Paytm Parent Approves $300 Mn Investment From Berkshire Hathaway

In a step closer to officially become a portfolio company of US-based investment firm Berkshire Hathaway, Indian digital payments decacorn Paytm’s parent company One97 Communications has reportedly approved the investment of $300 Mn from Berkshire.

The documents from the Registrar of Companies show that in lieu of the investment Berkshire will subscribe to 1.7 Mn equity shares of Paytm.

The board has also resolved that Paytm founder Vijay Shekhar Sharma, chief finance officer Madhur Deora and senior vice-president of finance Vikas Garg as those responsible for negotiating this deal on behalf of the company.

The investment comes as first for Berkshire in an Indian company. Berkshire has now confirmed $300 Mn investment acquiring 1.7 Mn shares for $176.18 per share. The company has taken a 2.9% stake in Indian payments giant. 

Vijay Shekhar Sharma had announced the deal in a blog post saying that US-based investment firm Berkshire Hathaway is now a part of Paytm’s journey.

Berkshire Hathaway joins Ant Financial, SoftBank, Alibaba, and SAIF Partners as key shareholders in Paytm.

As part of the deal, Todd Combs, investment manager, Berkshire Hathaway has joined Paytm’s board of directors, which also includes Pallavi Shroff and Mark Schwartz as independent directors.

Earlier, reports had surfaced that Buffett, through his US-based holding company Berkshire Hathaway is in talks to pick up a 3-4% stake in the company through a primary subscription of shares for about $286.81 Mn-$358.37 Mn (INR 2,000-2,500Cr) in One97 Communications.

It was being speculated that the deal could value the company at about $12 Bn.

Paytm: A Success Story

The Noida-based company has recorded 200 Mn customers and a gross transaction value (GTV) of $20 Bn (March 2018), registering over 1 Bn transactions per quarter.

With a valuation of $10 Bn (as of January 2018), Paytm, which started out with digital payments, has been rapidly expanding its portfolio. It has expanded to ecommerce with Mall, started its own Payments Bank, and has also ventured into event ticketing services, wealth management, insurance and gold services.

Here’s a quick update on happenings at Paytm:

• The company recently partnered with SoftBank and Yahoo Japan’s newly launched digital payments company PayPay to expand to Japan
• Paytm has also started offering forex services for the top 20 international currencies and may also enter cross-border remittance services.
• The company is looking to raise funds to build a new retail model to equip shopkeepers with technology, logistics, and marketing capabilities.
• Paytm is testing using the facial recognition feature for unlocking the payments application, and plans to extend this feature to allow customers to pay at merchant outlets in a blink of an eye
• Paytm Labs led by Harinder Takhar is working on a mechanism to determine the “credibility score” of a person seeking a loan from the bank
• Began operations of mutual fund platform, Paytm Money with 850K users

Paytm as an entity is targeting multiple markets through its portfolio services.

The Indian ecommerce industry is currently worth $200 Bn while the digital payments industry is expected to grow five-fold to reach $1 Tn by 2023, as predicted by Credit Suisse.

As Berkshire joins Paytm in its growth in India, the company’s global expansion looks promising.

[The development was reported by ET.]

Update: September 27, 6:05PM
The story has been updated to include that Berkshire Hathaway has confirmed $300 Mn in One97 Communications, the parent company of Paytm, acquiring 1.7 Mn shares at $176.18 per share for 2.9% stake.

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