Food delivery giant Zomato Ltd.’s acquisition of the entertainment and ticketing business of Paytm will challenge the dominance of BookMyShow in the segment, according to Karan Taurani, senior vice president at Elara Capital Plc.
Zomato will acquire Paytm’s entertainment and ticketing business for Rs 2,048 crore. The boards of both companies approved the transaction on Aug. 21, according to exchange filings.
Commenting on the deal, Taurani said that while the valuations may not appear “very cheap or attractive,” they are reasonable given the growth potential in the live events and online ticketing segments.
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“The live events and ticketing business can develop at a rate of 15% to 20% per year. Given that there are just two major players in this market—BookMyShow and Paytm—Zomato's decision to scale up its ‘going out’ business is strategically sound,” Taurani told NDTV Profit.
Currently, Zomato’s going out segment generates around Rs 400 crore revenue and it could increase significantly after the Paytm deal.
With the integration of Paytm’s ticketing business, this figure could rise to Rs 700 crore, Taurani said. “The growth potential in this segment is significant, with projections indicating a CAGR of 15% to 20%. Over the next few years, this could effectively double Zomato’s revenue in this space."
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The acquisition will bring economies of scale, enhancing Zomato’s bargaining power regarding commission rates and negotiations with artists, he said. “Zomato has shown strong performance in both the food and quick commerce sectors despite being a late entrant. If they can replicate this success in the ticketing business and compete effectively with BookMyShow, it will strengthen their market position,” Taurani said.
Acknowledging BookMyShow’s market dominance, Taurani suggested that Zomato’s entry could shake up the market. “Although BookMyShow currently dominates with exclusive access to major events, Zomato’s ticketing initiative, especially when integrated with its existing platform, could capture market segments that BookMyShow is yet to fully explore,” he said.
Looking ahead, Zomato has set an ambitious goal for Ebitda margins exceeding 25%. Taurani emphasised that even achieving a 20% margin in this competitive and fragmented market would be a notable accomplishment. “Such a margin would be a strong indicator of the business’s potential, reflecting well on the overall commission and profitability of the new segment,” Taurani said.
“Our valuation target for Zomato is not significantly impacted by this deal. Instead, it reflects a strategic move to leverage Zomato's existing customer base across its food and quick commerce platforms," he said.
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