Paytm – Zomato Deal Rs 2,048 Crore: Selling Entertainment Ticketing Business to Zomato – What it Means for Investors
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In a significant move within India’s fintech and e-commerce sectors, One 97 Communications Limited (OCL), the parent company of Paytm, has finalized agreements to sell its entertainment ticketing business to food delivery giant Zomato. The deal, valued at Rs 2,048 crore in cash, involves transferring the movie, sports, and event ticketing services managed by Paytm to Zomato. This strategic transaction is set to put both companies’ shares in the spotlight, making it a crucial topic for investors to watch. (Paytm – Zomato Deal )
Paytm-Zomato Deal: Key Details and Structure
The Paytm-Zomato deal is structured to ensure a smooth transfer of Paytm’s entertainment ticketing assets. The process will include:
- Transfer of Ticketing Business to Subsidiaries: Paytm will first shift its entertainment ticketing operations to two wholly-owned subsidiaries—Orbgen Technologies Pvt Limited (OTPL) and Wasteland Entertainment Pvt Ltd (WEPL). These subsidiaries manage the TicketNew and Insider platforms, respectively.
- Sale of Subsidiaries to Zomato: Following the transfer, Paytm will sell 100% of its stake in OTPL and WEPL to Zomato. This sale also includes the transfer of approximately 280 employees from Paytm’s entertainment ticketing division to Zomato, ensuring continuity and expertise.
Transition Period and Continued Service Availability
During the transition, which may take up to 12 months, Paytm has assured users and merchants that they can continue to book movie and event tickets through the Paytm app, TicketNew, and Insider platforms without any disruption. This approach is designed to maintain a seamless experience for all parties involved while the ownership and management of these services change hands.
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Why Did Paytm Decide to Sell Its Entertainment Ticketing Business?
The decision to divest from the entertainment ticketing sector aligns with Paytm’s strategic focus on its core business areas—payment services and financial products. Over the past few years, Paytm has significantly expanded its offerings in sectors like insurance, equity broking, and wealth management, positioning itself as a comprehensive financial services provider.
#Zomato is set to acquire #Paytm's entertainment and ticketing business for ₹2,048.4 crore or $244 million, as the food delivery giant aims to strengthen its presence in the "going-out" sector.
Read here: https://t.co/WzQpGfLGOa pic.twitter.com/xewiX3LJHu
— Mint (@livemint) August 21, 2024
In FY24, Paytm’s entertainment ticketing business generated Rs 297 crore in revenue with an adjusted EBITDA of Rs 29 crore. However, by offloading this business, Paytm aims to concentrate resources on enhancing its primary financial services, leveraging cross-selling opportunities, and expanding its market footprint in these critical areas.
Expert Insights: Market Reactions and Share Price Projections
Following the announcement of this deal, both Paytm and Zomato’s shares have garnered significant attention. As of August 21, Paytm’s share price stood at Rs 573.10, while Zomato’s share price was Rs 259.95 on the BSE.
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Paytm Share Price Outlook:
Investment advisory firm StoxBox has recommended a ‘BUY’ rating for Paytm with a target price of Rs 615 and a stop-loss at Rs 530. Analysts have observed that Paytm’s stock, after an 80% decline from its listing high, has shown a bullish cup-and-handle pattern, indicating a potential reversal in trend. The stock’s recent upward momentum, supported by short accumulation phases and a recovery above its 200-day moving average (DMA), suggests a positive outlook.
Zomato Share Price Outlook:
StoxBox has also issued a ‘BUY’ recommendation for Zomato shares, targeting Rs 285 with a stop-loss at Rs 252. Zomato’s stock has been on a robust uptrend since January 2023, displaying strong price strength, improving earnings per share (EPS), and resilient demand from buyers. This indicates ongoing positive momentum, making it a low-risk, high-reward opportunity for investors.
Fundamental Factors Driving Paytm’s and Zomato’s Market Position
Paytm’s Strategic Positioning:
Paytm’s strength lies in its extensive and active customer base, with 7.8 million monthly transacting users as of June 2024. These users primarily engage with Paytm for UPI-based payments, bill payments, and other financial services, which also supports Paytm’s commerce business. This broad customer reach enables Paytm to generate revenue from both consumers and merchants, creating a stable and resilient business model. Moreover, the company’s ongoing efforts to enhance cross-selling financial services are expected to drive further growth and profitability in the coming quarters.
Zomato’s Growth Prospects:
Zomato is optimistic about its growth trajectory, particularly in the food delivery and quick commerce segments. The company’s quick commerce venture, Blinkit, is aggressively expanding, with plans to double its store count and quadruple its gross order value (GOV) in the coming fiscal years. Zomato’s management is committed to reinvesting in this segment to capture a larger market share, despite anticipated challenges. Additionally, Zomato’s B2B arm, Hyperpure, is expected to continue its healthy growth, contributing to the company’s overall margin improvement as the business scales.
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Conclusion: What Should Investors Do?
The Paytm-Zomato deal marks a significant shift in the Indian fintech and e-commerce landscape. For Paytm, this move underscores its commitment to sharpening its focus on core financial services, while Zomato continues to strengthen its foothold in the quick commerce and food delivery sectors. Investors considering these stocks should keep a close eye on the developments surrounding this transaction and the broader market conditions.
With positive technical and fundamental indicators, both Paytm and Zomato shares offer potential investment opportunities. However, as with any investment, it is crucial to consider the risk factors and market trends before making any decisions.
I am Praveen Kumar, a 21-year-old passionate about writing and staying informed. On CNA Times, I bring the latest news and updates, offering readers accurate and insightful information with my expertise and dedication.
