Namaste, Sat Sri Akaal, and Salaam. 🫡

Happy morning folks. Hope life is good.

Today we’re diving into -
- Warren Buffett’s Paytm problems,
- ED’s (enforcement directorate) $1.1 billion beef with BYJU’s,
- And a crazy rally in Indian infra stocks.

Our read time today is 4 minutes and 43 seconds - faster than Orry prints lakhs doing moye moye and kacha badam 💀

Let's dive in. 👇

Market Vibe Check

Warren Buffett takes a 40% loss on his Paytm flip. 📉

TLDR -
- Warren Buffett sold all of his Paytm shares for a 40% loss - $260mn → $160mn
- Paytm was one of his very rare direct investments into a tech company outside of the US. He’s probably burnt his fingers on India for the foreseeable future.
- Comes at a very intriguing time, especially since Paytm’s growth has been marvelous of late.

The Oracle of Omaha has paper hands…

In 2018, Warren Buffett’s company made a rare direct investment into an Indian tech company - none other than Paytm.

It’s been a very topsy-turvy ride since then, with higher highs and lower lows coming each step of the way.

Buffett doesn’t enjoy volatility much, so he’s sold out his entire Paytm investment at a 40% loss - almost $100mn in real terms.

This comes at an interesting time, especially since Paytm’s merchant lending arm is picking the pace up at a good rate.

A quick refresher on what Paytm’s dreams are -
- Get lots of merchants/shop-owners/stores to use their payment machines
- Track all their transaction history, revenues, volumes, etc
- Use this data to sell them tailored loans
- Sit back and enjoy the wonders of compounding

And they’re walking the talk like no one else is.

Last quarter alone, they added over 1.2 million new stores to their merchant base - a jump of 15% from the quarter before.

They currently have a merchant base of 9.2 million, growing quicker and quicker each day.

If they dominate the acquiring-side dhandha, then they’re virtually set, since that business will generate all the cash needed to make other bold bets that they can’t make otherwise.

Solid plan, and even better execution.

BYJU’s gets a $1.1 billion target placed on them. 🎯

TLDR -
- BYJU’s has been called out for violating money laundering/foreign exchange rules amounting to $1.1 billion.
- There has been all sorts of crazy stuff - funds being misplaced, wrong documents being filed, investors not getting equity, etc.
- Puts a pretty dark stain on the Indian startup ecosystem.

BYJU’s bakwaas is the only eternal thing in our lives…

India’s Enforcement Directorate (ED) is the most feared organization for white collar criminals.

They are the central government agency responsible for overseeing money laundering scams and violations of foreign exchange law.

Their latest target is BYJU’s, and the allegations are very heavy. I’ll run through them all in language that actually makes sense -

1 - Failure to submit documents for imports against advance remittances

BYJU’s has apparently made “advance payments” to foreign entities - which is a normal thing to do - but not shown any official documentation regarding the services/goods that they received from these foreign businesses.

And no one knows where this money’s gone.

2 - Failure to realise export proceeds

BYJU’s is a company registered in India - so they’ve taken Indian services & sold them abroad.

To do business abroad, they’ve had to set up foreign companies.

But they haven’t sent the cash back home to their parent company within the legally mandated 9-15 months timeframe.

And once again, no one knows where this money’s gone.

3 - Failure to file documents regarding foreign remittances

India’s foreign exchange policy requires companies to report their foreign exchange transactions to ensure transparency.

BYJU’s has been sending millions abroad, with no hisaab as to where it’s gone.

4 - Failure to allot shares against FDI (foreign direct investment)

Foreign companies investing in BYJU’s have done so from abroad - which means that this counts as FDI.

However, BYJU’s apparently hasn’t allocated them any shares and instead kept all the money without giving them a stake on paper.

All of these violations sum to a total of around $1.1 billion - which is absolutely INSANE for a company this young.

This is what we call ghor kalyug 🙈

India’s infrastructure companies see a $125bn rally. 💸

Indian investors are allocating their billions of dollars towards industrial stocks at a rate never seen before…

Modi & Co. have big plans to turn India into an economy that’s driven by MANUFACTURING not CONSUMPTION, and this is helping all sorts of heavy-industry businesses to fly.

While local manufacturers are confident, foreign companies are also helping push India’s capex cycle into an upswing.

Modi is spending big on infrastructure with an aim to make India a developed nation by 2047. The world’s fifth-largest economy is tipped to become the third-biggest by 2027, according to IMF estimates.

He a $1.2 trillion program last year to ease India’s bottlenecks, in addition to another initiative to build a network of roads and highways, with a proposal to scale up capital spending by 10 trillion rupees ($120 billion) this year.

Insane stuff.

In other news… ☕

Julius Baer thinks about selling their private debt business (FT)

Bytedance starts mass layoffs in their gaming arm (TC)

Amazon’s $1.4bn Roomba deal gets a warning from European regulators (BBG)

Coinbase wants to “move ahead” after Binance’s $4bn settlement (CNBC)

Foxconn plans a $1.6bn further investment into India (Mint)

And that’s the tea the chai for today.

Thanks for reading, and we hope you enjoyed it. Have a mauj-masti filled day.

Lots of ❤️,

Team Cutting Chai