Zomato’s shares were surging on Wednesday as brokerages saw major upside in its potential acquisition of Paytm’s ticketing business.

What Happened: The food delivery firm acknowledged on June 16 that it was in discussions with Paytm for a deal but no binding decision had been taken so far.

The acquisition discussions aim to bolster Zomato’s “going-out” business, aligning with its strategic focus on four key areas. UBS has given Zomato a “buy” rating with a target price of ₹250 per share, seeing the acquisition as a fitting complement to Zomato’s going-out offerings. UBS also mentioned that initial valuations for this acquisition seemed reasonable.

Although neither Zomato nor Paytm has disclosed the transaction’s valuation, media reports estimate the deal could range between ₹1,600 crore and ₹2,000 crore. If confirmed, this would be Zomato’s second-largest acquisition since it bought Blinkit in 2022 for $569 million (₹4,744 crore) in an all-stock deal.

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BookMyShow In The Crosshairs: According to JM Financial, successfully closing this deal would enhance Zomato's going-out business, including Zomato Live, which currently competes with Paytm's event ticketing vertical. The deal could elevate Zomato to the second position in the events and movie ticketing space, just behind BookMyShow.

JM Financial maintained a “buy” rating on Zomato with a target price of ₹250 per share, noting the deal could potentially add around 2.5% to Zomato's FY24 consolidated revenue. However, the impact on profitability is uncertain due to delayed subsidiary-level disclosures, it said.

Elara Securities also reiterated its bullish stance on Zomato, highlighting the company’s healthy cash reserves and investments. Elara suggests the potential acquisition may not significantly impact Zomato’s liquidity, maintaining a “buy” rating with a target price of ₹280, indicating a 48% upside from the last closing price.

Price Action: Zomato shares climbed 5.25% to ₹198.52 in morning trade on Wednesday. The stock has risen nearly 60% so far this year.

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