One 97 Communications Ltd (Paytm) and Zomato Ltd shares gained 5 per cent and 3 per cent respectively on Thursday. This comes after Zomato’s acquisition of Paytm’s ticketing business, marking a strategic expansion into the event and travel booking sectors.
On Wednesday, the company’s board of directors approved a share purchase and subscription agreement with One 97 Communications (Paytm operator), Wasteland Entertainment Private Limited (WEPL), and Orbgen Technologies Private Limited (OTPL) to acquire their entertainment ticketing business.
Under the agreement, One 97 Communications will transfer its movie ticketing business to Orbgen Technologies Private Limited (OTPL) and its sports and events ticketing business to Wasteland Entertainment Private Limited (WEPL) through a slump sale.
Zomato will acquire the entire stake owned by OCL in OTPL and WEPL through a share purchase transaction, making OTPL and WEPL wholly-owned subsidiaries of Zomato. The estimated cost of acquiring OTPL is Rs 1,264.6 crore, while WEPL is valued at Rs 783.8 crore, according to a company filing with the stock exchanges.
Here is how brokerages view this update for Zomato:
Jefferies: Buy | Target Price: Rs 335
Valuation looks compelling in the context of growth forecast and ultimate margins. While Jefferies likes food delivery, low capital intensity promises a high return ratio in the steady state. The third clear growth vector is established and the company will probably focus on market share, with even the potential to claim leadership, which may entail investments.
Motilal Oswal: Buy | Target price: Rs 300
The company expects to complete the acquisition in 2QFY25. Zomato’s food delivery business is stable, and Blinkit offers a generational opportunity to participate in disruption of industries such as retail, grocery, and e-commerce.
As a part of its going-out business, Zomato currently offers dine-out table bookings and a few live ticketing events, whereas Paytm’s platform offers ticket bookings for movies, sports, and live events, which will significantly solidify Zomato’s impending launch of its “District” app.
Zomato technical charts
In the case of Zomato, the stock price has been on a strong uptrend since hitting a low point in January 2023, completing a full-circle and indicating potential momentum in the ongoing price trend.
“The stock has shown resilience to drawdowns below its shorter-term moving average, offering a low-risk, high-reward opportunity. Additionally, Zomato displayed an improving EPS, price strength, and strong buyer demand, which are all positive signs,” StoxBox said.
Here is how brokerages view this update for Paytm:
Global brokerage CLSA has maintained a “Hold” rating on Paytm but increased its target price from Rs 480 to Rs 530. Similarly, Citi has raised its target price from Rs 410 to Rs 440, while maintaining a “Sell” rating.
CLSA has increased its FY26-27 adjusted PAT estimates by 12% for FY27 due to the interest income from this deal. Citi also views the sale of the ticketing and events business as a positive move and noted that the next potential trigger for Paytm would be government approval for FDI in payment aggregators.
“In our view, the deal would shore up Paytm’s cash and cash equivalents, which would possibly be used to scale up the rewards/cash-back program to revive its dwindling payment business following the RBI action. The net one-off gains adjusted for the earnings outgo would reduce net loss in FY25E, but hurt future earnings,” Emkay Global’s Anand Dama said.
Paytm technical charts
StoxBox said the pattern analysis of Paytm indicates potential signs of the stock reaching a bottom. The stock has recently shown a Bullish Cup and Handle breakout, suggesting a potential reversal in trend. The recent upward movement has been accompanied by short phases of accumulation, further reinforcing the potential trend, it said.
“Additionally, the price action has reclaimed its 200 DMA, providing immediate support, which is a positive sign,” StoxBox said.
Comments
0 comment