Eternal Limited (ETERNAL) Earnings Call Transcript & Summary

Ladies and gentlemen, a very good evening, and welcome to Zomato Limited's Q3 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 Singh Dhindsa, Founder and CEO of Blinkit; and Kunal Swarup, Head of Investor Relations. 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 our 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 will be starting directly with the Q&A section of the call. [Operator Instructions]

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

Sir, 2 questions. Firstly, can you elaborate a little more on the take rate in Quick Commerce coming off? So while you've explained why we've seen profitability worsen because you've brought forward sort of the acceleration in stores and warehouses. Can you talk about the take rate? And then the second question, a related question, why do you feel so confident about profitability improving in Quick Commerce? I understand the sort of store maturity. Can you give us a sense of what proportion of stores will be mature, let's say, in fiscal '26?

I'll take the take rate question. So Aditya, the take rate difference that you see every quarter-on-quarter is usually just a mix of -- the product mix itself, so O&D is typically a quarter where we also see more sales of electronics products, more sales of general merchandise and some of the other categories, which percentage take rate-wise are lower, but overall revenue profile is healthier. So that's usually the delta that you see. There is no significant trend for the take rate in the quarter that we've observed for the core or for the noncore categories.

And Aditya, on your second question, see, I think like what we have given in the letter is sort of broken up our business into the top quartile cohorts of store and the bottom just to showcase the fact that investments into newer stores, which are much younger in terms of utilization lower than others is leading to the profitability at an aggregate level reducing, right? So I think that trend we have said -- as we have said, is likely to continue as we continue to accelerate the pace of new store addition. But as you can see from that chart in question 2, that stores which have matured are still generating a healthy amount of contribution margin. And that sort of gives us confidence to continue the expansion that we are doing right now.

Understand. And has this also been a function of just a faster new city addition because I'm assuming that with new cities, you need additional logistics, warehouses and obviously, the AOV could be lower to start with or frequency could be lower to start with.

Yes, that's directionally right, Aditya. But I think new cities are still a very small fraction of our overall expansion. So it is one of the factors, but not the only one.

Understand. And so majority of these new stores then would be just densification in the existing cities?

That's right.

Next question is from the line of Ankur Rudra from JPMorgan.

The first question is on the reason for the accelerated additions and the -- bringing the growth forward. Is this because you see a bigger opportunity in the market versus before versus matching competition in the space? And secondly, just sticking with the cities side, our data says you've gone very long in terms of probably perhaps over 80 cities. Can you talk about what is the opportunity you see beyond the top 10 or 20 cities, which we understood in the past was a core value proposition and how the unit economics, the average bill values and the time to breakeven changes here?

Akshant, this side. So see, I think -- I don't think we took a sort of a very conscious call on accelerating the store expansion. It's more an outcome of the work that we've been doing in the past many months. And it just happens to be that we were able to add a lot many new stores than what we envisaged maybe a year ago when we gave the guidance of getting to 1,000 stores by March '25, right, and so on. So I think over the last 1 year, we've built organization bandwidth to be able to expand faster and increasing confidence in the business is, therefore, allowing us to continue at that pace. So I don't think the pace of expansion going up has anything to do with any decision that we have taken in this quarter, right? It's just like naturally where we are today is a natural outcome of what the work that we've been doing in the past. And on your second question on the smaller cities, as I mentioned, I think 80% of our business or maybe more is still in the top 8 cities. However, we are seeing fairly healthy traction in the smaller cities wherever we have entered and opened the store and launched the service. From an economic standpoint, also, the smaller cities on a sort of payback basis or ROI, ROCE basis look attractive to us. And therefore, we continue to open more stores in these cities. And I think as we look forward next 1 year, a larger portion of our new stores are now going to be in these smaller cities compared to what we saw in the last year. And I think once we build some fair bit of density in these smaller cities is when we would publicly share more data about how these cities are any different, if at all, from the larger cities.

Just a follow-up question on the fall in take rate as well. Overall, the unit economics also seem to have suffered a bit on Quick Commerce. Could you talk a bit about was it entirely just the upfronted cost of the network and warehousing? Or was there anything on the marketing costs or subsidies perhaps given out to match with the competitive activity in the space?

So our marketing cost went up, as we've also mentioned in the letter. But the marketing -- when we say marketing, we mean the digital marketing cost, which is below contribution, but above EBITDA. Our discounts are nearly 0 in our business. We are a marketplace business. So we -- there's sort of hardly any discounts that are funded by us on our platform. The other part of take rate that exists is the delivery charges that we charge consumers. We have seen a slight decline there because of the market and the competition being where they are on the delivery fee. So more or less, the decline is not significant, but yes, that has also partly contributed to the decline in take rate that you see.

Just last question on food, if I can. Can you share a bit of the color on the food growth momentum you're seeing? Was it a lot worse in December? And was there any impact of a lot of competitive activity on short duration food delivery? One of your peers launched that. There's also a lot of cloud kitchens being launched by you and by competition on the 10-minute side. Any impact of that on the food consumption and what you've seen?

Ankur, I don't think any of this has so far had a material impact on our sort of Zomato restaurant aggregation food business. I think all these things -- any form of 10-minute delivery in India today is, I think, at a very early stage and will not move the needle at all even if you aggregate and put it together. Like, for example, at Bistro, we are live in only a handful of locations. And other form of quick deliveries also are largely cannibalizing the existing business. It's sort of making the experience better. So I don't think what you're saying in terms of focus on quick deliveries, I don't think that has anything to do with the slightly lower growth that we have seen in the business last quarter.

Next question is from the line of Vivek Maheshwari from Jefferies.

A couple of questions. First is on the food delivery again. So Akshant, the news data mentions about broad-based slowdown. And this is a comment from other consumption-oriented companies also. Do you think for you as a company or for this as a category, it moderates further before it starts picking up, your letter mentions again about things picking up. But do you think because a lot of consumer companies are talking about urban being -- seeing more moderation in the foreseeable future before it gets better? What is your take?

Look, we don't want to crystal ball gaze here these things, I think very hard to predict, these things are a function of a lot of variables and most of them are not in our control. So I don't want to, at this point, comment on how this recovery will pan out. But yes, what we know is what we have reported, and then we see how it unfolds from here.

Okay. And through the course of the, let's say, the latter half of the quarter, so November to December end, was it broadly stable? Or any change through the course of those few weeks?

It's a very short time period and with also a lot of seasonality, festivals, winters coming in and so on. So I would not, therefore, read too much into how those 6 weeks, 7 weeks panned out. Let's wait and watch. I think this quarter will tell us on how the recovery is and what we are seeing.

Got it. And on the second bit on the AOVs for Blinkit business, sorry. Last quarter, you mentioned about the seasonality. So the AOVs was 660, now it is comfortably over 700. Do you think this is the new norm that we should look at from a next, let's say, at least next few quarter perspective?

No, Vivek. So the AOVs that we are mentioning here, I think one is in O&D, we see the festival impact on the AOVs as well, which with every passing year, we are seeing the festival segment being a larger and larger portion of the business whenever they come around, especially the Diwali season. So I think a lot of that is an impact of that. Some of it is the impact also of the higher ASP categories like electronics actually becoming larger for us. But this is not a secular trend across quarter-on-quarter. I think this would probably be a trend to more look forward on a year-on-year basis.

Got it. And last question, Albinder, on the Blinkit business, again, the retention rates, what you have mentioned in the news letter is very, very good. But in the context of competition and we have seen, let's say, horizontals also getting into Quick Commerce, do you think getting -- so we are comfortably above 1 crore customer or 10 million now, to get the next 10 and the next 10, do you need to incentivize much more because, let's say, if I'm as a user, let's say, I like Blinkit and that's why I'm so used to the platform, I come there all the time. But the incremental customers, one because of the afford -- or let's say, it's going to be less affluent, so to speak. And the other bit is can be -- would be chased by so many platforms, including the newcomers. How do you think it unfolds over the next couple of years? The incremental users I'm thinking about?

To borrow a [ chance raise ], I don't want to crystal ball gaze over here. See, I think the fundamental truth in our business is that we have to present ourselves to the customers for them to consider us and use us as a platform. And once they do that, then it is the consistency of the service, the quality of the service, which retains the customer, right? And that has many dimensions apart from just pricing. So we are confident that when we talk about those dimensions and our retention rates because of everything that we do on that end, we should see similar trends going forward as well. We will see the increased competition impact the cost of presenting ourselves to the customer, which is primarily today our digital marketing cost, right? And because there will be more competition over there, we expect that, that number will go up. But that doesn't impact how we look at our business or what we prioritize, right, which is essentially the things which drive the retention for us.

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

My first question is on Blinkit. So earlier, we used to provide a data point wherein we used to say that to reach 1,000 stores per day per store, it used to take around 2 months. I would just like to know if -- what would be the time taken by the newer stores which have been opened in recent months to reach that 1,000 number because that is the number where we typically end up being contribution positive. And a related question to that is, does the densification of our store network in some of the cities have a direct impact on your throughput of existing stores as well because of cannibalization?

Swapnil, so on your first question, I think broadly, no material change in terms of the breakeven point compared to what we had shared earlier. If there is, we will sort of tell all the investors and update them. But I think we're still ballpark operating in the same zone of sort of store breakeven in around 2 to 3 months. That's what we are seeing right now. I mean this answer is also linked to your next question. I think some of this is also linked to what that new store is. Is it a new area, a new city or a sort of additional store in existing neighborhood. But as a whole overall aggregate new store addition group, I don't think that time line has changed at this point. right? And yes, you're right. If you open a store, which is an existing area, it does lead to not cannibalizing the existing -- sales of an existing store, but it does lead to a slowdown in the ramp-up of the existing store, right? And hence, to that impact, it sort of reduces the utilization of the network, if you know what I mean. And hence, it sort of drags the margin down a little bit in the short term. But it builds more capacity for future expansion and assortment expansion.

Okay. By any chance, would you have any SSG kind of a number that you can share for some of the more mature stores and how they are tracking?

See, again, as I said, SSG will not make sense here because we are still adding stores in the same neighborhood. So if I open a new store in the same neighborhood, the first store -- SSG will actually not make sense. So maybe the right metric to look at is SSG of a polygon or a neighborhood, right? And we do track that data internally, but we don't share it publicly yet at this point. But I think what I can share with you is SSG is quite healthy at this point because most of the network is still from a capacity standpoint underutilized. And from a demand standpoint also our penetration in the market is still low. And hence as we add more category and as we spend -- reach out to more users through marketing,we are seeing a fairly healthy SSG at a polygon level.

Got it. And the second question is with respect to your category addition. You mentioned some categories like electronics, high-value electronics, maybe laptops, I saw somewhere. Does that -- so my question here is like how do you account for the high MRPs in AOV. Do you consider the MRP as AOV when it comes to this kind of electronics? Or do you take the commission income, which was, I think, in the case of mobile phones, you used to take the commission income in the AOVs? And does that have a correlation to your AOV increase for this particular quarter?

Swapnil, it's a good question. So outside of FNV category, where we account for the selling price as the AOV, outside of that, for all other categories, the MRP is counted in the definition of AOV, and that's what I mean that definition is there in our letter, and it is disclosed. However, as we are seeing the share of products where there is the delta between MRP and what the brand and seller is selling at is increasing in our business. I think we are considering disclosing more data from next quarter onwards, which can help shareholders and investors understand the actual customer paid AOV as well as the gross GOV that we are currently reporting.

Got it. And then later, you mentioned some -- that your growth investments will continue on Blinkit. Now the question here that I would like to ask is like should we see your absolute losses increasing hence forth? Or do you -- or should we expect in percentage -- I mean the percentage number to come down a bit? I mean any trajectory-wise will be helpful here.

So at this point, again, we don't want to give more guidance than what we've already given, Swapnil, and I hope you'll appreciate that given market is dynamic, competitive. So we'll see. I think -- but directionally, yes, as we mentioned in the letter, we do expand -- we do expect the investments in Blinkit to go up. And as a result, the losses on an absolute basis go up in the next 1 or 2 quarters.

Got it. And just one last question on food delivery as well. So this is a bit of [indiscernible]. So we have been hearing that some of the restaurants have been renegotiating their take rates with you guys, the commission rates. And I think your take rates have not meaningfully increased in this quarter despite the fact that there was a significant increase in the platform fees. That benefit has not come down to your reported take rate. Is that the reason are you renegotiating those commissions?

Not at all. I mean commission renegotiation is a part of our business. It happens every day, every quarter, right? So I think nothing special that we are aware of in this quarter.

Next question is from the line of Yogesh Aggarwal from HSBC.

A couple of questions. Firstly, on the top 50 stores, obviously, they are mature stores and the throughput is very high. But the contribution margin is 6.4%. So is that the peak one can expect or even for these stores, CM will go up and what will lead to further expansion, if at all, there will be?

So I don't think this is the peak. I think in this business right now, even for the more mature stores, there is a fair bit of cost that we are paying for us operating in a competitive market, right? So that impacts the delivery fee that we charge from consumers, that impacts the last mile cost that applies to even these stores, right? So I think all of that in long term will change. Also, as the business scales, our gross margins or sourcing margins should improve, our ad income should improve, right? The contribution margin, the way we define it also includes a lot of fixed costs, which are sort of fixed in nature, including back-end warehousing cost, employee costs and so on. So I don't -- I think there's a fair bit of room for the contribution margins to go up from where you see the top 5% stores are today to where they could be, let's say, 2, 3 years down the line.

Okay. Okay. Good. The second question was, Akshant, on densification. So as you said, bulk of the new stores are more like network stores in the similar cities. So have you seen that resulting in lower delivery cost because I'm hoping that the delivery radius would have come down across larger cities. So has that impact on delivery cost come down or not yet? Or is that something we should expect?

So densification happens, we do see delivery costs come down, which are primarily a function of the polygon of the stores becoming smaller. But on an aggregate level, that delta, the rundown is a lot slower because we are also expanding, like you mentioned, more than 30% of the network is new. So when we open a new store, typically, the polygons to be slightly bigger, especially if we are opening them in non-serviceable areas in the same city or in nearby cities. So it's a combination of that. But to your core question, as we densify the last mile cost has come down for us.

Got it. Got it. And just related to that, at the store level, at least anecdotally, we have seen the rental, the bigger salaries have gone up quite a bit. So is that something which will moderate or normalize? Or is that something you expected in the business model and therefore, it doesn't bother you?

I think that was -- that has always been the cost of doing business. I think so it was fairly built into how we think about the business. And we also think that, that is -- it's -- in some areas, it is an unusual run-up, which will also normalize in the near term.

Next question is from the line of Gaurav Malhotra from Axis.

I just had one question. So you mentioned about heightened marketing spends in the third quarter. Would you say that this was sort of evenly or really the heightened activity happened, say, in December or mid-November onwards or this would be more uniform through the quarter?

Gaurav, it was not uniform. It was definitely more backloaded for us because the first half of the quarter was primarily the festival season, where we were already fairly close to our capacities. So we didn't really need to spend as much on marketing. And also, if you look at the trend of the last 2 quarters, as we keep on adding more stores, the need to spend on marketing sort of goes up. So what we were spending sort of November onwards was we opened 150 stores in the previous quarter. So those stores are also ramping up. And we were also adding stores at a steady clip in October as well. So that is what led to the marketing increase in the latter half.

Just next question on dark store. You mentioned that obviously, you have advanced your guidance of 2,000 by end December. But in terms of the impact on losses, you have indicated the next 1 or 2 quarters. So should we then assume that the next 1,000, most of it will come in the next 2 quarters and will not be as back-ended?

Gaurav, it will be a little bit more dynamic because right now, we've added, I would say, almost 300 stores over the last 4 or 5 months, right? And some of these stores towards the second half of the year will also start maturing and moving into different category, while we'll still be adding more stores. right? So it basically depends on sort of how this plays out because it's not a consistent trend throughout the year. There are a lot of seasonal factors which affect like store openings, our ability to hire people for the stores and also like how our back-end network scales up. So what we are hoping for is that as the percentage of stores which are not mature goes down towards the end of the year, we will start seeing better profitability.

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

Congrats on the milestone of 1,000 stores ahead of your schedule. My first question is on the key drivers for food delivery margins. You did talk about platform fee, but did the delivery cost also come down in that business? And what drives our confidence of margins going to 5% in the next few quarters? What would be the key drivers?

Gaurav, so I think I don't want to be specific here given it's sort of competitively sensitive. But in general, I think as we have mentioned in the past also, this business economics is a function of multiple levers. And I think it's small optimizations which add up and result in margin expansion. So I think we sort of continue to, therefore, drive confidence from the progress that we are seeing across the board in various parts of the business, including delivery cost, including the consumer fee going up, as you have seen in the past and AOV going up and so on, right? So unfortunately, like we can't be more specific than that, but that's where we are.

Okay. Just I'm trying to understand like this optimization in all is obviously not coming at the cost of market share, right? The focus on maintaining market share will be primary goal. And then obviously, with that in mind, you will be optimizing on the margins.

That's right, Gaurav.

Got it. Second question on quick commerce. Just want to understand what percentage of the total expansion is happening in our top 1, top 2 cities? And what scope do you think we have on keep -- on expanding these cities? Like where do we kind of see maturity and store expansion slowing down for the top cities?

So Gaurav, we are -- I would say that more than half of the stores, we are expanding in the top 8 cities out of all the expansion that you've seen. About 20% of the expansion has come into new cities. And the rest is essentially non-serviceable areas in or around the top cities or the other cities which are already open for us.

Got it. Thirdly, on the bottom 250 stores, you gave some data on the contribution to GMV and the contribution margins. Is it fair to say that will be largely attributable to the latest quarter only because those are the newest stores, and therefore, they will be most inferior in terms of their contribution margin and contribution to overall GOV?

Largely, that's true.

Got it. And lastly, you did mention that by end of the year, a lot of the stores will kind of come to maturity. Would that basically be also aligning with a time line for improvement in the unit economics in quick commerce business?

Gaurav, it's hard to say because, see, like you mentioned, we don't know -- we will know better once we, I would say, are closer to 1,600, 1,700 stores, what the pipeline after 2,000 looks like, right? So if we are still adding 30%, 35% of the network every quarter, then it is hard to predict whether the economics will move, the profitability will be like easy enough. But if we are at a situation where we are adding only 10%, 12% of the network every month, then of course, we can [ every ] quarter, then we can confidently say that profit will be there. So a lot will depend on sort of where we are sitting in the second half of the year.

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

I have a few questions. First question, clearly, we saw some slowdown on food. On quick commerce for mature stores and mature users, are you guys seeing slowdown? And if not, should we expect some kind of a slowdown in sync with the macro economy?

Nothing so far, Sachin.

Got it. From a competitive perspective, how should one think about it? Is it across the board amongst all operators or just select 1 or 2 platforms? And the reason I'm asking, I'm trying to gauge how long this could continue?

Sachin, your guess is as good as ours. So we -- I don't think we have a really big point of view on -- we see all of the competition as just competition. But I think our attempt is to do our job better and do what is right for our business. So I don't think that we are focused on -- we even can differentiate between one or the other.

Got it. And as of now, one gets a sense you guys are maintaining your market share on the quick commerce side. So the question out here is, if the competition sustains for a long time, is there a thought process at some point, let's say, to, for example, introduce some kind of a loyalty program or in a way, add a bit of a platform discounts and so on and so forth. Any general thoughts out there?

I don't think, Sachin, that we are -- even if we were planning to do something like that, we would disclose it on a conference call. But I think right now, we are -- I think our focus has been and always will remain on making sure that our service levels improve and then we do what we do well for our customers despite the increasing level of competition over the last, I would say, 6 quarters as well, we have maintained or increased our market share. So I think that is a strategy which is working for us, and I think that is what we will stick to.

Got it. One question on food. We saw the approach, let's say, between you guys and your top competitor being slightly different, where the focus of Bistro is more on the cloud kitchen perspective and your competitor is largely working with the restaurants to sort of reduce to a select set of menu, which could be delivered in 10 minutes. Wondering if that is something which you guys are also open to exploring or will continue as of now to stick to the Bistro model?

So actually, Sachin, we've mentioned in question 10 that we've also launched the same feature that Swiggy has done, which I think you were asking for them, so curated less than 15 minutes delivery with a curated menu and a dedicated fleet is something that we launched in the December quarter. And it's available in select locations right now, but we want to scale that as we move forward. So I think we're trying to address the need for quick delivery through various formats and Bistro by Blinkit is sort of one of them. And we'll continue to make efforts to make the existing model of delivery from restaurants -- from Zomato also quicker as we go along.

Got it. And last question, Akshant. Last quarter, you did mention that there is no need to move to an inventory-led model, and you are happy largely with the marketplace model on quick commerce. I presume nothing changes out here, right?

That's right.

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

So my first question is on food delivery. Just taking off from what Sachin asked earlier, overall, your answer in that question seems you're taking a nod to Zomato Instant, which you had experimented with earlier. It seems a little bit overall cautious on the whole 15-minute food delivery from restaurants offering, relatively speaking. Is that interpretation correct, first? And secondly, if so, is that because you think it's harder to achieve metrics, NPS, whatever you have on that front? Is that why you seem a bit more cautious on that thing to me?

Vijit sir, that's not the case. I think the less than 15 minutes delivery offering on Zomato is something that we're very excited about. But I think all these things, whether it is Zomato 15 minutes delivery or Bistro are very, very nascent right now, right? I think it's not needle moving by a large significant distance today. So while we -- what we know for sure is that, yes, quick deliveries lead to more demand. That is a fact. But the answers to get there, I think it's still early days in terms of what models will work, which models will work sustainably, profitably and which models will be scalable to an extent where this becomes needle moving in the overall context. I think what I would say is that we are not sort of running too ahead on that yet. I think there's a lot of work to be done, and we'll see what things work and what don't.

Got it. And my second question is on quick commerce. So first, the customer delivery charges were they broadly lower across both new and old customers? Would you say in terms of the take rate, the impact it has there? Because I see one answer to your -- one of the answers on the questionnaire where you mentioned the customer delivery charges for the customers you acquired in October, November, December, and you're highlighting that. So I'm just wondering outside of those older customers, did they go down across the board for the customers you acquired in the last 2 years?

Vijit, this is Kunal here. It's largely indexed to new customers and driven by the increasing velocity of new store additions where in the initial period, we offer sort of lower or no delivery charges, largely that.

Got it. And just a last question on that. The customer retention statistics that you've shared for the December '22 cohort. So mainly, if I understand that right, broadly at 40% for many quarters since December '22. How are the newer cohorts tracking versus that 40% number for the October to December quarter?

Yes. I mean they all tracking as per broadly our expectation, in fact, better than our expectation we had a couple of years ago. So yes, nothing that I want to highlight there unless you have a specific question.

No, no, no. I was just wondering because you chose that specific cohort.

I think we chose that cohort because we wanted to show the retention of our core customers. And the way we've defined the core customer is a customer which is at least like 2 years old in this case. So the newer the customer, I think like it will be early days, and the retention numbers, therefore, could be different. But broadly, this customer base that we have shown here in this table contributes to about 1/3 of our GOV, [ meaningful ] chunk of customers who've been with us for more than 2 years now. And their retention has actually increased if you look through the quarter by 1 percentage point despite perhaps this quarter being the most competitive that we have seen in the last 2, 3 years. So that's -- and these customers are also paying a healthy delivery fee of INR 20 per order. And that's the point we wanted to make that, as Albinder mentioned, the work that focus that we have on maintaining and continuously improving our service levels, I think is sort of helping us be the platform of choice for our core customers, which is what matters most to us.

[Operator Instructions] The next question is from the line of Rishi Jhunjhunwala from IIFL.

Slightly different way in asking the customer-related question. So in what -- if you can give some color on what is your customer acquisition cost in areas where you are expanding, but say, a competitor is already there and customer retention costs in areas where you're already there and a peer is coming in and being very aggressive. And the reason -- one of the reasons I asked that also is because while there is a cost associated with expansion for you in the newer stores going from 1,000 to 2,000, just trying to understand if there is a pressure on profitability on your top 50, 150 store cohorts also given that you possibly are doing customer retention initiatives.

Yes, Rishi, we are not doing any specific customer retention initiative, by which I assume that you mean whether we are offering discounts to the customers to retain them. We don't do any of that. I think we invest in our service to be able to maintain customers. So to be specific, that is not something that we are doing, I think, and we've been largely able to both maintain or grow our market share in our top markets because we continue to innovate on behalf of the customers. So that is just to address a specific point. I think your question around marketing, if we are going into a market after somebody has already entered the market, we do see -- we do have to spend more on marketing to get the trials, but that is not usually a very significantly higher number. But what we see in the market is that whenever we enter a market, our retention rates on the customers that we actually acquire in those cities are higher than competition, which allows us to gain market share, which we have also demonstrated in a lot of the markets in South and East that we've entered after competition.

So is it -- just to conclude on that, is it fair to assume that sequentially in your top 300 dark stores, your profitability has actually not gone down quarter-on-quarter?

That's right. Broadly, Rishi, I think what has changed, as we've also mentioned in our response to Question 5 is I think for the slightly older business, as you're saying, I think the margin expansion has paused. I think -- but I think our margins are broadly still intact. They haven't fallen.

Next question is from the line of Manish Poddar from Invesco.

So just trying to think about the losses. So just trying to understand, let's say, in two areas. One is in terms of competition and second in terms of setup of infra. Would you say, let's say, this quarter or whatever you're witnessing now in January, the larger variable for loss increase here forth also will be setting up of infra across the, let's say, from 1,000 stores to 2,000 stores. Is that how one should think about it? What I'm trying to broadly understand is, let's say, by all the interventions which you plan to do, is there a theoretical loss cap which you have, let's say, to have a particular revenue market share intact? I'm just trying to gauge that.

Yes. So I think we're not thinking that way, Manish. I don't think we are operating from a mindset of a cap on losses because I think as long as our mental model or framework here is that if the underlying core business is strong and if we have the bandwidth or capacity or capability to expand at a faster pace than we are doing today, then I think we'll do that. And then loss is just going to be an outcome of that, right? So we're not operating from a fixed budget on expansion at this point given that the market is very large, and we clearly see a first-mover advantage in this business in getting to consumers first. So we'll scale as fast as we can.

And would you say that the larger part of the, let's say, the loss or investments this quarter would be because of stores not getting mature? Or would it be competition, if I had to put 70-30, 50-50, any sense of that?

Almost 100% going to be expansion and expansion is not just the stores that we'll open in this quarter. But even the stores that we opened in December quarter or September quarter, some of those stores. I mean in terms of like if you look at the overall store network and then look at the capacity utilization, that metric is falling every quarter actually for us because we are adding way more new stores than what we did in the previous quarter. So I think 100% of our or most of our losses if they increase from here is going to be account of that unless something meaningfully changes on competition that we don't know today.

Okay. Just one last one. So in terms of -- I'm sure you all gather a lot of data. In terms of order market share for both food delivery and quick commerce, let's say, for quick commerce, how would that number any sense stack up in, let's say, your core market, let's say, Delhi versus -- I'm just trying to understand market share for you guys in both the segments. And for quick commerce, largely in Delhi, how is that stacking up in your view? With this last run rate, are you able to maintain market share? Or are you still losing market share? I'm just trying to gauge that.

Yes. So first of all, Manish, we don't track order market share. I don't -- we don't think that's a relevant market share because that can be manipulated, especially if you're doing free delivery, then you see orders splitting and therefore, it doesn't present the right picture. But we do track the GOV market share. And so far, we don't think our GOV market share has changed meaningfully despite the competition. And that's an important metric for us. I think we want to continue to be the market leader as we build the infrastructure further from here on. And as long as it makes sense, we would want to continue to be in that position.

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