EDINBURGH — Warren Buffett is arguably the world’s most successful investor, producing returns above the S&P 500 average through his investment trust-like company year in and year out. But he’s also very conservative, opting for companies with large moats and shying away from new business models. Lately, though, Buffett has developed an appetite for tech companies. His Berkshire Hathaway has also been scouring in countries previously off the radar, in particular India, where the financial service sector is expected to grow exponentially. Some analysts argue, however, that India’s start-up scene is becoming overheated. Berkshire Hathaway is in the BizNews portfolio. – Jackie Cameron
By Saritha Rai
(Bloomberg) – Berkshire Hathaway Inc. bought a stake in the company behind Paytm, India’s biggest digital-payments brand, in the conglomerate’s first foray into the country’s startups.
Berkshire is set to acquire 3 percent to 4 percent of One97 in a deal that values the target at more than $10 billion, the people said, asking not to be identified because the discussions are private. Warren Buffett, Berkshire’s chairman and chief executive officer, wasn’t directly involved in the investment in One97 Communications Ltd., his assistant, Debbie Bosanek, said Monday in an email. Bosanek declined to comment on the size of the investment.
One97, founded by billionaire Vijay Shekhar Sharma, runs the Paytm brand and is the leading player in India’s booming digital-payments market. Berkshire joins a high-profile group that’s 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 PricewaterhouseCoopers LLP partner in India. “Financial services reach only the top 10 to 20 percent 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. Mint reported on talks for a deal earlier 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,” Sharma said in a 2016 profile.
He’s ridden that momentum to prominence in India’s technology field. India’s digital-payments industry is forecast to reach $1 trillion by 2023, from about $200 billion now, according to Credit Suisse Group AG.
One97 owns 49 percent 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 considered an 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 sizable investments in American Express Co., Wells Fargo & Co. and Bank of America Corp.
“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,” Arora said.
The Berkshire investment comes as some critics question whether India’s startup scene has become overheated, with several recent multibillion-dollar investments boosting the value of such companies.