Berkshire Hathaway owned by Warren Buffet has sold its entire stake in One97 Communications Ltd, the parent company of fintech major Paytm, in a large block deal on Friday, November 24.
Berkshire Hathaway Inc through its affiliate BH International Holdings sold more than 1.56 crore shares or 2.5 per cent of the fintech giant, according to bulk deal data on the National Stock Exchange (NSE).
According to NSE data, BH International Holdings offloaded 1,56,23,529 shares, amounting to a 2.46 per cent stake in Noida-headquartered Paytm. The shares were disposed of at an average price of ₹877.29 apiece, taking the transaction value to ₹1,370.63 crore.
Meanwhile, Copthall Mauritius Investment picked up 75,75,529 shares and Ghisallo Master Fund LP acquired 42.75 lakh shares, amounting to a 1.19% and 0.67% stake in Paytm, respectively. Buffett had picked up a 2.6% stake in Paytm in 2018, investing nearly ₹2,200 crore, valuing the leading fintech giant at $10–12 billion, according to reports.
Paytm reported a 32 per cent year-on-year rise in its revenue of Rs 2341 Crore in the July-September quarter of fiscal 2023-24 (Q2FY24). The fintech major had reported revenue of ₹1914 crore in the year-ago period. The net loss (attributable to owners) narrowed down to ₹290.05 crore in the September quarter of current financial year.
The company reported a sequential rise of 7 per cent in its revenue from ₹2,341 recorded in June quarter of the current financial year. On a quarterly basis, Paytm reported a marginal increase of 7 percent as it saw its revenue recorded at ₹2,341 crore in the June quarter of current fiscal. During the last quarter, it reported a net consolidated loss of ₹357 crore.
On Friday, shares of Paytm opened at ₹922.75 and plunged more than 4.5% to hit an intra day low of ₹880. Shares settled 3.23% cent lower at ₹893 apiece on the BSE.
Now that Berkshire Hathaway has exited Paytm; what is next on the books for the consumer internet company?
Ever since the company reported a positive adjusted EBITDA in the December 2022 quarter, things have been turning around for the fintech company.
There has also been a significant rise in the number of merchants opting to pay subscription fees for payment devices. Meanwhile, Paytm’s CEO is also clearing the dark clouds when it comes to Chinese shareholding in the company.
Earlier this year in August, Vijay Shekhar Sharma announced that it has entered into an agreement with Ant Financial to buy 10.3% stake in One97 Communications. Post the transaction, Ant ceased to be the largest shareholder in the company.
Berkshire Hathaway is not the first foreign institution to exit Paytm; Why are FIIs exiting in bulk?
This is not the first instance of a foreign institution (FII) exiting their stake in Paytm. Several other multinational investment giants such as SoftBank and Antfin have also been offloading their stake in Paytm since last year.
Berkshire Hathaway’s block deal comes three months after Antfin Holdings offloaded 22.7 million shares of Paytm or a 3.59% stake in the company in August 2023.
These sales could be a combination of the environment getting tougher for private equity (PE) firms as well as the valuations that are available in the market today.
If a lot of experts are to be believed, the era of ultra-low interest rates seems to be behind us. With interest rates likely to stay structurally higher, the PE firms need to turn more judicious with respect to the deals they enter.
Gone are the days when these firms used to fall over each other in trying to throw money at every big idea they liked. It is more about the numbers than narratives now.
Paytm is also trading at the highest level in many months so what better time to sell stakes than the current market where they are getting full bang for their buck. Besides, these firms also need liquidity just in case things turn ugly in the west.
