Fairfax India new issue

[Sullivcd]

2 hours ago, Crip1 said:

We can only speculate and, honestly, I am not as concerned about that as I am about the fact that the investor who knows FFI inside and out, arguably better than anyone, determined that $12/share was an attractive price. It could be argued that the same investor felt that FFI was more undervalued than FFH.

 

-Crip

Good point

[ICUMD]

From today's developments. Can only speculate reasons for the investors to sell at current market prices. 

 

OTOH, Fairfax's playback is clear.  Buy back aggressively FIH.U while at a tremendous discount to BV.

 

They have purchased back nearly 10% of the company in the last six months.  Anticipate ongoing buybacks, if not an outright takeover by FFH.

 

 

[hobbit]

5 minutes ago, ICUMD said:

From today's developments. Can only speculate reasons for the investors to sell at current market prices. 

 

OTOH, Fairfax's playback is clear.  Buy back aggressively FIH.U while at a tremendous discount to BV.

 

They have purchased back nearly 10% of the company in the last six months.  Anticipate ongoing buybacks, if not an outright takeover by FFH.

 

 

 

IMO takeover by FFH will never happen. The whole point of forming FIH was to have the flexibility to do investments that they cannot do through FFH. Also having a nice fee stream does not hurt. 

[bluedevil]

Question I have (as a shareholder of both the parent and Fairfax India) is why didn't Fairfax India have the opportunity to repurchase these shares, rather than the parent?  Fairfax India is buying stock and recently paid $15 a share.  Seems that Fairfax India would want to buy back more at $12.

  

[Xerxes]

Maybe there was a specific advantage for the two sellers to transact through a third-party (Fairfax) than a buyback through FIH. 

Edited February 16, 2022 by Xerxes

[gfp]

I don't think Fairfax India has enough spare cash on hand to take those blocks in one go, but I could be wrong and they may have plenty of revolving debt capacity they could access quickly.

 

- but that's why they call them "conflicts of interest" LOL

Edited February 16, 2022 by gfp

[ICUMD]

 

13 minutes ago, bluedevil said:

Question I have (as a shareholder of both the parent and Fairfax India) is why didn't Fairfax India have the opportunity to repurchase these shares, rather than the parent?  Fairfax India is buying stock and recently paid $15 a share.  Seems that Fairfax India would want to buy back more at $12.

  

I suspect  Fairfax India is keeping its capital for more acquisitions while FFH is buying back simply as a way to deploy cash at an attractive valuation.

 

It will get interesting once Anchorage lists on the Indian exchange.

[glider3834]

It looks like Fairfax Financial (via HWIC Asia) has reduced its direct holdings in IIFL Wealth as well as IIFL Finance during Q4 (while Fairfax India (via FIH Mauritius) holdings in both companies has not changed in Q4). So possibly they did this to raise cash to buy shares in Fairfax India directly, effectively to take advantage of that big discount to book & buy the underlying holdings (incl IIFL Wealth & IIFL Finance) effectively at a discount. Just a thought ...

 

 

Now holds less than 1% in each

 

 

 

Edited February 16, 2022 by glider3834

[Crip1]

Did anyone else have the conviction, and the dry powder, to add sub US$12 yesterday? I added 25% to my position.

 

-Crip

[TwoCitiesCapital]

56 minutes ago, Crip1 said:

Did anyone else have the conviction, and the dry powder, to add sub US$12 yesterday? I added 25% to my position.

 

-Crip

 

Only a modest add at $11.90. Definitely didn't get the best price or the biggest am liquidity constrained in the accounts I can actually buy this in. 

[Viking]

No. I was adding to my Fairfax position given how cheap it currently is. Fairfax India is on my watch list and sub $12 has been a great entry point the past year. 

[longlake95]

this is now cheap

[TwoCitiesCapital]

12 minutes ago, longlake95 said:

this is now cheap

 

Probably about as cheap as it's been in USD or CAD. 

 

Seeing continued depreciation of the Indian Rupee in this risk-off environment let alone what the price of the underlying investments are doing (indian stock exchange is down 10-15% YTD too). 

 

Not saying we shouldn't be acquiring it - only that buying today at $11-12 doesn't seem that much better than buying previously at $13-14 in terms of discount to NAV. 

Edited March 7, 2022 by TwoCitiesCapital

[longlake95]

noted. correct. These headwinds won't last forever. Hopefully, we see Prem & co. put more USD to work in the country.

Edited March 7, 2022 by longlake95

[ICUMD]

Looks like FIH sold IIFL wealth for proceeds of 190 million USD.  Net gain of 65 million. Looking forward to see where they put the proceeds.

 

Share buybacks seem to make sense!

[Viking]

1 hour ago, ICUMD said:

Looks like FIH sold IIFL wealth for proceeds of 190 million USD.  Net gain of 65 million. Looking forward to see where they put the proceeds.

 

Share buybacks seem to make sense!

It looks like Fairfax India got a good exit price as well. I wonder if the proceeds will be used to buy back more Fairfax India shares. Perhaps Fairfax India is raising cash to support future growth of Anchorage (via infrastructure investments).

—————

Bain Capital, global private equity firm, on Thursday said has agreed to acquire 24.98% stake in IIFL Wealth Management Limited for  ₹3,680 crore ($485.6 million).

 

Existing investors General Atlantic and Fairfax India Holdings Corporation will make a partial exit from IIFL Wealth, part of the homegrown financial services firm IIFL Group.

 

Bain Capital is proposing to acquire 2.2 crore shares constituting 24.98% stake in the company at  ₹1,661 per share for a total consideration of  ₹3679.95 crore "by way of a share purchase agreement executed on March 30, 2022 with General Atlantic Singapore Fund Pte. Ltd. and FIH Mauritius Investments Ltd," IIFL Wealth said in a regulatory filing.

The exact shareholding post-acquisition is yet to be disclosed.

The deal will be through Bain Capital’s investment vehicle BC Asia Investments X Ltd. The transaction is subject to regulatory and other customary approvals, the filing added.

 

As on December 2021, General Atlantic owned 21% in IIFL Wealth, while another 13.64% was held by FIH Mauritius Investments Ltd, a wholly owned subsidiary of Fairfax India Holdings Corporation, owned by Indian born Canandian billionaire Prem Watsa.

 

Mumbai-based IIFL Wealth Management is among the leading wealth and alternative asset managers in India with ~$44 billion (around  ₹3.3 trillion) in assets (as on December 31, 2021).

 

https://www.livemint.com/companies/news/bain-capital-to-acquire-25-in-iifl-wealth-general-atlantic-fairfax-part-exit-11648701785729.html

[hobbit]

1 hour ago, Viking said:

It looks like Fairfax India got a good exit price as well. I wonder if the proceeds will be used to buy back more Fairfax India shares. Perhaps Fairfax India is raising cash to support future growth of Anchorage (via infrastructure investments).

—————

Bain Capital, global private equity firm, on Thursday said has agreed to acquire 24.98% stake in IIFL Wealth Management Limited for  ₹3,680 crore ($485.6 million).

 

Existing investors General Atlantic and Fairfax India Holdings Corporation will make a partial exit from IIFL Wealth, part of the homegrown financial services firm IIFL Group.

 

Bain Capital is proposing to acquire 2.2 crore shares constituting 24.98% stake in the company at  ₹1,661 per share for a total consideration of  ₹3679.95 crore "by way of a share purchase agreement executed on March 30, 2022 with General Atlantic Singapore Fund Pte. Ltd. and FIH Mauritius Investments Ltd," IIFL Wealth said in a regulatory filing.

The exact shareholding post-acquisition is yet to be disclosed.

The deal will be through Bain Capital’s investment vehicle BC Asia Investments X Ltd. The transaction is subject to regulatory and other customary approvals, the filing added.

 

As on December 2021, General Atlantic owned 21% in IIFL Wealth, while another 13.64% was held by FIH Mauritius Investments Ltd, a wholly owned subsidiary of Fairfax India Holdings Corporation, owned by Indian born Canandian billionaire Prem Watsa.

 

Mumbai-based IIFL Wealth Management is among the leading wealth and alternative asset managers in India with ~$44 billion (around  ₹3.3 trillion) in assets (as on December 31, 2021).

 

https://www.livemint.com/companies/news/bain-capital-to-acquire-25-in-iifl-wealth-general-atlantic-fairfax-part-exit-11648701785729.html

Unless there is an immediate plan to use this cash for example for share buyback etc , this is not a good price. A large stake sale such as this normally comes at 20%+ premium to the trading price . IIFL wealth is doing really well as a business but there is a case to be made for  buying back shares of FIH at these prices. 

 

BIAL is the fastest growing major airport in the world with a second terminal coming online at some point later this year. There is a clear path to 200M in EBITDA. I would not be surprised at all if there is a significant markup in the valuation of BIAL ( >80%) from the current 2.6B in near future barring another wave of COVID. 

[ICUMD]

Agree.  I would argue that a FIH share buyback at current attractive prices will be a bigger bet on the airport. The airport is really the gem in the portfolio.

[glider3834]

5 hours ago, Viking said:

It looks like Fairfax India got a good exit price as well. I wonder if the proceeds will be used to buy back more Fairfax India shares. Perhaps Fairfax India is raising cash to support future growth of Anchorage (via infrastructure investments).

—————

Bain Capital, global private equity firm, on Thursday said has agreed to acquire 24.98% stake in IIFL Wealth Management Limited for  ₹3,680 crore ($485.6 million).

 

Existing investors General Atlantic and Fairfax India Holdings Corporation will make a partial exit from IIFL Wealth, part of the homegrown financial services firm IIFL Group.

 

Bain Capital is proposing to acquire 2.2 crore shares constituting 24.98% stake in the company at  ₹1,661 per share for a total consideration of  ₹3679.95 crore "by way of a share purchase agreement executed on March 30, 2022 with General Atlantic Singapore Fund Pte. Ltd. and FIH Mauritius Investments Ltd," IIFL Wealth said in a regulatory filing.

The exact shareholding post-acquisition is yet to be disclosed.

The deal will be through Bain Capital’s investment vehicle BC Asia Investments X Ltd. The transaction is subject to regulatory and other customary approvals, the filing added.

 

As on December 2021, General Atlantic owned 21% in IIFL Wealth, while another 13.64% was held by FIH Mauritius Investments Ltd, a wholly owned subsidiary of Fairfax India Holdings Corporation, owned by Indian born Canandian billionaire Prem Watsa.

 

Mumbai-based IIFL Wealth Management is among the leading wealth and alternative asset managers in India with ~$44 billion (around  ₹3.3 trillion) in assets (as on December 31, 2021).

 

https://www.livemint.com/companies/news/bain-capital-to-acquire-25-in-iifl-wealth-general-atlantic-fairfax-part-exit-11648701785729.html

I wonder if this to fund another substantial issuer bid/share buyback?? I guess we will have to wait & see.

[nwoodman]

On 4/1/2022 at 5:34 AM, ICUMD said:

Agree.  I would argue that a FIH share buyback at current attractive prices will be a bigger bet on the airport. The airport is really the gem in the portfolio.

Sure is.  I think it is going to catch a lot of investors by surprise, in a good way.

 

https://indianexpress.com/article/cities/bangalore/international-departures-increase-25-each-day-bengaluru-airport-7846332/

[netcash1]

Do you the construction progress of Bangalore Terminal 2?  

[glider3834]

When asked if Fairfax would bid for the public sector banks that are coming up for sale, Watsa said his company was "looking at all of those opportunities".
 

Read more at:
https://economictimes.indiatimes.com/industry/banking/finance/banking/govt-should-sell-all-its-stake-in-psu-banks-insurers-says-prem-watsa/articleshow/90695797.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst

[Viking]

I watched the Fairfax India AGM. Here are some thoughts:

- overall, i was impressed. It was the first time i saw management in the flesh.

- Chandran Ratnaswami (CEO) appears to be a very smart dude.

- unlike Africa, Fairfax’s skill set and track record in India is stellar; lots of tailwinds; future looks bright.

- whoever it was asking management all the hard questions… thank you!

- they have assembled a very good collection of assets in India. Maxop and Jaynix investments in 2021 are seeding the next generation of multibaggers.
- Fairfax India had bought back 1.9 million shares to March 4, 2022. (Same seller who sold Fairfax 5.4 million shares in Feb).
- Sanmar’s IPO/deleveraging in 2021 was a very big deal. If market conditions help (PVC pricing stays elevated) there could be significant value to be unlocked in the Egypt sub.

- mildly disappointing to learn the Airport’s revenue request for 3rd control period (2021-2026) was cut by $125 million (and pushed into next control period).

- here is a good example of the value management at Fairfax India is driving for shareholders: sold 14% of Fairchem in Nov 2021 for $46 million; recouping more than its ENTIRE investment (of $30 million). Still own 53% of company values at $155 million at Dec 31, 2021. Wow!

- i think there is a good chance Fairfax India does another Dutch auction at some point in 2022. They had cash and government bonds of $230 million at Dec 31. Another $70 million in liquid public equities. Jaynix cost $33 million. When it closes proceeds from IIFL Wealth will be $191 million (they are keeping 3.8% stake). Looks to me like Fairfax India has (or will have) the cash to do another Dutch Auction.
- i shifted a little more of my Fairfax into Fairfax India (tax free accounts).

Edited April 23, 2022 by Viking

[rohitc99]

23 minutes ago, Viking said:

I watched the Fairfax India AGM. Here are some thoughts:

- overall, i was impressed. It was the first time i saw management in the flesh.

- Chandran Ratnaswami (CEO) appears to be a very smart dude.

- unlike Africa, Fairfax’s skill set and track record in India is stellar; lots of tailwinds; future looks bright.

- whoever it was asking management all the hard questions… thank you!

- they have assembled a very good collection of assets in India. Maxop and Jaynix investments in 2021 are seeding the next generation of multibaggers.
- Fairfax India had bought back 1.9 million shares to March 4, 2022. (Same seller who sold Fairfax 5.4 million shares in Feb).
- Sanmar’s IPO/deleveraging in 2021 was a very big deal. If market conditions help (PVC pricing stays elevated) there could be significant value to be unlocked in the Egypt sub.

- mildly disappointing to learn the Airport’s revenue request for 3rd control period (2021-2026) was cut by $125 million (and pushed into next control period).

- here is a good example of the value management at Fairfax India is driving for shareholders: sold 14% of Fairchem in Nov 2021 for $46 million; recouping more than its ENTIRE investment (of $30 million). Still own 53% of company values at $155 million at Dec 31, 2021. Wow!

- i think there is a good chance Fairfax India does another Dutch auction at some point in 2022. They had cash and government bonds of $230 million at Dec 31. Another $70 million in liquid public equities. Jaynix cost $33 million. When it closes proceeds from IIFL Wealth will be $191 million (they are keeping 3.8% stake). Looks to me like Fairfax India has (or will have) the cash to do another Dutch Auction.
- i shifted a little more of my Fairfax into Fairfax India (tax free accounts).

my concern is BIAL which accounts for a large portion of the value. What the government is doing is par for course - Keep changing the terms such that in the long run the investor earns sub par returns. losses are borne by the investor and when the asset turns, then cap the upside by calling the profits as excess

[ICUMD]

I've had a few days to reflect on the AGM and my Fairfax India holding.

 

AGM further cemented my thoughts as follows:

1. Consistent track record of identifying excellent Indian investments and turning them around in 1 - 2 years with 25% return or way more. (with the exception of NCML)

 

2. BIAL: again, the gem in the portfolio - really leveraging India's growing middle class, multiple revenue streams and popularity of air travel.  This has taken a hit due to COVID, but will rebound spectacularly in the next year as pent up travel returns to normal and likely overshoots.  A brand new Terminal 2 will attract new travellers.  460 Acres of land being monetized is the cherry on the cake.  The governments plan to push back the aero returns to the second control period  - is reasonable.  Overall, I don't think the government will reneg on the 16% contractual aero rate of return, as this will hinder further foreign investments. 

 

Further, ownership of BIAL gives Fairfax India certain intangible 'privileges' in Bangalore - ex. control of HAL, large land holding, influence over rail transit and profile/influence with the local government.  Interesting to say the least.

 

3. Performance Fees

At current discount to BV prices, I think this additional cost is more than baked in.

 

3. Parallels - 

The best parallel for this company is really Brookfield Asset Management.  Except, these guys have a 'home field' advantage with their ties to India.

 

4. Shareholder friendly?

I think they are.  They are doing buybacks at attractive valuations - by both Fairfax India and Fairfax Holdings (even though FFH doing so reduces their performance fee returns).  They stated that they will not be doing share offerings at current prices.   They are internally raising money (about $450 Million) to do more deals.  And their recent deals seem to be solid - Maxop, Jaynix etc.  Lots of good developments to come in 2022!

 

5. Low share trading volumes.

This is a wild card.  I think, any significant attention to this company will cause it to skyrocket. 

In many ways, its akin to some of my startup company investments.

 

So, if you have patience, its a good investment in my mind.  

Its profitable, attractively valued and boasts investments in infrastructure and well established businesses in a growing, developing country.  Hard to see any of this not work out overall.