Minority Stock Positions

Berkshire Hathaway’s Paytm Investment Ends in a $140 Million Loss

(BRK.A), (BRK.B)

Berkshire Hathaway’s foray into India’s payment platform, Paytm, has concluded on a sour note, as the conglomerate exits its position with a substantial $140 million loss.

Back in 2018, Berkshire made a strategic investment by acquiring a stake in One97 Communications Ltd, the parent company of Paytm.

In a recent development, Berkshire opted to sell its stake for $164.7 million (13.71 billion rupees) through a bulk deal on Friday. Notably, this investment reflected a departure from the traditional investment strategies championed by Warren Buffett, who has historically been averse to technology stocks, save for his large position in Apple.

The Paytm investment was orchestrated by Berkshire portfolio manager Todd Combs, signaling a potential shift in the next generation of Berkshire’s investment management towards a more diverse approach.

Expressing optimism at the time of the investment, Combs stated, “I have been impressed by Paytm and am excited about being a part of its growth story, as it looks to transform payments and financial services in India.” Unfortunately, the anticipated success of the venture did not materialize as Paytm encountered hurdles early on.

In 2020, Paytm faced a setback when it was removed from Google’s Play Store for violating gambling policies. The Play Store’s prohibition on unregulated gambling apps, including online casinos facilitating sports betting in India, led to Paytm’s removal. The challenges persisted into 2021 when Paytm’s initial public offering (IPO) underperformed expectations.

During its stock market debut, Paytm’s share price plummeted by 26 percent, with intraday trading pushing the stock down as much as 28 percent from its issue price. This turn of events underscores the volatility and challenges present in the dynamic fintech landscape, demonstrating that even strategic investments made by established entities like Berkshire Hathaway can face unforeseen obstacles.

© 2023 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell a stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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