Warren Buffett’s Berkshire exited Paytm 2 months before RBI curbs

Two months before the Reserve Bank of India or RBI on Wednesday ordered Paytm Payments Bank to stop accepting fresh deposits in its accounts or popular digital wallets from March, Warren Buffett-owned Berkshire Hathaway sold its entire stake in One97 Communications Ltd, the parent company of fintech major Paytm, in a large block deal in November.

Warren Buffett had picked up a 2.6 per cent stake in Paytm in 2018
Warren Buffett had picked up a 2.6 per cent stake in Paytm in 2018

On Thursday, Paytm, an Indian digital payments firm founded by Vijay Shekhar Sharma, lost a fifth of its market value after the RBI ordered Paytm Payments Bank to stop accepting fresh deposits in its accounts or popular digital wallets after February 29, raising worries over revenues from the company’s main payments business.

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The RBI’s order could be a precursor to cancelling the bank’s license, a person familiar with the matter told news agency Reuters.

Paytm counts Japan’s SoftBank and China’s Ant Financial among its early investors. Over the past year, SoftBank has reduced its Paytm stake, while Warren Buffett’s Berkshire Hathaway and China’s Alibaba Group have exited the company.

Berkshire Hathaway sold 2.5 per cent of equity worth nearly 1,370 crore at a share price of 877.29. Buffett had picked up a 2.6 per cent stake in Paytm in 2018, investing nearly 2,200 crore. During the Paytm IPO, Berkshire Hathaway sold shares worth 220 crore.

The action against Paytm Payments Bank followed years of non-compliance with central bank rules, including on customer due diligence, use of funds and technology infrastructure, the source said.

Paytm’s stock fell to a six-week low of 609 rupees, erasing around $1.2 billion in value from the company also known as One 97 Communications. The stock was down 20%, at the bottom of an exchange-imposed trading band, marking its worst day since listing in 2021.

The bank, which houses all of Paytm’s 330 million wallet accounts, is important to the company’s app and wallet eco-system, which could be hit if Paytm cannot find banking partners to replace its payments bank.

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