Eternal Limited (ETERNAL) Earnings Call Transcript & Summary

Ladies and gentlemen, a very good evening, and welcome to Zomato Limited's Q1 FY '25 Earnings Conference Call. From Zomato's management team, we have with us today Deepinder Goyal, Founder and CEO; Akshant Goyal, Chief Financial Officer; Albinder Dhindsa, Founder and CEO of Blinkit; and Kunal Swarup, Head of Corporate Development. 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 construed as a forward-looking statement, may involve risks and uncertainties. Such statements or comments are not guarantees of future performance and actual results may differ from those statements. Additionally, please note that this earnings call is scheduled for a duration of 45 minutes, and we'll be starting directly with the Q&A section of the call. [Operator Instructions]

First question is from the line of Ankur Rudra from JPMorgan. Seems like we're facing some technical difficulties. We'll circle back to Ankur. Next question is from the line of Vivek Maheshwari from Jefferies.

A few questions. First, on the food delivery business. So on a Y-o-Y, Q-o-Q basis, the numbers look -- growth looks quite impressive. And it has come without any impact on margins, by and large, which means that there may not be major, let's say, promotion discounts in the quarter. When we talk to some of the discretionary companies, the view is that there has been a bit of -- there may not be slowdown, but a moderation in growth for sure and bit of a caution from a near-term perspective. What are your thoughts on the near-term food delivery business in terms of growth? Any concerns on the horizon for you?

Vivek, Akshant here. So I think we think that GOV growth of 20% plus we should be able to continue in the near term also. So to that extent, there might be -- and currently, we're trending at 27%, 28% year-on-year growth. So that might fall a little. But by and large, I don't see any specific concern on the demand side at this point, at least in our business.

So Akshant, the restaurants, I mean, you are not picking up any caution from the restaurant partners?

No, nothing specific at this point.

Interesting. And the other thing, Akshant, is on the margins bit in the food delivery business. So 4% to 5% journey, do you think -- by when do you target to get there? Is it going to be more moderate from here? Or do you think by exit F'25, you should be there?

So hard to comment on exact timeline there. I think the idea is to grow the right way and invest in the areas that we need to while we continue to scale. So we are not thinking of a particular timeline as a goal here and then working backwards from there. That's not how we're operating right now. But as you are seeing that the business -- in the business, the margin has been expanding over time while we continue to also invest in growth and the long-term platform health. So -- and there's so many variables. As you're saying, there's also more demand which over the last 2 years, in general, has been unpredictable, and there is competition and so on. So I think we'll do the right things and hopefully continue on that journey on margin expansion from here on. And in a few quarters from now, we should get to that range we're talking about. We're not very far from that now.

Got it, got it. On the QC bid, so you have explained quite well in the letter, but this 2,000 dark stores by March -- latest, I think you are saying latest by March '26. Two parts to that. One is the store ramp-up period. And if you are adding, the competition will also follow for sure. What could this imply from a profitability standpoint? Again, I have gone through a letter in detail. But would love to know if -- I think your guidance last time was, let's say, flattish EBITDA on an absolute basis for the next few quarters. Do you see that slipping into red in case, both because of you adding stores and therefore, inefficiency of the new store as well as competition following the suit, and in a micromarket, there may be more competition?

So Vivek, again, very hard to say that. I think at this point, we don't think that will happen, and that's why we have said that we believe that the business will remain profitable. But of course, as you are saying, there are so many variables and factors at play here. So it's not like that what you're saying cannot happen, it can, but it doesn't look likely right now. And from a more longer-term perspective, I think we have fair confidence in the fact that this business can be as profitable as food delivery in terms of margin, if not more. And by when we get to that margin is a function of, again, pace of expansion and the competitiveness in the market, which is hard to predict in the short term. But from a long-term perspective, we feel fairly confident that we'll get there.

Got it. And last question, Akshant. Anything more on the announcement on district? Anything big picture can you share with us?

Nothing, Vivek. I think we have mentioned how we think about the going out business in the letter. And I think we'll continue executing on that and share more updates as and when we have that. So nothing specific beyond what we have shared in the letter.

Next question is from the line of Vijit Jain from Citigroup.

Yes. So Akshant, my question is -- first question is a housekeeping one. There's a reduction in Google Maps APIs from this quarter onwards for India, right? Is that a material contributor to your bottom line?

No, Vijit. That is not going to impact our profitability meaningfully from here. Because, I mean, what we read in papers is like more a headline number, but at least what we've analyzed, it doesn't seem to impact our profitably meaningfully at this point.

Akshant, the second question is on the delivery related charges. Just wondering if the increase Q-o-Q and likely on a per unit basis as well, right, and so is that across both food delivery and quick commerce?

This is Kunal here, Vijit. Yes, there is some increase. But what you can see from the P&L is a function of the amount net of customer delivery charges, right? Customer delivery charges have been declining as our goal proportion increases. But as such, net of that, there is no meaningful change to the delivery cost number.

Got it, Kunal. And I have just one last question. So in the quick commerce business, if I just look at the fixed costs below the contribution line, right, it seems largely flattish Q-o-Q. Now I know your wage increases are September quarter, right, if I remember this right. So is that how one should look at it here for the quick commerce business as well? Because one would have thought maybe there will be some G&A increases perhaps here related to all the new tax shows ads, et cetera?

Yes. So Vijit, the total fixed cost that you would compute is a function of multiple costs there, right? One is the corporate costs and then there's also marketing cost. And therefore, some of these costs balance each other out. So there would be some increase in corporate costs because of the scale of the organization increasing. But at the same time, there could be a quarter where we spend a little less on marketing. So that's what would happen. So corporate costs would have grown, but you don't see it at a total level.

Got it. And districts will be a separate app? I'm sorry if I missed that in the letter, if you specifically mentioned that. Or is it going to be the way going out shows up on the Zomato app right now?

So you're planning to launch as a separate app and brand for that where we take advantage of the traffic that we have on the Zomato app. It's going to be pretty much like how we build Blinkit, which is a separate brand, separate app, but still making sure that we keep our cost of customer acquisition lower using the traffic that we have under Zomato app.

Next question is from the line of Sachin Salgaonkar from Bank of America.

Congrats for a good set of numbers. Three questions from me. First, just wanted to understand in terms of opening up stores going all the way to 2,000. It's very clear that you will go into area where you guys are not an incumbent or have a first mover advantage. So with that respect, how do you intend to differentiate versus competitors and get the users to switch to your platform? As you know, it's not easy for users to switch which you clearly are in a dominant position in an area like NCR and competitors often struggle out there to get any consumers from you.

Sachin, this is Albinder. So even if you look at the 113 stores that we opened in this quarter, a significant number of them were not in NCR. Our focus is to just maintain a high quality of service. And in the markets where we are going, we believe the service at our level, both in terms of the selection that we make available to your customers and the consistency of the service, those are not actually at the same level that we provide. So when we are opening these locations, we are finding success in getting customers to start adopting our service over time.

Got it, Albinder. Just a quick follow-up out here. Any sense on overlap between users between Zomato and other platforms? Or rather Blinkit and other platforms?

It's not something that we actively track.

Got it. Second question is on the Blink take rate. I assume this quarter, I think we should not read too much given the GMV mix. Or was there anything particular which didn't lead to an improvement in take rate out here?

I think take rate is very dependent on a lot of factors, right? We also had some amount of like food inflation, which is baked into, I think, about INR 2.40 when it came to the AOVs for staples and other products. And when there is more inflation, sellers usually tend to pass along some of the cost benefits to the customer to maintain competitiveness. So take rates usually are a function of a lot of these things. And because a large chunk of the business is FMCG, food and staples, so those factors are also fairly significant when we are looking at take rates. So overall, we are seeing our proportion of products outside of the core category increasing and that also has higher take rates. But I don't think you can read a lot into the product mix based on the take rates that we're showing.

Got it. And from a 3- to 4-year perspective, what should lead to an improvement in take rate? Is it mainly the mix? Or is it the ad?

I think both of them.

Also delivery fee. That's also part of the take rate that we're computing. So it's the gross margins, the delivery fee and ad income. So we think we should see benefit accruing across all these 3 line items.

And my last question is on the size of the stores. Clearly, you guys are opening more stores and what you shared into a shareholder letter is you guys are gaining share for e-commerce. So is there a thought process to have bigger dark stores than the existing ones and hence improve the assortment?

Yes. I think we opened -- our preference is to always open larger stores and our current inventory of the stores that we are looking at to open are on average larger than the ones that we have. But a lot of it is dependent on the real estate available in the cities. So it usually tends to be a mix.

Next question is from the line of Aditya Soman from CLSA.

So a few questions. So firstly, on Blinkit dark stores. Any idea of how much of these would be sort of owned or unmanaged by you versus outsourced?

Aditya, our attempt is to make sure that every new store that we open, that eventually it is run by a local partner.

Understood. And how much of the growth in Blinkit was driven by new SKUs given that you're really expanding the number of SKUs?

So I think overall, we actually don't actually demarket it and provide that information. But we've been adding SKUs consistently over the last 4 quarters, and some of our categories have become the largest percentage of the platform. So they are now starting to contribute meaningfully to the overall growth number as well because the customer wallet share goes up for us when that happens.

Understand. Very clear. And just in terms of on the -- switching gears to the food business, any sense on the order growth on the food side? How that's trended? And secondly, on the gold subscribers, can you give us any sense on that number of gold subscribers and how that is changing delivery fees?

Aditya, on the food delivery side, GOV growth is largely a function of order volume growth. There is a little bit of AOV growth as well year-on-year, but mostly it's order volume growth. And as far as gold membership is concerned, I think the program has sort of matured now in terms of size. It is increasing month-on-month, but there is no large movement from the data that we shared a couple of quarters ago when we said that almost half of our GOV is from gold member. So we're ballpark in the same 50%, 55% zone per day on the Zomato Gold Membership bids.

That's very clear. And maybe just one follow-up on Blinkit. The new dark store sort of order count, you mentioned a few in the 2 calls ago that you were sort of hitting 1,000 orders a day in 2 months and then it will widen. Where are we today in terms of further 113 that you've launched in the previous quarter?

It's pretty much same right now, Aditya. In terms of getting to that scale, we're still taking 2, 3 months.

Next question is from the line of Swapnil Potdukhe from JM Financial.

Congratulation on a good set of numbers. My first question is more of a clarification with respect to the comment that you mentioned that the industry growth expectation in food delivery is around 30%. Is that an indirect way of suggesting that you expect to grow at 30% GOV over the next 5 years? And if that is the case, we have been growing at around 25% to 30% last 3, 4 quarters. What gives you that confidence of growing at a faster rate?

So just to be clear, that statement is for our own business. So what we mean there is that FY '22 to FY '24, our food delivery GOV has grown at 30%. So we're not talking of the industry there.

Yes. But do you aspire to grow at that rate? And if that is the case, what would be the levers that will drive higher growth?

These are already growing at 27%, 28%, right? So we're very close to that, right? And we're trying to -- we do believe that there is a chance that we continue growing at that pace. But as we said, I think the overall expectation from a longer-term perspective is still that we should at least grow at 20%. But as we are seeing in the last few quarters, we're doing more than that, right? So we don't know whether we'll be able to deliver 30% or not, but at least 20% should be possible.

Got it. Very clear. The second question is also kind of a clarification. So your take rates in food delivery has improved Q-on-Q. Your contribution margins have come down. Now you did call out that the higher share of gold did affect your delivery charges. Was there also an element of the elections or the heatwaves affecting the supply and that leading to some incremental spends?

Yes, that's right, Swapnil. That did play a role in slightly lower contribution margins in this quarter.

And we should expect that to reverse going ahead, some of it, if not all?

That is right. But again, in this quarter, we expect rains, right? So that again puts a pressure on the delivery cost. So I think at different quarters, there are different dynamics on different line items, but the overall larger message is that directionally the overall adjusted EBITDA margin should continue increasing from here.

Got it. And then one question on the macro front. So we have been hearing a lot of things from the government that they are planning to work on social security benefits for their delivery partners. And if those things do take past, how do you see the impact on your margins across the board, both for delivery quick commerce...

So there's no clarity on these topics at that -- at this point. So different states are taking a different view on how these welfare benefits should be administered and exact impact on the P&L is not clear at this point, right? But we don't expect it to be very meaningful. And at this point, we don't expect it should impact our margins, right? We should be able to absorb this in our business or even pass on to the customers.

Got it. And on Blinkit, so there is a mention about share shift from built to a premium range modern retail in large cities. Will it be possible to explain which retail formats are we talking about or you can use some examples to explain what do you mean by that point?

Swapnil, so I think when we talk about modern organized retail, it is multi-store format organized retailers, which might not be at the scale of the hypermarts, but ones that are used by customers more often during the weak purchases. So I would rather not name the other players, but I'm sure like there is plenty of examples in every city of this kind of a modern format, which is typically multi-store operated and catering to the premium end of the customers.

Got it. And just the last one. So we have seen some increase in your CapEx this quarter Q-on-Q. Now is that entirely related to Blinkit, especially given the fact that you made a comment just a few minutes back that you're partnering with local partners for new store expansion. So how do we tie up that increase in CapEx?

Swapnil, Kunal here. So it's a combination of the Blinkit store scale-up and partly also where we're increasing some warehousing capacity on the hyperpure side. So I think it's both of these things combined, but a larger proportion is the Blinkit part.

And there is a -- yes.

Just to clarify. So even when we open stores with partners, our policy now is that we actually take the upfront cost of the CapEx because we find that we are able to do a higher quality CapEx other than expecting the partners to invest in the higher-quality CapEx set that we expect.

Understood. And there's also a working capital release of around INR 175 crores if I'm not wrong. Is that related to the calendar dates that used to highlight earlier or something else?

Yes, Swapnil. So it's that and also, I think, a little bit of growth. In line with the growth in hyperpure business, right? So that's business where we have positive working capital. So as that business is growing, we have seen some working capital growth on account of that also.

Next question is from the line of Gaurav Rateria from Morgan Stanley.

Congratulations on solid set of results. My first question is on food delivery. I want to understand how broad-based the growth was across top 8 and non-top 8 cities. And when we look at the top 8 cities, what's been the driving factor for growth? It is also driven by the user growth? Is it more by frequency? Is it more by average order value? Just trying to understand the key factors driving the growth in top 8 as well?

Gaurav, I think the growth is fairly broad-based across the top 8 and the non-top 8. I think, like we mentioned before, top 8 even today, the supply -- from a supply standpoint, we still have enough work to do on supplier sufficiency, both in terms of on-boarding existing restaurants and increasing the choice for customers in terms of new restaurants and cuisines. So I think as we work on supply, that has had a bearing on growth as well. Not too much, I wouldn't attribute too much of the growth through AOV, like Akshant mentioned earlier as well. So it's largely more supplier efficiency, more customers that has been the bigger driver in the top 8.

Got it. Secondly, on quick commerce. If I look at -- any online model has 3 key tenets, right, selection, price and convenience. So how are we solving for selection? You did mention that some locations have gone to the extent of 22,000 SKUs. But there is always a pull and push between the size of stores required to store these SKUs and the time required to deliver the same within the mentioned bracket of 10 to 20 minutes, right? So I'm just trying to understand that typically, this is a constraint from a business model perspective. How are you solving for that? And what's been the experience in some of these locations where you have been able to take the SKUs to more like 20,000 plus?

Gaurav, I think the experience for the customer is always more delightful when they have a larger selection, like I said. And I think how we do it, that's part of the magic, and we would rather not talk about that.

Okay. And last question. From a use of cash perspective, we've been getting cash, any opportunities that you would be looking from in organic perspective? Or any change in philosophy or thought process from returning of cash to shareholders?

So nothing beyond what we've already shared, Gaurav, in terms of investment opportunities and even on distribution back to shareholders as we have mentioned in the past, that's not something we are considering right now. We want to retain strong balance sheet at this point.

Next question is from the line of Samarth Patel from Equirus.

Yes. My first question is to Akshant. We have implemented a platform fee or you can call it convenience fee of INR 5 to INR 6 in food delivery, which was almost 0 last year. Now given that the only online category which successfully have implemented convenience fee is the OTA sector, right? So how much flexibility do we have to potentially increase this platform fee without adversely affecting our volume growth in food delivery?

Yes, so I think we'll know that only with time. As you're saying, this is something -- little bit of untested waters for a business like ours. So yes, we're taking step by step and we'll see how sensitive the demand is to the platform fee and take a business call accordingly.

Just a follow-up to that question. Is it going to be like a dynamic fee? So let's say, in terms of the higher volume for any particular day, are we planning to charge a different platform fee? Or more or less, it is going to be the static in nature?

No, all these are options. And as I said, nothing is cast in stone. So we keep experimenting with ideas depending on what makes more sense is, I think, like you take that call and move on. So at this point, there's no fixed formula here that we have in mind and that we want to stick to. So we have to be open-minded and keep experimenting. .

Okay. Now the second question to Albinder. Can you share some, let's say, qualitative insights in terms of ramp-up of new dark stores? You mentioned that the order volume growth is similar to last year's dark store opening. But in terms of, let's say, breaking even at a store level, if you can just share some insight because the AOV could be different, right, in the market that we are getting into. So that largely determines the profitability. So if you can just share some qualitative insights there?

Samarth, like you said in the last call as well, the market profitability of a store is dependent on a lot of factors, one of which is the geography in which we open and whether it's a store in geography that we already operate in, the kind of area that, that store serves. So there are a lot of qualitative factors there. We don't like to look at averages when it comes to what time it takes for a store to get there. I think we will -- we rather internally track each store's journey and have its own timeline, whatever is the outcome, that's what we are confident of. In general, what we've seen is that, that number has been going down as our network has been expanding and our brand has been getting stronger, as well as our selection across the board has gotten better.

Understood. Understood. And the last question like as previous participant also asked, that we have been expanding our SKU. So currently, in some of the stores, as you mentioned in shareholder letter, we are at 25,000 unique SKUs, right? Now there is always going to be a trade-off between speed, cost and assortment width. So like, are we okay to sacrifice some sort of speed and cost to increase our assortment width? Or like given the kind of tech-enabled model we have, we are confident that we will be able to have cost and speed within the defined gartels and be able to increase the assortment width? And how far we are from the maximum number of SKUs that we can add into these dark stores?

Samarth, I think the answer is the second one that we want to stick and we continue to stick to delivering all of this assortment in 10 minutes, and that will also always be our operating principle moving forward as well. In terms of what is the SKU count that we can reach, I think as we expand more and we add more SKUs, we also keep innovating on that front. So I don't think that there is a limit that we can define to that, that's a max number of SKUs that we'll be able to serve in the neighborhood. Same neighborhood 2 years ago used to serve -- we used to serve about 5,000 units. Now we're at 25,000. So I think that number can still go up meaningfully.

Next question is from the line of Manish Poddar.

So I have 3 questions. First is, Akshant, if you can help me understand that in the food delivery business, let's say, in markets of South India, how would now our market shares been trending in your view?

So I think our market -- I mean, our market is fairly broad. It's hard to have a sense of the absolute market share. But I think what we're able to track is directionally how are we growing compared to the overall industry that includes aggregators and restaurants who also sell directly to their platform. And in some of the markets in the South, if you take a slightly longer view, last 2, 3 years, we think our market -- the penetration and the share that we have in those markets has grown meaningfully.

But let's say, if you have a national market share versus the market share in those regions, is there a gap, let's say, within 10 percentage points or it is still a 20%, 25% gap?

No, I think we are very not close to our national average even in the cities in the South where historically 3, 4 years ago, we were meaningfully lower.

Okay. That's interesting to hear. The second one is, let's say, in the grocery business, what would the broader mix be? How much would be the share of, let's say, general merchandise and fresh except dairy?

So in the Blinkit business, we don't provide that breakup.

Okay. Let me put -- if you don't give me that, let's say, in terms of scaling this, let's say, from the store count today to, let's say, 1,800 to 2,000 stores in the next 2 years. What really is the hindrance in terms of doing that in your view?

I think our ability to execute, nothing more.

Okay. And the last one, in terms of -- just in terms of capital allocation. So let's say, probably the deal of -- there was this media article going across that is not happening, and we've gone ahead and doing this organic. And now cash is also accruing for the last few quarters. So what is the thought with the cash on books? That's it.

Manish, at this point, as I mentioned in response to a previous question and also in our past letter, I think we -- there is a big value of having a strong balance sheet given that we are in multiple businesses and most of our competition is -- our private company has large balance sheet as well. So there is no plan for distributing the cash at this point. So we'll just like hold the balance sheet.

Ladies and gentlemen, in the interest of time, we will now move on to take the last 1 to 2 questions. The next question is from the line of Rahul Jain.

Congrats on strong performance. Just curious to understand any specific reason for highlighting need to -- the store count that we will go from 1,000 to 2,000 right away. And is there any insight that why we need so many stores? Is it because the average MPU per store is not expanding significantly, and that's why to address a larger audience the need for expanding the lower base has to be significantly higher? Or you see a certain gap in terms of number of order frequency per household in an area which would mean that addressing a larger audience becomes a critical element to grow rather than expanding in the same space?

No. So there is no expansion in the same space here, right? Space is a store here. And what we have shared here is our opportunity and outlook on what -- how large can this business become for us. And we've shared it now because we feel confident about getting to these kind of outcomes. So as we've done in the past, we have made sure that we transparently communicate on how we view growth opportunities in the business now being [indiscernible] and in that spirit that we have shared [indiscernible].

And this MTU per store kind of a metric of achieving 11,000, 12,000 number. Is it good given the kind of the radius and density that you cater to for a particular store? Or is there any specific benchmark, which is an ideal number?

We don't think of the business in this way, Rahul. So I'm unable to comment on this.

Next question is from the line of [indiscernible] Global.

I know you don't reveal the secret sauce, but I think it would be helpful for everyone to just understand how much software and sort of how exactly are you reaching service levels with what is effectively a franchise model? We've seen many franchise models in different countries scale, but it requires high levels of operating rigor and all kinds of internal systems. So maybe you can just break it down at a high level as to what are the 2 or 3 things you do to achieve this outcome that will be pretty hard for a new or existing player to replicate? Because essentially, I mean, you can -- this is sort of like McDonald's, right? You're sort of arguing that you can still, while maintaining service levels, you can scale to very high numbers. So I'm sure that's not as easy as partnering with some local guy and setting up a box and just putting SKUs in the store. There's got to be more complexity to this. So if you could just help people understand that, that would be helpful.

Great. So like you said, a lot of this is the systems and the tech that we've built over the years that helps us to achieve this, but that also comes with the operating rigor that we have to put into place. So those are givens. And I think we generally foster a culture of innovation so that we can actually try to get to these outcomes because we feel that these create real value for the customers. So when we are thinking of selection, we are not really thinking of constraints, we are thinking of how to make it happen. And that's the culture of the organization, and we solve for that. And I believe that once you start solving for it and you build the systems, you build them over a long enough period of time, that you will get to these outcomes. So to your question, I don't think it is as easy to replicate. Of course, it's always possible. But I think it does require not just operating rigor, but a lot of systems and the knowledge of how the entire ecosystem works and of course, great partners.

Next question is from the of Abhisek Banerjee from ICICI.

Yes. A couple of questions from my side. First is on the order value. So EUV, would it be correct to imagine that it is broadly in line with what we saw last quarter? Or would the 425-ish be a better number?

Abhisek, we don't provide that metric, so we'll not be able to comment on that.

Okay. Fair enough. But see, the reason I was asking is, if I take that the last quarter's number was there and whatever tepid improvement has happened, which is about 50 bps if I take out the delivery fees, then the assumption is that almost 30 bps is coming from platform fees. So is the risk coming from advertising? That is what basically I'm trying to understand.

Yes. So again, we'll not be able to comment on specific levers of margin improvement. We don't do that because of competitive reasons, as you can appreciate. But yes, I mean, in the past, we have mentioned that ad revenue is growing for us, and so is platform fee and that is [indiscernible] for everyone has consumers. So yes, those 2 have played a role even in this quarter.

Got it, sir. Sir, now going to the hyperpure business. I know you don't talk too much about it, but it has scaled up, I mean, even beyond what the most bullish guys were thinking. It's now a INR 5000 crore revenue business. So could you give us some -- at least some more details on it, say, things like how many restaurants are being serviced and all?

Yes. So it's growing well, the business. But having said that, we still feel that there's a lot of work to be done in terms of unlocking a much larger TAM than what we can see right now for this business. And hence, as you would see, our focus is more on discovering that and solving new problems than on profitability at this point, right? So we want to just like run this business close to breakeven and see if there are newer markets or newer customer segments within the restaurant industry that we can unlock, run few experiments. We continue to do some experiments around that and I think like, yes, as and when those scale, we'll be happy to share more details with everyone.

Got it. So the angle I was asking this was from that, we have always heard about commissaries that these large QSR chains have. So would it be possible to at least give some idea of what would be your pricing differential with these commissaries?

So today, we actually don't even cater to these last QSR chains as our customers. Our customer segment today is like sort of middle-level restaurants with few outlets, right? So the value proposition there is higher quality supply delivered in a predictable fashion on demand, pretty much right on the next day and priced comparatively. So that value prop today is serving well large section of these restaurants. And I think we need to think harder and create value proposition for rest of the restaurant industry where we are able to add value to what we are doing today, and therefore, get more business from that. That's a WIP for us.

Understood. And finally, on the CapEx part that Kunal briefly mentioned with regards to you doing the CapEx yourself in some of the dark stores. But I'm sure that you will not be doing that free of cost, right? You would be taking some deposit money or something from your partners. So where is that coming up? Is that coming up in the other items line?

Abhisek, we don't recognize that as revenue or we don't actually have that part of it. It's in the form of a bank guarantee from the partners. So it doesn't actually come on our books.

Okay. But any specific reason why you would do that? I mean, that would make your balance sheet even better, right?

We want to be fair to our partners. A lot of the partners that we get on board are hard-working small business owners that actually want to have a larger business. And a lot of the time, they don't actually have the means to be able to invest large amounts, but they can provide a bank guarantee against some of their assets, right? So to be fair to them, we don't want them to -- we don't want to be riding on their cash. We go through a rigorous process to select them, and we trust that they will operate our business the right way. But at the same time, we also want to nurture the ecosystem so that the hard-working folks actually get an opportunity to update their life by working with us.

Understood. But that also kind of gives me the idea that probably -- so is one entrepreneur being given multiple dark stores in that sense?

That [indiscernible] themselves with the first one, but then we can give them. That's on our discretion.

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