Zomato-Paytm Deal: Zomato, Paytm stocks settle lower after ticketing business transaction

Zomato Managing Director and CEO Deepinder Goyal said, "Post this acquisition, the going-out business would be spread across multiple different platforms -1) Zomato’s existing going-out business (dining-out + event ticketing) would continue to run on the Zomato app and 2) the acquired business (movie + sports + event ticketing) would continue to run on the Paytm’s main app (for a transition period of up to 12 months) along with Insider and TicketNew apps (which would both get transferred to Zomato as part of the transaction). In the short term, District app will duplicate the offerings above and over time, we will gradually nudge our customers to move from the Zomato / Paytm / Insider / TicketNew apps to the District app. Once most customers start transacting on the District app, we will remove the duplication and shut-down this business on all the other apps. Eventually, there will just be a button to launch the District app on the Zomato app (like it is for Blinkit today), so that we continue to tap into the large customer base of Zomato."

"Ensuring a smooth discovery and booking experience for our customers and business continuity for our merchants will be our top-most priority during this transition," he added.

Addressing investors concern in relation to the proposed acquisition, Deepinder Goyal said, "If you see the market landscape today, going-out (for entertainment) is not really an organised category in India. Customers have to go to different apps for booking movie tickets, IPL tickets, dining-out table reservations, discovering live entertainment, booking weekend getaways, etc. Having all these usecases addressed through ‘District’ - our dedicated going-out app - has the potential to drive strong customer engagement and incremental demand across each of these use cases - some of these are strong customer pull use cases (like a blockbuster movie ticket booking) while others could be more discovery based transactions (like a pop-up by a star chef at a local restaurant). We want to position “District” as the brand that consumers turn to when they are thinking of going out."

"In line with this thinking and our belief around building ‘super brands’ (Zomato, Blinkit) as opposed to ‘super apps’, 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. This also helps us keep the Zomato brand even more closely associated with food delivery only," he added.

Zomato Managing Director and CEO Deepinder Goyal said, "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 in FY24 growing at 136% YoY. It never gets spoken about much given all the attention food delivery and quick commerce get but this is already a profitable and large business for us."

"Our stated mission as an organisation is to build products and services that power India’s changing lifestyles. We believe, over the next decade and beyond, going-out experiences will continue to grow strongly in lockstep with overall growth in lifestyle and consumption.The proposed acquisition helps us add more scale and offer newer use-cases (like movie and sports ticketing) to our customers in this segment. It makes us more relevant for our customers which also gives us an opportunity to spin-off the business into a new app (we are going to call it District) which could be a game changer for each of these use cases given the need for a single brand as a destination in this segment," he added.

Zomato Managing Director and CEO Deepinder Goyal in a letter to shareholders said, "The proposed acquisition helps us add more scale and offer newer use-cases (like movie and sports ticketing) to our customers in this segment".

Zomato believes the deal makes it more relevant to its customers and gives an opportunity to spin off the business into a new app.

"We are going to call it District, which could be a game changer for each of these use cases given the need for a single brand as a destination in this segment," Goyal added.

Zomato is keen to position 'District' as the brand that consumers turn to when they are thinking of going out, he added.

Shares of Zomato were trading 1.1% higher at ₹263 apiece after the online food delivery platform announced that it will buy Paytm's entertainment ticketing business for ₹2,048 crore.

Shares of One 97 Communications, which operates Paytm, were trading ₹588.5 apiece, up 2.5%, on the NSE.

Paytm said the selling entertainment ticketing business allows the fintech firm to strengthen its focus on core payments and financial services distribution. Paytm said with its 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's entertainment and ticketing business covers movies, events (live performances) and sports.

According to the agreement, OCL's entertainment ticketing business will be transferred to its 100% subsidiaries, Orbgen Technologies Private Limited (OTPL) and Wasteland Entertainment Pvt Ltd (WEPL). The 100% stake in these subsidiaries (which operate the TicketNew and Insider platforms) will then be sold to Zomato.

Thereafter, the food aggregator will spin off the new business into a new application called 'District'.

Under the deal, Zomato will fully acquire OTPL, which is into movie ticketing, for ₹1,264.6 crore and buy Wasteland Entertainment Private Limited, which is into events ticketing for ₹783.8 crore.

The combined entertainment and ticketing business has a scale of ₹297 crore in revenue from operations and ₹29 crore in adjusted EBITDA in FY24.

"The transfer will also include around 280 existing employees from the entertainment ticketing business," OCL said, adding that the transaction generates substantial profits for Paytm and cash proceeds will further support the balance sheet.