Plummeting losses of 30%! Warren Buffett, emergency evacuation! What's wrong with India?
The "stock god" suffered a big defeat.
After holding the position for five years, the "stock god" Buffett cut the meat and cleared the "Indian version of Alipay", losing more than 30%.
Recently, Warren Buffett's Berkshire Hathaway sold more than 15.6 million shares of Paytm, India's largest digital payment company, for $164 million for about 13.71 billion rupees (about 1.2 billion yuan) through a block transaction.
As a result of this transaction, Berkshire Hathaway no longer holds a stake in Paytm.
In 2018, Berkshire invested about $260 million in Paytm, buying a 3% stake in Paytm at a valuation of about $10 billion, at a cost of about Rs 1,279.7 per share at the then exchange rate, according to the local stock exchange.
The average price of the liquidation sale was Rs. 877.29 per share, which puts Buffett's loss per share by 31%.
It is worth mentioning that Paytm is Berkshire Hathaway's first start-up with a direct investment in India.
Affected by the news of Warren Buffett's liquidation, the share price of One 97 Communications Ltd, the main body of Paytm, plummeted by 5% in a single day, and the latest total market value shrank to 566.5 billion rupees (about 49 billion yuan).
Warren Buffett's last sell-off was after Paytm's IPO, when Berkshire Hathaway sold 1.4 million shares at a price of Rs 2,150 per share, a cumulative increase of about 68% compared to the initial purchase price.
After the IPO, Paytm's stock price continued to plummet, and to this day, its stock price has been in a state of breakdown. Although Paytm's share price has recovered 68% this year, it is still 60% below the IPO issue price.
The continuous collapse of the stock price and the uncertainty of operation may be the main reason for Berkshire Hathaway's liquidation of "meat".
According to the analysis, Paytm's stock price plummeted after the IPO and the loss of confidence among retail investors, as the company has not made a profit since its inception in 2010 and shows no signs of profitability in the short term.
Buffett's investment in the field of payment electronics has frequently encountered Waterloo, public information shows that in addition to Paytm, Berkshire Hathaway also invested in StoneCo, a Brazilian digital payment company in 2018, since 2021, the stock price has continued to collapse, as of Friday's U.S. stock market close, at $14.5 per share, compared with the IPO price of more than 53%.
Indian "Alipay"
Founded in 2010, Paytm is India's largest payment platform and currently has more than 300 million registered users, equivalent to half of the number of Internet users in India, and more than 20 million merchants on the platform. At present, Paytm has developed into a comprehensive financial service platform covering digital payment, insurance, credit and other businesses.
Founded by Vijay Singh Sherma, Paytm took advantage of the fact that India's large population does not have a bank account, so he founded Paytm in 2010 and launched a simple mobile app that people can use to pay utility bills such as utilities.
His promotion strategy is to set up thousands of offline recharge points, where users can recharge offline with cash and pay for utilities online.
But in the first few years of Paytm's existence, Paytm had a very difficult time. The main reason is that India is poor, most people do not have mobile phones, cannot afford computers, and as of April 2015, the number of people in India with access to the Internet was less than 100 million.
So, until 2015, India's total population was 1.2 billion, and the number of registered users of Paytm was only 25 million, which is only 5%.
At the critical moment, Paytm ushered in the biggest outlet.
In 2015, Modi launched the "Digital India" strategy to make the Internet accessible to the vast rural population.
In November 2016, Modi once again amplified his moves, announcing the "demonetization order", which directly became the outlet for the explosive development of online payment platforms.
Paytm focused on policy opportunities and cooperated with a number of partners at the first time, with a rapid increase in market share and explosive growth in the number of users.
Shortly after the demonetization order went into effect, Paytm announced that it had set a record for the number of transactions in a single day, with app downloads increasing by more than 1,000 times and the average number of transactions per person skyrocketing. The data shows that its registered users grew from 30 million to 122 million in 4 months.
The policy outlet and market space are huge, and all kinds of capital are optimistic about Paytm and have taken out real money to invest, including Warren Buffett.
Therefore, Paytm is also known as India's "Alipay", India's largest mobile payment service company, officially listed on the Bombay Stock Exchange in November 2021, raising 183 billion rupees (about 16 billion yuan), directly setting a record for India's largest IPO.
Behind Paytm's listing, there are many popular investors, including Ant Group holding 29.6% through Antfin (Netherlands) Holding B.V. (Ant Group's overseas equity investment platform), SoftBank Group holding 19.6% and Alibaba holding 7.2%. In addition, BlackRock, the world's largest public fund management company, and the Canada Pension Plan Investment Board are cornerstone investors in Paytm.
However, Paytm's performance in the capital market is not satisfactory. On the first day of listing, Paytm's share price plummeted, closing down more than 27%.
Since then, Paytm's stock price has been struggling with questions about its earnings prospects, industry involution, and overvaluation, and its stock price has been falling.
Alibaba's "Great Retreat"
In February this year, according to Indian media reports, Alibaba Group sold all the shares of Paytm, an Indian financial services platform, through a block transaction, involving an amount of about 13.6 billion rupees (about 1.124 billion yuan), ending the eight-year investment.
Behind the frenzied sell-off of the bigwigs, the uncertainty about Paytm's prospects continues to rise.
Looking back at Paytm, it is not difficult to find that its initial operation strategy is to frantically burn money, subsidize and increase traffic, and then look for traffic monetization scenarios.
The embarrassing thing is that Paytm is completely opposite to the business logic of Taobao and Alipay, resulting in a very narrow profit path for Indian "Alipay".
Paytm has tried e-commerce, food delivery and other fields, but it has not gone well, and finally has no choice but to return to the online financial business and become a lending platform.
The bigger risk comes from the policy level, with the RBI officially launching the UPI (Unified Payment Interface) system in 2016, which connects governments, financial institutions and third-party applications.
In fact, Clearance Paytm is just a microcosm of Alibaba's "escape" from the Indian market. In 2022, Alibaba and Ant Group completely withdrew from Paytm Mall, the "Indian Tmall".
Behind the flurry of sell-offs is the fierce competition in the Indian market.
At present, price wars and traffic wars exist in almost all fields such as e-commerce, payment, entertainment, and travel in India, and there are many international competitors.
In addition to the fierce competition in the market, the risk of uncertainty in India's regulatory policy may also be one of the factors considered by Alibaba.
Since 2020, the Indian government has frequently "censored" and "banned" some Chinese companies, causing more and more multinational companies to retreat.
In March 2022, Shopee, a cross-border e-commerce platform, announced that it would withdraw from the Indian market. Its official explanation, according to reports, is "given the uncertainty of the global market." ”
In response, Bloomberg commented in the report that given the unpredictability of the policy, India's troubles may outweigh its value.