Paytm Shares Jump Over 5% To Touch Intraday High Post Ticketing Business Deal

Shares of Paytm rallied 5.4% to touch an intraday high of INR 604 apiece on the BSE today (August 22) a day after the fintech giant announced to sell its entertainment ticketing business to foodtech major Zomato for INR 2,048 Cr.

However, the stocks pared some gains to trade at INR 576.8 per share at 11.30 AM, just marginally above the previous close at INR 573. 

On Wednesday (August 21), Paytm signed a definitive agreement to sell its entertainment ticketing business to Zomato for an INR 2,048 Cr all-cash deal. 

As a result, Zomato shares also gained 2.71% intraday to reach INR 267.00 apiece on the BSE. By 11.30 AM, Zomato shares too corrected gains to trade at 259.55, a slight dip from the previous closing at INR 259. 

Under the deal, Paytm will transfer its movie ticketing business to its subsidiary Orbgen Technologies Pvt Ltd (OTPL) and its sports and events ticketing business to another wholly-owned subsidiary Wasteland Entertainment Private Ltd (WEPL).

Eventually, Zomato will acquire a 100% stake in the two subsidiaries (OTPL and WEPL) and will take over the ownership of the two entities. As part of the transaction, nearly 280 employees from Paytm’s entertainment ticketing business will now join Zomato.

The deal, expected to close by September, will pave the way for scaling up Zomato’s ‘going-out’ business. Additionally, the acquisition will set the stage for the debut of Zomato’s latest app ‘District’, which the company plans to launch in the coming weeks. 

In a shareholder letter, Zomato laid out its plans to make the most of the new acquisition and diversify beyond food ordering and quick commerce. 

Following the deal, several brokerage firms have outlined their rating and target price for both the companies.

While the brokerage firm Motilal Oswal gave a neutral rating to Paytm with a target price of INR 550, it gave a buy rating to Zomato setting the Target Price at INR 300.

Yesterday, the fintech major also proposed salary cuts for its board members before its annual general meeting (AGM) slated for September 12.  

Outlining the effect of the deal, Motilal Oswal added, “During the transition period (up to 12 months), movie and event tickets will remain available on the Paytm app, as well as on the TicketNew and Insider platforms, ensuring an uninterrupted experience for users and merchant partners. The transaction is expected to further strengthen Paytm’s balance sheet and enable the company to focus on its core payment and financial business.”

It is pertinent to note that Paytm has been expanding its offerings despite regulatory hurdles. Earlier this month, Paytm’s parent company One97 Communications rolled out an upgraded soundbox device to facilitate payments by tapping a debit or credit card or scanning a QR code.

Last month, SEBI chairperson Madhabi Puri Buch said that the markets regulator will ensure adequate oversight to prevent a “Paytm-type contamination”.

In the same month, it secured approval from the government to invest INR 50 Cr in its payments arm, Paytm Payment Services, enabling it to apply for an online payment aggregator (PA) licence from RBI.

In June, Paytm also received an administrative warning from SEBI on related party transactions conducted with Paytm Payment Bank in 2022.

Paytm’s troubles began earlier this year with RBI clamping down on Paytm Payments Bank Ltd (PPBL) for flouting KYC norms and non-compliance with rules.

The central bank ordered a slew of restrictions on PPBL, including barring it from taking deposits or credit transactions or top ups in any customer accounts, prepaid instruments, wallets, FASTags and National Common Mobility Cards.

Besides, Paytm has also been under SEBI’s scrutiny as it received a show cause notice from the market regulator about the 2.1 Cr employee stock options (ESOP) granted to the company’s founder and CEO Vijay Shekhar Sharma in the fiscal year ended March 2022 (FY22).

Paytm’s consolidated net loss widen to INR 840.1 Cr in the June quarter (Q1) of the financial year 2024-25 (FY25), up 134% year-on-year from INR 358.4 Cr in the year ago-period.

Revenue from operations dropped 36% in Q1 FY25 to INR 1,502 Cr from INR 2,342 Cr in the corresponding quarter last year.