In the ever-evolving Indian startup ecosystem, food delivery giant Zomato is discussing acquiring Paytm’s ticketing business for approximately ₹1,600-1,750 crore ($190-210 million). Both companies have confirmed this deal in their filings, indicating a significant strategic realignment for both parties.
The possible buyout of Paytm’s movies, travel, and live events ticketing business signals Zomato’s strategic expansion towards becoming a one-stop shop for all “going-out” activities.
Let’s dig deeper to understand what this means for Paytm, Zomato, and BookMyShow, the current market leader in India’s burgeoning online ticket-booking sector.
Why Zomato Wants Paytm’s Ticketing Business
Zomato’s interest in Paytm’s ticketing business is driven by its goal to diversify revenue streams and capitalize on the growing “going-out” culture in India.
Currently, Zomato operates four key business areas: food delivery, quick commerce (Blinkit), going-out, and B2B supplies.
In FY 2024, Zomato’s going-out segment accounted for 6% of its total consolidated Gross Order Value (GOV) of ₹47,918 crore. This segment showed an astonishing 136% YoY growth in revenue, indicating a large, untapped opportunity ahead.
By integrating Paytm’s ticketing platform, Zomato can offer its extensive user base a seamless way to book movie and travel tickets, attend live events, and potentially even make restaurant reservations – all within a single app. This integration could enhance customer engagement and loyalty, and generate additional revenue through convenience fees and advertising opportunities.
It is worth noting that the potential acquisition of Paytm’s movie ticket business isn’t entirely unexpected. Zomato has been hinting at its ambitions in the “going-out” space for some time. In December 2023, the company launched a dedicated “Live” tab on its app.
In a recent move, Zomato has announced a ₹100 crore ($12 million) investment in Zomato Entertainment, its subsidiary that manages live events and ticketing.
The Zomato Paytm deal would significantly accelerate all the future plans of the food delivery giant in India related to the online ticketing business.
Paytm’s Strategic Realignment
Paytm’s struggle is no surprise. Following the RBI ban on its Paytm Payments Bank, the fintech company has been laying off hundreds of employees as part of restructuring and cost-cutting measures.
In 2017, Paytm made a strategic move by acquiring a majority stake in Insider.in, an online ticketing and events startup, for approximately $5.42 million (₹35 crore). The following year, it further bolstered its presence in the ticketing sector by acquiring TicketNew, an Alibaba-owned ticketing platform.
Within Paytm, the movie ticketing and events business operates under its marketing services division, alongside activities such as advertising, credit card marketing, and gift vouchers. In Q4 FY24, Paytm reported a 28% YoY increase in Gross Merchandise Value (GMV) for ticketing, deals, and gift vouchers, amounting to ₹2,804 crore. This growth was driven by gains in market share within the travel sector, despite facing disruptions, and increased volumes in the events business.
Despite double-digit growth in GMV for ticketing and deals, Paytm’s decision to divest this segment to Zomato may raise eyebrows. However, this strategic move underscores Paytm’s commitment to refocusing its resources on core sectors like fintech and lending, where it maintains market leadership. Ticketing, while growing, is still a smaller part (less than 17%) of their overall business, therefore requiring less focus.
Additionally, Even though Paytm’s ticketing business is growing in terms of revenue (GMV), it might not be as profitable due to high direct costs. Although specific figures haven’t been disclosed publicly. By offloading this business unit, Paytm aims to streamline operations and potentially bolster its overall profitability.
In an exchange filing, Paytm confirmed the preliminary nature of discussions with Zomato, noting that all talks are non-binding at this stage.
Zomato Competing With BookMyShow
BookMyShow, India’s leading online ticket booking platform for entertainment with over 90% market share, launched these online services in 2007.
BookMyShow enjoys several competitive advantages that distinguish it from its rivals. First, it holds a significant first-mover advantage in the market, having established a robust presence in over 650 towns and cities in India. Second, the platform benefits from a strong 30+ million customer base and loyalty due to its longstanding industry experience.
Additionally, BookMyShow has cultivated solid relationships with event activation companies and offers a diverse array of events to its users.
Currently, BookMyShow is in the final stages of securing a substantial investment round of $300 million. This capital infusion is poised to significantly bolster BookMyShow’s financial resources, empowering it to scale up its operations further.
Looking at BookMyShow’s financial performance, the company achieved a remarkable 252% YoY growth in its operating revenue, amounting to ₹975.5 crore in FY23. Interestingly, a whopping 66% of this revenue came from ticket bookings, surging 185.5% YoY to ₹648 crore in FY23. The income from live events or concerts also skyrocketed by 9.5 times to ₹237 crore, contributing to a net profit of ₹85.1 crore in FY23.
Despite its advantages, including a comprehensive ecosystem and strong customer recall, BookMyShow’s position as India’s biggest and largest online ticketing platform for entertainment is under threat.
On the one hand, multiplex owners are trying to acquire customers directly to reap the most of them, while on the other hand, Zomato has now started strenthening its ticketing business arm. Zomato’s established distribution network, combined user base with Blinkit, and experience in live events could significantly enhance its market position.
India’s Online Ticketing Sector
With the increasing penetration of smartphones and internet, more Indians are opting to purchase event tickets online. The online ticketing market in India is projected to grow from $1.2 billion in 2020 to $2.3 billion by 2025. With increasing disposable incomes and a growing interest in live events, particularly among younger demographics, the market is ripe for disruption.
The acquisition of Paytm’s ticketing business by Zomato appears well-timed, considering that there are relatively few players in this entertainment ticketing sector.
One thing is certain: Zomato’s potential acquisition of Paytm’s movies and events ticketing business will be a win-win for both companies and customers. Currently, Zomato Ltd (NSE: ZOMATO) boasts a market capitalization of ₹1.62 trillion, whereas One 97 Communications Ltd (NSE: PAYTM) stands at ₹271.04 billion on the NSE.
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