A number of senior as well as middle management executives had vested their stock options in Rivigo
Rivigo founders Gazal Kalra and Deepak Garg didn’t buy back any shares
Esops make 7-10% of Rivigo's overall shareholding
Nearly 30 ex-employees of Gurugram-based logisticsUnicornRivigo have encashed on their stock options in the company, reaping in an estimated amount of $10 Mn.
“Over30 employees have sold the shares, after exercising their options, in times of financial need and have benefited substantially from the life-changing wealth. Some of them have used the money to fund their children’s foreign training, while others have used it to build a house,” said Gazal Kalra, cofounder at Rivigo, in a media statement.
Theshares were picked up by existing as well as new investors.However, the company’s founders, including its chief executive Deepak Garg, did not buy back the stock.
Rivigo ESOPs: The Key Pointers
The secondary transactions, the last of which took place in July, were not at a discount to the valuation commanded by the company in its primary funding rounds.
Rivigo has decidednot to cap vesting of employee stock options.This has allowed a number of executives to sell all their stock at one go,a rarity in startupsthat usually allow employees to sell their stock in ventures only in stages, and that too at a discount.
Esops form about 7-10% of its overall shareholding
Rivigo: The Growth In A Nutshell
Inc42 DataLabs, in its weekly financial analysis seriesWhat The Financials, has earlier revealed that Rivigorecorded a total income of $58.60 Mn (INR 401.82 Cr) in FY17, up by 370% from its FY16 income of $21.67 Mn (INR 148.61 Cr).
Further, the company reportedtotal expenses of $67.48 Mn (INR 462.64 Cr) in FY17and an operating income of $56.45 Mn (INR 387 Cr) in the same period.
Rivigo has also been speculated tohavenearly 1,770 employees, on whom it spent$10.82 Mn (INR 74.21 Cr) in FY 17— 16% of its total operating expenses.
In the uber-competitive logistics space,which is poised to touch$307 Bnby 2020, Rivigocompetes with equally strong investor-backed startups likeBlackbuck, Locus, Locanix, ElasticRun, 4tigo Network Logistics, among others.
Esops: The Trend Is Here To Stay
The Esop encashment at Rivigo comes soon afterTemasek Holdings bought sharesworth $30 Mn from former and early employees of the cab-hailing company Olaas part of a secondary share sale.
Prior to this,Walmart-Flipkartacquisition had opened upformer and current employees of Indian ecommerce company for massive Esop payouts.
Further, employees can liquidate their stock options in three instalments — half of the stock on the date of closing of the Walmart deal, 25% a year later, and the remaining stock options two years after the first liquidation.
Here are some other startups which have joined Esop bandwagon:
Unicorn food delivery company Swiggyapproved its first employee stock repurchase programme.The share buyback or Esop, which had to be implemented in June, was estimated at over $4 Mn (INR 27 Cr).
Founder and CEOof Paytm Vijay Shekhar Sharma had also pledged about 5% of his personal holding inPaytm Mall for theEsoppool. This move added about $50 Mn worth of stocks to the Esop corpus.
Earlier this year, furniture playerUrban Ladderoffered Esops in order to attract senior-level talent, according to the MCA documents filed by the company.
• Apart from data centres, the government wants to build an ecommerce platform in PPP, especially to promote MSMEs • A Central Consumer Protection Authority will be created to oversee the implementation of the ecommerce policy, after its enactment • With the country’s ecommerce industry being hugely reliant on foreign investments and players, favouring local players might imbalance the ecommerce ecosystem
One of the biggest blunders of theNehruvian erawas the initiation of theLicense Raj (in the name of protectionism), a term used to describe the system of licences, regulations, and accompanying red tape that were required to set up and run businesses in India between 1947 and 1990. This paralysed the Indian economy, limiting the scope of FDI for decades.
Today, more than 70 years since Independence, it looks like we’re going back to the license era. PM Narendra Modi’s government seems to have a rising interest and ‘greed’ in accessing people’s personal data, as and when it needs (disguised in the garb of ‘security urgencies’), as is clear from the draftPersonal Data Protection Bill(PDP Bill) and the draft ecommerce policy.
Personal data security is not the only issue at stake. The draft ecommerce policy makes several random proposals such as making the National Payments Corporation of India (NCPI)’sRuPay card(a domestic solution/alternate to Visa and Mastercard) mandatory for payments gateways. It also suggests the creation of a government-aided ecommerce platform to promote micro, small and medium enterprises (MSMEs).
However, creating another ecommerce platform won’t solve MSMEs’ problems — what they need is a level playing field and infrastructure, efficient supply chains, manufacturing support, and a fair GST regime to be able to remain in business or join ecommerce sites as vendors.
Similarly, making RuPay card the mandatory payment gateway is going to add to the troubles of ecommerce platforms as gateways are usually decided based on the target audience. Moreover, the move is restrictive and makes it seem as if RuPay is unable to compete with Visa and Mastercard in an open market.
These and many more “suggestions” in the draft ecommerce policy make it apparent that its technology-related policy initiatives notwithstanding, the Modi government is more inclined towards the License Raj than a forward-looking approach.
How? This is exactly what we will discuss in this article.
Indian Ecommerce: A Sinking Boat?
In spite of the countryhavingabout 400 Mn Internet users, the Indian ecommerce market is way too young to merit comparisons with the Chinese and US markets. Its annual turnover — $33 Bn — is still significantly lower than what Chinese ecommerce players sellon Singles Day ($45 Bn) alone.
However, it is difficult to reconcile the growth projections of the Economic Survey data with the Morgan Stanley report. While the Survey marks the growth rate at 19.1%, to arrive at Morgan Stanley’s target of $200 Bn by 2026, the growth rate needs to be higher than 30%.
Even with global retail giants such as Walmart and Amazon betting big on India, the ecommerce market here has been a sinking boat at large.
With sales being heavily dependent on deep discounts and free delivery models in a price-conscious market, most big ecommerce players — Amazon, Flipkart, and Snapdeal — have continuously reported huge losses. So much so that Snapdeal, which once was the second-largest ecommerce platforms in the country, is now on the verge of shutting down its operations. (However, this year, the companyclaimedto have become cash flow positive.)
Flipkart, which was recentlyacquiredby Walmart, registered $1.25 Bn (INR 8,771 Cr) losses in FY17, a staggering 68% increase in its losses compared to FY16. Amazon India is in similar waters, with its FY 17 losses increasing to $692 Mn (INR 4,830.6 Cr) from $527 Mn (INR 3,679 Cr) in FY16, a 31% increase.
The silver lining for the industry is that despite facing heavy losses, Indian ecommerce has been thriving owing to the continuous inflow of funds from foreign players and investors. Clearly, they’ve spotted some treasure at the bottom of the sinking boat.
But, does the draft national ecommerce policy do enough to ensure justice to their investments? Does the Indian startup ecosystem have late-stage investors like in China to take on foreign investors? Do the MSMEs that the government wants to promote have the infrastructure and supply chain facilities to sell independently? The policy neglects a number of issues that are core to the Indian ecommerce ecosystem.
The Draft Ecommerce Policy: Too Late, Too Loaded
The central government, led by PM Modi, had promised to introduce an ecommerce-friendly policy back in 2014 when it came to power. However, it’s onlyafter four yearsthat the government set up a task force under the guidance of a 70-member think tank headed by the minister for commerce and industry, Suresh Prabhu.
Besides Prabhu, the ecommerce think tank included officials fromthe ministries of finance, home affairs, corporate affairs, and electronics and information technology,among others. It also comprised representatives of the telecom, IT, and ecommerce industries, from companies such asBharti Enterprises, Reliance Jio, TCS, Wipro, Ola, Snapdeal, Makemytrip, UrbanClap, Justdial, PepperFry, and Practo.
Among the notable suggestions that the task force made in its first copy of the ecommerce policy draftare:
FDI: Up to 49% foreign direct investment (FDI) may be allowed in inventory based e-commerce companies with a condition that the e-tailer sells 100% Made-in-India products. This will allow ecommerce firms to offer their own brands as long as they are made in India. It is also suggested that foreign ecommerce websites be brought on a level playing field with their Indian counterparts.
Marketplace restrictions:Ecommerce marketplaces will no longer be allowed to offer deep discounts through their in-house companies listed as sellers. In fact, the policy framework recommends to put a sunset clause on discountsto prevent platforms from directly or indirectly influencing the prices of goods and services. Bulk purchases of branded goods by related party sellers, which lead to price distortions in a marketplace, will be prohibited.
Made in India push:The sale of domestically produced goods through online platforms would be promoted by allowing limited inventory-based B2C model, wherein 100% made in India products would be sold through platforms whose founder/ promoter would be a resident Indian, the platform company would be controlled by Indian management and foreign equity would not exceed 49%.
Consumer protection: To provide a forum for consumers, the task force suggested a Central Consumer Protection Authority (CCPA). This, besides helping protect consumers’ interests, will act as the nodal agency for intra-government coordination. It will also provide a platform for e-commerce operators to register complaints of fraudulent activities.
Redressal: The draft suggests a separate wing to be set up in the Enforcement Directorate. This wing will handle grievances related to guidelines for foreign investments in ecommerce.
Payments: To detect frauds in cash-on-delivery transactions, the task force has suggested the creation of a counter-fraud, intelligence-based authentication mechanism. The draft also makes it mandatory for ecommerce platforms to add a payments facility via the homegrown RuPay cards.
More power to founders: The draft policy seeks to give more control and power to the founders of ecommerce businesses, rather than investors. Article 2.19 of the policy framework avers that “the need to amend relevant provisions of the Companies Act so as to facilitate founders to have control over their e-commerce companies despite having a small shareholding, will be examined in the light of the experience of their utilisation by e-commerce companies.”
International Context: Where Is The Balancing Act?
India is not the first, nor the last to seek to protect domestic companies in its ecommerce policy. A number of countries such as China and Vietnam have taken policy initiatives to promote domestic players. China, being an early entrant, played it differently and succeeded in dictating her terms for foreign players. This is one of the biggest reasons that Amazon’s market share could hardly increase from 0.7% there.
International attention has been focused on India, what with giants such as Amazon and Walmart betting big in India. But the draft Indian ecommerce policy, in its bid to favour domestic players, fails to address other concerns such as one arising from the World Trade Organisation (WTO), which clearly is not in favour of data localisation and domestic preference.
A group of 71 WTO countries has launched intensive discussions on ecommerceand also met for the first time in Geneva with 13 other delegations. India has chosen to be an observer instead of a member of the group, as membership may hinder the government’s ability to promote and support the domestic industry.
However, India is actively engaged in bilateral and regional trade agreements such as the Regional Comprehensive Economic Partnership (RCEP) and ecommerce has been a key component of such agreements.
The Indian Council for Research On International Economic Relations (ICRIER), initsWorking Paper No 354,Trade Rules in Ecommerce: WTO and India, had highlighted, “Regulations are needed for consumer protection and national security. It is, therefore, important to have “smart” regulations to protect domestic interest. The government should support domestic players through appropriate regulations. But such regulations should not counter WTO commitments. For example, while a subsidy contingent of export performance or on the use of domestic goods over imported goods can be prohibited under the WTO’s Agreement on Subsidies and Countervailing Measures, the government can give subsidies for additional employment creation or for technological upgradation in a smart way which can benefit the industry.”
In thetimes o’ Trump, it may not be that easy to fully concentrate inward without looking outward. The ICRIER report also raises concerns through the USnon-paper proposal on prevention of localisation barriers. The Office of the United States Trade Representative (USTR, 2017) report on foreign trade barriers lists a number of Indian policies that may impose localisation restrictions. And, as we have seen lately, the trade war between the US and India in terms of increased tariffs, the bloodbath could extend to ecommerce as well.
Now, with the first copy of the draft Ecommerce policy out, Amazon and Walmartfeelthe proposed policy is “heavily tilted” against foreign firms and are likely to ask the US government to reach out to Indian policymakers in case the final policy is “not moderated”.
This is important, asAmazon and Walmart (through Flipkart), both US companies, hold over 70% of the Indian ecommerce market share.
SoftBank Group Corp posted a 49% increase in its first quarter operating profit
SoftBank gains were led by the sale of its Flipkart shares to Walmart for about $4 Bn
As part of Flipkart stake sale, SoftBank said it expects deferred tax of $645K (¥71,746 Mn)
Japanese technology conglomerate SoftBank Group Corp posted a49% increasein first-quarter operating profit. The profit of $2.2 Bn (¥244.9 Bn) for its $100 Bn SoftBank Vision Fundcame from the gains of its stake sale in Flipkart to Walmart.
For the quarter ended June 30, the Tokyo-headquartered companyposted an operating profit of$6.42 Bn (¥715 Bn), compared to $4.30 Bn (¥479 Bn) in the same period in the previous year.
SoftBank said it expects the sale value of its Flipkart shares (representing 19.95% of Flipkart shares on a fully diluted basis) to be approximately$4 Bn. SoftBank also said it expects to pay a deferred tax of$645K (¥71,746 Mn) on this gain.
The Flipkart stake sale represents a milestone for the SoftBank Vision Fund because it is the first instance of monetisation of an investment made under it.
“The Company estimates that the sale of Flipkart shares will occur within 24 months of the inception of the investment and has calculated the deferred tax at 43.68%, being the Indian short-term capital gains tax rate expected to apply to the sale of Flipkart shares,” it stated in its consolidated financial report for the first quarter ended June 30th.
Last month,reports surfaced thatKabir Misra, managing partner at SoftBank Capital, was looking to launch his own startup fundwith a corpus of $250 Mn and that the fund would also countSoftBank Group as an anchor limited partner.
In May, in thebiggest M&Adeal seen in Indian ecommerce segment, Walmart bought about 77% in Flipkart for $16 Bn, opening up a new front in the battle with Amazon to be the leader of what is the most lucrative ecommerce market in the world.
As SoftBank exits Flipkart, it is also planning to invest in its portfolio company Paytm’s ecommerce unit i.e. Paytm Mall.Inc42had reported earlier thatan initial round of discussions to invest as much as $3 Bn in Paytm Mall.
SoftBankhas already invested$8 Bnout of the $10 Bnin the Indian ecommerce and internet market in the last five years after setting a target to invest in India by 2024 and going by the rewards it has reaped, it will surely be looking to up its investment a notchafter previouslyslowing down because of write-offs in some of its initial investments like Snapdeal and Housing.com.
Reports have already emerged as to how the Japanese conglomerate plans to invest between$60 Bn -100 Bnin a solar power project in India and how it will partner with Paytm to create amobile payment service in Japanby year-end.
Expect SoftBank to go hard on the Indian markets in the times to come.
Google has also partnered with four Indian banks in order to offer instant, pre-approved loans to customers • It has added new features such as an increased number of places for payments to the Google Pay to ensure a seamless experience for users • As a part of the rebranding, Google Pay will enable UPI-based payments on Play Store as well
At times when WhatsApp Payis facing troublein rolling out its full scale India operations, global search engine giant Google has announced that it has changed the name of its digital payments application Google Tez to Google Pay on August 28.
Inc42had earlier reportedthat Google is planning to rename Google Tez to Pay and may enable Unified Payments Interface (UPI)-based payments on Play Store as well.
Google Tez was launched in September 2017, and serves lives of more than 22 Mn people and businesses who use it every month. People from over 300,000 suburbs, towns, and villages use it to pay for their electrician, book bus rides, or split a dinner bill with friends.
To support the development, Google has also partnered withfour Indian banks including HDFC Bank, ICICI Bank, Kotak Mahindra Bank, and Federal Bankin order to offer instant, pre-approved loans to customers through the Google Pay in seconds.
Customers will be able to use Google Pay to take out a customised loan amount from their banks, with minimal paperwork, and the money will be deposited securely and instantly by their banks into their banks account.
Along with other old features, Google has added certain new features to Google Pay which include the following-
More Places To Pay For Users
Google Pay will allow payments online on applications, websites, and branded retail stores. Moreover, more partners for transactions will be added along with the existing partners which include Goibibo, Freshmenu, and rebBus.
The company will also be doing deeper integrations with BookMyShow. Google Pay can be used in the later part of the year for payments at retail stores such as Big Bazaar, e-Zone, and FBB.
Powering Small Businesses To Help Them Grow
Google Pay will also be working on building a dedicated merchant experience to help small business grow by helping them in getting discovered through Google Search and Maps, and ensuring communication through messages and offers.
Currently, these features are being tested with merchants in Bengaluru and Delhi.
Indian Digital Payments Industry: The Ongoing Tussles
The players in the Indian payment industry have been rushed towards growth for a while with the incoming competition from all directions. However, things are changing at fact pace now, segregating the dominating players from the masses.
For instance, in July 2018, Unified Payments Interface (UPI)has reported a4% fall in the number of transactions, from 246 Mn in June to 235.6 Mn in July as revealed by the National Payments Corporation of India (NPCI).
Among all other major players, PhonePe has claimed the top spot and claims to have a 40% share of the market.
At the same time, Paytm hasraised an undisclosedamount of funding from Warrent Buffett, who has invested through Berkshire Hathaway. As a part of the deal, Todd Combs, the investment manager at Berkshire Hathaway, has joined Paytm’s board of directors.
According to a reutersreport,Indian digital payments industry is expected to reach $700 Bn by 2022 in terms of value of transactions.
It is also being expected that more than 80% of the urban population in India will adopt digital payments as a part of their routine by 2022 and 70% of the retail chains will adopt the same.
Amazon and Tapzo have been in discussions about the deal for the past three months
The valuation of Tapzo for the deal is speculated to be a markdown of nearly 50%, similar to its last fundraise
Global ecommerce company Amazon has plans to further strengthen its portfolio and presence in India as the company has acqui-hired Tapzo, an “all-in-one” app that aggregates 35+ different apps in one place, across categories such as cabs, food, recharge, bill payment, news, cricket, horoscopes, and more.
According toInc42sources, the deal has been under discussion for the past three months. Tapzo’s valuation for the deal is speculated to be a similar markdown as its last fundraising.
Tapzoraised$1.9 Mn in December 2017 from existing investors RB Investments Pte Ltd and Ru-Net South Asia at a post-money valuation of $47.3 Mn (INR 308 Cr) — nearly 50% less than its valuation in the previous round — $85.54 Mn (INR 600 Cr).
Sources revealed that the Tapzo team was sitting with Amazon Pay team in their WTC office.
As part of the deal, Todd Combs, the investment manager at Berkshire Hathaway, has joined Paytm's board of directors
Pallavi Shroff and Mark Schwartz have joined Paytm as independent directors
Berkshire Hathaway confirmed the investment but didn't disclose the financial details of the deal
“This is an endorsement from the world’s most respected investor,” says Paytm Founder Vijay Shekhar Sharma.
Indeed it is. Well-known investor, actor, philanthropist, entrepreneur, and financier Warren Buffett, who avoided investing in the technology sector because he did not “like to own stocks in companies whose business he didn’t understand,” has made his first bet on Indian technology company — One97 Communications, the parent of digital payments company Paytm.
Paytm founder and CEO Vijay Shekhar Sharma said in a blogpostthat US-based investment firm Berkshire Hathaway is now a part of Paytm’s journey.
Berkshire Hathaway joins Ant Financial, SoftBank, Alibaba, and SAIF Partners as key shareholders in Paytm.
Todd Combs, investment manager, Berkshire Hathaway,said, “I have been impressed by Paytm and am excited about being a part of its growth story, as it looks to transform payments and financial services in India.”
As part of the deal, Combs has joined Paytm’s board of directors, which also includes Pallavi Shroff and Mark Schwartz as independent directors.
Paytm founder and CEO Vijay Shekhar Sharmasaid, “We feel both excited and humbled by this endorsement. Berkshire’s experience in financial services and long-term investment horizon is going to be a huge advantage in Paytm’s journey of bringing 500 Mn Indians to the mainstream economy through financial inclusion. It is my honour to welcome Todd to our board, where he will bring his wealth of experience to guide our management team.”
Earlier, reports had surfaced that Buffett, through hisUS-based holding companyBerkshire Hathaway is in talks to pick up a 3-4% stake in the company through a primary subscription of shares for about $286.81 Mn-$358.37 Mn (INR 2,000-2,500Cr) in One97 Communications.
It was being speculated that the deal could be clinched in the coming weeks, valuing Indian digital payments giant Paytm at about $12 Bn.
Google and Paytm Mall are looking to pick up a 7-10% stake in Future Retail
The duo plans to invest $500.31 Mn- $571.9 Mn in Future Retail
PremjiInvest recently invested $251 Mn in Kishore Biyani’s Future Retail
Future Retail, the Kishore Biyani-owned Indian retailer, has been creating a lot of buzz lately. It has hit the headlines again with reports that a consortium of search giant Google and the Alibaba-backed Paytm Mall is looking to picking up a 7-10% stake in Future Retail.
According to reports, the duo is planning to joinforces to invest $500.31 Mn- $571.9 Mn (INR 3,500-4,000 Cr) for the stake,challenging Amazon,which too was exploring an investment in the retail group. Future Retail dominated the Indian hypermarket, supermarket, and home segments with brands such as Big Bazaar, Easy Day, and Foodhall, among others.
Further, it was reported that a private equity fund may also join the mega-alliance.
Future Retail, with its Retail3.0 model, has beenexploring foreign investments to take on global giants such as Amazon and Walmart-Flipkart and blend technology with its brick-and-mortar stores.
Inc42had earlier in February reported that Future Group was eyeing astrategic alliancewith Amazon.Future Group CEO Kishore Biyanieven met Amazon founder Jeff Bezosin the US to initiate discussions on the matter.
A deal with Future Retail could have given Amazon just the edge it needs to further its ambitions to penetrate deeper into the Indian retail consumer segment.
Biyani, however, denied any knowledge of such a possible move by a Google-Alibaba consortium to ET. Paytm, Alibaba and Google spokespersons also declined to comment.
Future Retail: Scouting For Foreign Investment
Earlier this month, Kishore Biyani disclosed hisplans to close a dealwith a foreign investor for Future Retail (FRL) in the near future.
“Ultimately, its all about how formidable we all are as players get bigger and you need an alliance. Wecan’t sellmore than 10% and foreign portfolio investor (FPI) is the only route available.It should take two-three months for any deal to fructify,” said Biyani, without naming the alliance partner.
It was said that the fund infusion would be through both primary and secondary share sale, and may even see some existing shareholders’ stakes in FRL getting diluted further.
The company hasacquired half a dozen supermarket store chains and put together a total retail space of 13.6 Mn sq ft, with a presence in 255 cities through over 1,030 stores.
Talking about leveraging the data available with Future Retail, Biyani had said that the company has adatabase of nearly 500 Mn customerswho visit his stores annually, which can be a great attraction for foreign investors.
Amazon’s plan to invest in Future Retail was slipped by investment of PremjiInvest whichpicked up a 6% stakein Future Retail for $251 Mn.
Amazon NV Holdings is registered as a foreign portfolio investor (FPI) that can acquire up to 10% in an Indian entity as a single company. An Indian company, however, can dilute up to 49% of its stake to multiple foreign portfolio investments (FPIs).
Here are other plans in the pipeline for the Future Group:
It plans to enter the milk and dairy products delivery segment bylaunching 1,000 outletsunder the Easyday, Nilgiris, and Heritage brands
Other verticals such as fruits, vegetables, and groceries will be added after the milk delivery model is in place
It has plans to expand its network of Easyday stores to 10K by 2022 from the present 950 stores
Why Google And Paytm Mall?
After failed plans to invest in Indian ecommerce company Flipkart at the time of Walmart acquisition, Google was speculated to venture into Indian ecommerce alone.
At the time, it was said that Google is planning to launch ecommerce business in India later this year and the launch may coincide with Diwali. However, a Google executive has termed these reports as mere “speculation”.
The development came at the timewhen Googlehas already invested $550 Mnin Chinese ecommerce firm JD.com. The two companies said in a statement that the deal is part of a strategic partnership to jointly develop markets.
Further, with its paid advertisement listing service Google Shopping, the company plans to make it more of an omnichannel experienceto encourage brick and mortar retailers to list with Google.
To be noted, in the US, Google Shopping enables offline retailers to see what is in their stores for free as well as a mark on Maps. The company plans to launch this feature along with several others to increase the number of sellers on its platform.
Google’s first attempt in Indian ecommerce can be traced back to itsGreat Online Shopping Festival (GOSF)– an online shopping event launched by Google India in December 2012in collaboration with a number of Indian online shopping platforms.
GOSF was portrayed as India’s answer to the hugely popular ‘Cyber Monday’ sales in the US. However, in November 2015, the company discontinued it due to growing popularity of ecommerce companies like Flipkart and Amazon India. GOSF also set the foundation for several online sale events hosted by players like Flipkart, Snapdeal, and Myntra among others.
On the other hand, Alibaba has invested heavily in India in the payments and retail space through Paytm Mall and BigBasket, leveraging its global expertise.
Paytm Mall is already aiming for anear-threefold rise in annualised gross sales to $10 Bn by March 2019 and had already achieved $3.5 Bn in annualised gross sales in June.
With global online as well as offline shopping disrupted with Amazon and Whole Foods deal andWalmart’s acquisition of Flipkart,the world has become a smaller place for Kishore Biyani’s Future Retail.
Berkshire Hathaway may take a 3-4% stake in digital payments company Paytm
Warren Buffett is looking to invest $286.81 Mn- $358.37 Mn in Paytm
The investment may value Paytm at more than $10 Bn
Image Credit: Livemint
Paytm may be set to join the club of Warren Buffett’s investments — Apple, Bank of America (BAC), Coca-Cola, American Express, Phillips 66, and a lot more
There was a time when investor, actor, philanthropist, entrepreneur, and financier Warren Buffett avoided investing in the technology sector because he did not “like to own stocks in companies whose business he didn’t understand.”
That changed when he invested in almost 170 Mn shares of Apple in 2016 and bought an additional 75 Mn shares of the iPhone maker in the first quarter of 2018 for between $11 Bn and $14 Bn. He has reportedly even explored investing in global cab hailing company Uber.
Now, Buffett is reportedly looking to make his first direct investment in India in Paytm.
Reports have surfaced that Buffett, through his US-based holding company Berkshire Hathaway, is in talks to invest about $286.81 Mn-$358.37 Mn (INR 2,000-2,500Cr) in Paytm’s parent company One97 Communications.
It is being speculated that the deal could beclinched in the coming weeks, valuing Indian digital payments giant Paytm at about $12 Bn.
With existing investors likeChina’s Alibaba Group Holdings and Japan’s SoftBank, Paytm is one of the most valued companies in India and achieved $10 Bn valuationearlier this year after a secondary share sale by employees.
It is being speculated thatBerkshire Hathaway is in talks to pick up a 3-4% stake in the company through a primary subscription of shares.
The transaction wasdiscussed at a board meeting of Paytm held a few weeks ago. However, the deal size, as well as other details, have not been finalised yet.
“Berkshire Hathaway is impressed by the scale that Paytm has been able to build in a short period of time. They realise that technology companies go through a cycle of losses before they start generating cash,” the report added.
Further, it is being speculated thatTodd Combs, one of Berkshire’s key fund managers who is also seen as a potential chief investment officer at the firm, is leading the transaction.
An email query sent to Paytm didn’t elicit any response till the time of publication.
Paytm’s Exponentially Growing Portfolio
The Noida-based company hasrecorded 200 Mn customersand agross transaction value (GTV) of $20 Bn(March 2018), registeringover 1 Bn transactions per quarter.
With avaluation of $10 Bn (as of January 2018), Paytm, which started out with digital payments, has been rapidly expanding its portfolio. It has expanded to ecommerce withMall,started its ownPayments Bank,and has also ventured into event ticketing services,wealth management, insurance andgold services.
Inc42had earlier reportedthat on the revenue front,One97 Communications has been on shaky ground, oscillating between highs and lows. The company’stotal revenue for FY17 stood at $122 Mn (INR 828.6 Cr),which is a 38.6% increase from its FY16 revenues of $88 Mn (INR 597.8 Cr).
In some relief for the company,its losses declined 39% from a massive $229 Mn (INR 1,496.7 Cr) in FY16 to$133 Mn (INR 899.6 Cr) in FY17.
The companyrecentlypartneredwith SoftBank and Yahoo Japan’s newly launched digital payments company PayPay to expand to Japan.PayPay will leverage Paytm’s technology and expertise in mobile payments. The services will be launched in the fall of 2018.
Paytmhasalsostarted offering forex services for the top 20 international currencies. It may also enter cross-border remittance services.
The company is looking to raisefunds to build a new retailmodel to equip shopkeepers with technology, logistics, and marketing capabilities.
Paytm as an entity is targeting multiple markets through its portfolio services.
The Indian ecommerce industry is currently worth$200 Bn while the digital payments industry is expected to grow five-fold to reach $1 Tn by 2023, as predicted byCredit Suisse.
Berkshire Hathaway once burnt its hands in an indirect investment in India in 2011 as a corporate agent of Bajaj Allianz General. The company exited two years later owing to lack of profitability and laws that constrained ownership by foreign companies.
Now, Berkshire Hathaway, which has portfolio companies with operations in India, seems to have again taken up the challenge of investing in Indian companies. We’ll have to wait and watch whether Paytm can make the final cut for Buffett’s cheque.