ETERNAL LIMITED (ETERNAL) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, a very good evening, and welcome to Eternal Limited's Q1 F527 earnings conference call. From Eternal's management team, we have with us today Albinder Singh Ginsa, Akshan Goyal, and Kunal Salud. Before we begin, a few quick announcements for the attendees. Anything said on this call, which reflects outlook for the future, or which could be understood as a forward-looking statement, may involve risks and uncertainties. Such statements or comments are not guaranteed as a future performance, and actual results may develop from those statements. 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 question, please use the raise hand feature available on your Zoom dashboard. We will announce your name on the call and unmute your line, post which you can proceed with your question. We will wait for a minute while the question queue assembles.

The first question is from the line of God of Malhotra from Access. Please go ahead.

Yeah, hi. Good evening, everyone. Congrats on a good set of numbers. Just a couple of questions. Firstly, you know, you seem to have raised the long-term guidance in quick commerce from 5% to 6% towards 6%. So, what gives you this confidence to do this now, especially when there is sort of competitive intensity in the sector?

Yeah, hi, Gaurav. So I think like this is what we are seeing in the business. I think what we're trying to communicate here is that over time, we have increased the capex per store in our business, right? And some of these investments are leading to increasing efficiency in the business. It's also a function of the increase in average store sizes, etc. So, all these investments are clearly lining up in a way where we have now higher visibility on the margins, and we think at this point that we're likely to end at the higher end of the range that we had guided earlier and the communication.

Understood. The next is, you know, you mentioned the sort of the older cohort spending 3x, you know, versus 3x versus 3 years back. Just wanted to get a sense of, you know, the split between how much of this is related to order frequency and how much is it related to the AOV growth?

So, Gaurav, like, we don't share that data, but, like, directionally, most of it is frequency growth. I think with passage of time for a customer cohort, we see that AOV kind of stabilizes. It grows, but only slightly, and most of the growth comes from frequency growth.

And just one last question. How much of this growth which we are seeing at an aggregate level in Lincoln, how much of it is coming from existing cities versus geographical expansion?

I think most of it is from existing cities. Thank you.

Next question is from the line of Vivek Maheshwari from Jefferies. Please go ahead.

Hi. Good evening, team. My first question on Blinkit, two parts. On your question number response in question number eight, you have mentioned two points. If you can please elaborate on that. But you started with a statement, no competitive intensity remains high, but it has become more predictable. Can I request if you can elaborate on this? And do you also think that this is, you know, let's say the first quarter has been the peak of competitive intensity or the phase where we are, you know, the highest competition is at this point of time?

So first quarter, so far, it was the peak of comparative intensity that we have seen till date, both because number of players are higher and everybody was more aggressive. But when we look at comparative intensity and the way that it has evolved over the last few quarters, what we're seeing is that most of the competition is coming in providing subsidies to customers on products and also on delivery fees. And that is what has become more predictable, that most competitors are going towards grocery subsidizing, which we are fairly clear on what we do in that and what is the kind of impact that it has on the business. And we don't think that there is a lot of wiggle room for people to go much, much deeper than what they are currently going, because that would balloon losses fairly significantly. So that's what we mean by it is fairly predictable now.

Interesting. Got it. And the second part also, if you can elaborate on this, you know, you mentioned pricing-led growth requires sustained cash burn and leads to systemic trap they can't easily walk out of. Can you just elaborate on this piece also?

We are fundamentally a, you know, supply creation business. And if you channel your supply towards providing discounts to customers, then that's what the business becomes. Every time you want to pull away from that, there is nothing else to offer to the customers because that's what you got the customers in the first place for. So there is no pullback in this, like we also explained that, you know, there's no pullback that you'll pull the discounts and the customers will stay because you got the customers by promising them a subsidy. And then they'll try to move to the next platform or the next platform, or they will drop out of the category. So, we don't see a recovery for platforms from this trap if they are acquiring customers by giving a lot of subsidies. There is no path to recovery of saying that they'll be able to retain those customers when they pull back the subsidies.

And really, just to add, I think this is also coming from our own experience in the past. I think like a couple of years ago, when we were building out this business, we were in many cities, major cities, number three or four players, right? And our initial approach in those markets, like typically e-commerce thinking is that, look, let's start discounting and get customers and over time, the investment will pay off, right? And that didn't work for for us initially in markets and markets in the south, right? So eventually what worked was working on the infrastructure growth, which Alvinder mentioned. And, you know, we have the outcomes in front of us. Now we are the leading player by NOV in most of these markets, right? So we strongly feel that discount-led growth is not sustainable in the business. And that is what has become predictable. And so we're able to more confidently plan our next few quarters on What we need to do.

Got it. And just last one, you know, on the same point, you know, you already have a have a number of MTUs, which is comfortably over 30 million. Let's say if you have to, you know, I'm sure the industry is growing so rapidly. If you have to double this number, so let's say 30 plus 30. Do you think with the current strategy, not discounting at the time where the, you know, intensity is very high in the market, you the service quality will still be, you know, And whatever you stand for will still be able to allow you to do that, or there will be, you know, a cohort of customers which will be price sensitive, and therefore, you know, getting incremental customers from this stage will require more, probably, discounting on your part.

Vivek, so our strategy in these things is that, you know, it's not like we don't give customers value as well. As our platform has gotten bigger, our profitability has gotten better. There is a certain amount that we keep reinvesting back into making our product prices more competitive, giving customers actual value, which allows us to also then be able to tap into deeper customer cohorts, which might be more price sensitive than the ones that we currently have. So that process will continue. But that's a gradual process, where as the platform gets bigger, we pass on more benefits to the customers. It allows us to tap into a larger market. And I think that is where the additional MTUs will come from as well.

And also, Vivek, we don't think this level of discounting is sustainable, as we said. So we expect this to not continue beyond the near future. So we do think that this will come off. And therefore, the pressure on us needing to discount just to maintain competitiveness on price will go down. Even with that, the prices can come off with scale, but that's then a choice that we make to pass on the benefits of scale to customers rather than actually trying to complete with price on someone else.

Got it. Thank you.

Wishing you all the very best.

Thanks.

Thank you. Next question is from the line of Ajitya Soman from CLSA. Please go ahead.

Yeah, hi. Good evening, and thanks for the opportunity. So two questions. Firstly, on Blinkit, we saw a blower AOV now for two quarters in a row. While we've seen very strong order growth, can you just explain what led to this drop in AOV? Last quarter, I understand there was an element of seasonality, but we've seen it drop a little bit more. And just maybe related to that, with sort of the delayed monsoon, what has been the impact, if at all, on the business or any changes in the mix or anything of that sort? And secondly, on food delivery, now the absolute number of monthly transacted customers you're adding is actually increasing every quarter. Now, is this a function of sort of new customers coming to the fold or just a faster conversion from the ATOs and also any sense on frequency here in food delivery?

I think on Blinkit, the AOV drop is still sort of, you know, in the same range as we were last year, but most of this drop is usually just related to small changes in the patterns that happened during the quarter. So overall, in terms of, you know, the throughput and the category shares, nothing has materially moved to change the AOV. Some of it also can just be related to lower product prices because there is a lot of competitive intensity, which also forces us to price match on a lot of things. Those can also have an impact on lowering AOV.

And generally, Aditya, we're not expecting the AOV to grow from here, right? So if you look at year on year, it's flat, right? So that accounts for seasonality for Q1, right? And we expect broadly AOVs to remain in the same range, right? So, in Q3, they might climb up again because of functionality, but broadly, ballpark, we don't think they should move up in a meaningful way.

Understood. So, the right way then to understand this is the focus remains on sort of order growth and maintaining AOV at the current level, which is already profitable.

Yeah, I mean, AOV is more an outcome, right? We don't drive that. I think the mix of categories and products and assortment that we have leads to that AOV, right? Eventually, what is important is the NOV in the business and the margins, right? So, as long as they move in the right direction, we don't worry too much about AOV because there could be smaller categories of products which are high margin and vice versa, right? So, beyond a point, AOV doesn't dictate the margin structure too much from here on.

No, very clear. And on the food delivery question.

Yeah, on food delivery, I think the increase in MPUs is a combination of both. The addition of new users, I think we've seen acceleration in new users that divided to a platform in the last two or four quarters, right? So, the category is growing, as well as it's a function of more customers transacting more frequently, right? So, both of them are playing a part in the growth in MTUs, which you are seeing, which is driving growth.

Very clear. And this, just to be clear, this is not a good bistro, right? Right?

No, there is no Bistro overlap in our disclosures, right? So neither in NOV nor in the bottom line.

Correct. Yeah.

Very clearly segregated. It's also, the Bistro business is also in a separate entity. So I think the segregation of accounts is very, very clear, and there's no overlap in this food delivery business.

Perfect. Very clear. And then maybe lastly, since we're on Bistro, just to, if you can give a sense of how many kitchens you have now and what the current state of the business is. Yes.

So I think broadly, you know, we're adding about 10 odd kitchens a quarter. That's the pace of expansion there. Right. So, you know, but what is encouraging is in some of our older kitchens, we are seeing a lot of progress in throughput. And we feel like we're getting the mix of right assortment, menus, menu pricing, and operational infrastructure and efficiency. Right. Right. So I think as we iterate and make that better, we will see the business becoming more profitable, and we can be then more aggressive on expansion as we build that confidence. So it's the same mindset we had while we built out Blinket, that you get things right, basic processes which you know need to be fixed, and as you do that, that allows us and gives us more room to more aggressively expand in the future. So, I think we'll be cautiously expanding for now, but at some point, it can accelerate once we are more confident about the business.

Great. No, that's it. Thanks. Thanks very much.

Thank you. Next question is from the line of Swapnil, Port Dukhe from JM Financial. Please go ahead.

Hi. Thanks for the opportunity. My first question is on Binkit. See, you mentioned last quarter that there will be some bit of seasonality in the Binkit business, And that will help you grow meaningfully faster. And you did deliver 21% Q1Q volume growth. Now, I was looking at your historical data as well. It seems that between 1Q and 2Q typically grow between 18% to 20% in volume terms. In fact, last year you grew 26%. So will it be fair to say that we should be looking at a similar kind of a growth in 2Q as well and probably in line with the historical range, if not more?

Sorry, sir, we don't want to comment on the quarter right now. No guidance on that.

Okay. The second question is with respect to your take rates in the business, Blinkit business again. You have seen some decent improvement in the take rates, but that doesn't seem to be flowing down to your contribution margin. Now, is there any particular reason that is hurting you here? Because ideally, a decent proportion of your take rate increase should slow down to contribution margin rate.

There was some increase in the cost of doing business in the quarter, because there were a lot of states which implemented the increase in minimum wage. So that was one factor. And also, you know, we are also opening our largest stores. So some of that contribution also comes from earlier stages of these stores. The contribution is lower than when we open smaller stores.

Yeah, again, as for me, it's a seasonal business. So in Q1, the last mile costs are also usually higher, right, because of summer and heat and various other factors. So if you look at year on year, you see that a large part of gross profit increase or ticket increase has translated into contribution increase, right? So, on a more, I think, longer term, the right metric to compare with is Q1 of previous year, and it could be different for quarter to quarter, depending on seasonality. The margin could be higher because of mixed change also, right? So, those things are also, in addition to what Alvinder said, I would like to note.

Got it. The other question is with respect to your CAPEX, the items that you have said, you say, per store basis, one should look at around 2.5 crores of CAPEX. You added around 200 stores this quarter, but your KPEX was 700 crores. I mean, there is a meaningful difference between what you are suggesting as typical KPEX versus what is there in the balance sheet or your cash flow statement.

I think we should look at this number more longer term because I think there is a lumpiness in investments here because while we are presenting the information as capex per store, but part of the capex, a large part of the capex is in warehousing, right? And that investment is lumpy. So, if you will, therefore, look at last six months, nine months, or longer term, our CAPEX and look at the CAPEX per store for that period, you will find it is lower than 2.5 floors. So, we expect, therefore, that to continue going forward.

Right. And just the last one on your, in a way, retention data that you mentioned that over a three-year period, typically, a cohort of customers, say, 3x increase. Now, when you give this data, this data is for only those customers who you have retained, or this is also for, includes customers who may have left the platform and, you know, never come back after three years.

Yeah, it's for the overall cohort, right? So, if you are acquiring 100 customers in a quarter, the percentages are for the entire 100, right? So, if 40 of them never show up again, then the retention is only 60%, right?

And despite that, you will 3x increase, is what you are suggesting.

Yes. So, for the cohort that has remained, therefore, the growth is much higher, right? But at the full cohort level, the numbers are what we have presented here.

Got it. Thanks a lot for the opportunity and all the best guys.

Thank you. Next question is from the line of Jignanshu Gaur from Bernstein. Please go ahead. Hi, Jignanshu. Are you there? Seems like you are facing some technical difficulties. We'll move on to our next caller. Next kind of question is from Vijay Jain from Citigroup. Please go ahead.

Yeah, thanks for the opportunity. Congratulations on a great set of numbers. My first question, so, you know, you mentioned you plan to add gourmet stores in these Tier 1 cities, right, as you focus on assortment in these cities. So, does that mean split orders in metro cities in the future, or are you thinking of these stores as generally, you know, housing more expensive assortment, but housing everything? That's my first question.

It's a combination of both visits. It depends on the kind of real estate that we get, and infrastructure requirements. So, if we are able to fulfill it within the same stores, like I've said, we are opening larger stores. So, we have the ability to fulfill it as well within some stores. Got it.

And so, is there any, you know, consideration that split orders is not a good user experience? Is that the case at all, or in your experience, that has not really been, you know, a factor at all?

As a platform, we do want to make sure that, you know, we're not tilting too much towards split orders because the customer experience could be not as great. But so far, we have not experienced that in practicality. I think customers value the availability of products more than the split orders. Understood.

My second question is, you know, in that comment on competition, I know one of the previous callers already talked about it a little, But you also said that discounting, you believe, is even less effective in quick commerce than e-commerce. And I wanted to just double check. You say that because quick commerce is a higher frequency engagement and that habit formation and expectation of discounting becomes more entrenched here. Is that why you're saying that or is there more to it?

No, so I think the difference is, I think, on the real estate available, right? Quick commerce, you're working off smaller store sizes, right? So you have a limited shelf space, right? So if you are discounting in categories where the margins are low and you discount on them, then that's all that sells from that store, right? And you don't have space to actually really increase assortment. Or even if you increase assortment, the reliability of that availability is not there for the customers, right? So I think that's the fundamental difference. In e-commerce, you have like large warehouses, right? You could deliver into, get more customers looking for grocery items that are highly discounted. Creatively, you can still offer and fulfill wider assortment, right? Here, the constraint is the store size, and that's why I think it's different in case of e-commerce.

Got it. Interesting. My last question. So, you know, that comment on EBIT margin of 4% and adjusted EBITDA margin of closer to 6%. I want to be just clear because you say EBIT margin of 4% not adjusted EBIT. So, are you including ESOP expenses when you say EBIT margin of 4% or are you including something else?

Yeah. So, there is ESOP expenses and there is depreciation, right? So, we are accounting for both of them.

Okay. And then you get to a gap EBIT margin of 4% as long-term.

That's right.

And if I can just squeeze in one last question on inventory losses, you say that it's about 1.8% of NOB and largely driven by perishables. Practically speaking, does this go down from 1.8% or it's a harder problem to solve, aside from, of course, the mix changing?

It has been fairly asymptotic so far, so we don't expect it to be materially much better.

Got it. And do you net it at the gross profit level?

That's right. That's what you mentioned also in the letter, that last line of question 6, that all the losses are netted off from gross profit. I mean, they're part of COGS in a way, right? So gross profit is net off in losses.

Understood. Thank you so much. Those are my questions.

Thank you. Next question is from the line of Yogesh Agarwal from HSBC. Please go ahead.

Hi, just a couple of questions. Firstly, can you provide some color on the growth differential across bigger cities and the smaller towns in Blinket?

Yagesh, obviously the non-metro cities are obviously growing faster because they're also growing of a smaller base. The percentage growth rates obviously will look much higher over there. And also, whatever comparative intensity we see, we see mostly starting off within grocery in the top tier cities. So, there is some impact of that over there. Although we are still seeing robust growth in tier one cities, we think there is some share shift also which happens over there, which lowers the numbers that we end up seeing.

Right, right. Thanks. And just the other one, based on the new economics for the stores, I think now, since they are bigger stores, you're looking at 21, 2200 OPD per store per day. Is there a possibility to modify the existing stores for them also to do 20, similar level of throughput going forward, or we are close to peak there in terms of size and throughput?

As a regular exercise, so we've been upgrading a lot of the existing stores also to find more optimal properties which are larger and move to larger store sizes.

Right, right.

Thank you. Thank you.

Thank you. Next question is from the line of Ankur Rudra from JPMorgan. Please go ahead.

Hey, thank you. Looks like a nice growth recovery in QC. Do you think you're back to regaining share in the market or is the industry growth resistance better than expected in the quarter?

I mean, like, we don't know, like, it's speculative, Ankur, so I think we are more focused on what we can rely on is our data. So as we mentioned, like, for us, the tracker is customer retention, which I think is better than what it has been. So from our vantage point, therefore, if the market is expanding faster than us, it really doesn't matter to us.

Got it. In response to Vivek's question, you had mentioned that you have been passing on some benefit of scale as value to customers. How do you distinguish between giving customers value versus discounting you see from your peers?

We usually don't look at whatever discounting is happening from the peers beyond a certain point. Our baseline is usually what we think product prices can be sustainable in the long run, and that is sort of what we index towards. And the idea is that if our business is generating more efficiency and we can actually lower those prices even further, that is when we actually take those price decreases. But we want to sustainably stay at those prices for the foreseeable future. We usually don't discount for a shorter period of time, just to get some customers.

Got it. Got it. As a follow-up, you know, it was a nice surprise to see a very nice, sharp increase in MTOs and quick commerce, despite a lower spend in marketing and fewer store ads. Is there anything you did differently this time to increase the MTO addition? Not really. Okay, just last question on food delivery then. Can you elaborate how you have responded to toying and only given you have accelerated this quarter and doesn't appear like there's been any share loss despite lower customer fees from these, you know, formats?

No, I think so. As we mentioned also, Ankur, in the response to question three, that we're trying to be price competitive in certain markets where these platforms are more aggressively spending, right? So, so, so far, you know, that's been enough to be able to make sure we are able to defend and not lose share to these platforms. One of the things that we did was actually last year when we dropped the eligibility for free delivery for a gold member to 99 rupees instead of 199. So that's one example of how that reduces the cost for a customer which is seeking a low value order.

Understood. Appreciate it. Thank you.

Thank you. Next question is from the line of Abhishek Banerjee from ICICI. Please go ahead.

Hi, yeah, thanks for the opportunity. Again, just on the Capex per survey, so you're giving 2.5 crores now on a single one crore earlier. So, is that one crore should be comparable in terms of, did you used to include warehousing tables also in that one crore number?

That's right.

Okay, good. On the networking of the site, so you have actually managed to reduce it to 12 days, right? But when you are actually going to be inviting more, I think the thought process was that if you increase your assortment, it can actually increase from that 18 days number. So what has kind of helped you reduce it further? Is it just terms update or something else?

So, I think, see, 12 days is what we are saying here is like a steady state estimate right now. Currently, as you mentioned in question 5, we are at 14 days, right? So, what has changed, like what has helped us reduce it from 18 to 14 and what we think will take it to 12 further is largely, I think, on account of lower inventory days than what we initially thought we need to carry. So that, I think, as you've, you know, the replenishment and the throughput from the stores and the supply chain has been able to, like, we'll have been able to achieve a lower inventory days number in the business. And I think that's been the main driver of this production.

I understand. And with regards to your OCA current, there is a tax, you know, just in reversal, which has come in. The OCA movement has been carried this quarter. Is that kind of a sustainable level going forward? And also, if you could use some color on the taxation, that would be really good.

So, Abhishek, this is Kunal here. So, the tax refund was on account of, you know, a refund because there were certain expenses which were ambiguous on whether they'll be allowable. So, we had deposited higher advance tax and there's a refund towards that. So, that's normal course of business. I think such things may come up once in a while going forward as well, but nothing structural.

So, Abhishek, I think we'll share more about it in the coming quarters. I think we are still in some ways in a little bit of stealth mode here, right? So, it's an enterprise AI product and business, and I think we're seeing good traction in that, but it's an evolving market, as you know, right, the entire AI space, so I think we want to take a couple of more quarters and build our thesis more strongly around this, and then, you know, we'll share more about this business going forward.

But when you're seeing expenses, is it, you know, because your losses have kind of increased there, so is it on manpower, or is it on, you know, buying GPUs and stuff like that?

Largely, manpower.

Manpower. Okay. And one question is not really a, you know, important question, but since you've already spoken about how there's no really point, you know, getting users beyond, you know, a certain number of empty projects. So, do you, could you give us some color on what is, what is the Pareto ratio that looks like in QC? We already know that it's very cheap in food delivery. But in QC, is it steeper than that, or how does it kind of look?

We didn't understand your question.

So, maybe your top 15 to 18 percent culture was already right, 80 percent of revenues. How does that ratio kind of apply in QC, if it would be some color?

That's flatter than that.

It is flatter. Cool.

Thank you. Next question is from the line of Manish Hadoukya from Goldman. Please go ahead.

Hi, good evening. Thank you for taking my questions. My question actually is a follow-up on what was discussed earlier. Now, Akshant, when you say that your AOV should remain range-bound in the foreseeable future, and when you also talked about the cohort data earlier, you said that a large part of that expansion was a function of frequency and not necessarily AOV. I'm just trying to reconcile that with one, your assortment expansion over a period of time where non-grocery has continued to expand from an assortment perspective. We are already talking about gourmet as also an added focus area from an assortment perspective. So when I think about MTU expansion in the near time, I understand why average AUVs may not expand. But over a period of time, if I look at today, your basket size, you're probably MTUs are spending less than 2,000 rupees per month on your platform. Why should that number not be substantially higher in two to three years from now as MTU growth maybe starts going down at some point in time? If you can just help maybe explain that a little bit better, that would be great. Thank you.

Manish, I think the wallet share will increase, right? So we are not saying a customer will spend the same amount of money, right? So there's a distinction between wallet share and AOV, right? So when we say AOV are unlikely to increase despite assortment expansion, I think what we are saying is a lot of assortment that we are adding is also low AOV assortment, right? So there is that element which you have to acknowledge. Also, I think as frequency of consumers go up on a platform, we see that they really start ordering, you know, fewer items in a cart, right? Because it becomes a daily use case. And as customers, we have seen for ourselves that, you know, the order sizes need not be 400, 500 for every order as you become a more frequent customer. So there is like, therefore, a drag on AOV from both these sides where, you know, as frequency goes up, we see the AOV flattening out. And also the assortment expansion in many of the general merchandise categories is actually small, but the margin is higher, right? So that doesn't hurt us. So net-net, therefore, while there will be an inflationary pull on AOV, there will also be a pull on AOV expansion because of some assortment that is higher AOV. But as a combination of all of these factors at this point, we feel that that's not something, AOV expansion is not something that we see happening at this point.

Got it. Very clear. Thank you. My second question was, again, maybe a follow-on to one of the previous questions. Now, when you look at, let's say, your CapEx per store assumption where you have now increased that by 150% versus where you had earlier, but your NOV per day per store assumption is only up by 60%, how do I reconcile the difference between these two numbers? Like, why should NOV per store only go up by 60% when you're talking about CapEx expansion of 150% versus previous assumption?

Manish, the CAPEX expansion has a lot to do with the overall supply chain and not just the store itself. So the efficiency of the supply chain goes up because we are able to store more products in a single warehouse. We have a few requirements if we are able to do more CAPEX and put more products in the same store, same warehouse, ship them more efficiently. So that is why we are doing that capex. But the correlation to how it goes to, like, just it is not only correlated to the store's throughput.

Another thing about this money issue is that, like, I mean, like, see, higher capex with lower NOV growth can be explained if you are expanding the market, right? So, I think what we are solving here is actually trying to expand the market while making sure the ROC is healthy, right? So, when we, you know, like, for example, opening stores in smaller cities could lead to a lower NOV per day per store, right? But if that NOV is still profitable at 6% margin, then that increases the top line for us, right? So, that's the whole point. And I think the spirit on this topic is that, look, we are open with these numbers moving around, right? The Capex per store, the networking capital, or NOV per day per store, even the margins, EBITDA and EBIT margins, as long as the math on ROC is stacking up well, right? The more we invest, even if the margins fall, for example, but if the ROC remains high, still the absolute dollar of profit on the business will be more, right? So that's how I think I would look at it.

Very clear. My just last question is on margin. Now, given that you mentioned that competition is becoming or become more predictable, so you're not seeing any material pressures of that or your margins continue to expand despite that, and you also called out that June was probably at least closer to peak, if not the peak of competition. So is it safe to say that as long as growth in the business continues, as per your expectation, which you said should be robust, there are no near-term pressures on margins that we should anticipate, and directionally, margins should continue to improve. Is that like a fair conclusion?

I think so. I think at this point, we can say that.

Thank you so much. Very clear. All the best. Thank you. Next question is from the line of Darima Mishra from Kotak. Please go ahead.

Yeah, thanks so much for the opportunity. I had a couple of questions on district. So you mentioned in the letter that district is operating across five categories. I presume out of those five, Dine Out and Movies are the largest revenue contributors. Is that correct? And what traction are you seeing for the new categories, let's say, events, activity outlets, et cetera?

Yeah, Garima, that's broadly correct. So today, dining out and movies are the bigger categories. And, you know, amongst the newer ones, I think, you know, retail stores and events could be the more promising ones. But we are still early in that journey. We're seeing good traction. I think at this point, the idea is to figure out, you know, how much value we are able to add to the supply ecosystem and also from a customer experience standpoint, kind of work on areas that improve customer experience. So I think that's the journey we are on on the other category. So we'll say how they'll kind of what kind of trajectory of growth we'll be able to see. But as of now, things are promising.

Okay. Second, in terms of users, how would the MTU base of district compare with, let's say, that of the food delivery business? And should we assume that district is present in as many cities as, let's say, the dine-out or food delivery business is present in?

So, like we pointed out in the past as well, for the going out business, I think we certainly think of the customer base as slightly different from the food delivery business and, you know, a base that is able to spend more. And, you know, that's also reflected in the AOVs that we see in district. So I think we wouldn't compare it, but we think there's still enough room to grow even at this NAOE base.

There's definitely a smaller customer base, Garima, for going out compared to food or quick commerce. And the number of cities that we will do this business in will also be much smaller than the other two businesses.

Understood. Got it. That's it for me. Thanks.

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 Ajitya Suresh from Macquarie. Please go ahead.

Yeah, thank you for the opportunity. So, two questions. The first is on the productivity gains which you'll have seen in the past, say, two quarters. Can you maybe talk to that a little bit and how you see that trending in the next few quarters or maybe on a, say, two-three-year basis? That's the first one. And the second is, Akshat, as a business stance today, if you were to kind of measure or calculate ROC, what would that be like? Thank you.

So I think right now, of course, a bit margin is negative. So there is no ROC. So we are all talking about feature here. It's a business and industry which is in the making right now. So we're trying to invest. I mean, the framework we've given for ROC is a framework for us to think about on how much to invest in the business. That's right. So as of today, given the margin in the business is negative, there is no ROC. And I hope that answers your question. Yeah, that's clear. Thank you. On your first question, Aritia, can you be more specific? I mean, it's a very generic question.

So you have seen productivity gains at dark store level in the past few quarters, whether that be on a per-order basis or a NOV basis. Can we just talk through beyond just cohorts maturing? Is there any other dynamics at play which is driving this improvement?

So it's everything. I think not just last few quarters, we've seen the productivity improving since the time we started the business, right? So the productivity gains are at the dark store level, at the warehouse level, supply chain, even our marketing is getting more efficient, right? Assortment. So I think it's everything the business is about. So, yeah. So again, not sure, like, if you have a specific question here, but otherwise the answer is what I just said.

Great.

Thanks, Akshar. Thank you. Next question is from the line of Ashwin Mehta from Ambit. Please go ahead.

Yeah, hi. Can you hear me? Yes. Yes, so just two questions. One, in terms of tables, there seems to be a material increase of almost 1650 crores this quarter. So what exactly is driving that? And secondly, a broader view in terms of are we getting better terms? And the second one was in terms of food delivery, where the restaurant count this quarter seemed to have gone down. So is there some rationalization at play? How are we seeing additions there?

So, on the first question, tables include both trade tables as well as expense tables. So, trade tables have increased because of the scale of the business, right? At this point, you know, we are not necessarily trying to over-optimize on terms with the brands. So, it's really more driven by scale. And then expense tables keep fluctuating.

Yeah, there's nothing to highlight on tables. table days are fairly unexpected lines. And on the second question, Ashwin, I think it's a little bit of impact of the LPG situation in the country in the last quarter because of which some restaurants went offline. So, I think that's why probably you see a slight dip in the monthly active restaurant partners.

Okay. Thanks, Ashwin. All the best.

Thank you.

Thank you. Ladies and gentlemen, we will now conclude this conference call. Thank you for joining us, and you may now disconnect your lines.