Zomato is set to acquire Paytm's entertainment and ticketing business for Rs 2,048 crore. This comes as the food delivery major looks to expand its presence in the 'going-out' segment, while the struggling fintech seeks to focus on its core financial services offerings.
Brokerages view this development positively, with Bernstein, Jefferies, and Nomura highlighting the acquisition's potential to expand Zomato's total addressable market (TAM), enhance growth, and compete against market leaders like BookMyShow.
Analysts at Emkay Global stated that the acquisition gives size and scale to Zomato's 'going out' business, acting as an additional growth engine over the medium-to-long term. It also lends credence to the company's aim of building a one-stop destination for 'Going-out' and would be part of the new District app, to be launched in the next few weeks, they said.
Zomato management believes that going-out experiences will continue to see strong growth, with overall growth in lifestyle and consumption. Post-acquisition, the management estimates going-out GOV at over Rs 10,000 crore in FY26.
It expects the going-out business to operate near break-even on an adjusted EBITDA basis, while potentially delivering 4-5 percent adjusted EBITDA margin as a percentage of the gross order value (GOV) over the medium-to-long term.
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Zomato's strong execution track record grants confidence that going out will add further value over the long term, said Emkay Global as it retained a buy rating on the stock with a target price of Rs 270 per share.
Bernstein has given Zomato an "Outperform" rating with a target price of Rs 275 per share, citing the acquisition as a strategic move that will expand Zomato’s TAM into the event ticketing sector. The brokerage also highlights Zomato’s strong track record of successfully acquiring consumer tech businesses, which adds confidence to this latest move.
Jefferies is also bullish on the stock with a "buy" rating. It even raised its target price on the stock to Rs 335 per share. The international brokerage finds the valuation of Paytm’s ticketing business acquisition compelling, especially considering the expected growth forecast.
Analysts emphasize that, like Zomato’s food delivery segment, the ticketing business has low capital intensity, which promises a high return ratio once it reaches a steady state.
However, Jefferies also points out that Zomato will face competition from market leader BookMyShow, posing the question of whether Zomato can replicate its success in this new area.
Also Read | Zomato approves acquisition of Paytm's entertainment ticketing business for Rs 2,048.4 crore
Nomura has also placed a "Buy" rating on Zomato, with a target price of Rs 280 per share. Zomato’s management believes that the acquisition will allow the company to focus on areas where it expects to increase its GOV significantly.
However, Nomura identifies potential risks, such as the smooth integration of the acquired business into the new 'District' app and the initial cash burn required to incentivize users to migrate from Paytm’s app to Zomato and District apps.
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