Zomato plans to acquire Paytm movie business may add little on valuation front, say analysts

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Zomato and Paytm have stated in their respective filings with the exchanges that they are in active discussions regarding the transfer of Paytm’s movies and events business to Zomato. However, both companies noted that there is currently no binding agreement requiring additional disclosures or board approval.

According to JM Financial, per media reports, the potential deal value could be ₹1,500-2,000 crore. This, as per the brokerage estimates, would value Paytm’s movies and events business at 5x-7x FY24 sales.

“Successful closure of such a deal will likely strengthen Zomato’s Going-out business, which includes Zomato Live that competes with Paytm’s events ticketing vertical. The deal could catapult Zomato to second position in the events & movie ticketing space, behind only Bookmyshow,” it further said.

Revenue upgrade

According to Elara Securities, in terms of revenue, Paytm Live may contribute 14.1 per cent of FY24 revenue for consolidated business, which may lead to a revenue upgrade, but valuations may remain same as the valuation of the live events & ticketing business will be much lower than Food delivery/Blinkit. However, the events (IP) business can make potential losses, due to the market being fragmented with several firms and higher artist costs, which may have a mild negative impact on Zomato’s profitability prospects.

“Zomato has reported a consolidated PAT of ₹350 crore in FY24 which is likely to grow 3x to ₹1,170 crore in FY25E; hence, increased losses due to Paytm Live will be the only monitorable, in our view. We await further details,” Elara Securities said while reiterating its Buy stance with a TP of ₹280

Zomato has a healthy cash and investments pile of ₹12,400 crore as on FY24; hence, the potential acquisition of Paytm Live may not have a big impact on its liquidity, it further said.

According to JPMorgan, Zomato has been successful in some acquisitions such as Uber Eats India, Runn and Blinkit. Movies and Live events can be seen as an eventual adjacency to Dining Out.

JM Financial’s BFSI analyst Sameer Bhise said that for Paytm the development is in line with its stated strategy of focussing on the payments and financial services business. Incrementally, cash realisation from this sale should aid Paytm as it re-energises its marketing spends