Zomato’s shares gained around 3% in early trade after acquiring Paytm’s ticketing business, a move that strengthens Zomato’s presence in event and travel booking.
While Zomato’s shares have erased early gains, analysts are optimistic about this deal.
Brokerages like Jefferies and Motilal Oswal setting price targets as high as Rs 335 for Zomato.
Let’s have a look at the details of the deal first.
Zomato’s board recently approved the acquisition of Paytm’s movie, sports, and events ticketing business through an agreement with One 97 Communications (Paytm), Wasteland Entertainment, and Orbgen Technologies.
Paytm will transfer its movie ticketing business to Orbgen and its sports and events ticketing to Wasteland Entertainment, both of which will become wholly-owned subsidiaries of Zomato.
The total acquisition cost will be slightly more than Rs 2,048 crore.
Analysts believe the acquisition is expected to strengthen Zomato’s new “District” app, focusing on the growing “going-out” sector, including ticket bookings and dining reservations.
Now, let’s have a look at the brokerage views on Zomato:
Jefferies | Recommendation: Buy | Target Price: Rs 335
Key Takeaway: Jefferies sees Zomato’s growth potential in food delivery, with low capital requirements that promise high returns. They also view the ticketing acquisition as a new growth opportunity that may help Zomato capture more market share.
Motilal Oswal |Recommendation: Buy | Target Price: Rs 300
Key Takeaway: Motilal Oswal is optimistic about Zomato’s growth, driven by its food delivery business and Blinkit’s potential to disrupt retail and grocery sectors. The Paytm deal will further support Zomato’s expansion into entertainment and ticketing.
Nomura |Recommendation: Buy | Target Price: Rs 280
Key Takeaway: Nomura believes this acquisition will significantly boost Zomato’s going-out business and predicts the gross order value (GOV) could grow from Rs 3,200 crore in FY24 to Rs 10,000 crore by FY26. Although Nomura hasn’t yet factored the new business into its model, they see long-term potential for Zomato’s profitability.
What does it mean for investors?
The acquisition positions Zomato to capitalise on the growing entertainment and travel sectors, potentially increasing its GOV and profit margins over the next few years.
While analysts are generally positive, with target prices ranging from Rs 280 to Rs 335, investors should consider Zomato’s broader strategy to diversify its services and strengthen its market leadership in the going-out sector.
What’s in it for Paytm and its investors?
Additionally, brokerage firm Motilal Oswal Financial Services has said the sale of the entertainment ticketing business would help One 97 Communications Ltd (Paytm) sharpen its focus on core business, travel, deals, and cashback services, which are crucial for expanding the merchant base and growing overall sales.
“The cash proceeds will further strengthen the balance sheet. We estimate Paytm’s EBITDA to turn positive by FY27. We maintain our Neutral rating with a target price of Rs 550,” it said.
(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)
Source Agencies
