Is Paytm first of Buffett’s India bets?
India’s largest payment services provider Paytm on Tuesday said Warren Buffett-owned Berkshire Hathaway Inc. has invested an undisclosed amount in the company, in a rare deal for the world’s best-known investor who typically avoids internet companies.
One97 Communications Ltd, which owns Paytm, also said Berkshire’s investment manager Todd Combs who was leading the investment discussions will join its board.
Mint first reported on Monday that Buffett’s Berkshire Hathaway is set to buy a 3-4% stake in One97 for ₹2,200-2,500 crore, the billionaire investor’s first investment in any Indian company. The current round pegs Paytm’s valuation at about $10-12 billion, the report said.
The Omaha, Nebraska-based Buffett and his firm have always steered clear of money-losing internet startups that have shown zero to little promise of generating profits, especially in emerging markets. Berkshire also does not hold shares in Alibaba Group, China’s e-commerce and payments giant, which is an investor in Paytm.
Investors that Mint spoke to expressed surprise that Berkshire chose to invest in Paytm which—though the market leader—has reported mounting losses.
The company reported total consolidated losses of ₹1,260 crore (one-time exceptional item of ₹591.3 crore) in the year ended March 31, 2017 on total revenue of ₹828.6 crore.
While this deal is an endorsement for India’s startup ecosystem, industry experts said it was too soon to gauge Buffet’s interest in India as an investment destination.
“This deal was largely about (Paytm founder) Vijay Shekhar Sharma and Paytm. Berkshire did not spend too much time doing diligence or carrying countless checks on the sector/ competition as they are usually known to do,” a person familiar with the matter said on condition of anonymity.
“The investment is a boost for the startup ecosystem as Berkshire is a marque, conventional investor, but it’s too early to say if this is part of a broader strategy,” said Vinod Murali, manag- ing partner, Alteria Capital Advisors, a venture debt fund. “Berkshire has traditionally avoided both emerging markets and internet companies. So, we’ll have to wait for 18-24 months to see if they will do more such investments and whether other conventional investors will follow.”
The investment comes in the middle of an unfolding a digital payments war. Over the past year, Paytm’s near-monopoly status in digital payments has been challenged by numerous players such as Google Pay, Amazon Pay, BHIM and Flipkart-owned Phonepe, while newer players such as Whatsapp’s payments service are also expected to mount a significant challenge. With the Berkshire investment, Paytm has effectively separated itself from the rest of the pack.