Warren Buffett's Berkshire Hathaway offloaded its entire stake in Paytm, India's largest digital payment company, often referred to as the "Indian version of Alipay," in a bulk deal on the 24th. Reports indicate that Buffett's company faced a loss of 6 billion rupees (approximately $72 million), marking a 30% investment loss.
According to Indian stock market data, BH International Holdings, fully associated with Berkshire Hathaway, rapidly sold its 15.6 million shares in One 97 Communications Ltd., the parent company of Paytm, as the Indian stock market opened.
The transaction was executed at a selling price of 877.2 rupees ($10.52) per share, bringing in nearly 14 billion rupees (about $164 million) for Berkshire Hathaway. The shares were acquired by Capthall Mauritius Investment and Ghisallo Master Fund LP, with Morgan Stanley's Indian division acting as the exclusive broker for the deal.
Following the transaction, One 97 Communications Ltd.'s stock in the Indian market plummeted by 5%, closing with a narrowed loss of 3.3%, marking its largest single-day drop since October 26. The company, backed by investors like SoftBank, BlackRock, and Alibaba, reported losses last quarter. Investors are hopeful that the company will turn profitable by 2024 as it expands into credit services and its primary payment network.
In September, Paytm's CEO Vijay Shekhar Sharma expressed his willingness to increase his stake in the company, weeks after buying shares from Ant Financial, thereby becoming Paytm's largest single shareholder and strengthening his control over the company.
Berkshire Hathaway's Class B shares rose 0.18% at the close of the U.S. stock market on the 24th, priced at $362.18. Paytm was Berkshire Hathaway's first direct venture capital investment in India, with a $280 million investment in 2018 for a 2.6% stake or 17.02 million shares, at an average purchase price of 1,279 rupees per share, valuing Paytm's parent company at $10 billion. During Paytm's IPO in November 2021, Berkshire Hathaway sold 1.4 million shares at the top end of the IPO price range of 2,150 rupees, netting $36 million, a 68% return.
However, due to the IPO's poor performance, Paytm's stock has been below its IPO price, despite a 68% rise this year, still 60% lower than its IPO price. Reports suggest that Berkshire Hathaway decided to cut its losses and completely exit its position. In this sale, Berkshire Hathaway sold Paytm shares worth 13.7 billion rupees. Considering the reported loss of 6 billion rupees, the investment loss rate is about 30%. Including the profits from the sale during Paytm's IPO, Berkshire Hathaway's total investment loss in Paytm is approximately 5.1 billion rupees, a loss rate of about 27%.
Interestingly, Paytm is not Buffett's only failed investment in the digital payment sector. Public records show that besides Paytm, Berkshire Hathaway also invested in Brazilian digital payment company StoneCo in 2018, facilitated by investment manager Todd Combs. Although StoneCo's stock performed well after its Nasdaq listing in October of that year, tripling in value at one point, it has been on a downward trend since 2021. On Friday, its stock was trading at $14.4 in the U.S. stock market, nearly 54% below its IPO price.
