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Zomato Acquires Paytm’s Entertainment and Ticketing Business for ₹2,048 Crore

• ByStartupStory     |    August 22, 2024

Zomato, the food delivery giant, is set to acquire Paytm’s entertainment and ticketing business for ₹2,048 crore in a strategic move to bolster its presence in the ‘going-out’ segment. The acquisition, approved by the boards of both companies on August 21, 2024, signals Zomato’s expansion into a broader array of lifestyle services, while Paytm focuses on strengthening its core financial services offerings.

The transaction, a cash deal, will see Paytm retain ticketing and entertainment options on its app for the next 12 months. During this period, users will be redirected to Zomato’s upcoming app, ‘District,’ which is designed to consolidate Zomato’s going-out business, including dining, movies, events, and more. To encourage this transition, Zomato will offer incentives to users who switch to the new app.

Earlier this month, Zomato had announced the launch of ‘District,’ an ambitious platform aimed at integrating lifestyle services such as dining out, movie ticketing, sports events, live performances, shopping, and staycations. The app is expected to go live in the coming weeks.

“This is not really an absolutely new business for us as we have already been doing ticketing as a business for more than a year now and have been eyeing building more use-cases for that business. Just to recap, our going-out business (which includes dining-out and event ticketing) did ₹3,225 crore of GOV (gross order value) in FY24 growing at 136 percent YoY,” said Zomato CEO Deepinder Goyal.

Paytm’s entertainment ticketing business generated ₹297 crore in revenue and ₹29 crore in Adjusted EBITDA in FY24. The fintech major had built its movie ticketing business from scratch and expanded through acquisitions, including Insider and TicketNew, for ₹268 crore between 2017 and 2018. In FY24, the business being acquired by Zomato enabled the purchase of 78 million tickets by over 10 million unique customers, generating a combined GOV of more than ₹2,000 crore, reflecting a 29% year-on-year growth.

As part of the acquisition, approximately 280 employees will transition to Zomato. Goyal highlighted the significance of this acquisition, stating, “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). We are betting on the team much more this time and hoping everything works out 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.”

Industry experts believe the acquisition could significantly enhance Zomato’s movie ticketing and events business. According to Sreedhar Prasad, a former Partner at venture capital firm Kalaari, “At the end of the day, it is not a diagnostics lab that Zomato is acquiring… What it is doing is trying to get a bigger wallet share of the user’s lifestyle spends which is an area the company already plays in.”

Prasad also emphasized that Zomato’s strength lies in its ability to help customers discover new experiences. “Zomato is better at making customers discover new things when they are on the app. More importantly, food and quick commerce have more frequency of use as opposed to a vanilla ticketing platform that you might visit only on the weekends,” he said.

The acquisition comes at a time when the growth phase of food delivery appears to have plateaued, prompting Zomato and its competitor Swiggy to invest heavily in quick commerce. The move into movie ticketing and events is seen as a bold step to drive long-term revenue growth. However, brokerage estimates suggest that the acquisition of Paytm’s entertainment and ticketing business may only contribute around 2.5 percentage points of incremental revenue to Zomato’s consolidated financials initially.

Karan Taurani, a senior analyst tracking the media and e-commerce sectors at brokerage firm Elara Capital, noted that the movie ticketing and events market in India is poised for healthy double-digit growth, driven by factors such as increased acceptance of live events in Tier II markets, higher ticket prices, new sports events, and rising per capita income. Taurani added, “More than 95 percent of the ticket booking for cinema multiplexes is online, and aggregators such as BookMyShow and Paytm combined account for about 90 percent of online bookings for multiplexes.”

Zomato’s live events and ticketing business, Zomato Live, currently generates revenue through multiple streams, including a take-rate from third-party event organizers, ticket sales for Zomato-managed events, sponsorship revenue, and commissions on sales from participating restaurants and merchants. In FY23, Zomato Live sold 190,000 tickets and reported revenue of ₹52.9 crore.

For Paytm, this transaction represents a significant profit, with the cash proceeds further strengthening its balance sheet. The company expressed confidence in substituting the revenue from its entertainment ticketing business by expanding its core areas of payments and financial service distribution. “This transaction generates significant profits for Paytm, and the cash proceeds will further strengthen the balance sheet. With a strong focus on long-term value creation, the company remains confident in substituting revenue from its entertainment ticketing business by expanding core business areas of payments and financial service distribution,” Paytm stated.

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