How Zomato’s Latest Move Boosts Event and Travel Booking Services and What Analysts Predict for the Future
The recent acquisition of Paytm’s ticketing business by Zomato has created a buzz in the financial and tech circles. This strategic move is aimed at bolstering Zomato’s foothold in the dynamic “going-out” sector, which includes ticket bookings and dining reservations. Here’s a comprehensive breakdown of this deal, its implications, and what analysts are saying.
Overview of the Paytm-Zomato Acquisition
Zomato, known for its food delivery and dining services, has expanded its horizons by acquiring Paytm’s movie, sports, and events ticketing business. This acquisition, valued at over ₹2,048 crore, marks a significant milestone for Zomato as it ventures deeper into the event and travel booking markets. The deal involves transferring Paytm’s movie ticketing business to Orbgen Technologies and its sports and events ticketing operations to Wasteland Entertainment. Both entities will become wholly-owned subsidiaries of Zomato.
Initial Market Reaction
In the early hours of the deal announcement, Zomato’s shares saw a boost of around 3%. This uptick reflects investor optimism regarding the company’s expanded portfolio. However, Zomato’s stock has since adjusted, showing a more stable response. Analysts, though, remain positive about the long-term potential of this acquisition.
Analyst Perspectives on the Deal
Jefferies and Motilal Oswal’s Price Targets
Brokerages such as Jefferies and Motilal Oswal have set ambitious price targets for Zomato’s shares, forecasting levels as high as ₹335. This optimism is rooted in the belief that the acquisition will significantly enhance Zomato’s market position.
Karan Taurani’s Insights
Karan Taurani, Senior Vice President at Elara Securities, weighs in on the deal’s impact. Taurani suggests that while the acquisition isn’t exceptionally cheap, it is reasonable given the market landscape. He emphasizes that Zomato’s track record of turning around companies, like Blinkit and its foray into the food business, bodes well for this new venture.
Evaluating the Acquisition’s Value
Reasonable Valuation
Taurani notes that the deal’s valuation is not particularly attractive but reasonable. With only two major players in the live ticketing business—BookMyShow and Paytm—Zomato’s entry into this market could be a game-changer. He highlights that Zomato’s ability to revamp companies could prove beneficial in optimizing the ticketing business.
Growth Potential and Profitability
The acquisition is expected to provide a significant boost to Zomato’s “going-out” sector, which currently generates around ₹400 crore in annual revenue. Taurani also points out that the ticketing business has the potential to grow at around 20% annually. With an EBITDA margin ranging from 10% to 15%, Zomato’s management aims for a stronger margin of 20-25% in the medium term. This ambitious target underscores the importance of effective margin execution.
Impact on Zomato’s Business Strategy
Cross-Selling Opportunities
Integrating Paytm’s ticketing business offers Zomato a valuable cross-selling opportunity. The company’s vast customer base, especially among the youth, could be leverage to enhance user engagement across its various apps. This could lead to increased revenue streams and a more robust market presence.
Future Prospects for Zomato and Paytm
Zomato’s Expansion
This acquisition aligns with Zomato’s broader strategy of diversifying its offerings and capturing a larger share of the “going-out” market. By adding ticketing services to its portfolio, Zomato is positioning itself as a comprehensive platform for event and dining reservations.
Paytm’s Role Moving Forward
For Paytm, transferring its ticketing business to new entities allows it to focus on its core operations. The company will continue to benefit from the growth of its ticketing businesses under the management of Orbgen and Wasteland Entertainment.
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Conclusion
The Paytm-Zomato deal represents a strategic expansion for Zomato into the ticketing and events sector. While the initial market reaction has been mix, analysts view the acquisition as a promising move that could significantly enhance Zomato’s market position. As Zomato integrates Paytm’s ticketing business and aims for higher profitability, the long-term outlook for both companies appears positive.
