Warren Buffett’s investment in India’s Paytm falls

Written by Staff Writer As of Tuesday, the first trading day for Paytm Payments Bank, a unit of India’s largest payments giant Paytm.com, the Rs 250 ($3.9) equivalent in the government bond market, has…

Warren Buffett's investment in India's Paytm falls

Written by Staff Writer

As of Tuesday, the first trading day for Paytm Payments Bank, a unit of India’s largest payments giant Paytm.com, the Rs 250 ($3.9) equivalent in the government bond market, has fallen 27% from where it started. Paytm is valued at Rs 49,920 crore ($7.35 billion) after its IPO.

The first big listing after the midnight November launch of a near-unprecedented cash ban by Prime Minister Narendra Modi, the cash-free payments bank allowed investors and others to buy shares with the help of a preference share allotment.

Not just inbound investors

The option of investing in the stock market was largely taken up by individual Indian investors at the time, but interest from outside came later. Among the investors from outside were billionaire investor Warren Buffett and his holding company Berkshire Hathaway, whose $500 million investment came earlier in the month.

Warren Buffett invests $500m in Paytm. But the man who built his career in China also sees a future for this e-commerce firm.

News reports in India suggested that Buffett’s investment attracted criticism among investors and advocates of privatization of public banking institutions.

“I am not happy with Paytm-DoCoMo deal, considering increasing levels of ownership of Indian government-run banks by foreign interests,” former Finance Secretary AR Jayaraman wrote in the Business Standard newspaper.

“Buffett should focus on policies such as reducing FDI (foreign direct investment) in retail space,” he added. “Since most Indians live on cash, investing in regulated sector — FDI — is the best way to channel cash flows.”

Yet Indian regulators sought to calm the jitters.

“Companies that invest abroad only if their parent in a foreign country qualifies to invest in India,” the Securities and Exchange Board of India said in a statement. “The only criteria is that foreign shareholding is less than 26% in the financial services company.”

For Paytm, which claims to be the world’s largest remittance provider by volume of funds transferred, the news may have been welcomed by more of a domestic crowd.

Paytm’s immediate challenge is to grow its mobile payments service as well as its financial services portfolio to put it on a par with rivals such as Indian digital bank Snapdeal and India’s largest lender ICICI Bank, which is smaller than its Singapore-listed behemoth.

A Paytm spokesperson told CNNMoney the IPO was a success and could not speculate on what its share performance would have been had other investors participated.

“We achieved half our target at the issue price of Rs 21 a share and we will get more understanding of the long-term prospects of payments banks after listing,” the spokesperson said.

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