Zomato to buy Paytm's entertainment and ticketing business for Rs 2,048 crore

This marks Zomato's entry into a broader array of lifestyle services, encompassing dining out, movies, sports ticketing, live performances, shopping, staycations, and more — all within a single platform.

"This is not really an absolutely new business for us as we have already been doing ticketing as
a business for more than a year now and have been eyeing building more use-cases for that business. Just to recap, our going-out business (which includes dining-out and event ticketing) did Rs 3,225 crore of GOV (gross order value) in FY24 growing at 136 percent YoY," Zomato CEO Deepinder Goyal said.

Meanwhile, Paytm's combined entertainment ticketing business achieved Rs 297 crore in revenue and Rs 29 crore in Adjusted EBITDA in FY24. The fintech said that it had built its movie ticketing business from the ground up and acquired Insider and TicketNew for Rs 268 crore between 2017 and 2018.

In FY24, the business being acquired generated a combined GOV of over Rs 2,000 crore (29% YoY growth) by enabling purchase of 78 million tickets by more than 10 million unique customers on its platform.

As part of the transaction, around 280 employees will move to Zomato.

"On the people side, this acquisition is our first major acquisition where we are acquiring a team that we do not know very well (in Uber Eats acquisition we did not acquire any team and in Blinkit we knew the founder and team really well). We are betting on the team much more this time and hoping everything works out well. The main driver of success is going to be cultural integration of the new team that will join us – which means assimilation of the new team into our flattish culture," said Goyal.

According to experts,  the acquisition could help Zomato spruce up the movie ticketing and events business via an integrated loyalty programme, find a way to crosssell its food offerings, and create better discovery of entertainment options for users.

“At the end of the day, it is not a diagnostics lab that Zomato is acquiring… What it is doing is trying to get a bigger wallet share of the user’s lifestyle spends which is an area the company already plays in,” said Sreedhar Prasad, a former Partner at venture capital firm Kalaari.

Zomato will bring an element of discoverability to the movie ticketing and events business—something that is currently missing. Typically, users first log on to a ticketing platform when they have already decided to watch a certain movie or attend a comedy show. They purchase a ticket and leave, without spending any time exploring what else is on offer.

“Zomato is better at making customers discover new things when they are on the app. More importantly, food and quick commerce have more frequency of use as opposed to a vanilla ticketing platform that you might visit only on the weekends,” said Prasad.

Further, it is no secret that the high-growth phase of food delivery has run its course. That is one of the major reasons Zomato and Swiggy are pumping hundreds of millions of dollars into the quick commerce business.

As such, making a bold bet on movie ticketing and events could help Zomato drive up its revenue growth in the long-term. However, estimates made by brokerages in the last couple of days indicate that acquiring Paytm Insider will only add up to 2.5 percentage points of incremental revenue to Zomato’s consolidated financials to begin with.

According to experts, Zomato could spruce up the movie ticketing and events business via an integrated loyalty programme, find a way to crosssell its food offerings, and create better discovery of entertainment options for users.

“At the end of the day, it is not a diagnostics lab that Zomato is acquiring… What it is doing is trying to get a bigger wallet share of the user’s lifestyle spends which is an area the company already plays in,” Sreedhar Prasad, a former Partner at venture capital firm Kalaari, told Moneycontrol earlier.

Zomato will bring an element of discoverability to the movie ticketing and events business—something that is currently missing. Typically, users first log on to a ticketing platform when they have already decided to watch a certain movie or attend a comedy show. They purchase a ticket and leave, without spending any time exploring what else is on offer.

"More than 95 percent of the ticket booking for cinema multiplexes is online, and aggregators such as BookMyShow and Paytm combined account for about 90 percent of online bookings for multiplexes. Improved visibility on content and higher ticket prices on premium content would drive convenience revenue. Apart from this, aggregators also produce their own events, which, too, report strong growth, led by higher F&B and ad revenue," said Karan Taurani, a senior analyst, who tracks the media and e-commerce sectors for brokerage firm Elara Capital.

Zomato Live's current revenue streams include a take-rate from third-party event organisers on sale of tickets through the platform, ticket sale collections for events managed by Zomato (e.g., Zomaland), sponsorship revenue relating to Zomato live events, rentals, commission charged on sale of food and other products from restaurants/merchants participating in Zomato managed live events.

In FY23, the business sold 190,000 tickets on its platform and reported revenue of Rs 52.9 crore.

India’s live events and ticketing business may continue to report healthy double-digit growth, backed by increased acceptance of live events in Tier II markets, higher ticketing revenue led by price hikes, new sports events, such as WPL, PKL and ISL, international format events, such as Lollapalooza, and rising per capita income, according to Elara Capital.

"This transaction generates significant profits for Paytm, and the cash proceeds will further strengthen the balance sheet. With a strong focus on long-term value creation, the company remains confident in substituting revenue from its entertainment ticketing business by expanding core business areas of payments and financial service distribution," said Paytm.