Warren Buffett. Picture: GETTY IMAGES
Warren Buffett. Picture: GETTY IMAGES

Bengaluru — Berkshire Hathaway has agreed to buy a stake in the company behind Paytm, India’s biggest digital payments brand, in Warren Buffett’s first foray into the country’s startups, people familiar with the matter said.

Buffett is set to acquire 3%-4% of One97 Communications, valuing the target at more than $10bn, the people said, asking to not be identified as the discussions are private. A formal announcement could come in the next few days, they said.

One97 Communications, founded by billionaire Vijay Shekhar Sharma, runs the Paytm brand and is the leading player in India’s booming digital payments market.

Buffett would join a star-studded group who have invested in Sharma’s companies, including Masayoshi Son’s SoftBank and Jack Ma’s Alibaba Group Holding Ltd. and Ant Financial.

"It’s a paradigm shift," said Dinesh Arora, a partner at PwC in India. "Financial services reach only the top 10% to 20% of India, but technology has the potential of adding a big slice of India’s 1.3-billion people and bringing savings, credit and investments to their smartphones."

One97 declined to comment while Omaha-based Berkshire Hathaway did not immediately respond to a request for comment outside US business hours.

Mint reported on talks for a deal earlier on Monday.

Sharma got a huge boost in 2016 after India’s government moved to eliminate most of the nation’s paper money in circulation in a bid to curb corruption.

His fledgling startup, a pioneer in the country’s nascent field, signed up tens of millions of consumers and hundreds of thousands of businesses for digital services in a matter of months.

"Overnight, we went from a new thing to a must-have," Sharma said in a 2016 profile.

He has ridden that momentum to prominence in India’s technology field.

India’s digital payments segment is forecast to reach $1-trillion by 2023, from about $200bn now, according to Credit Suisse.

One97 owns 49% of Paytm Payments Bank, which leads India’s digital payments market.

Online retailer Paytm Ecommerce, also founded by Sharma, shares the brand name with One97 and runs the online retail platform Paytm Mall, selling everything from smartphones to fashion.

Buffett, who turns 88 this week, has long focused on value investing and shied away from technology companies because of what he joked were his own "intellectual shortcomings" in understanding the field.

But he has adapted in recent years and piled into holdings such as Apple. He is said to have considered a $3bn investment in Uber earlier this year.

Buffett’s Berkshire Hathaway has a penchant for financial services and disclosed in August that he had boosted his stake in Goldman Sachs. He also has sizeable investments in American Express, Wells Fargo and Bank of America.

"Fintech is exciting because it dramatically brings down the cost of servicing customers, connecting people even in the remotest parts of India and providing them the same level of customer service as someone sitting in Mumbai," said Arora.

The Buffett investment comes as some critics question whether India’s startup scene has become overheated. Several recent multibillion-dollar investments have inflated the value of startups.

Bloomberg