Berkshire Hathaway, the Warren Buffet-owned investment powerhouse, has made a profit of $16 million on its sale of 1.4 million shares in the IPO of Paytm, which tanked 27% on the day of listing.
In September 2018, Berkshire had invested $300 million (₹2,179 crore) for 2.6% stake (17.02 million shares) in Paytm’s parent, One97 Communications, in a funding round that valued the start-up at $10 billion. The deal, made through BH International Holdings, is Buffett’s maiden investment in India.
The holding company’s average cost of acquisition in the digital payments start-up is ₹1,279.7 per share, which means the 1.4 million shares, worth ₹179 crore ($24 million), were offloaded for ₹301 crore ($40 million) at ₹2,150 a share, the upper end of the price band, fetching Berkshire ₹122 crore ($16 million), that is, a gain of 68%.
While institutional and retail investors have taken a knock on their investments with the share price falling 27% to end at ₹1,564.14 on the BSE on Thursday, the selling investors, including Berkshire, continue to sit on decent gains on their remaining holdings. Based on Paytm’s closing market cap of ₹1.01 lakh crore on Thursday, Berkshire’s current stake of 2.41% (15.6 million shares) is still worth ₹2,443 crore ($330 million) against its acquisition cost of ₹1,999 crore ($278 million).
In terms of overall ranking in Berkshire’s portfolio of Top 50 holdings, though, One97 sits way down at No 34 but fares much better than Berkshire’s holding in Sirius, the US-based satellite radio and online radio services player, which is valued at $276 million. Berkshire’s value of investment in Brazilian digital payments company, StoneCo, too, is below that of Paytm, but the quantum of holding is much lower. The stock of StoneCo, however, has come off 30% in recent sessions after the fintech company reported a net loss of reais 1.26 billion ($230 million) in the third quarter of CY21, owing to a write-down in the fair value of investments. Incidentally, Combs has been the driving force behind Berkshire's technology bets, including the recent investments in Snowflake and StoneCo.