It’s nothing short of a biblical tale. Paytm*, India’s largest digital payments company, has drawn three wise men from lands afar to shower it with gifts.
First came the Chinese king, Alibaba. It presented Paytm with the Chinese digital payments playbook. Japanese behemoth SoftBank was next, bearing the single largest cheque any Indian tech company had seen until then. And now, investment firm Berkshire Hathaway, led by billionaire investor Warren Buffett, has made an investment of about $300 million in Paytm’s parent company—One97 Communications Ltd. Berkshire’s investment marks the first time that any large US investor—much less a legendary firm like Berkshire—has taken a position in an Indian fintech company.
This is just one of a few firsts.
It is the first time Berkshire has invested in any Indian company, let alone a tech company. It is also the first startup ‘unicorn’ bet it has made anywhere in the world. Even though Berkshire’s investment amounts to the fewest dollars spent among the three major investors, the halo it casts on Paytm has a much stronger glow. After all, Berkshire is not just any investment firm—it is not only one of the biggest companies in the world (ranked fourth in the Forbes Global 2000 list with a market cap of approx $500 billion), but also one of that rare breed of investors who don’t mind taking 100% ownership of the companies that they back and going all-in. With a simple but sharp focus on backing businesses that generate large free cash flows, Buffett and Berkshire have built and maintained a formidable reputation over the past many decades as one of the most astute investors in the world.
While Berkshire made it clear in its statement on Tuesday that Buffet himself has nothing to do with the deal, that might not be a bad thing in itself. While it robs Paytm of some bragging rights, the fact that Todd Combs led this deal is a much bigger win in practical terms. 45-year-old Combs is widely considered a successor to 87-year-old Buffet and, in a sense, represents the yin to Buffett’s yang when it comes to tech investments. If Buffet is a technophobe who famously passed on investing in Amazon and Google, it is his investment manager duo of Todd Combs and Ted Weschler who have taken the lead in charting a new course for Berkshire by picking up significant stakes in tech leaders such as Apple.
This deal is significant not just for Paytm but for India fintech at large, which has largely been overlooked by US investors thanks to the e-commerce frenzy. This could soon change with Berkshire’s investment. Indian fintech generated close to 29% returns on investment, the highest worldwide, according to a report released by the City of London Corporation in January 2018.
While the deal is significant, it might also seem like a strange one for a couple of reasons.
