'Financial boost': Paytm biz sale to strengthen balance sheet. MOFSL shares target price

The sale of entertainment ticketing business would help One 97 Communications Ltd (Paytm) have a sharper focus on core business, travel, deals, and cashback services, which are crucial for expanding the merchant base and grow overall sales, said Motilal Oswal Financial Services Ltd (MOFSL). This strategic move could enhance shareholder value by concentrating efforts on high-growth areas, the domestic brokearge said in its latest note.

Paytm will transfer its entertainment ticketing business to Zomato through a two-step process. The first is the subsidiary Transfer: The entertainment ticketing business will be transferred to OCL’s 100 per cent subsidiaries, Orbgen Technologies Pvt Ltd (OTPL) and Wasteland Entertainment Pvt Ltd (WEPL). Later, OCL will sell 100 per cent of its stake in OTPL and WEPL, which operate the TicketNew and Insider platforms, respectively, to Zomato. Around 280 existing employees from the entertainment ticketing business will be included in the transfer to Zomato.

The sale of entertainment business would provide a financial boost, as this transaction will generate significant profits for Paytm, allowing it to reinvest in other high-potential areas.

"The cash proceeds will further strengthen the balancesheet. We estimate Paytm’s Ebitda to turn positive by FY27. We maintain our Neutral rating with a target price of Rs 550," it said.

On Zomato, the brokerage said Zomato's food delivery business is stable, and Blinkit offers a generational opportunity to participate in the disruption of industries such as retail, grocery and e-commerce.

"We value the business using a DCF methodology, assuming 12.5 per cent cost of capital. We maintain our BUY rating with a target price of Rs 300, implying 15 per cent potential
upside.

While Paytm’s current business is at adjusted EBITDA of 1.5 per cent of GOV, higher commissions for exclusive events and cost optimization could take this higher in the medium term, MOFSL said.