Shares of One 97 Communications Ltd (Paytm) surged 4 per cent to Rs 442 in Tuesday’s trade on BSE following reports that the company is in talks with Zomato to sell its movie ticketing business. Zomato shares also rose 1.5 per cent in early trade.
The stock will also be in news as Non-Executive Independent Director Neeraj Arora resigned from his position. Paytm appointed Rajeev Krishnamuralilal Agarwal as Non-Executive Independent Director of the company.
In the case of Zomato news, Paytm said the potential transfer of Entertainment business, a component of our Marketing Services, is one opportunity under consideration. It had in its recent earnings call said that its focus will be on payment and financial services along with digital goods commerce, which are designed to help merchants scale their businesses.
“However, any discussions currently underway are preliminary and do not involve any binding agreements that require approval or disclosure under Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, or other applicable laws. As such, any information pertaining to these discussions should be considered speculative at this time,” Paytm said.
If the transaction goes through, it will be among the largest buyouts for Zomato after it acquired Uber Eats in 2020 and took over quick commerce platform Blinkit (formerly Grofers) in 2021 in an all-stock deal valued at Rs 4,447 crore.
In the case of Arora’s resignation, Paytm said the resignation was due to pre-occupation and other personal commitments. He will accordingly cease to be a Non Executive Independent Director with effect from closure of business hours on June 17, 2024. Consequently, he will also cease to be a member of the “Nomination and Remuneration Committee” and the “Investment Committee” constituted by the board of Paytm.
Agarwal has got wide experience of Securities Markets, Commodity Markets and Taxation. He was Whole Time Member at SEBI for five years. He was also member at Forward Markets Commission, erstwhile regulator of Commodity futures markets, for five and a half years.
Paytm shares are up 21 per cent in the past one month. Yet, they are down 34 per cent year-to-date.
Commenting on the development, JM Financial BFSI analyst Sameer Bhise said, “Media reports speculate a deal value of Rs 1,500-2,000 crore. While Paytm in its quarterly filings does not disclose revenue or profitability of its events and movie verticals, we estimate total revenue of Rs 275–300 crore for the verticals in FY24. This implies a likely valuation of 5x-7x FY24 sales. Note that the deal would potentially add only around 2.5% to Zomato’s FY24 consolidated revenue. The impact on profitability is difficult to ascertain at the moment as annual subsidiary-level disclosures come with a lag. Zomato’s balance sheet remains healthy to facilitate the deal with a net cash balance of Rs 12,200 crore as of March 2024.”
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