Fairfax India new issue

[This2ShallPass]

5 hours ago, SafetyinNumbers said:

If intrinsic value is $35-40 and we started at $9.50 post IPO fees, is that a good enough return?

After 10 years, in my opinion the only return you should calculate is what you can get. It's their responsibility as managers to close the discount at some point (especially when they happily charge fees on BV).

 

[SafetyinNumbers]

2 hours ago, This2ShallPass said:

After 10 years, in my opinion the only return you should calculate is what you can get. It's their responsibility as managers to close the discount at some point (especially when they happily charge fees on BV).

 

It’s a conundrum. The fees are lower because the marks are conservative but the realizable returns are also lower. It’s certainly a special situation since it’s easy to see BIAL is marked too low and there are trying to change that via IPO for the past 4 years. I appreciate the frustration but the underperformance is mostly the growing discount to intrinsic value which is not unique to Fairfax India given the market structure. 

[Hsmpanl]

4 hours ago, SafetyinNumbers said:

It’s a conundrum. The fees are lower because the marks are conservative but the realizable returns are also lower. It’s certainly a special situation since it’s easy to see BIAL is marked too low and there are trying to change that via IPO for the past 4 years. I appreciate the frustration but the underperformance is mostly the growing discount to intrinsic value which is not unique to Fairfax India given the market structure. 

I’m agnostic to the marks since I own both FFH and FFI, it’s really left pocket right pocket for me. I think the question is what responsibility does a company have to reliably cash out shareholders close to intrinsic value? Since BIAL is internally reinvesting there isn’t much FFI can do to close the valuation gap if the market won’t pay a fair price for the assets. Situation is what it is and I’m happy to wait for things to play out over the next decade(s) as long as intrinsic value continues to compound.

[SafetyinNumbers]

41 minutes ago, Hsmpanl said:

I’m agnostic to the marks since I own both FFH and FFI, it’s really left pocket right pocket for me. I think the question is what responsibility does a company have to reliably cash out shareholders close to intrinsic value? Since BIAL is internally reinvesting there isn’t much FFI can do to close the valuation gap if the market won’t pay a fair price for the assets. Situation is what it is and I’m happy to wait for things to play out over the next decade(s) as long as intrinsic value continues to compound.

I suspect they will start increasing the mark on BIAL as the model DCF passes the mark. That will help BV momentum although Q3 looks tough because of the public marks had a rough quarter and the rupee weakened.

[dartmonkey]

30 minutes ago, Hsmpanl said:

I’m agnostic to the marks since I own both FFH and FFI, it’s really left pocket right pocket for me. I think the question is what responsibility does a company have to reliably cash out shareholders close to intrinsic value? Since BIAL is internally reinvesting there isn’t much FFI can do to close the valuation gap if the market won’t pay a fair price for the assets. Situation is what it is and I’m happy to wait for things to play out over the next decade(s) as long as intrinsic value continues to compound.

This is also my situation and my view. In fact, since my FIH position is so big (ever since they travelled back down well under $10 5 years ago, and I doubled down), the lower fees from the ‘conservative’ marks are a net benefit for me. I own .007% of FFH but 0.11%of FIH, 15 times more, so for every dollar FFH leaves on the table for FIH, I get $15 back (unrealized) from FIH.

 

Because of my outsized position, I would like FIH shares to trade up closer to the $40 I think would be their value, so that I could at last rebalance, so I can understand This2ShallPass’s frustration. We just have to take his screen name to heart, though, since I don’t see what FFH or FIH can really do about it. Intrinsic value won’t pay for my cottage, but I’m not going to accept $17 for $40 in value just because I feel impatient, especially since I will be doubly frustrated if the discount closes in 6 months, just after I have thrown in the towel. 

[73 Reds]

32 minutes ago, dartmonkey said:

This is also my situation and my view. In fact, since my FIH position is so big (ever since they travelled back down well under $10 5 years ago, and I doubled down), the lower fees from the ‘conservative’ marks are a net benefit for me. I own .007% of FFH but 0.11%of FIH, 15 times more, so for every dollar FFH leaves on the table for FIH, I get $15 back (unrealized) from FIH.

 

Because of my outsized position, I would like FIH shares to trade up closer to the $40 I think would be their value, so that I could at last rebalance, so I can understand This2ShallPass’s frustration. We just have to take his screen name to heart, though, since I don’t see what FFH or FIH can really do about it. Intrinsic value won’t pay for my cottage, but I’m not going to accept $17 for $40 in value just because I feel impatient, especially since I will be doubly frustrated if the discount closes in 6 months, just after I have thrown in the towel. 

Interesting discussion.  I started buying Fairfax India not long after I began buying Fairfax Financial during Covid, albeit in much smaller quantities.  The obvious question is, should I have purchased more Fairfax Financial instead?  The answer for me (no) goes to the heart of value investing.  When comfortable with management and with the certainty, or strong belief that the asset is appreciating regardless of market price, the only issue here involves the timing of when price catches up to value.  I'll probably buy more at these and lower levels and be thankful later.  Resisting the urge to compare what "could have been". with another investment vs. "what is" with Fairfax India is part and parcel of value investing.  Precisely the same feeling I have toward JOE.  Not a concern.   

[SafetyinNumbers]

36 minutes ago, 73 Reds said:

Interesting discussion.  I started buying Fairfax India not long after I began buying Fairfax Financial during Covid, albeit in much smaller quantities.  The obvious question is, should I have purchased more Fairfax Financial instead?  The answer for me (no) goes to the heart of value investing.  When comfortable with management and with the certainty, or strong belief that the asset is appreciating regardless of market price, the only issue here involves the timing of when price catches up to value.  I'll probably buy more at these and lower levels and be thankful later.  Resisting the urge to compare what "could have been". with another investment vs. "what is" with Fairfax India is part and parcel of value investing.  Precisely the same feeling I have toward JOE.  Not a concern.   

My FFH position is 10x my FIH position partially because passive has to own FFH while no one has to own FIH. Being in a benchmark gives a better chance at trading at fair value. I trade FIH for that reason while I don’t touch FFH (except to add). In any given year though FIH BVPS can go up a lot more than FFH given the potential BIAL IPO catalyst. 

[73 Reds]

3 minutes ago, SafetyinNumbers said:

My FFH position is 10x my FIH position partially because passive has to own FFH while no one has to own FIH. Being in a benchmark gives a better chance at trading at fair value. I trade FIH for that reason while I don’t touch FFH (except to add). In any given year though FIH BVPS can go up a lot more than FFH given the potential BIAL IPO catalyst. 

Yeah, one of the issues is whether, and to what extent the price an investment trades at is important.  Depends a lot on holding period.  For me, most of my investments are private with no market price because they are not for sale and I'm comfortable with that.  

[TwoCitiesCapital]

2 hours ago, SafetyinNumbers said:

My FFH position is 10x my FIH position partially because passive has to own FFH while no one has to own FIH. Being in a benchmark gives a better chance at trading at fair value. I trade FIH for that reason while I don’t touch FFH (except to add). In any given year though FIH BVPS can go up a lot more than FFH given the potential BIAL IPO catalyst. 

 

I'm similar but it's 5-6x. 

 

Went way heavier into Fairfax as there was a more clear view on how the discount would close - earnings. And earnings were obvious with rising interest rates and exploding float. 

 

At this point, I think the value skews to Fairfax India, but also is a less clear path to how that's unearthed. We've been talking about Anchorage forever - it hasn't happened yet. IDB bank hasn't happened yet. Tender offers/repurchases have been small and/or irregular. The value is there, and still adding, but is less clear to me how/when the shares re-rate versus FFH which has the clear catalysts despite maybe not being as "cheap". 

[mananainvesting]

I own a lot more $FFH.TO than $FIH, one thing I always think of is, why should $FIH be public?

10+ years is a long time for a company to be always valued lower than intrinsic value. If market hasn't closed the gap till date, what will make it close the gap later? Sometimes, making things simple is the way to go. Fairfax should just take Fairfax India private or at least plan for it (if there are currently any regulatory hurdles). 

 

Note: I understand for a few years when launched, the stock was trading over book/close to intrinsic value. 

[SafetyinNumbers]

3 hours ago, TwoCitiesCapital said:

 

I'm similar but it's 5-6x. 

 

Went way heavier into Fairfax as there was a more clear view on how the discount would close - earnings. And earnings were obvious with rising interest rates and exploding float. 

 

At this point, I think the value skews to Fairfax India, but also is a less clear path to how that's unearthed. We've been talking about Anchorage forever - it hasn't happened yet. IDB bank hasn't happened yet. Tender offers/repurchases have been small and/or irregular. The value is there, and still adding, but is less clear to me how/when the shares re-rate versus FFH which has the clear catalysts despite maybe not being as "cheap". 

Once Anchorage is public that might help close the discount because ~80% of the holdings will be marked to market. Investors tend to put a bigger discount on the private holdings. It also has a chance to be valued fairly which means it can be used as a source of capital for buybacks. I still think FFH compounds intrinsic value at a higher rate given the inherent leverage but FIH is trading at a bigger discount to IV.

[SafetyinNumbers]

1 hour ago, mananainvesting said:

I own a lot more $FFH.TO than $FIH, one thing I always think of is, why should $FIH be public?

10+ years is a long time for a company to be always valued lower than intrinsic value. If market hasn't closed the gap till date, what will make it close the gap later? Sometimes, making things simple is the way to go. Fairfax should just take Fairfax India private or at least plan for it (if there are currently any regulatory hurdles). 

 

Note: I understand for a few years when launched, the stock was trading over book/close to intrinsic value. 

They won’t take it private because the insurance companies get better capital treatment for owning a a Canadian listed public company than they would for holding private Indian companies. They also think in forever terms and taking advantage of Mr. Market is helpful to returns over time. 

[This2ShallPass]

14 hours ago, dartmonkey said:

so I can understand This2ShallPass’s frustration. We just have to take his screen name to heart, though, since I don’t see what FFH or FIH can really do about it. Intrinsic value won’t pay for my cottage, but I’m not going to accept $17 for $40 in value just because I feel impatient, especially since I will be doubly frustrated if the discount closes in 6 months, just after I have thrown in the towel. 

Maybe I should change my name to AtTimesItWon'tPass

 

This is the exact same thought process I have had for the last couple of years and hence been in this holding pattern. Lot of fomo, what if the IPO happens soon after I sell.

 

On could FIH have done something to close the gap, I think surely they could have prioritized buybacks. I'm positive 90% of the members of this board would have done that if we were the majority holders of FIH. Think this scenario, we have a $40 asset selling at $15 with future potential layered on top and your crown jewel is starting to take off. Would you be using $100M to buy peanut companies or buyback your own stock thereby increasing your ownership of BIAL?? Prosus laid out the way to close the holdco discount, it's simple and works.

 

 

7 hours ago, mananainvesting said:

10+ years is a long time for a company to be always valued lower than intrinsic value. If market hasn't closed the gap till date, what will make it close the gap later? Sometimes, making things simple is the way to go. Fairfax should just take Fairfax India private or at least plan for it (if there are currently any regulatory hurdles). 

Honestly this is the much bigger risk of holding FIH. If Anchorage continues to be delayed and FFH continues to build the war chest, taking out FIH is a logical option. We know Fairfax won't think twice about minority shareholders. Dead money for many years and taken out for a small premium is the worst case scenario here.

 

 

[This2ShallPass]

7 hours ago, SafetyinNumbers said:

Once Anchorage is public that might help close the discount because ~80% of the holdings will be marked to market.

Agreed. This also allows them to do exactly what Prosus did with Tencent. Sell Anchorage everyday and buyback FIH (go to controlling stake limit). Strangely this increases FIH ownership of BIAL and discount guaranteed to close.

[villainx]

7 hours ago, This2ShallPass said:

Lot of fomo, what if the IPO happens soon after I sell.

 

Sounds like updates Anchorage and IDBI might be big catalyst.  But India regulators move at their own pace.  IDBI might be helpful win or lose?  Either deploy capital in new asset or buybacks?

 

 

[treasurehunt]

10 hours ago, This2ShallPass said:

Agreed. This also allows them to do exactly what Prosus did with Tencent. Sell Anchorage everyday and buyback FIH (go to controlling stake limit). Strangely this increases FIH ownership of BIAL and discount guaranteed to close.

 

Won't FIH have to pay capital gains taxes on any sales of Anchorage? The Prosus sales of Tencent work so well because they are tax free. I guess if the discount is big enough, paying taxes is worthwhile.

[This2ShallPass]

7 hours ago, treasurehunt said:

Won't FIH have to pay capital gains taxes on any sales of Anchorage?

I didn't think about taxes, good point. 

 

21 hours ago, Haryana said:

I am much more excited knowing that they are marked low, do you have it backwards?

I don't get the benefits of lower marks. It's already trading at a discount to book, so artificially lowering book makes the returns even lower for minority. Say they mark it fairly at $35 and it still trades at 30% discount, that's $25 FFXDF share price. 

 

[Hsmpanl]

24 minutes ago, This2ShallPass said:

I didn't think about taxes, good point. 

 

I don't get the benefits of lower marks. It's already trading at a discount to book, so artificially lowering book makes the returns even lower for minority. Say they mark it fairly at $35 and it still trades at 30% discount, that's $25 FFXDF share price. 

 

The FFH performance fee is calculated off book value, so lower mark means deferred/lower fees.

[SafetyinNumbers]

9 hours ago, treasurehunt said:

 

Won't FIH have to pay capital gains taxes on any sales of Anchorage? The Prosus sales of Tencent work so well because they are tax free. I guess if the discount is big enough, paying taxes is worthwhile.

I don’t think they pay any capital gains tax because it’s held by a Mauritius entity.

[TwoCitiesCapital]

20 hours ago, This2ShallPass said:

On could FIH have done something to close the gap, I think surely they could have prioritized buybacks. I'm positive 90% of the members of this board would have done that if we were the majority holders of FIH.

 

I suppose it depends on what "prioritize" means in terms of scale. Exor has been doing buybacks for many of the last 10-years I have owned them - the stock is now near the widest discount it's ever been during that period. 

 

Alibaba was doing significant buybacks for over a year and the price kept going lower - it's recent pop from $70 - $190 wasn't as much fueled by buybacks as much as it has been powered AI optimism. 

 

Buybacks aren't a panacea for immediate value-gap closure. They just immediately created value. And FIH has been doing them - but I imagine they prioritize liquidity for future investments and taking additional stakes (like the many add-ons to BIAl) as well as gathering resources for a bid on something large like IBDI. 

 

I'd prefer they did more buybacls but under the competition for capital in a structure like this intended for long-term investing. 

 

20 hours ago, This2ShallPass said:

Think this scenario, we have a $40 asset selling at $15 with future potential layered on top and your crown jewel is starting to take off. Would you be using $100M to buy peanut companies or buyback your own stock thereby increasing your ownership of BIAL?? Prosus laid out the way to close the holdco discount, it's simple and works.

 

It still took awhile for Prosus to get it done and the NAV gap is still there...just smaller. Could it be that it wasn't the buybacks that closed the gap as much as it was the narrative shifts in China that resulted in ALL of its tech stocks popping? Not just the ones buying back shares? 

 

Waiting for an IPO of Anchorage also gives Fairfax more optionality on the buybacks front by giving it something liquid it can trim. 

 

20 hours ago, This2ShallPass said:

Honestly this is the much bigger risk of holding FIH. If Anchorage continues to be delayed and FFH continues to build the war chest, taking out FIH is a logical option. We know Fairfax won't think twice about minority shareholders. Dead money for many years and taken out for a small premium is the worst case scenario here.

 

I think it's a risk as Fairfax has demonstrated - but I don't know why they'd have listed the public vehicle just to take it private. At some point, they felt they needed a separate vehicle to do this and I expect whatever those reasons are to probably still be valid. 

[bluedevil]

I’m not certain the rationale behind a separate FIH still exists

 

it was originally created when Fairfax was capital restrained and regulators limited how much of their insurance sub money they could invest in India.  They saw a huge opportunity and wanted to put in more capital so did next best thing and took money from others while earning a fee and using that fee to increase their ownership over time. 
 

they have more capital flexibility now and haven’t been able to use FIH as a significant capital raising vehicle given the discount to book that has persisted 
 

 

[villainx]

1 hour ago, bluedevil said:

haven’t been able to use FIH as a significant capital raising vehicle given the discount to book that has persisted 

 

Definitely see this as the main point for why FIH exists.   And the discount has to be hinderance to pursuing more deals.

[SafetyinNumbers]

6 hours ago, villainx said:

 

Definitely see this as the main point for why FIH exists.   And the discount has to be hinderance to pursuing more deals.

Plus it allows the insurance subsidiaries to buy private Indian companies with a lower capital charge.

[This2ShallPass]

17 hours ago, TwoCitiesCapital said:

It still took awhile for Prosus to get it done and the NAV gap is still there...just smaller. Could it be that it wasn't the buybacks that closed the gap as much as it was the narrative shifts in China that resulted in ALL of its tech stocks popping? Not just the ones buying back shares? 

 

Yes I don't think the gap will close immediately, it took Prosus 2 years of buying daily because the discount was too large. They said they created ~$40B in value with this buyback. I don't think it's positive momentum on China. If that was the only case the discount would have widened. Market has been very clear, the larger Tencent is a % of Prosus, they will buy Tencent directly.

 

Also, this approach should force the discount to close given a large enough timeframe. You have two holdings

 

1. X selling for $0.5

2. Y selling for $1

 

In the scenario where X has 80% of Y (thereby having an inherent $0.8 value), selling Y everyday and buying back X for few years means the discount between X and Y cannot stay at 50%. It's the infinite money glitch.

 

 

[Txvestor]

On 10/6/2025 at 11:47 AM, treasurehunt said:

 

Won't FIH have to pay capital gains taxes on any sales of Anchorage? The Prosus sales of Tencent work so well because they are tax free. I guess if the discount is big enough, paying taxes is worthwhile.

LT cap gains 12.5%, not too punitive 

Edited October 8, 2025 by Txvestor