjusted revenue grew by 67.3%, driven mainly by the impressive performance in Quick Commerce and B2B supplies.
Conclusion: Eternal is facing profitability challenges due to heavy investments in growth, but investors remain optimistic, willing to pay a premium for its future potential. The company is seen as having significant long-term growth prospects, especially as it expands into new markets and business areas. However, this optimism carries considerable risk. If the company fails to meet growth expectations or struggles with profitability, there could be a sharp correction in its stock price.
Written By Sridhar J
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