On Wednesday, the company’s board of directors approved a share purchase and subscription agreement with One 97 Communications (operator of Paytm), Wasteland Entertainment Private Limited (WEPL) and Orbgen Technologies Private Limited (OTPL) to acquire their entertainment ticketing business.
Under the agreement, One 97 Communications will transfer its cinema ticketing business to Orbgen Technologies Private Limited (OTPL) and its sports and esports event ticketing business to Wasteland Entertainment Private Limited (WEPL) through a mass sale.
Zomato will acquire OCL’s entire stake in OTPL and WEPL through a share purchase transaction, making OTPL and WEPL wholly-owned subsidiaries of Zomato. The estimated acquisition cost of OTPL is Rs 1,264.6 crore, while WEPL is valued at Rs 783.8 crore, according to a company filing with the stock exchanges.
Here’s how runners see this update:Jefferies: Buy | Target Price: Rs 335
The valuation looks attractive in the context of growth forecasts and bottom-line margins. While Jefferies likes food delivery, the low capital intensity promises a high steady-state rate of return. The third clear growth vector is in place and the company will likely focus on market share, with even the potential to claim leadership, which may involve investments.
Motilal Oswal: Buy | Target Price: Rs 300
The company expects to complete the acquisition in the second quarter of fiscal year 2025. Zomato’s food delivery business is stable and Blinkit offers a generational opportunity to participate in the disruption of industries such as retail, grocery and e-commerce.
As part of its dining business, Zomato currently offers table bookings for dining out and some live ticketing events, while Paytm’s platform offers ticket bookings for movies, sports, and live events, which will significantly solidify the impending launch of Zomato’s “District” app.
Nomura: Buy | Target price: Rs 280
Zomato has entered into a definitive agreement to acquire Paytm’s entertainment ticketing business for a sum of Rs 2,000 crore. Zomato announced its intention to launch a District app to boost its “departures” business (which currently consists primarily of table reservations at restaurants).
Management believes that this acquisition will help Zomato focus more on this business, where it expects to grow market value from Rs 3,200 crore in FY24 to Rs 10,000 crore in FY26. In the long term, Zomato believes that this business can also generate an Adjusted EBITDA margin of 4-5% (as a percentage of market value).
However, Nomura said it has not incorporated the newly acquired business into its model pending the closing of the deal.
(Disclaimer: The recommendations, suggestions, views and opinions of the experts are their own and do not represent the views of The Economic Times)
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