The INR 2,048 Cr Question: Did Zomato Overpay For Paytm Insider Deal?

The Zomato and Paytm Insider deal is definitely one of the most high profile acquisitions in India. But the question that many are asking is: did Zomato overvalue Paytm Insider in the INR 2,048 Cr deal.

Zomato and its CEO Deepinder Goyal have been in this situation before, and had to answer a similar question two years ago. 

In 2022, when Zomato and CEO Deepinder Goyal decided to spend roughly $568 Mn (INR 4,447 Cr) to acquire quick commerce platform Blinkit, many were left scratching their heads as to whether this is the right valuation for Blinkit which had just pivoted to quick commerce after years of operating Grofers in a hyperlocal model. 

There were plenty of questions about the rationale behind the deal, particularly a year after Zomato’s public listing, and with pressure to turn profitable. Would acquiring and growing Blinkit disrupt Zomato’s path to profitability, analysts wondered. 

As it turns out, Zomato got its share of the quick commerce boom for a bargain. Today, Blinkit’s valuation is estimated to be close to INR 1 Lakh Cr or just over $12 Bn. The quick commerce app has the largest presence in India with over 630 dark stores around the country, and a major presence in key metros. 

Blinkit brought in over INR 2,000 Cr for Zomato in FY24, and doubled the revenue on a YoY basis in the last quarter (Q2 FY25), so it is on pace to make Zomato’s acquisition price look like a drop in a bucket. 

But assuming that Zomato and Goyal will pull this off again is a fallacy. The factors that worked for quick commerce cannot be applied to movie and events ticketing. 

The transaction size of 2,048 Cr is 6 to 7 times the revenue that Paytm Insider reported in FY24. Many industry watchers are shocked to see the rich valuation for a player that is a distant second to BookMyShow. So has Zomato overpaid for Paytm Insider? 

Is The Price Right? 

Multiple analysts and those in the events industry believe that Zomato’s valuation is overpriced by as much as 60%. 

As per industry benchmarks and Paytm Insider’s revenue trajectory, the price should have been in the INR 700 Cr-INR 800 Cr range, given the FY24 revenue of INR 297 Cr and EBITDA of INR 29 Cr. 

Karan Taurani, SVP at Elara Capital, who closely watches the media and consumer tech market believes that Paytm Insider was certainly given a premium with regards to the valuation, but he also noted that Zomato’s history of turning around businesses can actually deliver good ROI for the group in the medium to long term. 

“A lot depends on Zomato’s execution strategy and its track record of handling incumbent players which can fetch the company sizable returns in the long term,” Taurani added.  

Nishant Kini, founder of Bengaluru-based branding and events agency The Nishé & Co, added that the price seems particularly high considering Paytm Insider had a stronger presence in Tier 1, 2 towns. On the other hand, Zomato’s plan to add Paytm Insider to its District going-out vertical seems to be centred around metros. 

Going-out is the next big thing for Goyal. He wants to bring the same tech-led aggregation and feature set that has created Zomato and Blinkit to this relatively underserved space. 

The thesis is built around the fact that Zomato’s core base of millennials and Generation Z Indians has overlapped with the target audience for quick commerce and going out.

However, Paytm Insider’s business is built around ticketing, which is a subset of the going-out vertical for Zomato. In this light, Zomato’s valuation for Paytm Insider seems even richer. 

Then there’s BookMyShow, a cash-rich company with nearly 20 years of experience in the movie and events ticketing business and a separate event management vertical as well. The Reliance-backed startup is also profitable, and has been in the news for a potential $300 Mn infusion by KKR.

Reliance Industries, with 37% stake in BookMyShow, is a significant advantage for the company, particularly after the inception of the Nita Mukesh Ambani Cultural Centre (NMACC) in Mumbai in 2023, which has become the destination for large international cultural shows and performances, including some high-profile musicals. 

The company also has exclusive ticketing rights for large events that are owned and managed by its in-house team such as Lollapalooza India. 

Will Zomato dive into managing and owning live event properties? 

What Makes Going-Out So Attractive?

It’s as if the pandemic touched a raw nerve — Indians have increased discretionary spending on outdoor media and entertainment with great enthusiasm. Rising per capita income in the metros has led to a significant growth in spending on ticketed events, with all categories — music concerts, comedy performances, sports and other live events — growing in 2023. 

This is in line with the growth trends seen since early 2022, however, movie ticketing has not grown as significantly. 

For instance, PVR-INOX, one of the largest multiplex operators in India, saw revenue from sales fall to INR 594 Cr in the April-June quarter of FY25, compared to INR 695 Cr one year ago. 

This is why despite movie ticketing almost constituting a 70% of its annual revenue base, BookMyShow has invested millions into exclusive international events such as the Sunburn Festival and Lollapalooza India. 

One source privy to the events operations at BMS said that the company bought exclusive rights to host Sunburn Festival for Hundreds of Crores a few years ago, and this has mostly been a profitable investment. 

In addition, BMS also invested an undisclosed sum to buy the India rights for the legendary international music festival Lollapalooza, which it aims to take to breakeven by next year. The first two editions of Lollapalooza India give us an indication of why BMS has invested millions in this vertical. 

BookMyShow retains the entire consideration paid by visitors to Lollapalooza India and other festivals, with ticket prices ranging from INR 5,000 to INR 25,000 in some cases. Besides this, BMS earns revenue from exhibitors and merchants at these festivals 

The return of mega events can be attributed to the revenge spending trends seen in travel and retail shopping, which have reversed the lower consumer spending for these areas during the pandemic years. Sports events constitute more than 80% of the event ticketing market, and therefore this will be a major focus for Zomato in addition to movie ticketing. 

A March 2024 EY-FICCI report claims the live events and ticketing business in India grew by 20% in 2023 to reach a market size of INR 8,800 Cr and is expected to touch INR 14,700 Cr by 2026. 

“The proliferation of online ticketing platforms has made it easier for consumers to discover, purchase, and attend events and has aided in event marketing to create increased awareness,” the EY-FICCI report added.

Organising and owning large scale event IPs has its risks as well. While the revenue upside is clear, BookMyShow has to bear full losses for event cancellations due to any reason. 

For example: in September last year, BookMyShow came under fire after standup comic Trevor Noah’s shows in Bengaluru were cancelled. In this case, BMS was criticised for haphazardly cancelling the show and also not maintaining the high production value standards required for such events.

“We tried everything but because the audience can’t hear the comedians on stage there’s literally no way to do a show,” Noah tweeted about the reason for the cancellation. 

This shows that producing events is not a matter of will, but comes down to execution and the details. This is also why these events are typically in a higher price bracket than events where the platform is only selling tickets. 

Zomato’s Need For Events IP

“Movie ticketing has seen a slump in the wake of OTT entertainment, but live event ticket pricing has surged, and this does pose a challenge in attracting users beyond the affluent class. Hence platforms are looking to buy out large scale events knowing exactly what kind of consumer to attract,” added The Nishé & Co’s Kini.

Sources told Inc42 that BookMyShow is looking to consolidate revenue from live events. It is looking to sign deals with artists, comedians, musicians to create a pipeline of live events where it can maximise revenue collection. 

Zomato is also likely to focus on music festivals, especially targeting international artists, with its upcoming Dua Lipa concert for Feeding India being a prime example. The company does have some experience with its Zomaland carnival organised in several Indian cities, but there is no doubt that Zomato will have to invest in building new live properties and a steady stream of events to justify the high price it is paying for Paytm Insider.  

Paytm Insider does not have event IP expertise as it has only been a ticketing player and has not gone into event operations and management. 

“Much will depend on how the two entities are brought together and the users on Paytm and Zomato given some over the top discounts on highly priced tickets to these big events which could get them a breakthrough,” the founder of an event management company told us. 

However, there’s no denying that Zomato has the base and the track record of executing the right things to achieve growth. 

As Elara’s Taurani added, “Going out businesses have reported healthy margins in the recent past. This gives a strategic boost to Zomato, which already has a large consumer base of young people on its apps who could ultimately be convinced to buy tickets online.”

Him and others clarified that there is no short-term threat to BookMyShow in terms of market share in movie ticket booking and the live events verticals. One thing Zomato is trying to do is to differentiate itself in terms of user experience. 

For instance, the Dua Lipa concert has a ‘Buy and Sell Later’ option that lets users resell their ticket in case their plans change. This is perhaps the first such feature for a ticketing platform in India. It shows that Zomato is not afraid to take risks to attract users. 

Another factor that could work in Zomato’s favour is its pull with Industry players, particularly F&B brands that are a key part of the live events space. Zomato has also curried the favour of several high-profile celebrities through endorsements in the past few years, which can also work to boost the live events business in the short to medium term. 

Plus, event sponsors, brands and organisers have been looking for an alternative to BookMyShow which wields considerable power in negotiations on commissions and pricing. While BookMyShow is ahead for now, Zomato can gain some ground in the early days by looking to break this ‘monopoly’. 

Edited By Nikhil Subramaniam