At the end of August 2018 Berkshire Hathaway and the Indian payment service provider PayTM announced that the American investment legend Warren Buffett will invest USD 300 million in PayTM on the basis of a valuation of approx. USD 11 billion. Even though it is rather a small transaction for Berkshire Hathaway and therefore Warren Buffett is said not to have been personally involved in the deal, this transaction shows the following from our point of view:
India is increasingly becoming the focus of traditional American investors. Like Wallmart, who secured a majority stake in Flipkart in a spectacular transaction in the summer of 2018, Warren Buffett, who is considered to be more conservative in his investment decisions, is now in the picture. It is interesting to note that investors in companies such as PayTM are becoming increasingly international: Next to the Chinese Alibaba now a US American sits on the board of PayTM, which will probably not please the Indian government much, because they think more about how to reduce the influence of international players.
The push to cashless payment transactions that the Indian government is pursuing has opened an exciting race: PayTM is currently in the lead, closely followed by PayPal. However, Amazon (AmazonPay), Google (TEZ), WhatsApp (WhatsApp Payments) and a large number of smaller competitors are also trying to win the favor of users and are engaged in a user acquisition battle, which - how should it be any different in India - is being fought out with massive cash back, discounts and has wonderful consequences for consumers. This is partly good news for e-commerce and all forms of distance selling because the rate of cash on delivery payments is declining noticeably, which is a blessing for the providers. On the other hand, we are not in favor of the notorious Indian discount mentality, which is fueled once again by this.
While at this point e-commerce players benefit from the strength of the payment service providers, they are increasingly becoming competitors at the same time, because PayTM is expanding its business in many directions and is increasingly developing into a portal based on the Chinese model, in which, in addition to payment, purchasing, communications and news are part of the product mix.
So it remains exciting. We are pleased about the renewed validation of the Indian digital ecosystem by Buffett and the fact that with PayPal another Indian Unicorn has grown which has clearly exceeded the sound barrier of USD 10MRD. We are curious to see which targets the American players in India will target next.