Warren Buffett's Berkshire picks up stake in India's Paytm

In a statement, One97 Communications Ltd, which owns the Paytm brand, said US-based Berkshire Hathaway would have a member on the company board in lieu of the investment, but did not disclose the size of the deal or the stake sold.

However, people with direct knowledge of the development said Berkshire could have bought 3-4 per cent stake for about USD 300-350 million (about Rs 2,500 crore), valuing the Indian firm at over USD 10 billion.

The investment has not been made by Buffett in his personal capacity.

Berkshire, which has traditionally invested in companies in sectors like consumer, energy and insurance, joins Japanese giant SoftBank that had last year bought a reported 20 per cent stake in Paytm for an estimated USD 1.4 billion (over Rs 9,000 crore).

Other high-profile investors in Paytm include Jack Ma's Alibaba Group and Ant Financial.

Previously in March 2011, Berkshire had talked of plans to enter the Indian non-life insurance sector as a corporate agent of leading player Bajaj Allianz General. That partnership was wound up two years later due to losses.

This would also be the first investment by the firm owned by Buffett, who turns 88 this week, in an unlisted Indian company that still incurs heavy losses.

Popularly known as the Oracle of Omaha, Buffett has till now shied away from investing in technology companies but may have been lured by forecasts of India's digital-payments industry reaching USD 1 trillion by 2023, from about USD 200 billion now.

Todd Combs, investment manager at Berkshire, has joined the board of directors of Paytm, the statement said.

"I have been impressed by Paytm and am excited about being a part of its growth story, as it looks to transform payments and financial services in India," Combs said.

Paytm founder and CEO Vijay Shekhar Sharma said Berkshire's experience in financial services, and long-term investment horizon, will be a huge advantage in Paytm's goal of bringing 500 million Indians to the mainstream economy through financial inclusion.

According to reports, Buffett had at Berkshire's annual shareholders' meeting, said the financial payments industry is a huge deal globally and that many firms are working to reinvent the space.

Also, the group has been under pressure to seek investment opportunities to utilise the over USD 100 billion cash on its books, he had said.

For Paytm, which has become India's biggest digital payment platform in just eight years of operations, the fresh funding comes as a shot in the arm at a time when it is locked in a bruising war with rivals like Flipkart's PhonePe and Google's Tez.

The competition in the space is set to intensify further when WhatsApp launches its payments services in the Indian market.

WhatsApp has been testing its payments services in India with about one million users and is awaiting regulatory clearances to commence full-fledged operations.

Paytm, which has been aggressively diversifying its business into areas like investment management and e-commerce through various entities, had registered losses to the tune of Rs 899.6 crore in 2016-17.

Its total income, on the other hand, had grown over 38 per cent to Rs 828.6 crore in 2016-17 from the previous fiscal.

The Noida-based company was one of the biggest beneficiaries of the government's demonetisation move in November 2016, that pushed adoption of digital payments across the country.

Since then, Paytm's platform has seen manifold growth in transactions as well as expansion in number of users. It claims to have an annual run rate of 5 billion transactions and USD 50 billion in gross transaction value.

One97 Communications also owns 49 per cent stake in Paytm Payments Bank. The Paytm founder has also started e-commerce business under Paytm Mall that competes with giants like Amazon and Walmart-backed Flipkart.