Fairfax India new issue

[petec]

On 11/5/2025 at 9:31 AM, SafetyinNumbers said:

The capital treatment for the insurance subsidiaries is the reason. You should ask the question on the conference call Friday. 

 

Wouldn't this apply to all their Indian holdings though, including their stake in FIH?

 

I think the better argument might be that they owe a fiduciary duty to FIH minorities (who pay them to manage FIH), whereas they do not owe a fiduciary duty to the minorities in for example KW.

 

Certainly, if they took FIH under at what transpired to be a low price, the market would not trust them to launch another fee-bearing company again.

[SafetyinNumbers]

1 hour ago, petec said:

 

Wouldn't this apply to all their Indian holdings though, including their stake in FIH?

 

I think the better argument might be that they owe a fiduciary duty to FIH minorities (who pay them to manage FIH), whereas they do not owe a fiduciary duty to the minorities in for example KW.

 

Certainly, if they took FIH under at what transpired to be a low price, the market would not trust them to launch another fee-bearing company again.

My understanding is that FIH is considered a listed stock on the TSX so has different capital treatment. I’m not making an argument, just explaining why it’s not something I am concerned about.
 

On a side note, FFH happily pays fees to other money managers like WEF, BDT, Shawkwei and others so I find it amusing that it’s such a hang up for retail investors who pass on FIH.

[petec]

16 hours ago, SafetyinNumbers said:

My understanding is that FIH is considered a listed stock on the TSX so has different capital treatment. I’m not making an argument, just explaining why it’s not something I am concerned about.

 

Interesting, thanks.

[sholland]

On 11/13/2025 at 2:38 PM, SafetyinNumbers said:

My understanding is that FIH is considered a listed stock on the TSX so has different capital treatment. I’m not making an argument, just explaining why it’s not something I am concerned about.
 

On a side note, FFH happily pays fees to other money managers like WEF, BDT, Shawkwei and others so I find it amusing that it’s such a hang up for retail investors who pass on FIH.

Thanks @petec and @SafetyinNumbers.  I found your arguments persuasive. 

Additionally, I asked Grok the following question:

 

Why is it more favorable for Fairfax Financial to own part of Fairfax India as a listed stock on the Toronto stock exchange as opposed to owning all of Fairfax India as a private Indian company?  Specifically, I am interested in the capital treatment ramifications if Fairfax Financial bought all of Fairfax India.

 

 

To spare follow board members the long winded answer I have summarized Grok’s answer as follows:

 

Fairfax Financial, as an insurance holding company, is subject to Canadian regulatory oversight by the Office of the Superintendent of Financial Institutions (OSFI). Its regulatory capital is defined under the Regulatory Capital (Insurance Holding Companies) Regulations (SOR/2001-424), which includes shareholders’ equity, subordinated debt, and crucially, minority interests (NCI), minus goodwill. The adequacy of this capital is assessed on a consolidated basis, incorporating guidelines like the Minimum Capital Test (MCT) for property and casualty (P&C) insurers, adapted for holding companies.

 

The listed partial-ownership structure is more favorable because it incorporates non-controlling interests (NCI) into regulatory capital, allowing Fairfax Financial to control and consolidate Fairfax India and leverage external capital. Full acquisition and privatization would eliminate this NCI benefit, require significant funding, and likely result in a net reduction in available capital, harming ratios and increasing the need for additional capital reserves under OSFI rules.

[Viking]

Mr Market is a wonderful and very accommodating fellow. Fairfax India has sold off aggressively the past month or so and is down to $16.00/share. Why? No idea. What to do? Today, I am very happy to re-establish a position in the company about $16.00/share. 
 

Book value at Sept 30, 2025 was $20.72/share. Of course, this materially undervalues BIAL (and other private assets).
 

What is the catalyst? At some point we will get an Anchorage IPO. And this will likely spike the BV of Fairfax India. When will this happen? No idea. And it doesn’t matter (the when) - the economic/intrinsic value of BIAL is compounding nicely each year. Time is definitely the friend of this business.

 

Could Fairfax India go lower from here? Yes, of course it could. If fact if the market averages continue to sell off, it is likely that Fairfax India will extend its current sell off. After all, stocks are volatile.

Edited November 20, 2025 by Viking

[Hsmpanl]

1 hour ago, Viking said:

Mr Market is a wonderful and very accommodating fellow. Fairfax India has sold off aggressively the past month or so and is down to $16.00/share. Why? No idea. What to do? Today, I am very happy to re-establish a position in the company about $16.00/share. 
 

Book value at Sept 30, 2025 was $20.72/share. Of course, this materially undervalues BIAL (and other private assets).
 

What is the catalyst? At some point we will get an Anchorage IPO. And this will likely spike the BV of Fairfax India. When will this happen? No idea. And it doesn’t matter (the when) - the economic/intrinsic value of BIAL is compounding nicely each year. Time is definitely the friend of this business.

 

Could Fairfax India go lower from here? Yes, of course it could. If fact if the market averages continue to sell off, it is likely that Fairfax India will extend its current sell off. After all, stocks are volatile.

I purchased a bit more today as well. Clearly undervalued but needs a catalyst to rerate. Happy to hold and add opportunistically but feels like it will be a slog until suddenly it's not.

[Viking]

51 minutes ago, Hsmpanl said:

I purchased a bit more today as well. Clearly undervalued but needs a catalyst to rerate. Happy to hold and add opportunistically but feels like it will be a slog until suddenly it's not.

 

The important thing to me is what is going on under the hood at Fairfax India. I think BIAL is a jewel of an asset. My guess is it is increasing in value nicely every year. That is the primary the reason why I own Fairfax India today. You can get a high quality asset like BIAL at a significant discount to its economic/intrinsic value. I also love Hari Mahar and the management team. It is such a no brainer at $16 (risk/reward).

 

With Fairfax India, I think lots of people on this board are focussed on the price of the stock (i.e. trying to figure out/time exactly when it will re-rate etc)... and/or the fee structure. For me, both of those are non-issues. 

 

The big question for me is do I make Fairfax India a meaningful permanent position or continue to trade it. I have done very well trading in and out of it over the years. However, almost every year, Fairfax India keeps buying more and more of BIAL. As a result, they have an economic interest now in BIAL of 74%. I love this asset. Therefore, I likely should keep a core position moving forward - it is only a matter of time until this asset gets re-valued higher. And as others have pointed out, it could be a meaningful amount. In other words, patience might be the best strategy for me for Fairfax India moving forward.

 

Yes, I do get some exposure to BIAL with Fairfax. But it is very small compared to what I get from owning Fairfax India directly.  

Edited November 20, 2025 by Viking

[Hsmpanl]

4 minutes ago, Viking said:

 

The important thing to me is what is going on under the hood at Fairfax India. I think BIAL is a jewel of an asset. My guess is it is increasing in value nicely every year. That is the primary the reason why I own Fairfax India today. You can get a high quality asset like BIAL at a significant discount to its economic/intrinsic value. I also love Hari Mahar and the management team. It is such a no brainer at $16 (risk/reward).

 

With Fairfax India, I think lots of people on this board are focussed on the price of the stock (i.e. trying to figure out/time exactly when it will re-rate etc)... and/or the fee structure. For me, both of those are non-issues. 

 

The big question for me is do I make Fairfax India a meaningful permanent position or continue to trade it. I have done very well trading in and out of it over the years. However, almost every year, Fairfax India keeps buying more and more of BIAL. As a result, they have an economic interest now in BIAL of 74%. I love this asset. Therefore, I like should keep a core position moving forward - it is only a matter of time until this asset gets re-valued higher. And as others have pointed out, it could be a meaningful amount. In other words, patience might be the best strategy for me for Fairfax India moving forward.

 

Yes, I do get some exposure to BIAL with Fairfax. But it is very small compared to what I get from owning Fairfax India directly.  

Agree with you re: Hari and BIAL. My personal issue is I can't tell how BIAL is performing when FIH goes through drawdowns like this. If BIAL value is compounding at 10-15% in USD terms per year then hell yeah FIH is a no-brainer. I'm new to investing in India and some of the recent comments around expecting BIAL to relinquish their exclusive rights to allow another airport near Bengaluru combined with the bureaucracy around Anchorage and the privatization of IDBI give me a bit of pause as well. I also don't have any hedge to the currency and book value has been stagnant since '22 in dollar terms. All minor things, but so far they've kept me from making FIH a larger position.

 

I also want to keep my ratio of FFH to FIH reasonable to avoid risk of a takeunder at a low price. I don't think it's likely to happen, but it's a ratio I like to watch regardless.

[CS]

Can someone explain the Investment advisory fee on deployed/undeployed capital? What’s the purpose of It. Doesn’t it cause an incentive to advise to deploy the capital? 

[gfp]

7 minutes ago, CS said:

Can someone explain the Investment advisory fee on deployed/undeployed capital? What’s the purpose of It. Doesn’t it cause an incentive to advise to deploy the capital? 

 

You could look at it that way.  I doubt that was the intention or how it affects decision making in practice.

 

1.5% on deployed book value except for 50 bps on cash equivalents.

 

You could say the performance fee also incentivizes deploying the capital.  The goal is to deploy the capital after all.  I look at it more as a discount on paying them to hold cash vs. a moral hazard that it will drive them out of cash to make the big bucks but to each their own.

 

There is a way of looking at it that it would actually allow them to hold cash for longer without people screaming "why am I paying you 1.5% to hold cash???!!!"  So it could swing both ways as far as incentives / behavior.  I'm not gonna lose any sleep over that one.

Edited November 20, 2025 by gfp

[Crip1]

29 minutes ago, Viking said:

 

The important thing to me is what is going on under the hood at Fairfax India. I think BIAL is a jewel of an asset. My guess is it is increasing in value nicely every year. That is the primary the reason why I own Fairfax India today. You can get a high quality asset like BIAL at a significant discount to its economic/intrinsic value. I also love Hari Mahar and the management team. It is such a no brainer at $16 (risk/reward).

 

With Fairfax India, I think lots of people on this board are focussed on the price of the stock (i.e. trying to figure out/time exactly when it will re-rate etc)... and/or the fee structure. For me, both of those are non-issues. 

 

The big question for me is do I make Fairfax India a meaningful permanent position or continue to trade it. I have done very well trading in and out of it over the years. However, almost every year, Fairfax India keeps buying more and more of BIAL. As a result, they have an economic interest now in BIAL of 74%. I love this asset. Therefore, I likely should keep a core position moving forward - it is only a matter of time until this asset gets re-valued higher. And as others have pointed out, it could be a meaningful amount. In other words, patience might be the best strategy for me for Fairfax India moving forward.

 

Yes, I do get some exposure to BIAL with Fairfax. But it is very small compared to what I get from owning Fairfax India directly.  

Perm vs. Trading: I’ve had the vast majority of my position for a while now but have done a fair amount of trading in and out to bring my average cost to around $11. The return has been unsatisfactory considering I bought roughly half of my core position in 2018 and the rest in 2022.

 

Position size: It’s #3…in line with MKL and BRK but well behind Fairfax, so it’s not a small position.

 

The problem is that I am struggling to figure out fair value. Similar to Fairfax in that I can’t give a rock-solid “This is what it’s worth” figure, but I’m more than reasonably sure that both are worth substantially above where it’s currently trading. Dissimilar from Fairfax is that I’d have done way better by simply investing in an S&P Index fund over the past 3-7 years, so opportunity cost is significant. 

 

Ultimately, the plan is to keep the core position and will trade in and out where it make sense. I’ve endured suboptimal price action such that it would be foolish to sell out before receiving the reward for my patience.  

 

-Crip

 

P. S. It's kinda self-centered to talk about me in that post compared to the company. I do so wondering if others are in of a similar predicament. 
 

[CS]

My predicament is the fee structure. If it’s not an issue now due to the undervaluation, what happens when FV is reached? 

[Hsmpanl]

2 minutes ago, CS said:

My predicament is the fee structure. If it’s not an issue now due to the undervaluation, what happens when FV is reached? 

Fee structure is on book value with a high water mark. Doesn't seem unreasonable or out of market to me, plus I own FFH so a little right pocket, left pocket action in my view.

[73 Reds]

8 minutes ago, Crip1 said:

Perm vs. Trading: I’ve had the vast majority of my position for a while now but have done a fair amount of trading in and out to bring my average cost to around $11. The return has been unsatisfactory considering I bought roughly half of my core position in 2018 and the rest in 2022.

 

Position size: It’s #3…in line with MKL and BRK but well behind Fairfax, so it’s not a small position.

 

The problem is that I am struggling to figure out fair value. Similar to Fairfax in that I can’t give a rock-solid “This is what it’s worth” figure, but I’m more than reasonably sure that both are worth substantially above where it’s currently trading. Dissimilar from Fairfax is that I’d have done way better by simply investing in an S&P Index fund over the past 3-7 years, so opportunity cost is significant. 

 

Ultimately, the plan is to keep the core position and will trade in and out where it make sense. I’ve endured suboptimal price action such that it would be foolish to sell out before receiving the reward for my patience.  

 

-Crip

 

P. S. It's kinda self-centered to talk about me in that post compared to the company. I do so wondering if others are in of a similar predicament. 
 

For me the difference is that Fairfax has a demonstrable track record of increasing BV by 18%+/year since its inception decades ago and no real risk of what may or may not happen in India going forward other than its India investments.  Dependency on the IPO of a company's main asset also carries risk, and then what? (I own some shares of Fairfax India but not enough that it really matters).

[gfp]

5 minutes ago, Hsmpanl said:

Fee structure is on book value with a high water mark. Doesn't seem unreasonable or out of market to me, plus I own FFH so a little right pocket, left pocket action in my view.

 

One of the issues with charging fees on book value of a closed-end-fund type structure is that shareholders can't redeem/sell at book value.  So you can charge them performance fees and if the multiple compresses from, say, 1x to .5x, the shareholder can be in a loss while the manager get's incentive reallocation.  People don't like that

 

I remember some old coot years ago would always scream "But I can't spend Intrinsic Value assholes!"

 

Edited November 20, 2025 by gfp

[CS]

I’ll have to look at the high watermark. Anyone know why they chose every 3 years. So that fee taken so often means it can’t compound in your favor. The earlier fees would theoretically hurt you more as in investor in the long run, right?

Edited November 21, 2025 by CS

[Viking]

1 hour ago, Crip1 said:

Perm vs. Trading: I’ve had the vast majority of my position for a while now but have done a fair amount of trading in and out to bring my average cost to around $11. The return has been unsatisfactory considering I bought roughly half of my core position in 2018 and the rest in 2022.

 

Position size: It’s #3…in line with MKL and BRK but well behind Fairfax, so it’s not a small position.

 

The problem is that I am struggling to figure out fair value. Similar to Fairfax in that I can’t give a rock-solid “This is what it’s worth” figure, but I’m more than reasonably sure that both are worth substantially above where it’s currently trading. Dissimilar from Fairfax is that I’d have done way better by simply investing in an S&P Index fund over the past 3-7 years, so opportunity cost is significant. 

 

Ultimately, the plan is to keep the core position and will trade in and out where it make sense. I’ve endured suboptimal price action such that it would be foolish to sell out before receiving the reward for my patience.  

 

-Crip

 

P. S. It's kinda self-centered to talk about me in that post compared to the company. I do so wondering if others are in of a similar predicament. 

 

Owning Fairfax India in recent years (as a long term investor) has felt a little like those investors holding the CDS position in the Big Short after the housing market had clearly started imploding - and their position was not getting marked properly. My guess is a big payday is coming for investors in Fairfax India... but it will require conviction and patience. 

 

@Crip1, if you are measuring your return solely on market price then, yes, your return has been poor compared to alternatives, like a broad based index fund. A question:

• Does economic/intrinsic value matter?

My view is Fairfax India's market value (share price) does a good job of reflecting the value of the assets that are publicly traded and the assets that have been monetized over the years. And it does a terrible job of reflecting the economic/intrinsic value of the private assets, especially BIAL. And the disparity is growing every year.

 

In many ways, Fairfax India is like a coiled spring. Over time, it keeps selling other smaller assets and buying more and more BIAL. Each purchase coils the spring tighter and tighter. Over time, Fairfax India is becoming more and more a levered play on BIAL. And I love it. Because I like the asset so much.

Edited November 20, 2025 by Viking

[Whensthepaintdry?]

Is this a pfic? If so, are most of the owners here non U.S.?

[Munger_Disciple]

1 hour ago, gfp said:

 

One of the issues with charging fees on book value of a closed-end-fund type structure is that shareholders can't redeem/sell at book value.  So you can charge them performance fees and if the multiple compresses from, say, 1x to .5x, the shareholder can be in a loss while the manager get's incentive reallocation.  People don't like that

 

I remember some old coot years ago would always scream "But I can't spend Intrinsic Value assholes!"

 

 

Another problem with charging fees based on book value (as opposed to stock performance) is that the management is not very much incentivized to close the gap between book value and market price. So they can keep collecting fees regardless of how the stock performs. 

Edited November 21, 2025 by Munger_Disciple

[Marco Van Basten]

48 minutes ago, Whensthepaintdry? said:

Is this a pfic? If so, are most of the owners here non U.S.?

It is a PFIC.  

[Hsmpanl]

1 hour ago, Whensthepaintdry? said:

Is this a pfic? If so, are most of the owners here non U.S.?

I’m US based but just hold this in a traditional IRA.

[Hsmpanl]

59 minutes ago, Munger_Disciple said:

 

Another problem with charging fees based on book value (as opposed to stock performance) is that the management is not very much incentivized to close the gap between book value and market price. So they can keep collecting fees regardless of how the stock performs. 

It’s a risk, absolutely. I trust Fairfax to treat me fairly and believe they continue to mark their assets conservatively so as to not take advantage of investors in FIH. Something to monitor though.

[SafetyinNumbers]

47 minutes ago, Hsmpanl said:

It’s a risk, absolutely. I trust Fairfax to treat me fairly and believe they continue to mark their assets conservatively so as to not take advantage of investors in FIH. Something to monitor though.

They have bought shares back in the past. I suspect when they have more capital they will buy more.

[petec]

22 hours ago, Viking said:

You can get a high quality asset like BIAL at a significant discount to its economic/intrinsic value.

 

Agreed. Do you have a good idea of the IV? I need to do some work on this.

[CS]

110mm in cash and 8.2mm in shares (this is an expense too) roughly $130mm at todays close. Net -240mm(and growing as FV rises). Thoughts and opinions please?