Can Zomato-Paytm Deal Be The Next Blinkit Story In The Making?

After grabbing the lion’s share of the Indian food delivery market and entering the quick-commerce segment with Blinkit, the foodtech behemoth Zomato has now set its sights on the events and movie ticketing business. 

Reports first surfaced on Sunday about Zomato being in talks with Paytm for acquiring the latter’s movies and event ticketing business. Both the companies confirmed the development but said that the talks were in preliminary stages and no binding agreement was signed.

The aforementioned reports pegged the deal size at about INR 1,500 Cr.

The development has come within a year after Zomato launched a dedicated Live tab on the app. As per reports, Zomato was planning to expand its Live reach by venturing into new cities and developing fresh intellectual properties (IPs). 

Launched in 2018, Zomato Live initially centred around the Zomaland IP, a food carnival and music festival. This popular event has since grown to encompass eight cities.

Meanwhile, the anticipated acquisition holds significant potential for Zomato and the broader entertainment and event ticketing market in India. 

For Zomato, this move could enhance its existing live event offerings and position it as a formidable competitor to BookMyShow, the current market leader, which posted a net profit of INR 85.1 Cr in FY23. 

By integrating Paytm’s movie and events vertical, Zomato could leverage cross-promotional opportunities, expand its customer base, and diversify its revenue streams.

On the other hand, Paytm’s divestiture of its events business could signal a strategic realignment towards its core financial services and payments platform. This shift might allow Paytm to reallocate resources and focus on strengthening its market position amidst intensifying competition. 

Now, before we dive deeper into understanding what this deal could mean for Zomato and BookMyShow, let’s understand why Paytm may want to get rid of this vertical.

A Quick Look At Paytm’s Movie And Events Biz

In 2017, Paytm acquired a majority stake in online ticketing and events startup Insider.in for nearly $5.42 Mn (INR 35 Cr). A year later, it acquired Alibaba-owned ticketing platform TicketNew to ramp up the business.

For Paytm, movie ticketing and events business has been a part of its marketing services business. Besides, the segment also includes advertising, credit card marketing, and deals and gift vouchers. 

In FY23, Wasteland Entertainment Pvt Ltd, through which Paytm runs its Insider business, posted an operating revenue of INR 191 Cr compared to INR 46.5 Cr in FY22. 

The entity also narrowed its loss to INR 19.2 Cr from INR 26.1 Cr in FY22. Hence, the numbers indicate it is a growing business for Paytm, although it contributes only a small amount to Paytm’s overall business.

While Orbgen, the registered entity of its ticketing service had INR 15.6 Cr revenue in FY23 and reported an INR 4.6 Cr loss. 

The decision to sell the movie ticketing and events business comes at a time when Paytm’s core payments business has been hit by the Reserve Bank of India’s curb on Paytm Payments Bank.

In its clarification to exchanges after the report of the company being in talks with Zomato to sell the ticketing business, Paytm said, “As noted in our earnings call, our focus will be on payment and financial services along with digital goods commerce, which are designed to help our merchants scale their businesses.”

Besides, Paytm is also undertaking a restructuring exercise as it looks to cut costs and optimise its business.

“Paytm, of course, is going through its own set of struggles. Perhaps that’s why they’re looking to exit this business, which may not be a core proposition for them,” Karan Taurani, VP Elara Capital said.

What’s In It For Zomato?

Taurani added that while Zomato’s core proposition has been food, it has performed exceptionally well in the commerce sector. “If the company acquires the Paytm ticketing business and executes well with superior customer experience, it can definitely challenge market leader BookMyShow,” he added.

This will also allow Zomato to build a loyal customer base that can be monetised through various means such as ad revenue and ticket bookings. By partnering with content or event owners and charging a convenience fee for online bookings, Zomato can enhance its revenue streams. Given the shift towards online transactions, this strategy should do well, as customers increasingly prefer buying tickets online rather than from physical locations, according to Taruni.

Notably, if the deal pans out, it will be Zomato’s biggest bet since the INR 4,477 Cr Grofers deal, later rebranded as Blinkit. The successful execution of Blinkit’s operations demonstrates Zomato’s potential to make its bets successful. 

Within two years of coming under Zomato’s wing, Blinkit has emerged as a significant competitor to leading quick commerce services such as Swiggy’s Instamart and Zepto.

Now, with the combined user base of Zomato and Blinkit, its extensive distribution system, and its existing experience in organising live events, Zomato has the potential to push its live business with the Paytm Insider deal. 

Currently, Zomato’s live business contributes a single-digit percentage to its overall revenue. However, if this deal is executed, it could boost this contribution to mid-double digits within the next three years, according to an analyst.

Almost a year ago, Zomato hinted that its Going-out vertical could emerge as an important contributor to its business. In its shareholders’ letter for Q1 FY24, when Zomato announced that ‘Going-out’ would be reported as a separate business segment in its financials from the next quarter (Q2), founder Deepinder Goyal expressed his optimism about the vertical. 

“Our exposure to the live events space, and Zomaland’s success has us excited about how the live-events space in India is evolving… Dining-out + Live =“Going-out”. We believe this combo could be the 4th large business coming out of Zomato, that powers India’s changing lifestyles,” the CEO said then, adding that the company was also mulling spinning out Going-out business into a separate app.

While there has been no update on a separate app since then, it is important for the company to find an alternative revenue stream amid the slowdown in its core food delivery business. 

In Q4, Zomato saw a decline in the gross order value (GOV) of its food delivery business on a QoQ basis. Its GOV fell to INR 8,439 Cr during the quarter under review from INR 8,486 Cr in the previous quarter. 

While Zomato already offers a Gold subscription plan, the move has the potential to give a boost to its dine-out offerings as well.

Should BookMyShow Worry?

There is little doubt that Zomato, in this segment, will have to face tough competition from BookMyShow, which has been in the business for a very long time. 

Founded in 1999 by Ashish Hemrajani, Parikshit Dhar and Rajesh Balpande, BookMyShow’s online ticketing platform for events, movies, sports and plays was launched in 2007.

The company posted an operating revenue of INR 975.5 Cr in FY23, witnessing a 252% YoY jump. However, this growth was largely due to the opening up of the economy after multiple pandemic-induced lockdowns. 

During the peak of the Covid-19 pandemic in FY21, BookMyShow’s revenue had crashed to INR 74 Cr from INR 563 Cr in FY20.

Despite everything said and done, BookMyShow has several advantages that set it apart. Firstly, it has a significant first-mover advantage in the market. Secondly, it enjoys strong customer recall due to its long-standing presence in the industry. Moreover, it has built solid relationships with event activation companies and offers a wide range of events. 

On top of that, BookMyShow is also said to be inching closer to finalising a $300 Mn round that will enable PE major KKR to acquire a significant minority stake in the startup via a secondary share sale by existing investors. If fructified, the fundraise will help it line up a warchest to further scale up its operations. 

“While Paytm also hosts exclusive events, BookMyShow is more renowned for its extensive variety,” Taurani noted.

According to the industry veteran, BookMyShow’s comprehensive ecosystem — from customers to suppliers to content and event owners — works seamlessly. For instance, in sports and large-scale events like the IPL, BookMyShow is the largest aggregator, benefiting from its robust network and established reputation.

“Online ticketing is clearly a lucrative business if executed efficiently, as evidenced by BookMyShow turning profitable in FY23. However, it’s too early to predict whether BookMyShow will continue to have its monopoly in the market. The key factor will be how these platforms are able to enhance the customer experience,” Taurani said.

Meanwhile, Zomato has plenty to learn from BookMyShow’s mistakes. Last September, it had to cancel the India tour of Punjabi-Canadian singer Shubhneet Singh, also known as Shubh, due to backlash from netizens over some of the rapper’s social media posts featuring a distorted map of India. This incident led to calls for a boycott of the ticket-booking platform on various social media platforms.

Furthermore, officials from the Cricket Association of Bengal (CAB) and BookMyShow were summoned by the Kolkata police in a complaint about the black marketing of tickets for the ICC World Cup match between India and South Africa.

Moving on, Zomato is trying to mark its foray into the Indian live event management space at a time when there is a notable rise in the disposal incomes of Indians. Moreover, the timing of Zomato’s entry into the space seems perfect for two reasons. 

Firstly, the foodtech startup is expected to get enough headroom to grow and expand due to limited competition. Next, it is poised to witness enough sectoral tailwinds, as the industry is projected to become a $2.3 Bn market opportunity by 2025, growing from $1.2 Bn in 2020.

If one were to look beyond the aforementioned advantages then sports such as cricket, soccer, and others foster significant growth opportunities, and if the deal goes through, Zomato will likely have numerous opportunities to expand its Live business.

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