Buffet’s Debut Move
Media outlets report that Buffet is planning to invest in Paytm, a foremost mobile payments company in India. The news of the move was first circulated by Mint, an Indian Newspaper. Investment in this tech firm will allegedly stand as Buffet’s first investment in the country and will definitely be done through Berkshire Hathaway.
A source familiar with the transaction reported that both companies have been on the investment deal for a couple of months for an investment of roughly 25 billion rupees (equivalent to $360 million). The source also noted that an announcement of the deal could be made any moment from now. However, Paytm has refused to comment on the existence of the deal.
This debut investment in an Indian firm will allegedly launch Buffet into a rapidly developing market which a lot of top players from Silicon Valley are already taking steps to gain from. For instance, Google reportedly launched Tez, its mobile payments application last year in India. Similarly, the Facebook-owned mobile messenger, WhatsApp is allegedly looking to test run a service like Tez’s.
According to a director of research at Gartner, DD Mishra, a lot of momentum is already in existence. He added that the market will get extremely competitive and one would need to have sufficient financial means to be able to survive for an extensive duration.
Paytm is the biggest online payment firm in India and boasts of over 300 million customers. However, Indians still love to carry out transactions using cash, and so most of the businesses carried out in the country still have rupee coins and notes as the primary transactional means. However, Narendra Modi’s decision to place a ban on about 86% of the country’s cash sometime in 2016 provided a boost to different online wallets including Paytm which was able to get about 10 million users within one month.
Asides being the mobile payments market leader, it has also begun an online retail outlet known as Paytm Mall to compete with Amazon and the firm Flipkart purchased by Walmart earlier in the year.
Analysts at Fitch Solutions, Kenny Liew, noted that the considerable young population in India coupled with an increasing disposable income makes India a highly promising target for its online shopping and mobile payments. Liew further noted that those practices would lead to increased spending. That would, in turn, lead to an increase in e-commerce sales volumes and the extent of payments which Paytm is expected to capture.
In a previous interview, Buffet commented on his bullishness on the country highlighting the market’s incredible potential.
As noted by a Finance professor at Indian School of Business, Vaidyanathan Krishnamurthy, based on the fact that Buffet is deemed a major investor with investments that span for a minimum of a decade, his investment in Paytm stands as a clear signal that the firm would maintain relevance over that period.
Buffet is known to be reluctant about investing in tech. He reportedly avoided investing in tech stocks during the rise of the dotcom industry as he stated that he had no clear understanding of the business models of the companies. However, he recently invested a huge sum in Apple but completely pulled out of IBM.
A source abreast of the transaction noted that the primary rationale behind Buffet’s investment in Paytm is that he believes that there is a considerable upside in making an investment in the rapidly growing mobile as well as the cashless economy in the country. Experts have opined that his investment in an Indian tech business is a major plus for the entirety of tech startups in the country.
Paytm was founded by Vijay Shekhar Sharma. The mobile payments firm has been at the receiving end of the attention of Asia investors and has gotten funds from China’s Alibaba and Japan’s Softbank. Paytm offers different services including bill payments, mobile and payments and its recent online marketplace.
In 2017, Paytm’s valuation was $10billion which made it one of the most valuable startups in India. With the Berkshire investment, it is expected that the valuation will stay unchanged. Ajit Jain, the vice chairman of Berkshire Hathaway’s insurance operations was reportedly Buffet’s link to the Indian market. Jain joined Berkshire in the 1980s and is deemed one of the deputies closest to Buffet.