Back when the Oracle of Omaha, Warren Buffett, bought his first stock in 1941, India was still under the British rule. In the 77 years since then, Buffett has racked up a net worth of $85 billion by trading stocks around the world. In all that time and in all those investments, Buffett and his investment group Berkshire Hathaway haven’t invested in India. Not until now that is.
On Monday, Warren Buffett’s assistant Debbie Bosanek confirmed that Berkshire Hathaway has made an investment in One97 Communications, the parent company of Paytm. Although the company, built by Vijay Shekhar Sharma, is not a direct pick of the 87-year old Buffett.
Bosanek, who did not disclose any other details about the deal, said that Buffett was not involved in the transaction. “We feel both excited and humbled by this endorsement. Berkshire’s experience in financial services, and long-term investment horizon is going to be a huge advantage in Paytm’s journey of bringing 500 million Indians to the mainstream economy through financial inclusion,” said Sharma in a statement on Tuesday.
While neither Paytm nor Berkshire Hathaway revealed the size of the deal, multiple reports based on unnamed sources claimed that the Omaha, Nebraska-headquartered company invested $300-$350 million which would value the Indian company at $10-$12 billion. The reports stated that the deal was done through a primary subscription of shares. The quantum of investment would give Berkshire Hathaway roughly 3-4% stake in the Noida-based One97 Communications.
Founded in 2010, Paytm has evolved from being a digital wallet to India's largest digital payments firm, with a payments bank license. The businesses under its umbrella have expanded to e-commerce through Paytm Mall, and even wealth management through Paytm Money. The digital wallet, which is used to pay everything from taxi-bills to food bills from restaurants, has nearly 300 million users according to industry estimates. Other key investors in the company include Softbank, SAIF Partners, Alibaba Group and Ant Financial.
It was 47-year old Todd Combs, an investment manager at Berkshire Hathaway who led the investment. He also joins the board of One97 Communications which includes the likes of Pallavi Shroff and Mark Schwartz as independent directors.
“I have been impressed by Paytm and am excited about being a part of its growth story, as it looks to transform payments and financial services in India,” Combs said in a statement.
Combs, who joined the company in 2011 and relocated to Omaha soon after, is known to be close to Buffett. He manages close to $12 billion for Berkshire and is tipped to be the Chief Investment Officer once the legendary Buffett retires.
One of Combs’ key moments at Berkshire Hathaway was leading the firm’s largest ever acquisition of an industrial company Precision Castparts, for $34 billion in 2015. Combs is also said to be the man who brought together Buffett, Jeff Bezos, the billionaire founder of Amazon, and Jamie Dimon, CEO of JP Morgan Chase for a yet-to-be named healthcare venture, earlier this year.
The investment in Paytm comes as a departure from Berkshire’s long-time strategy of not investing in loss-making privately held companies. According to the latest filings with the Registrar of Companies, One97 Communications made a loss of Rs 1,604 crore in 2017-18, 78% more than the Rs 899 crore loss it reported in the previous fiscal.
Although, in an interview with an Indian television channel last year, Buffett had said that he is keen to invest in India in the right company.
“If you’ll tell me a wonderful company in India that might be available for sale, I’ll be there tomorrow. I think the potential for India is incredible. It’s a lot of people, a lot of buying power,” he had said inthe interview.
Berkshire’s first ever partnership in India, which did not involve any transfer of equity, was with Bajaj Allianz in 2011. Berkshire was selling insurance from Bajaj Allianz online. But with laws restricting foreign ownership, the partnership soon ended. Buffett said at the television interview in India last year that Berkshire would like to own 100% of any business that they run.
The stock markets responded positively to the developments. On the NYSE, Berkshire Hathaway’s shares closed 1.2% higher at $210.51 a piece on Monday. This was after a brief dip before the investment was confirmed.