Warren Buffett pockets $16 million in Paytm IPO

 

Berkshire Hathaway sells 1.4 million shares; continues to hold 2.41% stake in One97 Communications.

Berkshire Hathaway, the Warren Buffet-owned investing behemoth, generated a $16 million profit on the sale of 1.4 million shares in Paytm's initial public offering, which plunged 27% on the first day of trading.

In September 2018, Berkshire invested $300 million (2179 crore) in Paytm's parent, One97 Communications, for a 2.6 percent ownership (17.02 million shares) in an investment round that valued the start-up at $10 billion. Buffett's first investment in India was undertaken through BH International Holdings.

The holding company's average cost of acquisition in the digital payments start-up is 1,279.7 per share, implying that the 1.4 million shares, valued at 179 crore ($24 million), were offloaded for 301 crore ($40 million) at 2,150 per share, the top end of the price band, netting Berkshire 122 crore ($16 million) in gains.

While institutional and individual investors have seen their investments suffer as the stock dropped 27% to 1,564.14 on the BSE on Thursday, the selling investors, including Berkshire, are still sitting on significant gains on their remaining shares. Berkshire's present holding of 2.41 percent (15.6 million shares) is still worth 2,443 crore ($330 million) against its acquisition cost of 1,999 crore ($278 million) based on Paytm's closing market cap of 1.01 lakh crore on Thursday.

One97 is ranked No. 34 in Berkshire's Top 50 holdings in terms of overall ranking, but it outperforms Berkshire's $276 million position in Sirius, a US-based satellite radio and online radio services provider. Berkshire's investment in StoneCo, a Brazilian digital payments business, is also less than Paytm's, but the size of the holding is significantly smaller. StoneCo's stock, on the other hand, has dropped 30% in recent sessions after the fintech firm recorded a net loss of reais 1.26 billion ($230 million) in the third quarter of CY21 due to a write-down in the fair value of investments.

Incidentally, Combs has been the driving force behind Berkshire's technology bets, including the recent investments in Snowflake and StoneCo.