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Updated: Paytm confirms Berkshire Hathaway investment

Update: One97 Communications, which owns Paytm, has confirmed that Berkshire Hathaway has made an investment in the company, via a blog post. It also announced that Todd Combs, an Investment manager at Berkshire Hathaway, has joined its board of directors.

Paytm Founder & CEO Vijay Shekhar Sharma said that Berkshire’s experience in financial services, and long-term investment horizon will be a major advantage for his company.

Speaking to ET NOW, Sharma said that Berkshire expressed an interest to invest an even larger amount in Paytm. However, it failed to materialise given the lack of space to invest in the company. When quizzed on the Berkshire Hathaway’s valuation of Paytm, Sharma, while not revealing the exact number said that, it is ‘handsomely higher’ than the Softbank (valuation).” He also said that there was no discussion on any future investments from Berkshire in Paytm.

Sharma credited Mark Schwartz, a member of Paytm’s board of directors, for Berkshire choosing to invest in the company.

Earlier in the day: Berkshire Hathaway has made an investment in One97 Communications Ltd, Paytm’s parent company, reports Reuters. Debbie Bosanek, assistant to Warren Buffett, Chairman and CEO of Berkshire Hathaway confirmed the deal, which will mark the company’s first investment in an Indian firm. MediaNama has reached out to both the companies for a comment, and will update this report when we hear from them.

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While no details of the investment were revealed by either of the companies, reports suggest that Berkshire will acquire a 3-4% stake in the Indian firm for $300-350 million. The deal reportedly values the homegrown payments company at over $10 billion.

According to reports, both the companies were in talks since February, but an agreement was only reached recently. The deal is expected to be announced within the next two weeks, the report adds. Berkshire will now join the likes of Japan’s SoftBank Group and China’s Alibaba Group Holding as Paytm’s backers.

This is not the Berkshire’s first foray into India as the Warren Buffet owned company set up an insurance business in partnership with Bajaj Allianz in 2011. However, it exited the business and the country within two years, owing to a lack of profitability among other reasons. Given the outlook on digital payments in India and Paytm’s position within that ecosystem, Berkshire will in all likelihood have a better outing this time around.

Payments is getting competitive in India

Paytm will hope to use the fresh funding to ward off competition against arch rivals Flipkart-owned PhonePe and Google’s Tez. Moreover, the digital payment ecosystem is only likely to get even more competitive in the country given the inevitable arrival of WhatsApp’s payments. In such a scenario, coupled with its’s expansion drive, any investment in the company will only strengthen its cause.

It is important to recall that the Reserve Bank of India has barred Paytm Payments Bank from enrolling new customers on its platform from 20 June, due to compliance issues over its know-your-customer (KYC) norms. It remains unclear on how long the payments company will be barred from initiating new customers. RBI reportedly also asked the company to sack its Payments Bank CEO Renu Satti due to her “inability to lead the banking services” at the company, however it declined these reports.

Paytm’s recent developments

  • Last week, One97 Communications partnered with Alibaba to launch its artificial intelligence (AI) cloud computing platform Paytm AI Cloud in India.
  • Earlier this month, Paytm acquired Bengaluru based smart-savings management startup ‘Balance.Tech’ for an undisclosed sum to possibly launch a new mutual funds platform dubbed Paytm Money.
  • We also reported earlier this month that Paytm is working on the launch of its new mutual funds platform dubbed ‘Paytm Money.’
  • In July, the company launched a new digital payments service in Japan in collaboration with SoftBank, after Canada, where the company has a bill payments application. In the same month, Paytm Mall also announced the appointment of four new executives its senior management team, including one to launch and expand an international business.
  • In the same month, Paytm launched a Forex service, for currency exchange of 20 top international currencies on its platform.
  • Last month, Paytm Mall raised $200 million from SoftBank in a new round of funding.
  • In June, One97 Communications Ltd acquired Delhi-based technology startup Cube26 for an undisclosed amount.

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