Paytm share price jumps over 5%, Zomato shares gain 2% on ticketing business deal

Paytm share price rallied over 5% after the fintech giant announced to sell its entertainment and ticketing business to food delivery app Zomato for ₹2,048 crore. Paytm shares jumped as much as 5.47% to ₹604.45, while Zomato shares also gained 2.71% to reach ₹267.00 apiece on the BSE.

One 97 Communications, the parent company of fintech giant Paytm, 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.

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 % 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, Senior Research Analyst at Emkay Global Financial Services.

The brokerage firm has a ‘Buy’ rating on Zomato shares with a target price of ₹270 per share.

Meanwhile, Paytm 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 rewards/cash-back program 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, Senior Research Analyst at Emkay Global Financial Services.

Based on the rough proforma estimates, net value addition or change in Paytm 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.

Emkay Global has a ‘Reduce’ rating on Paytm shares, with DCF based target price of ₹375 apiece.

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.

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