Fairfax India new issue

[glider3834]

 

 

[bluedevil]

Imagine how valuable BIAL will be in 5 years, when it has expanded to full capacity, and is moving 70 million passengers a year; is connected to the metro system, has expanded highway access, and has a developed real estate campus surrounding the airport that will benefit from this connectivity.   And Fairfax India will have 76% of it for about $1.2 billion.

 

A perfect asset for a vehicle like Fairfax India.  It requires investors to put in money and not harvest any returns (as it gets re-invested) for a very long time - by 2030, Fairfax India will have been invested about 13 years, and will not have taken out any cash.  It probably won't take out any cash until the investment is closer to 20 years old -- after the airport has been fully maxed, based on having two runways, to 90 million or so passengers. 

 

But at that point, Fairfax India will have 76% of an extremely valuable asset.    

[Munger_Disciple]

If I understand correctly, US investors can only buy this in retirement accounts?

[gfp]

16 minutes ago, Munger_Disciple said:

If I understand correctly, US investors can only buy this in retirement accounts?

As a US investor, you should probably not hold FIH in taxable accounts.  You are allowed to own it - there is nothing stopping you - it's just a huge pain if you follow the rules.  The other option is to not follow the rules, which is common.  Not advice

[Munger_Disciple]

1 hour ago, gfp said:

As a US investor, you should probably not hold FIH in taxable accounts.  You are allowed to own it - there is nothing stopping you - it's just a huge pain if you follow the rules.  The other option is to not follow the rules, which is common.  Not advice

 

Thanks @gfp

[benchmark]

2 hours ago, gfp said:

As a US investor, you should probably not hold FIH in taxable accounts.  You are allowed to own it - there is nothing stopping you - it's just a huge pain if you follow the rules.  The other option is to not follow the rules, which is common.  Not advice

what rules need to be followed in a taxable account? why is it not advisable? 

[gfp]

8 hours ago, benchmark said:

what rules need to be followed in a taxable account? why is it not advisable? 

I feel like this conversation repeats every year or so. Google “is Fairfax India a PFIC” or passive foreign investment company. Then you and your tax professional can explore the requirements of “following the rules” for a taxable US investor.   Like I alluded to above, I’m sure many US investors own Fairfax India in taxable accounts and just don’t do anything. Not advice. Not a tax professional. 

[benchmark]

2 hours ago, gfp said:

I feel like this conversation repeats every year or so. Google “is Fairfax India a PFIC” or passive foreign investment company. Then you and your tax professional can explore the requirements of “following the rules” for a taxable US investor.   Like I alluded to above, I’m sure many US investors own Fairfax India in taxable accounts and just don’t do anything. Not advice. Not a tax professional. 

Thank you. 

[gfp]

https://www.fairfaxindia.ca/wp-content/uploads/2024/12/2024_12_December_20-PRFFH-Circular-Filing-Special-Meeting.pdf

 

Special meeting

 

"to approve a one-time deviation from the Company’s investment concentration
restriction set forth in its by-laws in order to complete the previously announced acquisition of an
additional 10% equity interest in Bangalore International Airport Limited, as more particularly described
in the management proxy circular."

Special_Meeting_Circular.pdf

Edited December 21, 2024 by gfp

[nwoodman]

Normally don’t get too excited by these renders but these guys do seem to deliver.  I remember thinking the same thing about T2 and what they delivered, IMHO,  was better than the initial pitch deck.  This  looks pretty swish.

 

 

Edited December 21, 2024 by nwoodman

[hobbit]

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. 

Edited January 6, 2025 by hobbit

[nwoodman]

On 12/26/2024 at 7:47 AM, hobbit said:

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+, 43M +

 

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. 

Based on sum of the parts Asian Century Stocks arrives at a NAV of $36 but conservatively ascribes no value to the future purchase from Siemens or the land development.  

 

https://www.asiancenturystocks.com/p/fairfax-india-fihu-cn-2024-update

 

A +50% holding company discount seems very cheap.  As the article goes on to say if they get the airport IPO happening by September ‘25 then the gap should close.  I recently bought a few as the discount  to IV just seems too large to ignore.

[mananainvesting]

Fairfax India thesis at MOI global by Jeffrey Stacey. Anyone has access to MOI, could you please share the Youtube link with me ?([email protected])

 

https://moiglobal.com/jeffrey-stacey-fairfax-india-202501/

 

Edited January 13, 2025 by mananainvesting

[Junior R]

52 week high

[Crip1]

Ummm...did I miss some news?

 

-Crip

 

P. S. Seeing as this bounced between US$15.25 and US$15.75 a few times over the past few months, I put in a buy order to bump up my position by roughly 20% (It's tied for my second largest holding) at $15.25 on Christmas Eve figuring I could catch a few more movements up and down. Clearly, that did not work. To anyone enjoying the recent run up...you're welcome.

 

[Saluki]

I noticed the big bump today too.  I didn't see anything on the news specific to FF India though.  

 

I have a mid size position that I started building in 2019.  Not adding or selling at these prices, just waiting for the catalysts to kick in. 

[hardcorevalue]

Prem Reputation Reflation. Just wait until the end of the decade.

[KFRCanuk]

Seems like there will be more future upside on FIH.U compared to FFH. Although FIH.U might never catch up to FFH.

[SafetyinNumbers]

4 hours ago, Crip1 said:

Ummm...did I miss some news?

 

-Crip

 

P. S. Seeing as this bounced between US$15.25 and US$15.75 a few times over the past few months, I put in a buy order to bump up my position by roughly 20% (It's tied for my second largest holding) at $15.25 on Christmas Eve figuring I could catch a few more movements up and down. Clearly, that did not work. To anyone enjoying the recent run up...you're welcome.

 

Fairfax India did an investor trip last week. My guess is that helped.

[SafetyinNumbers]

1 hour ago, KFRCanuk said:

Seems like there will be more future upside on FIH.U compared to FFH. Although FIH.U might never catch up to FFH.

FIH has a bigger discount but FFH has more leverage. Margin of safety seems high on both.

[valueinvesting101]

It seems sale of IDBI bank is getting closer:

https://www.business-standard.com/companies/news/idbi-bank-disinvestment-sale-bidders-due-diligence-financial-turnaround-125012200526_1.html

That could a reason behind the recent move.

[Hoodlum]

On 1/23/2025 at 12:16 PM, valueinvesting101 said:

It seems sale of IDBI bank is getting closer:

https://www.business-standard.com/companies/news/idbi-bank-disinvestment-sale-bidders-due-diligence-financial-turnaround-125012200526_1.html

That could a reason behind the recent move.

 

So, the final bids needs to be in by the end of February with the transaction expected to be completed likely late summer.  I wonder if we will hear of any leaks regarding the bids, after they have been submitted. 

 

Edited January 26, 2025 by Hoodlum

[gfp]

Did anyone on this message board attend the Fairfax India investor tour / trip this year?  I know Sanjeev went years ago.  Who went this year?

[dartmonkey]

1 hour ago, Hoodlum said:

 

So, the final bids needs to be in by the end of February with the transaction expected to be completed likely late summer.  I wonder if we will hear of any leaks regarding the bids, after they have been submitted. 

 

 So IDBI has a current market cap of 82632 crore, which translates to $9.6b USD, and the government (Union government, i.e. Federal government) plus the Life Insurance Corporation of India (LIC, which, from what I can tell, is the government-owned company that resulted from the nationalizion of all insurance companies in India in 1973) are selling 60.72% of their 95% stake. This is actually 30.48% from the government and 30.24% from promoter LIC, so it seems it is not 60.72% of their stake (as the Business Standard article incorrectly stated it) but rather 60.72% of the company, not that it makes a huge difference, since only 5% is currently held by private investors. So the acquirer, who would obtain control of the company, would presumably have to shell out something like .6072*9.6b = $5.8b, or perhaps more, if there is a control premium they have to pay over the current market price. 

 

What are their chances? Business Standard says that there are 4 bidders: Fairfax Financial, Emirates NBD, Oaktree Capital, and Kotak Mahindra Bank, who have until the end of February to submit their final bid. But this article from October 2024 says that there are 3 (Fairfax, Emirates and Kotak Mahindra), with the latter maybe not so keen on the idea: https://www.cnbctv18.com/business/exclusive-kotak-mahindra-bank-ceo-ashok-vaswani-nothing-seems-to-be-cooking-on-idbi-bank-currently-19485224.htm

 

If it is true that "the entire transaction poised to be completed by the first half of the next financial year (FY26)", as the Business Standard says, then we should know well before the end of June. And if Fairfax does win, it is obviously a very big deal for a company of Fairfax India's size, with its market cap of $2.4b (and considerably less than that, as little as a month ago), and book value of $2.9b (as of Sept 30). We don't know how Fairfax intends to structure the deal, but it would likely be transformative for Fairfax India, if they win the contest. They may have to sell other assets, likely higher than book value, and instead of being an airport and a few other little things, they would likely be primarily a big bank, plus an airport, and a few other tiny things. Given the uncertainty, it's not wonder the stock has been so volatile lately.

 

[SafetyinNumbers]

2 hours ago, gfp said:

Did anyone on this message board attend the Fairfax India investor tour / trip this year?  I know Sanjeev went years ago.  Who went this year?

I went. It was a great trip. Around 20 people including ~10 investors. Every management team we met was impressive including that of Fairbridge. All of the positions seem undervalued. Hopefully more investors will go every year and that will help close the discount as I’m much likely to hold onto my position for the long term as opposed to trading vs the discount. 
 

After seeing BIAL in action, it makes one think anything is possible in India and FIH is a right tail on that opportunity precisely because it’s actively managed and not passive.