nwoodman

OXY

Taiwanese electronics giant Foxconn has bought a huge tract of land on the outskirts of Indian tech hub Bengaluru, the key Apple supplier said in a filing Tuesday as it looks to diversify production away from China. https://www.deccanherald.com/business/business-news/foxconn-buys-300-acre-site-in-indian-tech-hub-bengaluru-1217113.html I think this was rumoured a while back, but now confirmed. Edit: Didn’t realise how close the airport it is https://www.moneycontrol.com/news/business/foxconn-buys-300-acre-land-in-bangalore-rural-district-for-rs-300-crore-10553231.html

Should unlock some decent tax losses too

Please let it be so. This would go a long way to remove the taint of past misdemeanours

Just completed Everest Base Camp and Island Peak in Nepal. 1000m of vert to get to Island Peak(6160m) was one of the most physically demanding days of my life. So grateful to the Nepalese climbing guides for providing me the opportunity. They are superstars. IMG_5491.dng

Picked up some more 7974.T Nintendo

A straw man argument. Apparently by penalising a rational use of company’s after tax profits, it will incentivise management to allocate retained earnings to these other endeavours.

Yep, very tempting at this level

FWIW

Another 7.9m shares, a thing of beauty. The elephant is squarely in the sights

Every chance in my opinion. I am sure it is not lost on all just what it means to be in a strong position at this point in time. There is going to be some remarkable opportunities for Fairfax and subs.

Warren Buffett’s Berkshire Hathaway Can Capitalize on Market Turmoil yup

Superb letter. Loved the call-out on Exco and Foran. Small holdings for now but considerable upside IMHO. Also so good to see Prem call out Andy Barnard and the “presidents”. Only parroting the more thoughtful posters here but but what an amazing transformation! (Got to get one exclamation mark in). Will be re-reading this one again

https://www.eurobankholdings.gr/-/media/holding/omilos/enimerosi-ependuton/enimerosi-metoxon-eurobank/oikonomika-apotelesmata-part-01/2023/fy-2022/4q2022-results-pr-en.pdf Very solid results. Aiming for a 25% payout in the form of divs and buybacks from next year. I like the idea of repurchasing the HFSF stake, hopefully at a good price. Even after the run up in the stock, still looks cheap. Results were ahead of both consensus and MS. Analyst note attached FWIW eurobank_20230309_0000.pdf

Made my morning

More OXY https://www.sec.gov/Archives/edgar/data/1067983/000089924323007400/xslF345X03/doc4.xml

Great post and totally agree. I was just reflecting on this today and thinking what an incredible swag of assets to hold at this point in time. Buffett said for many years that the energy business was always about wealth protection, understated to the last

Sounds like Digit may be having another crack at the IPO later this month Digit to have another go at an IPO Given a slew of regulatory hurdles and its complicated shareholding structure, the Fairfax-backed insurer has unfinished business before it can hit the bourses https://themorningcontext.com/internet/digit-to-have-another-go-at-an-ipo Digit Insurance is set to refile its draft red herring prospectus this month, according to three industry executives, who asked not to be named. Additionally, the board of the general insurance company is set to meet in the coming days to either restructure or nullify the stock appreciation rights issued to its employees late last year, says the first executive. In November and December, in two separate allotments, Go Digit General Insurance Ltd issued stock appreciation rights to about a dozen employees, including CEO Jasleen Kohli, who was chief distribution officer until April last year. Stock appreciation rights allow eligible employees to receive a bonus equivalent to the rise in the company's stock price. To be sure, Digit has been allotting these rights to its employees since 2018. According to the second executive, SEBI may have had concerns in its initial review of the draft papers for an IPO, but the latest issuance of stock appreciation rights could have led to the shelving of the draft prospectus altogether. Reuters was the first to report about the capital market regulator's decision to return Digit's IPO papers due to concerns about the stock appreciation rights. "The company may call a board meeting this week or next to possibly restructure these allotments into traditional ESOP schemes or nullify them altogether and refile its papers. There is an expectation that the refiling of fresh papers could happen before the closing of the financial year", which ends on 31 March, says the first executive. This is not the first time Digit has tried to convince SEBI to clear its IPO, a crucial step for the six-year old company's growth plans. SEBI had put the firm's IPO plan in "abeyance" in September last year after the firm filed its DRHP for the first time in August. Reuters had reported that the regulator had raised concerns that Digit had flouted laws by issuing shares to over 200 private individuals. The second and third industry executives cited above say that SEBI initially also had concerns about Digit's complicated shareholding structure and a conflict of interest among some of its directors who were also on boards of other related-party businesses. We could not independently verify this. Nevertheless, Digit made its case with SEBI later in September that it believed it was not in violation of an laws. SEBI restarted the review process in October. But Digit hit a bump again in January due to the stock appreciation rights it issued to its employees. Filings with the Ministry of Corporate Affairs show that Digit issued over 394,000 stock appreciation rights on 24 November and 30 December to nearly a dozen employees. Digit, which is backed by Canadian billionaire Prem Watsa's Fairfax Group, last raised capital in 2021 in a $200 million round from Faering Capital and Sequoia, valuing the firm at $3.5 billion. Digit's now-expired draft prospectus indicated that it wanted to raise Rs 1,250 crore in a fresh issue, with some existing investors expected to sell part of their stakes as well. The insurer has not publicly disclosed how it will price its IPO, but the second and third executives say the valuation is likely to be in the $4.5-5 billion range. A Digit spokesperson declined to comment. The company needs capital to grow as well as maintain a minimum solvency ratio of 150%, as prescribed by the insurance regulator. The solvency ratio is the amount by which an insurer's assets exceed its liabilities; it is a mandatory requirement for insurers to protect policyholders in adverse scenarios. Go Digit General Insurance's current solvency ratio is just under 190%, down from 220% in June last year. An IPO will not only help shore up its solvency capital, but also sustain it in the long run. The company also has other plans: It wants to expand into life and reinsurance businesses. It had applied for the respective licences last year, but the proposals have not been cleared yet. It has been over eight months since the company kicked off plans to go public, but regulatory hurdles have left its management frustrated. Can it get past SEBI's many concerns? Digit was founded in 2017 by former Bajaj Allianz chief executive Kamesh Goyal. The idea was to build India's first digitally oriented insurance firm. Along with Amazon- backed Acko and Navi General Insurance, Digit is among the three startups granted a full-fledged insurance licence in the last decade or so. It competes with over 22 other non- life insurers and six pure-play health insurers. In its six years of operation, Digit has recorded impressive growth, boasting a market share of around 2.5% (in premiums accrued) in India's highly competitive yet underpenetrated non- life insurance market. Its scale, however, is not comparable yet to its more established listed peers such as ICICI Lombard and New India Assurance. As a general insurer, Digit mostly sells motor, liabilities and health policies. Despite recording an annualized growth rate of 74% in gross premiums underwritten in the last three financial years, the firm is yet to record an annual profit. While in the first three quarters of 2022-23, Digit posted marginal profits, much of this was on the back of the return on investments of its parked funds rather than on the strength of its underwriting. For 2021-22, the company reported an underwriting loss of Rs 730 crore, which, after adjusting for an investment income of Rs 437 crore for the period, yielded a net loss of Rs 296 crore. In this period, Digit also reported a combined ratio of 113%, as against 109% for the financial year 2020-2021. The combined ratio is a measure of profitability of an insurance company in terms of its daily operations. A combined ratio of above 100% is indicative of a loss -making venture with a weak underwriting model. The high combined ratio for Digit, and several other insurers, in the last two fiscal years can be attributed to an abnormal amount of health-related insurance claims filed due to the COVID-19 pandemic. Digit's differentiating edge is its digital network, which it claims offers a faster and more seamless insurance service to customers compared with other insurers. The success of its model is somewhat apparent by the fact that over 60% of the company's insurance premium comes from tier-2 and -3 cities, where most policies are issued to individual holders and not corporations; retail policies sold at scale are seen as more lucrative than group covers from an insurer's perspective. Over 60% of Digit's policies in terms of premiums gathered are in motor insurance, followed by liability insurance, which constitutes about 12% of the total premium base. Digit also has a robust network of employees. The company has tie-ups with over 650 lawyers and 360 investigators. Its network also covers more than 700 surveyors and nearly 10,000 workshops. The company has stationed its sales team across 165 cities and has a team of 265 in-house service engineers. But does it warrant a valuation of $5 billion based on these numbers? Some industry analysts don't believe so. According to an expert, who didn't want to be identified, given the current market cap of more established general insurers listed on the stock exchanges, Digit doesn't warrant such an expensive valuation. "If you look at the numbers of players such as ICICI Lombard and HDFC Ergo, despite a significantly larger scale and more experienced business, their valuations are in the $5-7 billion range. If Digit prices the issue in this range, it leaves nothing much for investors," says this person. Perhaps it is to justify its lofty valuation that Digit wants to portray itself as a full-fledged insurance business making a foray into life insurance and reinsurance businesses. In 2022, the firm incorporated its life insurance arm, Go Digit Life Insurance Pvt. Ltd. This entity was recently converted into a public limited company, possibly on the Insurance Regulatory and Development Authority of India's suggestion. According to documents filed with the Ministry of Corporate Affairs, Go Digit Life Insurance has been preparing the ground over the past four months to become an operational life insurance company. During this period, the company altered its articles of association, appointed a new statutory auditor, increased its capital base from Rs 40 crore to Rs 200 crore and also commissioned a fair value report, seemingly incorporating suggestions made by the IRDAI. In July last year, Go Digit Life Insurance also brought HDFC Bank and Axis Bank to its cap table, with both private lenders buying around 10% each in the company. Last year, the firm also appointed former HDFC Life and Aviva Life senior executive Srinivasan Parthasarathy as its managing director. The tvpical life insurance licence process involves three lavers of checks and Go Digit Life is still in the process of getting the first stage of clearance. The regulatory scrutiny is much higher, as life insurance is a riskier and more capital-intensive business," says the first executive cited above. Securing a reinsurance licence is going to be even harder. "It's really rare for the IRDAI to offer reinsurance licences to any player, let alone a startup. There is only one domestic reinsurer currently, which is GIC Re, and Digit will have to pull a rabbit out of the hat to become the second-ever domestic reinsurer." While the IRDAI is yet to approve Digit's life insurance and reinsurance proposals, Digit's senior management, says the first executive, is confident that it will get the life insurance licence, especially as IRDAI chairman Debasish Panda - who took charge a year ago - has publicly said that he wants more players entering the insurance business. But even as preparations for an IPO are underway, a host of regulatory issues continue to plague the company. One of the main reasons for Digit's success in recent years has been the continued backing of Fairfax. Prem Watsa is known for his astute yet contrarian bets centred on financial services and infrastructure businesses around the world (read "The silent, sure rise of Prem Watsa in India"). Digit has also raised funding from institutional investors such as TVS Capital, Sequoia Capital, Faering Capital and A91 Partners. Fairfax has pumped more than $150 million into Digit since its inception, providing a steady flow of capital. But the firm now faces issues due to the complicated nature of its shareholding. The company's old draft red herring prospectus reveals these concerns in some detail. Go Digit General Insurance's holding company, Go Digit Infoworks Services Pvt. Ltd, is a joint venture between Fairfax and Kamesh Goyal, and holds an 83.65% stake in Digit, while the balance is held by private equity funds. In Go Digit Infoworks, Fairfax (through FAL Corp.) and Goyal (through Oben Ventures) hold 45.25% and 54.75%, respectively. Additionally, FAL Corp. holds compulsorily convertible preference shares in Go Digit Infoworks. Upon conversion of these shares, the shareholding of FAL Corp. will represent an indirect shareholding of up to 68.65% in the main insurance entity, Go Digit General Insurance. In June 2022, the IRDAI dismissed a proposal by Digit to convert 7.8 million compulsory convertible preference shares held by FAL Corp. in Go Digit Infoworks (the promoter entity) into direct equity shares. According to Go Digit General Insurance's draft red herring prospectus, the insurance regulator said the proposal would result in the insurance company becoming a step-down subsidiary of FAL Corp., which is not allowed under the IRDAI regulations. A step-down subsidiary is a company owned by another company through one of the latter's subsidiaries. A promoter entity in an insurance company cannot be a subsidiary of another firm. If FAL Corp's preference shares in Go Digit Infoworks are fully converted, Watsa's company effectively becomes the majority owner of Digit's promoter entity, and Go Digit General Insurance becomes a subsidiary of a subsidiary. Unless a resolution is found, it's likely that FAL Corp's preference shares will remain locked in. This could impact Fairfax's ability to invest in the business in the future. In a recent regulatory filing by Fairfax in Canada, it said the company will explore all options prescribed in the law to find a resolution. "A resolution to this issue would involve Fairfax having to restructure its indirect holding in Go Digit's parent company into a direct stake, so that the conversion of the preference shares doesn't result in the insurance firm becoming a step-down subsidiary," says the second executive cited earlier. According to the third executive, Fairfax will continue its attempts to convince the IRDAI regarding the conversion of its preference shares but these conversations are expected to resume only after the completion of the IPO. However, it's unlikely whether the regulator will change its stance, given the straightforward nature of the law. This is not the only regulatory issue Fairfax has faced of late. Go Digit's DRHP also reveals that, in October 2021, SEBI served Fairfax a show-cause notice over allegations that the firm indirectly owns interests in "an asset management company and a trustee company of a mutual fund while being an associate of the sponsor of another mutual fund". While the violation pertains to Fairfax Financial Holdings and another subsidiary -FIH Mauritius Investments-owning IIFL Wealth Management and IIFL Trustee, the exact structure that triggered it couldn't be immediately determined. To assuage SEBI's concerns, FIH Mauritius Investments, in which Fairfax Financial Holdings indirectly holds shares, has entered a binding agreement for the sale of some of its shareholding in IIFL Wealth Management. But clearances from the regulator are pending. Fairfax's settlement application filed in June 2022 with SEBI is also awaiting review, the prospectus revealed. There were other issues too, all of which point to a firm that, in its enthusiasm, sometimes gets ahead of established norms. For instance, last year, Digit attracted scrutiny from the tax authorities. In June, the Central Board of Indirect Taxes and Customs directed the company to appear for a hearing and pay a fine of over Rs 10 crore. It is unclear whether Digit has appealed this penalty, even as it said the fine was paid "in protest". Separately, the Securities Appellate Tribunal also recently directed the firm to uphold the IRDAI's order to discontinue a product that was technically life insurance. While Goyal has built a strong insurance franchise, there is still work to be done. Some of the issues it has faced recently could be attributed to its enthusiasm and lack of experience. But how these issues will come to the fore again in the lead-up to an IPO is anybody's guess.

@gfpThank-you

Governance, leverage, opaque structure, availability of cash and hubris are the big one’s for me. When things go well they go very well but the leverage cuts both ways. In general the structure is a short sellers wet dream as we have seen in the past. Having said that, this “potential disaster”is now my largest holding (just) in my primary account and second largest in my retirement. Agree with the more prolific posters here that there have been improvements on all fronts and the current valuation still has an acceptable margin of safety

7974.T Nintendo

If you understand why this worked - valuation? quality of the company? timeframe? then you are well on your way. Not saying Berkshire is the (only) answer, but it provides an excellent basis for handicapping business prospects, recognising the beauty of long-term compounding and management integrity. 10 years or so to formulate a sensible framework is perfectly acceptable if you then use it for another 30-40 years, it will work out well. I understand the desire to jump around but you need to resist the urge to pay taxes. I sometimes wonder if the lure of the trade in the "tax-free account" is like the call of the sirens for patience. One of the advantages you have as a small retail investor is timeframe i.e. patience. @dealraker is spot on and I wish someone had said that to me in my early 20's, very nicely put.

The text on this tweet

Or The Onion. “For me the interests of my investors is paramount and everything is secondary. And to protect investors from potential losses we have withdrawn that deal”. :LMFAO

Not a gamer but the kids talked me into watching The Last of Us. I am usually flicking through emails or business stories, perhaps even CoBF while watching stuff. Not this one, device free and totally into the story. Episode 3 has ruffled a few feathers but I am still revelling at such great story telling and directing. Very few times I have given a shit about characters in a matter of minutes.