Shares of Paytm extended losses for a third straight session, falling up to 2.5 percent on June 19, with an Emkay note highlighting risk to customer traffic if a deal with Zomato for the movies and event ticketing business goes through.

The domestic brokerage said the entertainment is a high-margin business with a take rate of 5-8 per cent in movies and event ticketing business — a subset of marketing services. This is likely to hit Paytm’s customer traffic, it said.

Paytm’s strategy is to focus on the dwindling core business of payments and financial services, post the RBI action. Paytm recently shelved plans to manufacture General Insurance products, and instead is focusing on distribution.

Paytm’s subsidiaries Wasteland Entertainment (Paytm Insider) and Orbgen Tech (Ticketnew.com) logged FY23 revenue of Rs 193 crore and Rs 16 crore, leading to marketing/overall revenue share coming in at 14 per cent and 3 per cent, respectively.

“Assuming higher revenue of Rs 260 crore in FY24 (factoring in strong traction in 3QFY24), Zomato is reportedly offering higher deal value of Rs 2,000 crore (8x revenue), incl. receivables. The deal would shore-up Paytm’s cash balance (Rs 5,300 crore) and could be used to scale-up rewards/cash-back program to revive its payment business (UPI market share down, to 6 per cent in May 2024 against 10.5 per cent in January 2024),” Emkay Global said.

Given the business slowdown, the Paytm management guided an Ebitda loss (exESOP) of Rs 500-600 crore in the June quarter, as the full-quarter impact of business disruption gets absorbed.

For now, Emkay Global has retained its ‘Reduce’ rating on the stock with a target price of Rs 300 per share, given the prolonged business slowdown.

In the last year, Paytm stock has plunged over 53 per cent, underperforming benchmark Nifty which delivered returns of 25 per cent during this period.

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