Why FIIs and DIIs are at odds about Eternal stocks?
What's the story
Eternal Ltd, a company with a market capitalization of ₹3 lakh crore, is facing mixed reactions from investors. While foreign institutional investors (FIIs) have cut their stake in the firm from 58% to 42%, domestic institutional investors (DIIs) have increased their stake from 6% to 26.5%. The contrasting investor behavior highlights differing perspectives on Eternal's business model and growth potential.
Investor sentiment
FIIs have been exiting the stock for past 12 quarters
FIIs have reduced their holdings in Eternal by 17.02% over the past 12 quarters. The reduction indicates a reluctance to accept the company's growth-at-all-cost strategy, especially those familiar with developed-market metrics. Amit Khurana of Dolat Capital said institutional investors are hesitant to pay high valuations due to negative free cash flow and competitive challenges faced by the company.
Market optimism
Blinkit's growth and expansion plans have boosted DII sentiment
Despite the FII exit, DIIs have been bullish on Eternal's prospects. Their stake in the company has surged from 6% to 26.5% over the last year. The optimism is largely driven by Blinkit's impressive 155% year-on-year growth in gross order value (GOV) for Q1 FY26, and rapid store expansion plans. Management hopes to reach 2,000 outlets by year-end, further fueling investor confidence.
Market skepticism
High valuations not supported by fundamentals, say analysts
Despite the impressive growth figures, some analysts remain skeptical about Eternal's future. They argue that the high valuations are not supported by fundamentals and could be masking deeper structural risks.
Investor confidence
Eternal's narrative not convincing global investors
For now, Eternal seems to have gained the trust of domestic investors betting on India's long-term digital consumption story. However, global investors are not convinced by the narrative at current valuations. As expansion continues to eat into margins, cost-side challenges remain a concern for analysts like Khurana and Vikas Gupta of Omniscience Capital.