Warren Buffett's Berkshire Hathaway exits PayTM with Rs 800-crore haircut

Berkshire Hathaway, the renowned investment firm led by Warren Buffett, has decided to exit its investment in One97 Communications Ltd, the parent company of Indian fintech giant Paytm. The transaction, executed through a large block deal, resulted in a loss exceeding Rs 800 crore, as disclosed by exchange data on Friday.

Buffett’s exit from his only investment in India comes days after the Reserve Bank of India tightened consumer lending norms, necessitating higher capital buffers for banks and shadow banks, including Paytm. As per information made available to the exchanges, Berkshire Hathaway offloaded its entire stake in Paytm, amounting to 1.56 crore shares or 2.5 per cent of the equity, for nearly Rs 1,370 crore at a share price of Rs 877.29.

This move comes five years after Buffett's initial investment of nearly Rs 2,200 crore ($300 million) in 2018, acquiring a 2.6 per cent stake in Paytm. At that time, the fintech company was valued at $10-12 billion, and the deal made news as it was Berkshire Hathaway's sole investment in India.

The investment, however, did not unfold as anticipated. While Paytm's valuation initially rose to $16 billion, the company's IPO later faced significant setbacks, becoming the worst-performing large IPO globally. Subsequently, Paytm's stock sharply declined, plummeting to a 75 per cent discount on its IPO price. Despite a partial recovery in the stock price, Berkshire Hathaway opted to cut its losses and divest, incurring a loss of Rs 800 crore.

This exit marks an unusual development for Berkshire Hathaway, known for its long-term investment strategy, with Buffett famously stating, "Our favourite holding period is forever." The decision to divest from an Indian startup within five years highlights the challenges and uncertainties that even the most esteemed investment firms face in the dynamic world of startups.

Despite being in the spotlight following the RBI's tightening of consumer lending norms, Paytm was included in the MSCI Global Standards Index, adding a layer of international recognition to the company. As of Friday’s closing trade, share prices for One 97 Communications Ltd settled at Rs 895 apiece, reflecting a 3.08 per cent decrease on the NSE.

The day's trading session saw the stock opening at Rs 920 and hitting an intra-day low of Rs 877.15. While Paytm's share price has shown a notable year-to-date gain of more than 68 per cent, the one-month return on the stock stands at a negative -2.3 per cent. This development underscores the volatile nature of the Indian fintech market and the challenges investors face navigating this landscape.