Popular American business magnate Warren Buffet’s multinational conglomerate Berkshire Hathaway is reportedly in talks to invest about US$286 to $358 million (~ Rs 2,000-2,500 crore) in Paytm’s parent firm One97 Communications, marking his first direct investment in India.
The deal is likely to be announced within the next couple of weeks and will value PayTM at over $10 billion, giving the Noida-based startup more uplift, that already counts China’s Alibaba Group Holdings and Japan’s Softbank as its major backers.
“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 the Economic Times report citing a person familiar with the development.
The report further said that the transaction was discussed at the board meeting of Paytm held a few weeks ago. But a deal, including the size of the investment, has not been finalized yet.
According to a second person cited in the report, Berkshire Hathaway is impressed by the scale that Paytm has been able to build in a short period of time. They realize that technology companies go through a cycle of losses before they start generating cash.
If this deal goes through then this will also be Berkshire Hathaway’s first investment in a privately-held technology company in the world. In the past, Berkshire Hathaway has selectively invested in some publicly listed tech companies, most notably International Business Machines (IBM) Corp. and Apple. Berkshire recently exited IBM, but still owns Apple stock.
One of Berkshire’s key fund managers, Todd Combs, who is also seen as a potential chief investment officer at the company, is leading the transaction, the newspaper reported.
Last month, PayTM conducted 5 billion transactions worth $50 billion in gross transaction value (GTV) on an annualised basis based on its performance in June. According to Registrar of Companies (RoC) filings, PayTM saw total income increase by 38% to Rs 828 crore with losses of Rs 899.6 crore in the year ended March 2017.
In the same month, it was also reported that PayTM is close to announce its new mobile digital payments service for Japan in collaboration with Softbank.
In May, Paytm’s parent, One97 Communication announced that its revenue grew to Rs 829 crore for the financial year 2017, up from Rs 598 crore in the year before, even as its losses narrowed for the same period.
One97 Communications, the parent company owns 49% in Paytm Payments Bank with the remaining stake held by its founder Vijay Shekhar Sharma in his personal capacity as per regulations.
About, Berkshire Hathaway, Warren Buffet promoted MNC traces its roots to a textile manufacturing company established by Oliver Chace in 1839 as the Valley Falls Company in United States’ Valley Falls, Rhode Island. In 1929, the Company merged with the Berkshire Cotton Manufacturing Company established in 1889, in Massachusetts.
Eventually, Buffett owned 31.7% aggregate voting power of Berkshire’s shares outstanding, as of July 2016.
Investments of Berkshire Hathaway
As of March 2017, 65% of Berkshire’s equity securities were concentrated in five companies — American Express Company ($12.0 billion), Apple Inc. ($19.2 billion), The Coca-Cola Company ($17.0 billion), International Business Machines Corporation (IBM) ($11.2 billion), and Wells Fargo & Company ($27.8 billion).
On March 25, 2011, Berkshire Hathaway made its first foray into the Indian insurance sector with its non-direct subsidiary BerkshireInsurance.com in the presence of Warren Buffett himself.
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