![Zomato Acquires Paytm’s Events And Movies Ticketing Biz](https://inc42.com/cdn-cgi/image/quality=75/https://asset.inc42.com/2024/08/zomato-acquisiton-featured-760x570.png)
The deal, expected to close by September 2024, will pave the way for scaling up Zomato’s ambitions in the “going-out” space and build newer use-cases for its customers
The acquisition will set the stage for the debut of Zomato’s new app District, which the company plans to launch in the coming weeks
Zomato projects its going out business to clock GOV of INR 10,000 Cr+ by the end of FY26, the first full financial year post the acquisition
After months of suspense, foodtech major Zomato finally announced the acquisition of the movie and events ticketing business of Paytm for INR 2,048 Cr in an all-cash deal on August 21.
The complex deal, expected to close by September 2024, 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.
Here are the key takeaways from the deal:
The Rationale
The company plans to leverage the acquisition to make deeper inroads into the growing going-out experiences market. Zomato founder and CEO Deepinder Goyal said that the proposed deal will enable the foodtech company to add more scale to its going-out business and offer newer use-cases to end-customers.
He said that Zomato’s aim is to build products and services to cater to the changing lifestyle of Indians, and the acquisition would make the company more relevant for the customers. It also provides it an opportunity to spin-off its going-out business into the new app District, as announced earlier, owing to the “need for a single brand as a destination in this segment”.
Explaining Paytm’s entertainment ticketing business, Deepinder said that the ticketing offering can currently be accessed by customers through the main Paytm app and web, two of its standalone platforms (app and web) called Paytm Insider and TicketNew, and offline box office sales.
Paytm’s ticketing business had a gross order value (GOV) of INR 2,000+ Cr (29% YoY growth) in the financial year 2023-24 (FY24). It facilitated the purchase of 78 Mn tickets by 10 Mn+ unique customers, the CEO added.
The business generated revenue of INR 297 Cr and an adjusted EBITDA of INR 29 Cr during the year.
The Valuation
Zomato chief financial officer (CFO) Akshant Goyal said that the foodtech giant is acquiring Paytm’s entertainment ticketing business at a nearly 1X “trailing enterprise value / FY24 GOV (gross order value) multiple”.
Terming the valuation “fair vis-a-vis relative valuations of other comparable companies”, Akshant also said that Zomato’s financial advisor for the deal, Kotak Mahindra Capital, also gave a “fairness opinion confirming” the valuation of the target businesses.
Customer Transition & Team Integration Key To Success
Deepinder said that Zomato has roped in its former executives, Rahul Ganjoo and Pradyot Ghate, to scale up the going-out business.
The duo will helm the transition of customer traffic from Paytm app/ Insider/ TicketNew to the upcoming District app over the next 12 months and “build on the vision” of the company henceforth.
As part of the transaction, around 280 employees of Paytm’s entertainment ticketing vertical would join Zomato. The CEO said that their integration with Zomato would be critical for the success of the acquisition.
“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)… 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,” he added.
Creating Another Super Brand With District
Deepinder said that the acquisition will set the stage for the launch of District – a one-stop shop for booking movie tickets, IPL tickets, dining-out table reservations, discovering live entertainment, booking weekend getaways, among others.
However, the transition would be gradual. Zomato’s existing going-out business (dining-out + event ticketing) would continue to run on the Zomato app, while the acquired business would continue to run on Paytm’s main app for a transition period of up to 12 months, along with Insider and TicketNew apps.
The District app will duplicate the above offerings in the short term, while Zomato will nudge its customers to move from Zomato / Paytm / Insider / TicketNew apps to the new app. Once most customers start transacting on the District app, the company would remove the duplication and shut down the business on all the other apps.
The company is following the strategy it adopted with Blinkit, wherein eventually the Zomato app would just have a button to launch the District app.
The CEO said that the move is in line with the foodtech major’s larger strategy to create another “super brand” after Zomato and Blinkit as opposed to creating a super app.
“… We think that a new brand will help customers build association with going-out use cases and also allow us to build a loyalty program which drives higher retention. It also makes it much easier for us to keep adding new use-cases for our customers given more real estate in a new app vs trying to fit it in a tab on the Zomato app,” added Deepinder.
Going-Out Business To Go Big
Zomato expects its going-out business to churn out INR 10,000 Cr in GOV by the end of FY26, the first full year post the acquisition of Paytm’s entertainment ticketing business. The founder said that any further step change in scale would depend on the company’s ability to build newer use-cases like shopping and travel, among others.
Goyal also projected that the going-out business would continue to remain “near break-even” on an adjusted-EBITDA basis.
In the medium-to-long term, however, he expects the business to potentially deliver a 4-5% adjusted EBITDA margin, as a percentage of GOV, provided its plans are “executed well”.