Why Zomato’s Parent Eternal Is Going Local with Domestic Capital & What It Unlocks for Blinkit | Explained

Eternal, the parent company of Zomato and Blinkit, is restructuring its ownership to become a “domestically-controlled” entity. Under this shift, the Eternal board has proposed capping foreign ownership at 49.5%, as per The Economic Times report. This move will enable its quick commerce arm Blinkit to transition from a pure marketplace model to one that holds inventory directly.

As of March 31, Indian investors like financial institutions, retail shareholders, and mutual funds owned 55% share of Eternal. This means the company is qualified for the Indian-owned-and-controlled company (IOCC) under Indian law. However, the proposal needs to be approved by shareholders.

The company has also raised Rs 8,500 crore in November 2024 through a qualified institutional placement (QIP), mostly from domestic mutual funds.

With this new transition, Eternal will now become a majority Indian-owned company, which follows a different set of rules and allows more flexibility. But the question rises: Why this move was important and how will it help the start-up?

Why Does It Matter?

Under India's Foreign Direct Investment (FDI) regulations, ecommerce platforms with majority foreign ownership are restricted from holding inventory directly. This limitation can hinder control over supply chains, pricing, and customer experience. By ensuring that Eternal Ltd is majority Indian-owned, the company qualifies as an Indian-owned-and-controlled company (IOCC).

Under this, over 50% of the company’s equity is held by Indian entities or Indian investors. And the right to appoint the majority of directors, to control management or policy decisions through shareholding, management rights, shareholders agreements, or voting agreements rests with Indian companies or citizens.

The IOCC status will be governed by a combination the Foreign Direct Investment (FDI) Policy, Foreign Exchange Management Act (FEMA), 1999, press notes issued by the DPIIT which provide clarifications and guidelines on FDI norms, especially concerning ecommerce and other sensitive sectors, among others.

How Is It Beneficial for Blinkit?

The IOCC tag allows Zomato’s quick commerce arm, Blinkit, to stock and sell its own products, rather than relying solely on third-party sellers. This shift enables Blinkit to launch new product categories, especially in segments with limited Indian brands, such as toys, festive items, and gourmet foods.​

In addition, it also allows the company to support small Indian manufacturers by providing working capital or purchasing directly from them, and improve profit margins, particularly in unbranded or fast-moving consumer goods (FMCG) categories.

Blinkit can now tap into underserved verticals like home décor, seasonal items, gourmet foods, etc. It can also bring inventory in-house which enables the quick commerce platform to streamline pricing, logistics, and sourcing --- improving gross margins, particularly in highly fragmented categories where individuals sellers lack scale.

Why Zomato Took IOCC Shift Now?

The pressure to take IOCC shift was from both the central government and the traders’ body. In January, The Economic Times reported that top executives from Blinkit, Swiggy Instamart, Zepto, and Bigbasket met government officials to clarify the operational mechanics of quick commerce as regulators looked to assess whether the model complies with existing ecommerce norms.

Even Union Minister Piyush Goyal, at the Start-up Mahakumbh 2025, has also said that there is a need to get more domestic capital in the Indian start-up ecosystem. “Grow and maintain your ownership. I really feel sad when I come to know that for some Rs 25 lakh or Rs 50 lakh some bright idea of a young start-up got sold to a foreign company. Let's try and get some more domestic capital coming into this ecosystem,” the minister had said.

He appealed to the unicorn start-ups, big private players and industry bodies such as Assocham and CII to come together and create a fund of domestic capital. Goyal also advised foreign investors to be benevolent towards the Indian start-ups and allow them to have a “respectable ownership of their work”.

Besides government, trade bodies such as the Confederation of All-India Traders (CAIT) have accused quick commerce companies of leveraging foreign capital to disrupt local retail markets, intensifying pressure on these firms to localise both ownership and operations.

What Do VCs Think?

As Indian start-ups navigate the complex funding landscape, the debate around foreign versus domestic ownership is gaining renewed attention. With regulatory frameworks tightening in certain sectors and trade bodies raising concerns about foreign capital's influence on local markets, founders and investors are weighing their options more carefully than ever.

“While gaining access to foreign investment opens a variety of opportunities, it may also leave the company fettered to other restrictions, which often impacts the original vision of the company,” said Karan Agarwal, Director, Wilson & Hughes. According to him, limited ownership would be preferred, where the company can attract FDI, but also maintain ownership for local advantages.

On the other hand, Elev8 Venture Partners managing partner Navin Honagudi calls for hybrid approach --- maintaining the agility to attract global investments while ensuring compliance with domestic regulations. “This balance allows start-ups to leverage international resources without compromising on local operational advantages,” he said.

As per data, Indian start-ups have raised over $12 billion in 2024. Of this, more than 80% capital came from overseas investors, while domestic contributions stand at a mere 15%. However, with rising scrutiny over foreign ownership in strategic sectors and vocal calls from the government to preserve Indian control, especially in consumer-facing businesses, start-ups are being nudged toward capital localisation.

Whether this shift fosters a more resilient and locally-rooted startup ecosystem or leads to capital constraints for high-growth ventures will depend on how quickly domestic capital pools can mature.

Ultimately, the path forward may lie in hybrid capital models that preserve strategic Indian ownership while remaining globally competitive. For startups, this is not just a compliance decision—it's a foundational choice about long-term control, vision, and value creation.