Even Berkshire Hathaway sees a massive opportunity in Paytm

Now accepted by Warren Buffett.
Now accepted by Warren Buffett.
Image: Reuters/Rupak De Chowdhuri
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One of the world’s most iconic investors has returned to India for a second inning.

On Aug. 27, billionaire investor Warren Buffett’s Berkshire Hathaway said it had bought a stake in One97, the owner of India’s largest digital payments firm, Paytm.

The Nebraska-based company backs some of the world’s largest firms like The Coca-Cola Co, Apple, American Express, General Motors, Goldman Sachs, Procter & Gamble, and Walmart.

While Berkshire Hathaway and One97 have not disclosed the details of the deal, reports say Berkshire has plowed in around $360 million (Rs2,394 crore) in Paytm for a 3-4% stake. It reportedly values Paytm at over $10 billion. Also, Buffett wasn’t directly involved in the deal with Paytm, the company told the Mint newspaper.

Berkshire benefits

Industry analysts reckon that unlike other such deals in the Indian startup space, this time, the investor has more to gain from the investment than the company that has been funded.

“I don’t think Paytm needs a brand of Berkshire Hathaway to prove that it is a good business. It is a good brand, a good business…Berkshire needs Paytm more than Paytm needs them,” said Yugal Joshi, vice-president at consulting and research firm Everest Group. “Paytm can raise money the way they want.”

India’s fintech industry is expected to have a turnover of $2.4 billion by 2020. Amid this, Paytm has emerged as a formidable player. It has so far raised more than $2.5 billion from investors, including China’s Alibaba Group, Japanese giant Softbank, and Taiwan’s MediaTek. Paytm also runs an e-commerce firm, Paytm Mall, and the Paytm Payments Bank. It is now also entering the cloud computing business.

Unlike Alibaba, Joshi said, Berkshire is largely a financial investor and doesn’t bring industry expertise to Paytm.

However, the entry of such a big global investor also paves the way for other large players to look at India seriously.

Berkshire in India

Berkshire first entered India in 2011 as a corporate agent for Bajaj Allianz General, selling insurance packages online. But it exited two years later reportedly due to a dull response and excessive regulations.

Yet, Buffett had been keen on having a presence in India for years.

“If you tell me a wonderful company in India that might be available for sale, I’ll be there tomorrow,” he had told news channel ET Now in an interview in May 2017, adding that “the potential for India is incredible.

This time, it looks like his company’s choice is sound.