Warrant Buffet's Berskshire Hathway's First Investment in India
US-based Berkshire Hathaway on Monday confirmed that it has made an investment in Paytm’s parent firm One97 Communications, ETNow reported.
The company led by legendary investor Warren Buffett confirmed to the channel that the investment has been made. Berkshire, however, clarified that it was not a transaction in which Warren Buffett was involved.
ET had reported this morning that Berkshire was in talks to invest about Rs 2,000-2,500 crore in the Paytm parent firm, n what could be the first direct investment in India by the legendary investor.
The development comes as Paytm is diversifying its business across financial services and offline payments.
Paytm also counts Alibaba Group Holdings and SoftBank as major backers.
Berkshire Hathaway Inc. is an American multinational conglomerate holding company headquartered in Omaha, Nebraska, United States. The company wholly owns GEICO, Dairy Queen, BNSF Railway, Lubrizol, Fruit of the Loom, Helzberg Diamonds, Long & Foster, FlightSafety International, Pampered Chef, and NetJets, and also owns 38.6% of Pilot Flying J, 26.7% of the Kraft Heinz Company, and significant minority holdings in American Express (17.6%), Wells Fargo (9.9%), The Coca-Cola Company (9.4%), Bank of America (6.8%), and Apple (5.22%). Since 2016, the company has acquired large holdings in the major US airline carriers, and is currently the largest shareholder in United Airlines and Delta Air Lines, and a top three shareholder in Southwest Airlines and American Airlines. Berkshire Hathaway has averaged an annual growth in book value of 19.0% to its shareholders since 1965 (compared to 9.7% from the S&P 500 with dividends included for the same period), while employing large amounts of capital, and minimal debt.
The company is known for its control and leadership by Warren Buffett, who serves as chairman and chief executive, and Charlie Munger, the company's vice chairman.
The news is making waves because this would reportedly also be Buffett's first investment in a privately-held company that is yet to turn profitable, underlining the potential he sees in India's technology market. Indeed, regulatory documents show that One97 posted a loss of Rs 899.6 crore in the 2016-17 fiscal. However, the company fared significantly better than the previous year, when it had reported a loss of Rs 1,496.7 crore. The Registrar of Companies (RoC) filings also show that the company's total income had jumped over 38 per cent to Rs 828.6 crore in FY 17.
Citing another source the daily added that Berkshire Hathaway was "impressed by the scale that Paytm has been able to build in a short period of time" and recognises that tech firms "go through a cycle of losses" before they start making money.
Though the size of the deal has not been finalised yet, the transaction was reportedly discussed at the Paytm board meeting a few weeks ago and could be clinched in the coming weeks, valuing Paytm at over $10 billion. That's a nearly 43 per cent jump in valuation from $7 billion last year when it raised $1 billion from Japan's Softbank Vision Fund. The digital payments major, which also counts China's Alibaba Group Holdings among its investors, had been valued at around $10 billion during the secondary share sale by employees earlier this year.
Sources added that one of Buffet's key deputies, Todd Combs - who is also seen as a potential chief investment officer at the firm - is leading the transaction. If things go to plan, Buffett's backing will give major fillip to Paytm, allowing it to consolidate its market position against the challengers like Flipkart-owned Phonepe and Google's Tez. Furthermore, Facebook-owned WhatsApp Payments and Reliance Jio also have big plans in this space.
In addition, it has been diversifying 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. Apart from its thrust on Paytm Payments Bank Ltd, which also manages its digital wallet, One97 is also looking to launch its mutual fund distribution platform under Paytm Money Ltd. It has reportedly set a target of 20 million customers in the next three years.
Meanwhile, Buffett will be hoping to get second-time lucky on his India bet - Berkshire had forayed with a much fan-fare into the Indian non-life insurance sector as a corporate agent of Bajaj Allianz General in 2011 but was compelled to shut shop two years later due to lack of profitability and laws constraining foreign stake in companies.
#wtism, #results, #earnings, #q1result, #q1earnings, #q1, #stockmarket, #shareprice, #popular, #trending, #sharemarket, #q1results, #results, #multibagger, #Earnings #q1fy19, #Q1Results, #Q1 FY 19, #Results, #bonus #dividend #recorddate #profit, #loss, #earninstockmarket,