Berkshire has invested in Paytm

Warren Buffet–owned Berkshire Hathaway (BRK.B) has recently confirmed that it has invested in Paytm’s parent company One97 Communications. The investment amount was not known, but according to sources, Berkshire spent $300 million–$350 million. The company and its subsidiaries have made many investments in a variety of sectors, including manufacturing, insurance, utilities and energy, freight rail transport, finance, and retail.

Berkshire’s investment follows Walmart’s (WMT) acquisition of a majority stake in India-based Flipkart. The move could be Berkshire’s first direct investment in India, thus signaling optimism in the Indian market.

Why Berkshire Hathaway Is Investing in Alibaba-Backed Paytm

Paytm in India

The investment in Paytm will give Berkshire a share in India’s attractive mobile payments market, which is expected to reach $1 trillion by 2023, according to estimates by Credit Suisse. Paytm is expected to use the investment amount to expand and diversify its payments network and build its financial services. Paytm has been growing its business across financial services and offline payments. 

Paytm has a dominant position in India’s digital payments space and has ~150 million users. Its investors include SoftBank, Ant Financial, Alibaba (BABA), and SAIF Partners.

India’s payments market

A majority of the Indian population prefer to use cash as a payment method. However, India’s Prime Minister Narendra Modi is making efforts to bring digitalization. In 2016, the Modi-led government banned high currency notes, which benefited Paytm the most. A lot of the urban population have adopted digital payments and don’t carry much cash with them.

A growing number of smartphone users as well as the availability of low-cost Internet have also boosted the digital payments market and attracted a lot of global players such as Amazon’s (AMZN) Amazon Pay, Google Pay, and PayPal (PYPL). These companies are trying to position themselves in India, an already saturated digital payments market, with domestic players such as ItzCash, CC Avenue, PayU, and Citrus Pay.

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