Paytm share price increased by nearly 5% after announcing a sale of its entertainment and ticketing division to meal delivery service Zomato for ₹2,048 crore. Paytm shares increased 5.47% to ₹604.45, while Zomato shares increased 2.71% to ₹267.00 on the BSE.
One 97 Communications, the parent company of finance giant Paytm, has agreed to sell its entertainment ticketing business, including movies, sports, and events, to Zomato for ₹2,048 crore.
During a transition period of 12 months, Paytm’s movie and event tickets will remain available on its app. Users will then be referred to Zomato’s future app for the ‘going-out’ phase.
Analyst Perspectives
Analysts feel that the acquisition adds size and scale to Zomato’s ‘getting out’ business, serving as an additional growth engine in the medium to long term. The transaction would help Paytm shore up its cash and financial equivalents, which could be used to expand the cash-back program and restore its payment operations.
Zomato’s management predicts a going-out GOV of over ₹10,000 crore in FY26, following the acquisition. Management expects the going-out business to be close to break-even in terms of adjusted EBITDA, with the potential to produce 4-5% adjusted EBITDAM as a percentage of GOV in the medium- to long term. Dipeshkumar Mehta, Senior Research Analyst at Emkay Global Financial Services, stated that management’s outstanding execution track record gives him confidence that venturing out will create long-term value.
The brokerage company rates Zomato shares as ‘Buy’ and sets a target price of ₹270 per share.
Meanwhile, Paytm’s aim is to concentrate on its core payment and financial services businesses. The offer values Paytm’s movie and event ticketing business at 6.9x FY24 revenue, compared to KKR’s earlier proposed deal for BookMyShow (7.7x FY23 sales).
Anand Dama, Senior Research Analyst at Emkay Global Financial Services, believes the transaction will bolster Paytm’s cash reserves, which could be used to enhance its rewards and cash-back programs and help recover its declining payment business after the RBI’s actions. While the net one-time gains, adjusted for profit outflows, may reduce the net loss in FY25E, they could negatively impact future earnings.
Impact on Share Prices
According to rough proforma projections, the purchase might result in a net value addition or adjustment in Paytm’s target price of approximately ₹25 per share, which is far smaller than the stock price reaction seen following the news.
Emkay Global rates Paytm shares as ‘Reduce’ and sets a target price of ₹375 per share based on DCF analysis.
Current Trading Status
At 9:25 am, Paytm shares were trading 2.58% higher at ₹587.90 apiece, while Zomato shares were up 1.06% at ₹262.70 apiece on the BSE.
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