Paytm shares surge 5% after ₹2,048-cr deal with Zomato

Shares of Paytm operator One97 Communications Ltd hit the day's high at 5.1% in the early morning trade today following its sale of movie and events ticketing business for ₹2,048 crore to food-tech platform Zomato. Zomato opened gap up and hit the day's high at ₹267 on the BSE, up 2.6% from yesterday's close, before settling at ₹260.20 at 10 AM.

Shares of Paytm at the current price of ₹588.70 on the BSE are trading 41% lower from its 52-week high of ₹988.30 touched on October 20, 2023. The stock hit its one-year low of ₹310 on May 9, 2024, following the RBI's adverse order against its former associate entity, Paytm Payments Bank.

Amid the crisis, the Paytm parent's loss stood at ₹840 crore for the April-June quarter of FY2024-25, up from ₹357 crore in the year-ago period. Vijay Shekhar Sharma-led company's revenue declined 36% to ₹1,502 crore in Q1 FY25 against ₹2,342 crore in the year-ago period.

Brokerage major CLSA, in its latest stock analysis, maintained its "Hold" rating on Paytm and increased its price target to ₹530 from ₹480. As per Motilal Oswal, the latest deal will strengthen Paytm's balance sheet and could help it turn EBITDA positive by FY2026-27. "We maintain our Neutral rating with a target price of ₹550."

The acquisition of Paytm's movie and events ticketing businesses will allow Zomato to expand its presence in the 'going-out' segment, while Paytm says it'll focus on its core financial services, the companies said in their exchange statements. The deal term says Paytm will transfer its ticketing businesses, TicketNew and Insider, along with 280 existing employees, to Zomato. These businesses, acquired by Paytm for ₹268 crore between 2017 and 2018, have recently reported a combined gross order value (GOV) of over ₹2,000 crore for FY24.

Zomato's Q1FY25 result earlier this month saw stronger quick commerce gross merchandise value (GMV) growth (+130% YoY) and a solid 27% growth in food delivery. Deepinder Goyal-led food delivery company reported a profit of ₹253 crore for Q1, a notable increase from the ₹175 crore profit in the year-ago period. Its revenue surged by 74% year-on-year (Y-o-Y), reaching ₹4,206 crore in Q1, up from ₹2,416 crore in the corresponding period of the previous year.

UBS Global Research and Evidence Lab in its August 19 analysis of the stock said its management was optimistic with an implicit positive guidance revision (aim for 25-30% CAGR in food delivery and further doubling of dark store count to 2000 by end-2026) with both segments' medium-term margin guidance reiterated as well. "Following the result, our FY26-28e GMV estimates are up 20-30% for q-com and 2-3% for food delivery. The faster growth results in slightly lower margins although consolidated adj EBITDA estimates are still up 2-3%. We raise our price target to ₹320 (₹260 earlier) and maintain Buy."

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