Berkshire Hathaway Inc., an American multinational holding company has decided to invest Rs 2500 crore ($356 million) in digital payments and e-commerce firm Paytm. Famous investor Warren Buffett is the chairman and CEO of Berkshire Hathaway. The company has stayed away from making large investments in technology companies for long but the changing times have put a pressure to reinvent the investment strategy. This is the first ever direct investment by Berkshire Hathaway in India, the company is looking for fresh investment venues to burn 108.6 billion dollar stockpile of cash. Paytm seeks to expand operations in e-commerce to take on Amazon and Flipkart.
Paytm was looking to raise 2,200- 2,500 crore ($300-350 million) at a valuation of about $10-12 billion, since February. The deal took almost 6 months to finalize. Buffett’s key investment deputy, Todd Combs was the man behind the diversification step of Berkshire Hathaway, Buffett himself was not involved in the deal. “This is to confirm that the investment was made and that it was not a transaction in which Mr. Buffett was involved”, a Berkshire Hathaway spokesperson said in a response to an email. The investment by one of the most reputed investment companies in the world will boost confidence in Indian e-commerce and technology companies business. This will also boost the overall investment profile of the country.
The e-commerce market is going through a lot of churn in the last few years. All big international players are jumping into the industry to gain early movers advantage. Paytm itself has investment from Softbank and Alibaba, the Japanese and Chinese tech and e-commerce giants. Through investments from these companies, Paytm has aggressively expanded in the e-commerce market by selling consumer goods, apparel, footwear, smartphones, bus tickets and movie tickets. Paytm Mall is aiming 10 billion dollars of annual gross sales by March 2019 which will make it the third largest e-commerce player in the market within a year of its launch. There are also talks about Google joining hands with Kishore Biyani’s Future retail to form a consortium with Paytm Mall. So, Paytm is most aggressive in expanding in the e-commerce market.
The other players which aim to capitalize on the e-commerce boom are Reliance, Amazon, and Walmart. Reliance is planning to launch a joint venture with Alibaba with an investment of at least 5 billion dollars to take on Amazon and Flipkart. Reliance will certainly integrate in e-commerce retail with Jio operations. Jio plans to capture broadband and mobile internet market and integrate it in the Internet of Things (IoT). So, every consumer electronics item like TV, refrigerator, and mobile phones will be connected to Jio internet which will help in collecting data on consumer behavior and offer customized products. In almost every board meeting Amazon announces a new investment in the Indian market. It sees India as the next big opportunity and plans to monopolize the market as it has done in the United States. Recently, Walmart acquired majority stakes in Flipkart for 16 billion dollars to take on Amazon.
India e-commerce, digital payments, and technology companies are now entering in the golden era of growth and expansion. Cut-throat competition between companies to capture the market will benefit the consumer because they will get cheaper products. The next few years are going to be an interesting watch for ‘new economy’ of India.