valueinvesting101

Chemplast Sanmar Limited IPO opens on August 10. https://www.globenewswire.com/news-release/2021/08/05/2275506/0/en/Fairfax-India-Announces-Filing-of-Prospectus-by-Chemplast-Sanmar-Limited.html Fairfax India -> Sanmar Chemicals Group (42.9% equity interest) -> Chemplast Sanmar Limited IPO ( 23.6% indirect equity interest after IPO for Fairfax India) Looks like they will also own stake in the Egyptian operation via Sanmar but CSL being IPOed will not have that. Seems bit complicated and can lead to conflict of interest between listed entity CSL and privately owned Egyptian operation.

Warren Buffett's Berkshire Hathaway could bag a 60% profit when Paytm goes public https://markets.businessinsider.com/news/stocks/warren-buffett-berkshire-hathaway-paytm-ipo-profit-digital-payments-india-2021-7

https://www.livemint.com/market/ipo/zomato-tatva-chintan-chemplast-sanmar-get-sebi-nod-to-raise-funds-via-ipo-11625490797220.html Chemplast Sanmar has filed DRHP with SEBI on 2 May. Chemplast Sanmar's IPO, which is backed by Canadian billionaire Prem Watsa, consist of a fresh issue of ₹1500 crore and an offer for sale of ₹2000 crore by its current promoters and shareholders. An offer for sale comprises sale of ₹1850 crore by Sanmar Holdings Ltd, ₹150 crore by Sanmar Engineering Services Ltd

I am wondering about motivation behind doing this interview. I hope Charlie is doing good and wish him great many years ahead!!

Succession was constantly recurring question raised in media about Berkshire for probably last 20-25 years. There were hints in Charlie's 50 year letter and also in elevation of Ajit Jain and Greg Abel to the board and appointee as VC. When formal announcement has been finally been made, there is hardly any impact on the stock price. Stock price had bigger impact from announcement of increased buyback executed during 2nd half of 2020.

As per annual report purchase price for Privi was $55 million in Aug 2016. There was merger and demerger, so this price might be reflecting cost after considering those transactions. Still 3x return in less than 5 years. Incoming cash might be going to Bangalore Airport as Indian Govt. is looking to reduce the stake and Fairfax has right of first refusal. https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/government-to-sell-remaining-stake-in-delhi-mumbai-bangalore-hyderabad-airports/articleshow/81492214.cms

Deal seems to be at price ~640/share (INR) whereas current price is 920/share. Privi's price has increased a lot since mid March 2021 from around 640 range. Annual report had disclosed But above details were not mentioned in the annual letter to shareholders.

Fairfax India Announces Sale of its Equity Interest in Privi Speciality Chemicals Limited https://www.fairfaxindia.ca/news/press-releases/press-release-details/2021/Fairfax-India-Announces-Sale-of-its-Equity-Interest-in-Privi-Speciality-Chemicals-Limited/default.aspx Seem to be selling at 31% discount to the current market price. 17% above carrying value on 31 December 2020.

Looks like Sanmar Chemical is also planning IPO. https://www.livemint.com/market/ipo/chemplast-sanmar-gets-ready-for-ipo-launch-11617644343783.html https://www.business-standard.com/article/companies/chemicals-major-sanmar-plans-to-raise-equity-to-repay-restructure-debt-121030800307_1.html Not clear about valuation but with Sanmar and BIAL IPO, Fairfax India's largest private holding should get public valuation and hence added transparency for Fairfax India valuation.

https://www.business-standard.com/article/economy-policy/aai-to-offload-residual-stake-in-bangalore-and-hyderabad-airports-121031500024_1.html AAI to offload residual stake in Bangalore Airport. Fairfax is likely to be a buyer. It will interesting to see the valuation and if third party buyer. OMERS could buy it directly from AAI too.

How do young kids get income to contribute to IRA? Is gift from parents considered income? Can they get income for doing household work? I guess some kids must be generating income from entertainment industry.

Another buyback of 180K shares for $126 million in 2020. Valuations at $53.35 billion. From latest AR for 2020.

Fairfax India book value growth since 1 Jan 2015 has been 8.7% in USD while Indian rupee depreciating by around 2.45% compared to USD. I can see that stock is currently trading below book value so actual shareholders returns can be higher. Majority of the value of Fairfax India is derived from Bangalore Airport stake. Large percentage of the returns from the airport are capped at 16% in INR. What will be the capped return on this investment in USD? Will those return be enough to outperform indexes?

Found this interesting tidbit from the annual report page K-29: Berkshire had approximately 1,600 record holders of its Class A common stock and 18,900 record holders of its Class B common stock at February 16, 2021. Record owners included nominees holding at least 351,000 shares of Class A common stock and 1,332,000,000 shares of Class B common stock on behalf of beneficial-but-not-of-record owners. So total number of shareholders is around 21K, much lower than typical meeting attendance :o. I guess that covers about 82% of the outstanding shares. That is 0.006% of the US population. Number of Shareholders AR2019 => 1750 (Class A) & 19,200 (Class B) Number of Shareholders AR2018 => 2000 (Class A) & 19,500 (Class B) Number of Shareholders AR2017 => 2100 (Class A) & 19,800 (Class B) Total shareholders are shrinking with Class A shrinking much faster. I guess there are shareholders selling boring Berkshire for exciting other investments in the market. I guess WEB has idea of the upcoming selling and hence patient/slower with buybacks. I feel odds of Berkshire share price compounding at 9-12% are very high in next 10-20 years.

Buybacks are better than partial spinoffs especially when company holds excess cash. Lot of listed companies languish in performance so hardly an argument for motivation. Humans do respond to information (market quote) as evident from rising media coverage and price of GME, Bitcoin...Do human generate returns (alpha) from this information?

BHE doesn't pay dividend to the holding company. I think Berkshire invests regularly in it. BNSF has guaranteed ROE from regulator and hence Berkshire would likely to invest more capital in it rather than take out. Rather both of these businesses were outlined as places to invest incremental cash generated by other businesses. Berkshire has always operated by buying undervalued companies generating free cash flow (sometimes growing) and then investing those cash flows into other businesses. Over last 20 years they have pivoted to buy whole companies rather than common stock investments. How would break up be better than current decentralized structure which enables capital allocation across different businesses? Berkshire is bet on capital allocated better internally within company over capital allocation in security market. Current structure allows tax efficient allocation over active management.

HDFC Bank Limited (HDB)

Anchorage Infrastructure Investments Holdings seems very likely. Valuation around $1.2-1.4 billion.

I think valuation for CSBBank (P/B=2.03) is stretched compared to other private sector banks in India such as Axis Bank(P/B=1.67). It might be due to low float of CSBBank leading to mispricing. I thought break up of IIFL was pre-cursor to merger of IIFL Finance with CSBBank but it seems valuations are NOT conducive for deal. Pure NBFC will be challenged going forward compared to merged CSBBank + IIFL finance. May be deal will happen in 2021 when COVID impact is clear.

Fairfax India Announces Intention to Make a Normal Course Issuer Bid period commencing September 30, 2020 and ending September 29, 2021, of up to 3,500,000 Subordinate Voting Shares. Fairfax India may purchase up to 15,429 Subordinate Voting Shares on the TSX during any trading day. It will take around 225 days to purchase close to 3.5 million shares. Repurchases could be around $21-30 million. Less than 0.3% of current market cap. Seems insignificant except to signal cheap price. https://www.fairfaxindia.ca/news/press-releases/press-release-details/2020/Fairfax-India-Announces-Intention-to-Make-a-Normal-Course-Issuer-Bid/default.aspx

Companies with dominant market share are usually trading at pretty steep valuation e.g. Asian Paints, Pidilite, Gillette India etc. There are some state controlled monopolies but I guess you are not looking at those. You can be on look out for HDFC Bank below 3 P/B ratio. It's taking market share from public sector banks for last 25 years in a growing market. Likely to continue for another 2-3 decades.

I find that private investment valuation hasn't changed much except Sanmar and NSE. Following note from the latest quarterly report is interesting: I believe BIAL gets to update user development fees (UDF) charged per passenger from AAI based on the expected equity return during the period and actual returns achieved during the period last period. If UDF is adjusted in 2022 to reflect lost of revenue/returns due to COVID then there should not be much impact for the airport valuation. This could the reason for 0.1% reduction in BIAL valuation vs. ~15% reduction in Sanmar valuation. Any more details about impact of COVID on BIAL valuation and UDF collection in the future?

Can WeChat ban announced by Trump lead to app getting removed from iPhone app store in China? China is important market for Apple and impact of iPhone demand will also have negative effects on other product and services demand. I wonder if Buffett can see the impact of such changes to Apple valuation. It seems to be priced for perfection and can lead to quick haircut of 30-40% if demand in China tanks or similar change can occur.

At $35 billion purchase price, this probably tops BNSF purchase. I think that was around $34 with debt but involved around 6% of Berkshire shares too. That level of capital deployment probably indicates longer term commitment too.

Buffett's Berkshire Hathaway reduces share count, suggesting possible buybacks https://www.reuters.com/article/us-berkshire-buffett-stock-idUSKBN24B2CZ?taid=5f08a57256bb3f000175c765