hobbit

they also invested another 18M in dec 2025 as well for TCI rights issue. I do not understand the logic of selling at the bottom of the cycle unless India business is distressed again due to the macro. Sanmar India has already gone bankrupt once before as well

This is painfully misinformed and highlights short term bias. If they announce a 10B BIAL IPO tomorrow , would you want them to change their fee structure again as the fees will now be rightfully earned ? I think FIH team should ignore all the noise around share performance and fees and continue executing. If you want to criticize FIH mgmt, why don't you pushback on the individual investments? A good argument would be explaining to us why BIAL wont be a 25-30B asset in 8-10 years time and if that is accurate every single penny should go into buying more of BIAL shares than short sighted buybacks to hit a certain rate of return in the short term. Apart from NCML, their investments have been solid and that should always be the focus.

details on BIAL airport city and second airport

unless they did a handshake deal already like in the case of privi and ended up selling at significantly below market value..they can come up with very unique ways to leave money on the table at times

IIFL finance + IIFL capital + CSB bank is worth 1.24B as of today, all of these are worth twice as much at the minimum. At this rate we are getting the airport for free

2022

What I find amusing is that some investors say that the sole purpose of FIH existing is to pay fees to FFH but simultaneously the same people are wary of a take under by FFH. Which way is it

Prem's take on FIH fees Unknown Analyst Yes. My second question is regarding the management and the performance fees that Fairfax Financial charges. Above our hurdle rate, the performance piece is tied to the book value and not the share price, which implies that even if the book value goes up and the share price does not Fairfax financials still generate a performance fee. I understand that it is tricky to tie it to the share price because the share price could be extremely volatile, it could be $30 today and the book value is $20. So my question is, why don't we pick the minimum of share price and book value? So whichever is the minimum of those 2 prices and then tie the performance fees to that minimum so that you guys only make money in terms of performance when shareholders make money. V. Watsa Yes. So it's another very good question. Performance fee is based on performance, long-term performance, 3 years each time. We take it in shares, unless it's selling at more than twice book value, I think, in which case, we have the ability to take cash or shares. It's a fair way to do it, we think. Share price and book values, sometimes the share price will go up way high. I think I don't know if you were the guy in the Fairfax meeting talking about Netflix, Netflix has come down 35% in 1 day. So we don't like tying it to share price because we expect that share prices will eventually reflect underlying net asset value or book value. We're very conservative in how we value book values, net asset values. But your point is well taken. And so every -- what you have to do accounting-wise, you have to set up a -- so I think the first time we'll have now 2023 is when the incentive fee will come in and calculate it. But in 2021 and 2022, you'll still have to accrue it but you might have to reverse it. It's only at 2023, 3 years down the road that you'll pay it. But accounting is such, you have to accrue it as it happens, and it goes up and down. And do you want to add that, Chandran? Chandran Ratnaswami No, that's exactly right. Unknown Analyst That's absolutely fair. And I'm not asking you to tie it to the shareholder like share price. I'm just asking wouldn't it be more prudent to tie it to the minima of share price and book value so that performance fees is only generated when shareholders make money. If the book value is $20 and the share price is $12, you don't make money. If the book value is $30 and the share price is $20, you still don't close. It's the minima of those 2 prices. V. Watsa I don't think -- if you review the record, I don't think you'll see anyone who's got minimum of share price or book value. Unknown Analyst But we are shareholder-friendly here... V. Watsa We'll -- seriously though, we think we can do much better than what we've done in the past. And really, this is not a good time. The stock price is low. The net asset -- India is just coming out of the pandemic. All those assets that Chandran went through are worth a ton, that Bangalore International Airport is talking about going to 90 million customers, 60 million in another few years and then 90 million. And I think it's selling at about $3 billion for the whole thing, right? How long is that going to last? And we got a 16% return on capital, return on equity. So you have to take a long-term view is what I'm saying, but those are very good questions, and thank you for asking them.

my understanding is that chandran then and gopal now are mere figure heads for compliance purposes. the real work was done by Harsha and now Sumit and team. If you are looking for alignment of interests apart from obvious alignment of FFH, you should be looking at how much shares Harsha owned or still owns and how much shares Sumit owns and how much of his liquid net worth is invested in FIH shares . Also for someone looking for an understanding of what Prem's perspective is on FIH mgmt fees, please read some of the annual meeting transcripts online , it comes up more than a couple of times and is a heated exchange. I do not hold FFH mgmt in any regard when it comes to equity investing however in FIH case they are absolutely fishing in the right pool.

Lets say BIAL does 530M in revenue for 2025 CY and this revenue grows at a 20% annual growth rate for the next 5 years. In 2030 , BIAL will do north of 1B in revenue and more than 700M in EBITDA. Assume a conservative 20x multiple on 700M in EBITDA would make the enterprise value north of 14B, which discounted at a reasonable rate will still yield 7B+ in equity value as of today. To put things in perspective, I think BIAL will likely do 1B+ just in aero revenue by 2033. I think people are vastly underestimating owing a top 3 monopoly asset growing at 30%+ in worlds 4th largest economy which itself is growing at 8% annually. The only risk here is geopolitical else BIAL alone will net investors a 20%CAGR since inception for their FIH shares. When Fairfax initially bought BIAL , India was a much more risky place to invest than it is today so kudos to them Investment returns are always going to be a power law. For FIH , BIAL and IIFL group of companies will generate vast majority of the returns, as long as everything else combined even tracks the market, we will be fine.

If you rate Fairfax mgmt as ethical and shareholder friendly, then the only thing that matters is the valuation of BIAL . If it trades at similar multipiles as GMR airports ( 30* EV/EBITDA ) which is the only listed pure airport play in India and assuming BIAL does on excess of 400M in EBITDA this year , it would value BIAL at 10B+ in enterprise value and assuming 1-1.2B in debt for BIAL the equity valuation for BIAL would be 8B+ which would imply a Nav per share of $50+ for FIH . This would put FIH at 1.4x the CAGR of s&p500 over the past decade. I think this is exactly why Ben ended up putting a slide comparing the valuation of BIAL to airports around the world adjusted for growth. It was a risky slide to include from legal perspective but if he included it anyways, it shows how confident they feel that BIAL will get a premium valuation in India. Assuming no upside from any other investment from this point onwards, these returns would be better than 99.9% of fund managers out there justifying the fees FFH charges. Therefore, if you can underwrite the political and operational risk for BIAL and think of FFH as shareholder friendly, you will end up more than fine.

48 million + passengers likely this year for BIAL out of which 7 million will be international passengers this is impressive growth. With these numbers, 6B for airport seems like a base case in an IPO. https://www.businesstoday.in/magazine/deep-dive/story/can-bengaluru-international-airport-overtake-mumbai-and-delhi-499611-2025-10-27

if the proposed structure generates some sort of investment fee stream for fairfax india which offsets the fees being paid to FFH, i would assume that it would certainly be positive for FIH. Can they also just sell CSB if they get a decent premium to generate cash for the deal and not having to worry about integrating two banks which are on different tech stacks.

Does this leave Fairfax India as the only legitimate bidder? IDBI seems to be a little too big for Kotak

if it comes down to non financial aspects, I think Fairfax might have the edge since they have successfully operated another bank( CSB ) in India. Even though IDBI's numbers have improved significantly over the last couple of years, I am still not sure if Fairfax India has the management depth to execute on this long term

some movement on IDBI , I think we will know next month if Fairfax India is still in the race. https://www.ndtvprofit.com/business/idbi-bank-acquisition-hopes-prompt-emirates-nbd-to-go-down-the-wos-route-profit-exclusive

I have been primarily been tracking the valuation of GMR airports which is pure airport play in India in public markets. With a worse growth rate , bad balance sheet, not so good revenue share arrangement ( Delhi airport is bad, Hyderabad is as good as Bangalore ) ; it has been trading at 25-30x the operating profit. I do not see how BIAL does any worse. https://www.screener.in/company/GMRAIRPORT/consolidated/ if you go the bottom right of the page , you can go through the quarterly PPTs and conference call transcripts. I have found them quite insightful when studying BIAL.

Can you please explain how you get to $25 if BIAL trades at valuations comparable to other airports? Given the growth BIAL should trade 25-30x EBITDA , which puts the valuation of BIAL at 6B and valuation of FIH in excess of $43.

Since 2024 will be the first year when T2 has been operational for the entire year ,do we have any insight into how much revenue and EBITDA Bangalore airport will do this year? 2023 - 194M EBITDA , 305M revenue, 37M passengers going by the projections here -- https://www.indiaratings.co.in/pressrelease/72989 https://aviationa2z.com/index.php/2024/12/24/indian-aviation-boom-airlines-airports-growth/ 2024 ( projection ) - 240M + in EBITDA, 380M+, 41M + if this actually turns out to be accurate then it would value the airport at 6B + which would imply a book value of $42+ for Fairfax India when Sydney airport was acquired it had zero growth and still the multiple paid was 20x EBITDA for the equity and 27x for the enterprise value. The debt to equity ratio is comparable for both airports with staggering growth ahead for Bangalore airport.

yah I am also confused by that , what's the need for special shareholder meeting?

For anyone interested in a deep dive in Bangalore airport https://www.icra.in/Rating/RatingDetails?CompanyId=14175&CompanyName=Bangalore International Airport Limited

IIFL finance is contemplating a demerger of its subsidiaries in the next 18 months. IIFL home finance is likely to be more than the current market cap of the entire company. https://www.moneycontrol.com/banking/may-list-iifl-home-finance-samasta-in-18-months-says-nirmal-jain-article-12827557.html

because of the uncertainty that whether it will be a merger or a forced sale at a discount to intrinsic value to a third party . Indian govt can easily make it contingent that FIH sells CSB before buying IDBI to expedite the transaction and not get it stuck in too much red tape as a merger would entail. I do not think this scenario will play out but there is a non zero probability that it might. Market hates uncertainty.

yes that's correct and its likely that CSB will get a significant premium for the merger, probably in the range of 80-100%. If not for IDBI deal overhang , CSB would be trading at much higher prices.

https://www.moneycontrol.com/news/business/rbi-lifts-restrictions-imposed-on-iifl-finances-gold-loan-business-12825738.html Restrictions lifted on IIFL finance's gold business