Gurgaon-based Zomato has confirmed that it is in discussions to acquire Paytm’s movies and ticketing business.

In a stock exchange filing, the company stated, “We acknowledge that we are in discussions with Paytm for the aforementioned transaction; however, no binding decision has been taken at this stage that would warrant a board approval and subsequent disclosure in accordance with applicable law.”

The company added, “The above discussion is being undertaken with an intent to further strengthen our Going-out business and is in line with our stated position of focusing only on our four key businesses currently.”

According to sources, the deal may value Paytm’s vertical at Rs 1,600-1,750 crore, including receivables from cinema exhibitors; the valuation could reach up to Rs 2,000 crore.

One of the sources mentioned, “Paytm Movies and Paytm Insider are being merged to bring in synergies between the two teams. The idea is to build this as a single unit… Zomato’s interest in this segment has been there for a while, so it fits in very well.”

Zomato Expanding Its Umbrella
Zomato has been aiming to capture consumer demand across various categories such as food, grocery, and entertainment.

If the transaction proceeds, it will be one of Zomato’s largest acquisitions, following its acquisition of Uber Eats in 2020 and the quick commerce platform Blinkit (formerly Grofers) in 2021, which was an all-stock deal valued at Rs 4,447 crore.

However, Zomato has diversified its offerings by including ticket-booking services for events and running a food festival called Zomaland.

In December 2022, it organized American musician Post Malone’s India tour and has shown a strong interest in making events and entertainment its fourth key pillar.

The Gurgaon-headquartered firm reported separate numbers for its going-out vertical for the first time in the September 2023 quarter.

Zomato’s CEO, Deepinder Goyal, stated that the combination of dining out, events, and ticketing could form the “fourth large business coming out of Zomato.” The company’s other three verticals are food ordering, Blinkit, and Hyperpure, which supplies restaurants.

“Zomato’s strategy is to take as much control of the customer’s discretionary spending wallet as possible,” said an executive. “It already has 18.4 million average monthly transacting customers in its food delivery business in FY24.

In quick commerce, it is the market leader with over 6 million average monthly transacting customers (Q4, FY24) and plans to double its dark store footprint to 1,000 across India over the next year.

Zomato views this market as a quasi-monopoly with BMS and believes it can compete effectively in a duopoly situation. With a massive customer base, Zomato is well-positioned to cross-sell its various services.”

Paytm’s Dodgy Move
Noida-based One97 Communications, which operates Paytm, began expanding into events and movie ticketing inorganically.

In 2017, it acquired a majority stake in Insider.in, an online ticketing and events platform backed by event management company Only Much Louder (OML), for just over Rs 35 crore.

The following year, Paytm acquired Chennai-based online ticketing platform TicketNew to enhance its entertainment ticketing business. OML subsequently exited the venture to be part of the KKR-backed platform Emerald Media.

The Competition

Paytm Movies is the closest competitor to the segment leader BookMyShow (BMS) in the movie ticketing market.

The Mumbai-based BMS, backed by Reliance Industries and venture capital funds such as Accel and Elevation, reported operating revenue of Rs 976 crore and a profit of Rs 85.72 crore for FY23.

BMS is currently finalizing a funding round in which private equity firm KKR is purchasing shares from existing shareholders, valuing the company, founded by Ashish Hemrajani, at Rs 7,500 crore.

The Outlook
Revenue in the Cinema Tickets market is projected to reach US$551.20 million in 2024 and the market is expected to grow at an annual rate (CAGR 2024-2028) of 3.36%, reaching a projected volume of US$629.00 million by 2028.

The number of users in this market is expected to reach 120.4 million by 2028. at the same time, user penetration is projected to be 7.8% in 2024, rising to 8.1% by 2028.

The average revenue per user (ARPU) is expected to be US$4.91. Globally, the highest revenue will be generated in China, projected at US$6,963.00 million in 2024. Norway will have the highest user penetration rate in the Cinema Tickets market, projected at 22.8%.

According to Ormax, the Indian box office grossed a record Rs 12,226 crore in 2023, surpassing pre-Covid numbers and marking the first time it exceeded Rs 12,000 crore.

In 2019, the Indian film industry’s gross box office collections were Rs 10,948 crore.

A Ficci-EY report suggests that the live event segment could reach Rs 14,300 crore by 2026, driven by sports events such as the Indian Premier League (IPL), the cricket World Cup, the football Indian Super League (ISL), and the Kho Kho league, which are attracting an increasing number of fans.

Similarly, Live music concerts, curated events, and international and homegrown festival franchises like Lollapalooza, NH7 Weekender, and Magnetic Fields have gained traction since Covid.

Looking To Consolidate
Paytm Marketing Services, previously known as cloud and commerce, includes deals, gift vouchers, ticketing for travel, movies, and events, advertising, and credit card marketing. Revenue from marketing services in FY24 was Rs 1,734 crore.

For Wasteland Entertainment Pvt, the entity running the live events platform Insider, FY23 revenue was Rs 192.7 crore, up from Rs 48.6 crore the previous year.

Paytm has diversified into this fast-growing space, organizing treks, comedy events, dining experiences, weekend getaways, and hosting global acts like UB40, 50 Cent, and Ronan Keating at festivals, clubs, gigs, and concerts.

However, nearly 83% of the overall revenue for One97 Communications in FY24 came from payments and financial services, which include payments, credit, insurance, and wealth management, while the remaining 17% was from marketing services.

A source familiar with the deal indicated that the Paytm board wants Vijay Shekhar Sharma’s company to focus on its core payments and financial services businesses.

Paytm’s payments bank was banned from operating on January 31 by the country’s central bank due to ongoing regulatory issues. Since then, according to its quarterly exchange filings, the fintech major has experienced a slowdown in two of its core businesses—merchant payments and consumer lending.

The company expects an EBITDA loss before ESOP costs of Rs 500-600 crore in the June quarter.