Bengaluru: Berkshire Hathaway Inc. has agreed to buy a stake in the company behind Paytm, India’s biggest digital payments brand, in Warren Buffett’s first foray into the country’s startups, people familiar with the matter said.
Buffett is set to acquire 3 to 4 per cent of One97 Communications Ltd., valuing the target at more than $10 billion (Dh36.7 billion), the people said, asking to not be identified as the discussions are private. A formal announcement could come in the next few days, the people said.
One97 Communications, founded by billionaire Vijay Shekhar Sharma, runs the Paytm brand and is the leading player in India’s booming digital payments market. Buffett would join a star-studded group who have invested in Sharma’s companies, including Masayoshi Son’s SoftBank Group Corp. and Jack Ma’s Alibaba Group Holding Ltd. and Ant Financial.
“It’s a paradigm shift,” said Dinesh Arora, a partner at PricewaterhouseCoopers LLP in India. “Financial services reach only the top 10 to 20 per cent of India, but technology has the potential of adding a big slice of India’s 1.3 billion people and bringing savings, credit and investments to their smartphones.”
One97 declined to comment while Omaha, Nebraska-based Berkshire Hathaway didn’t immediately respond to a request for comment outside US business hours. Mint reported on talks for a deal earlier on Monday.
Sharma got a huge boost in 2016 after India’s government moved to eliminate most of the nation’s paper money in circulation in a bid to curb corruption. His fledgling startup, a pioneer in the country’s nascent field, saw tens of millions of consumers and hundreds of thousands of businesses sign up for digital services in a matter of months.
“Overnight, we went from a new thing to a must-have,” said Sharma in a 2016 profile.
He’s ridden that momentum to prominence in India’s technology field. India’s digital payments segment is forecast to reach $1 trillion by 2023, from about $200 billion now, according to Credit Suisse Group AG.
One97 owns 49 per cent of Paytm Payments Bank, which leads India’s digital payments market. Online retailer Paytm eCommerce Pvt, also founded by Sharma, shares the brand name with One97 and runs the online retail platform Paytm Mall, selling everything from smartphones to fashion.
Buffett, who turns 88 this week, long focused on value investing and shied away from technology companies because of what he joked were his own “intellectual shortcomings” in understanding the field. But he has adapted in recent years and piled into newer holdings such as Apple Inc. He is said to have considered a $3 billion investment in Uber earlier this year.
Buffett’s Berkshire Hathaway has a penchant for financial services and disclosed in August that he had boosted his stake in Goldman Sachs Group Inc. He also has sizeable investments in American Express, Wells Fargo and Bank of America.
“Fintech is exciting because it dramatically brings down the cost of servicing customers, connecting people even in the remotest parts of India and providing them the same level of customer service as someone sitting in Mumbai,” said Arora.
The Buffett investment comes as some critics question whether India’s startup scene has become overheated. Several recent multibillion-dollar investments have inflated the value of startups.