Known for his smart investment moves, Warren Buffet is set to buy a small stake in One97 Communications Ltd, the parent of Paytm. Reports have revealed that Berkshire Hathaway is in talks to invest about Rs 2,000-2,500 crore at a valuation of $10-12 billion. Note that Paytm was valued at around $10 billion earlier this year. Interestingly, this will be Buffett’s first investment in an Indian company.
Paytm has been already funded by China’s Alibaba Group and Japan’s SoftBank. It has been backed by SAIF Partners and MediaTek also. “Berkshire is in talks to pick up a 3-4% stake in the company and it is being done through a primary subscription of shares,” said one of the sources.
The deal is expected to be announced within the next two weeks. Todd Combs, one of Berkshire’s key fund managers, is leading the transaction. This will be an unusual investment for Buffett, as he usually invests in established companies. Some of his most known investments include Coca-Cola, IBM, and Wells Fargo. Berkshire hasn’t had much success with startups — it tried to buy some stake in Uber, but the deal wasn’t finalized.
Buffett had set up Berkshire India in 2011 in partnership with Bajaj Allianz to sell insurance. However, it soon exited the partnership. Paytm’s growth after the demonetization is the prime reason for investors showing interest in the association.
The investment will help Paytm to diversify its business across financial services and offline payments after acquiring customers through services such as mobile recharges, rail and air bookings, movie ticketing and utility bill payments.
This is a very positive sign for Indian startup ecosystem as it might signal to the VC community that India’s startup revolution is here to stay. It will be interesting to see if this deal gets final as Buffett is considered as one of the most reputed investors in the world right now.