Indian online delivery giant Eternal (formerly Zomato) has reported a significant 78% drop in its fourth-quarter profit, primarily due to aggressive spending by its burgeoning quick commerce arm, Blinkit. This investment in expanding its store network and countering intensifying competition has overshadowed the impressive revenue growth of Blinkit.

Eternal's stock, which has witnessed remarkable growth in the past two years, fueled in part by the optimistic performance of Blinkit, now faces headwinds as the quick commerce landscape in India becomes increasingly crowded. Blinkit has been actively opening new stores and offering discounts and subsidized deliveries to gain market share against rivals such as Swiggy's Instamart and the well-funded startup Zepto.

In an analyst call, Blinkit CEO Albinder Dhindsa acknowledged the escalating competition, stating, "The impact is visible in the lack of significant margin expansion that we would have otherwise expected."

While Blinkit's quarterly revenue more than doubled year-on-year to ₹17.09 billion, its adjusted core loss widened considerably to ₹1.78 billion from ₹370 million in the same period last year. This increased loss is directly linked to the rapid expansion of its physical presence, with the store count more than doubling to 1301 stores year-on-year.

Eternal also highlighted potential future competition from major players like Amazon and Walmart-backed Flipkart, both of whom are making inroads into the quick commerce sector with increasingly shorter delivery times, sometimes as low as four to six hours.

Adding to the challenges, Eternal's core food delivery platform, Zomato, has experienced a slowdown in growth in recent months. The company attributed this to a "sluggish demand environment" and the growing popularity of quick commerce itself, which now includes the delivery of packaged meals.

In a strategic move, Eternal has decided to shut down its recently launched Zomato Quick service, which aimed to deliver food from nearby restaurants with quick commerce speed. The company cited "inconsistent customer experience" as the reason for discontinuing the service.

Zomato's adjusted revenue grew by 17% year-on-year to ₹24.09 billion, falling short of Eternal's projected growth of 20%.

Overall, Eternal reported a consolidated net profit of ₹390 million ($4.6 million) in the March quarter, a significant decrease compared to the ₹1.75 billion profit reported in the same period last year. This financial outcome underscores the intense battle for market share in India's rapidly evolving quick commerce arena and the substantial investments required to maintain a competitive edge.