Food ordering major Zomato is in talks with Vijay Shekhar Sharma-led digital payments firm Paytm to acquire the latter’s movie ticketing and events business.
"We acknowledge that we are in discussions with Paytm for the aforementioned transaction, however, no binding decision has been taken at this stage that would warrant a board approval and subsequent disclosure in accordance with applicable law," Zomato says in a stock exchange filing.
"This voluntary disclosure is being made to clarify our stance on the matter given that any transaction that is considered potentially meaningful may create uncertainty in the market," the food delivery company says.
The talks with Paytm parent One97 Communications are being undertaken with the intent to further strengthen the company’s going-out business, Zomato says, adding that this is in line with the company’s stated position of focusing only on four key businesses currently.
This comes weeks after Paytm founder Sharma said the company will prune non-core businesses and work on cost efficiencies including a leaner organisation structure. Due to the Reserve Bank of India’s (RBI) embargo on several of its products like FASTag and wallet, Paytm expects the annualised direct impact on EBITDA to be around ₹500 crore. Most of this impact will be in the first quarter of the ongoing fiscal as these products were operational during most of Q4 FY24.
Meanwhile, Zomato last month voluntarily surrendered the certificate of authorisation issued by the Reserve Bank of India (RBI) to operate as an online payment aggregator as the company doesn’t see it having a significant competitive advantage against the incumbents in the payments space. The payments landscape in India has evolved meaningfully over the past couple of years since the time Zomato applied for these licences, Zomato said in a regulatory filing.
“At Zomato, we do not see ourselves having a significant competitive advantage against the incumbents in the payments space and hence we don’t foresee a business in payments space as commercially viable for us, at this stage,” the food ordering company said. The licence surrender came three months after Zomato’s wholly-owned subsidiary Zomato Payments received approval from the RBI to operate as an online payment aggregator.
The food delivery giant reported a net profit of ₹175 crore for the quarter ended March 31, 2024, compared with ₹188-crore loss in the same quarter a year ago. Revenue from operations rose 73% year-on-year to ₹3,562 crore for the fourth quarter as against ₹2,056 crore in Q4 FY23. For the full financial year 2023-24, Zomato logged a profit of ₹351 crore from a loss of ₹971 crore in FY23. The top line growth was driven by robust performance by food delivery service and quick commerce platform Blinkit. Zomato's food delivery business reported revenues of ₹1,739 crore in Q4 FY24, up from ₹1,172 crore in the year-ago period. The quick commerce business revenue stood at ₹769 crore during the quarter compared with ₹363 crore posted in Q4 FY23.
One97 Communications’ loss widened to ₹550 crore for the quarter ended March 31, 2024, compared with ₹167 crore in the corresponding period a year ago. Loss widened due to impairment of ₹227 crore towards the carrying value of Paytm's investment in Paytm Payments Bank.
