Arguably one of the greatest investors Warren Buffett’s Berkshire Hathaway has received a 68% return on investment during Paytm’s IPO.
In 2018, Berkshire Hathaway invested around $300 Mn in Vijay Shekhar Sharma-led Paytm. On the day of Paytm’s IPO, Warren Buffett held $491 Mn worth of stock.
One97 Communications’ Paytm went for the country’s largest initial public offering worth INR 18,300 Cr earlier this week. The IPO was oversubscribed in the afternoon of the third day. One of the major reasons behind Paytm’s IPO oversubscription was the healthy response from institutional investors.
Over the last decade, Vijay Shekhar Sharma-led Paytm has garnered support from some of the marquee investors around the globe. These include Jack Ma’s Ant Financials, Japan’s SoftBank, South Africa-based AGH Holdings and Canada’s Discovery Capital.
Breakdown Of Berkshire Hathaway’s ROI:
In 2018, Warren Buffett, the chairman and largest shareholder of Berkshire Hathaway had invested INR 2,179 Cr in One97 Communications for a total of 1,702,713 equity shares. Berkshire Hathaway had bought each equity share for INR 12,797.46 (~ $300 Mn).
Berkshire Hathaway got 2.8% stake in Paytm against the investment.
Ahead of the IPO, Paytm had split its shares in 1:10 ratio, thus handing over more shares to its investors without receiving any money. Berkshire Hathaway, which held 1,702,713 equity shares in 2018, now holds 17,027,130 equity shares for INR 2,179 Cr investment. So at this point, each share price of Berkshire Hathaway would be INR 2,179 Cr/ 17,027,130 (equity shares) which would be = INR 1,279
If we calculate the difference in the equity share price, we will know the Return on Investment of Berkshire Hathaway from Paytm’s record IPO.
INR 2,150 – INR 1,279 / INR 1279 x 100 = 68%
During the IPO, Buffett’s Berkshire Hathaway sold 14,03,581 shares (8.24%). It sold the shares at a price band of INR 2,150, meaning it received a total of INR 301 Cr.
The valuation of the remaining shares held by Berkshire Hathaway, even after selling its 8.24% in IPO, would be INR 3,359 Cr.
It is worth noting that Berkshire Hathaway still holds 15,623,549 equity shares worth INR 3,359 Cr in Paytm.
If we further calculate Berkshire Hathaway’s ROI on the remaining equity shares, it would be:
INR 3,359 Cr – INR 2,179 Cr
———————————- X100 = 54%
INR 2,179 Cr