Berkshire Hathaway invests in Paytm

The US$520-billion American conglomerate, led by legendary investor Warren Buffett, has entered the Indian startup space by acquiring a 3-4 per cent stake in One97 Communications for over US$350 million

August 27, 2018

Starting off as a mobile recharge platform in 2010, Paytm has moved on to set up an e-payment and ecommerce business, competing with the likes of Walmart-run Flipkart and Amazon India

Paytm’s steadily-growing user base is currently estimated at more than 300 million; Valued at more than US$10 billion, Paytm has drawn funding from China’s Alibaba and Japan’s SoftBank

On back of rising affordability and internet penetration, India's ecommerce market is expected to reach US$220 billion in terms of gross merchandise value and 530 million shoppers by 2025

Besides funding, Paytm aims to use Berkshire’s experience in financial services as the Indian company builds its own financial operations for over 500 million Indians with net connections

Berkshire Hathaway Inc, the investment group led by Warren Buffett, has made its foray into the Indian startup scene with a stake purchase in One97 Communications Ltd, the promoter of e-payment and ecommerce platform Paytm. The US$520-billion conglomerate confirmed on August 27 that it picked up a 3-4 per cent stake in One97 for over US$350 million, valuing the entity at over US$10 billion. Paytm has amassed a vast and steadily-growing user base, currently estimated at more than 300 million, amid a Government-led push to move to digital avenues of payments as part of the ‘Digital India’ initiative.

Starting off as a mobile recharge platform in 2010, Paytm has moved on to set up an e-payment and ecommerce business, competing with the likes of Walmart-run Flipkart and Amazon India. As part of investment, Todd Combs, Berkshire’s investment manager, has joined the board at Paytm. The American group’s capital infusion in One97 follows a spate of investments in the firm by Chinese and Japanese entities. In March 2017, Paytm had received US$200 million from an investor party led by China’ Alibaba Group. Similarly in May 2017, Japanese conglomerate SoftBank Group had invested US$1.4 billion.

Investment into Paytm has continued this year with SoftBank and Alibaba pledging around US$450 million in April. India’s retail space has emerged as one of the most promising investment avenues worldwide with the sector expected to grow by 60 per cent to reach US$ 1.1 trillion by 2020, on the back of improving affordability and increased digital connectivity. Meanwhile, ecommerce sales are expected to reach US$120 billion by 2020 from US$30 billion 2016, which has generated great amount of investor interests. To encourage investors, the Government has allowed up to 100 per cent FDI in online retailing.

Besides the funding, Paytm aims to use Berkshire’s experience in financial services as the Indian company builds its own banking and wealth management operations targeting over 500 million Indians with Internet connections. It is also expanding into booking and ticketing services. Mr Combs said that the Berkshire was “impressed by Paytm” and “excited about being a part of its growth story, as it (Paytm) looks to transform payments and financial services in India.” While Mr Buffett was not personally involved in the transaction, in May 2018, he had expressed optimism in the global payments sector.

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