Shares of Zomato experienced a notable rise of 4% in early trading on Friday, reflecting investor enthusiasm following the company's recent announcement. At 12:37 pm, Zomato's stock was up 3.57%, trading at Rs 267 on the Bombay Stock Exchange (BSE).
The uptick in share price follows Zomato's substantial Rs 2,048 crore deal to acquire Paytm's entertainment ticketing business. As part of this transaction, Paytm will transfer its movie ticketing operations to Orbgen and its sports and events ticketing to Wasteland Entertainment. Both Orbgen and Wasteland will become wholly-owned subsidiaries of Zomato.
Analysts are optimistic about the acquisition, viewing it as a strategic expansion that enhances Zomato’s market presence beyond its core food delivery business. The acquisition aligns with Zomato’s objective to diversify its offerings and tap into the growing "going-out" market, which includes entertainment ticket bookings and dining reservations.
Jefferies has expressed a positive outlook on Zomato, assigning a 'Buy' rating with a target price of Rs 335. The brokerage highlights Zomato’s established food delivery business as a low-capital investment with significant returns. They believe the acquisition will enhance Zomato’s market share by providing new growth opportunities in the ticketing sector.
Similarly, Motilal Oswal is optimistic about Zomato’s prospects, also rating the stock as a 'Buy' with a target price of Rs 300. They point to Zomato’s growth potential, driven by its food delivery and Blinkit ventures, as well as its potential to disrupt the retail and grocery markets. The addition of the entertainment ticketing business is seen as a complementary move that could accelerate Zomato’s expansion and diversification strategy.
Nomura shares a positive view, setting a target price of Rs 280 for Zomato. They anticipate that the acquisition will significantly enhance the company’s presence in the entertainment sector. Nomura projects that Zomato's gross order value (GOV) could increase from Rs 3,200 crore in FY24 to Rs 10,000 crore by FY26. While the firm has not yet incorporated the new business into its financial models, it recognizes the long-term potential of Zomato’s diversification efforts.
For investors, this acquisition represents a significant step in Zomato’s evolution as it expands into entertainment and lifestyle services. The deal is expected to boost Zomato’s GOV and profit margins in the coming years, with brokerages forecasting solid growth.
With target prices ranging from Rs 280 to Rs 335, Zomato’s foray into the entertainment sector is being viewed positively, presenting potential opportunities for investors looking to capitalize on the company’s expanding market footprint. However, investors should carefully assess how Zomato’s broader strategic moves align with their own investment goals before making decisions.
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