Post-merger, movie tickets will be available on Paytm app for a year

One 97 Communications, the parent company of the fintech giant Paytm, has entered into definitive agreements for the sale of its entertainment ticketing business that includes movies, sports, and events ticketing to Zomato for ₹2,048 crore.

Paytm’s movie and event tickets will continue to be available on its app during a transition period for the next 12 months. After that, the users will be redirected to Zomato’s upcoming app for the ‘going- out’ segment.

Acquisition to boost Zomato growth

Analysts believe the acquisition gives size and scale to Zomato’s ‘going out’ business, acting as an additional growth engine over the medium-to-long term. For Paytm, the deal would shore up its cash and cash equivalents, which may be used to scale up the cash-back program to revive its payment business.

“Post-acquisition, Zomato’s management estimates going-out GOV at over ₹10,000 crore in FY26. Management expects the going-out business to operate near break-even on an adjusted EBITDA basis, while potentially delivering 4-5% adjusted EBITDAM as a percentage of GOV over the medium-to-long term. Management’s strong execution track record grants confidence that going-out will add further value over the long term,” said Dipeshkumar Mehta of Emkay Global Financial Services.

Paytm to focus on fin services

Meanwhile, Paytm's strategy is to focus on its core payment or financial services business. The deal values Paytm’s movies and event ticketing business at 6.9x FY24 revenue versus the proposed earlier deal for BookMyShow (7.7x FY23 revenue) by KKR.

“In our view, the deal would shore up Paytm’s cash and cash equivalents, which would possibly be used to scale up the rewards/cash-back programme to revive its dwindling payment business following the RBI action. The net one-off gains adjusted for the earnings outgo would reduce net loss in FY25E, but hurt future earnings,” said Anand Dama of Emkay Global Financial Services.

Based on the rough proforma estimates, net value addition or change in Paytm's target price due to the deal could be only ₹25 per share, far lower than the stock price reaction already seen after the newsflow around the deal, he added.

At 9:25 am, Paytm shares were trading 2.58% higher at ₹587.90 apiece, while Zomato share price was up 1.06% at ₹262.70 apiece on BSE.

                                                      (By arrangement with livemint.com)