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Warren Buffett’s Berkshire Hathaway May Have Just Found An Amazon-Like Opportunity In This Indian Startup

Warren Buffett’s Berkshire Hathaway May Have Just Found An Amazon-Like Opportunity In This Indian Startup

Berkshire Hathaway just placed a big bet on an Indian company that could pose a threat to Google and Amazon in the world’s fastest growing market.

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At Berkshire Hathaway’s (NYSE: BRK.A, BRK.B) 2018 annual shareholder meeting, Warren Buffett fessed up that he made a mistake by not investing in Amazon (NASDAQ: AMZN) and Google (NASDAQ: GOOGL, GOOG).

Now it seems Berkshire Hathaway doesn’t plan to make that mistake again.

On Monday, Berkshire announced that it had taken a stake in One97, the owner of India’s largest digital payments firm, Paytm.

While the details of deal have not been disclosed, reports say that Berkshire spent around $360 million on a 3-4% stake in Paytm, valuing the company at over $10 billion.

Paytm, which is already backed by Japan’s SoftBank and Chinese tech giant Alibaba (NYSE: BABA), is India’s largest mobile commerce platform.

Two years ago, Paytm saw a massive surge in traffic after India demonetized its high-value notes, amounting to 86% of the cash in circulation, in an effort to crackdown on the country’s shadow economy, forcing people to turn to cashless and digital payments.

Paytm had a user base of around 115 million before the demonetization, and has since crossed the 300 million user mark. The next closest e-wallet competitor in the country, MobiKwik, has around 100 million users.

The company also runs an e-commerce firm, Paytm Mall—the third largest e-commerce company in the country—as well as the Paytm Payments Bank. It’s also now getting into the cloud computing business.

These businesses are a good move for Paytm. India is the world’s fastest growing market and the rising penetration of smartphone and internet use there is playing a vital role in growth in the mobile payments, online shopping, and cloud sectors.

It also presents a massive growth opportunity for the company as the payments sector alone is expected to reach $1 trillion in India by 2023.

Such growth potential was enough to lure Berkshire Hathaway.

2011 marked Berkshire’s first foray into investing in India when it became a corporate agent for Bajaj Allianz General, which sold insurance packages online. Berkshire made an exit in 2013 due to excessive regulations and a dull consumer response. But that didn’t quiet Warren Buffett’s appetite for having a presence in the country.

In an interview with ET Now in May 2017, Buffett said “If you tell me a wonderful company in India might be available for sale, I’ll be there tomorrow,” adding that “the potential for India is incredible.”

Google parent, Alphabet, WhatsApp Pay owner Facebook (NASDAQ: FB), Amazon, and PayPal (NASDAQ: PYPL) are all trying to gain a presence in India.

As the leading digital payments company in India, Paytm has a powerful network effect, which will be difficult to compete against. And with Berkshire’s new investment, the growth prospects of these other companies may be significantly diminished in the country.

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