On Wednesday, the company’s board of directors approved a share purchase and subscription agreement with One 97 Communications (Paytm operator), Wasteland Entertainment Private Limited (WEPL), and Orbgen Technologies Private Limited (OTPL) to acquire their entertainment ticketing business.
Under the agreement, One 97 Communications will transfer its movie ticketing business to Orbgen Technologies Private Limited (OTPL) and its sports and events ticketing business to Wasteland Entertainment Private Limited (WEPL) through a slump sale.
Zomato will acquire the entire stake owned by OCL in OTPL and WEPL through a share purchase transaction, making OTPL and WEPL wholly-owned subsidiaries of Zomato. The estimated cost of acquiring OTPL is Rs 1,264.6 crore, while WEPL is valued at Rs 783.8 crore, according to a company filing with the stock exchanges.
Here is how brokerages view this update:Jefferies: Buy | Target Price: Rs 335
Valuation looks compelling in the context of growth forecast and ultimate margins. While Jefferies likes food delivery, low capital intensity promises a high return ratio in the steady state. The third clear growth vector is established and the company will probably focus on market share, with even the potential to claim leadership, which may entail investments.
Motilal Oswal: Buy | Target price: Rs 300
The company expects to complete the acquisition in 2QFY25. Zomato’s food delivery business is stable, and Blinkit offers a generational opportunity to participate in disruption of industries such as retail, grocery, and e-commerce.
As a part of its going-out business, Zomato currently offers dine-out table bookings and a few live ticketing events, whereas Paytm’s platform offers ticket bookings for movies, sports, and live events, which will significantly solidify Zomato’s impending launch of its “District” app.
Nomura: Buy | Target price: Rs 280
Zomato has entered into a definitive agreement to acquire Paytm’s entertainment ticketing business for a consideration of Rs 2,000 crore. Zomato announced its intention to launch a District app to bolster its “going out” business (which at present is mainly the table reservations at restaurants).
Management believes this acquisition will help Zomato increase its focus on this business where it expects to increase the GOV from Rs 3,200 crore in FY24 to Rs 10,000 crore in FY26E. In the longer term, Zomato believes this business can also generate 4-5% adjusted EBITDA margin (As % of GOV).
Nomura, however, stated that they have not incorporated the newly acquired business into their model pending the deal’s closure.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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