Following the announcement that the financial behemoth would sell its tickets and entertainment division to food delivery service Zomato for ₹2,048 crore, Paytm’s share price surged by more than 5%. Zomato shares increased by 2.71% to trade at ₹267.00 on the BSE, while Paytm shares surged by up to 5.47% to ₹604.45. The parent company of finance behemoth Paytm, One 97 Communications, has finalized arrangements to sell Zomato its entertainment ticketing division, which includes movie, sports, and event ticketing, for ₹2,048 crore.
Plan For Next 12 Months
During a transition phase over the next 12 months, Paytm’s movie and event tickets will remain available on its app. Users will then be taken to Zomato’s future app for the going-out section after that.
The acquisition provides Zomato’s going out business with size and scale and serves as an extra medium to long term growth engine. The agreement would support Paytm’s cash and cash equivalents, which it might utilize to expand the cash-back program and resurrect its payment business.
Zomato’s Going Out Business
Zomato’s management has estimated that going out GOV will exceed ₹10,000 crore in FY26 following the purchase. Over the medium-to-long term, management anticipates that the going out business will operate close to break-even on an adjusted EBITDA basis and might produce 4-5% adjusted EBITDAM as a percentage of GOV. The management has a great track record of execution, therefore there is hope that going-out will eventually result in further value.
Paytm’s Latest Approach
Focusing on its primary business of providing financial services or payments is Paytm’s current approach. Comparing the deal to the earlier proposed BookMyShow by KKR deal, Paytm’s movie and event ticketing division is valued at 6.9x FY24 revenue.
In response to the RBI action, Paytm’s declining payment business may be revived by scaling up its rewards and cash-back program, which would be supported by the deal and increase the company’s cash and cash equivalents. Although it would decrease the net loss in FY25E, the net one-time profits compensated for the revenue outgo would impede future earnings.
