Berkshire Invests $356 Million in Paytm Parent Company

Holding firm Berkshire Hathaway Inc. just made its first direct investment in India with digital payments firm Paytm, as the US conglomerate ventures into the financial payments industry.

Berkshire confirmed its acquisition of a stake worth ₹25 billion ($356 million) in Paytm’s parent company One97 Communications Ltd. and said Chairman and Chief Executive Warren Buffett was not personally involved in the transaction.

It was reported that Todd Combs, one of Berkshire’s key fund managers, is leading the Paytm deal.

Combs, who have been seen as a potential chief investment officer at the firm, is also in charge of Berkshire’s efforts to set up a healthcare joint venture with online retail titan Amazon.com Inc. and investment group JPMorgan Chase & Co.  

Earlier reports stated that Berkshire was planning to invest between ₹20 billion to ₹25 billion and pick up a 3 to 4 percent stake in a deal valuing Paytm at over $10 billion.

Uncommon Shift of Strategy

The deal not only marks Berkshire’s first direct investment in India, but also marks a strategy shift that is rarely seen from the Omaha-based firm that has traditionally invested in companies coming from the consumer, energy, and insurance industry.

Under pressure to find investments and reduce its huge stash of money worth $108.6 billion, Berkshire had showed signs of interest in the financial payments sector in May, saying the industry was big deal around the globe and that several companies were trying to reinvent the area.

The financial services space makes up 40.5 percent of Berkshire’s portfolio. Next to iPhone-maker Apple Inc., its largest holding, Berkshire has 12.8 percent invested in US bank Wells Fargo & Co. as its second biggest holding and Bank of America Corp. (BofA) at 9.79 percent as its fourth largest holding.

The investment offers substantial support for Paytm which has grown to become India’s largest mobile commerce platform in just eight years of its business.

Paytm is already backed by well-known companies including Japanese tech investor SoftBank Group Corp., Chinese e-commerce giant Alibaba Group Holding Ltd., and its financial services division Ant Financial Services Group.

Alibaba and Ant Financial together own around 40 percent of One97, following a $680 million investment in September 2015, which valued the Paytm’s parent company at about $3.4 billion.

SoftBank followed suit, investing $1.4 billion in the online payments group for a 14.2 percent stake and some existing shares. The investment had valued Paytm at around $7 billion.

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