Warren Buffet’s Berkshire Hathaway Buys Stake in Digital-Payments Company Paytm
American business magnate and renown investor Warren Buffett-led company Berkshire Hathaway Inc. has invested in a INR 2,500 crore stake in Indian fintech and digital-payments company Paytm. This is Berkshire Hathaway’s debut investment in India’s booming startup ecosystem.
Paytm owner One97 Communications Ltd said in a statement that someone from Berkshire Hathaway will sit on the board of One97 Communications. The size of the deal is not known.
According to reports, the deal could be a 3-4% stake running up to USD 300-350 million (about INR 2,500 crore), taking the Indian company’s value to more than USD 10 billion.
So far, Berkshire Hathaway has been known to invest in companies in areas such as consumer, energy, and insurance. With this deal, the American company will be joining the likes of Japanese giant SoftBank, which bought a 20% stake in Paytm last year for an estimated value of USD 1.4 billion (more than INR 9,000 crore. Paytm also boasts of investment from Jack Ma’s Alibaba Group and Ant Financial.
For 88-year-old Buffet, the investment is not a personal one. This is also Berkshire Hathaway’s first investment in an unlisted Indian company that till now suffers heavy losses.
Todd Combs, investment manager at Berkshire, is now sitting on the board of directors of Paytm. “I have been impressed by Paytm and am excited about being a part of its growth story, as it looks to transform payments and financial services in India,” news18 quoted Combs.
Paytm founder and CEO, Vijay Shekhar Sharma expressed that Paytm will benefit from Berkshire’s experience in financial services and long-term investment horizon. He said it will help in achieving Paytm’s goal of bringing 500 million Indians to the mainstream economy through financial inclusion.
Paytm has been facing challenges from rivals, Flipkart’s PhonePe and Google’s Tez. Hence, the deal comes as fresh burst of nourishment for the firm. The payments market is poised to get hotter with WhatsApp entering the market, which is waiting for regulatory clearance.
Paytm has been incurring losses to the tune of INR 899.6 crore in 2016-17, although its total income has risen more than 38% to INR 828.6 crore in 2016-17 from the previous fiscal.
The government’s demonetization move in November 2016 helped Paytm rise to the ranks of a popular fintech company, with an annual run rate of 5 billion transactions and USD 50 billion in gross transaction value.
With a 49% stake in Paytm Payments Bank, One97 Communications has also launched its ecommerce business under Paytm Mall, bringing in fresh competition for Amazon and Walmart-backed Flipkart.