Fairfax India new issue

[gfp]

Thanks for putting together the post @CoGreenwich&Laight

 

You live in Tribeca?

 

Despite all that bad stuff I still bought some FIH.U at 16.05 and 16.08 recently.  I think I'm gonna do OK.  But unlike some people, I will actually sell it when it goes up towards 20 again

[SafetyinNumbers]

18 minutes ago, CoGreenwich&Laight said:

As the Annual meeting is coming up, below are some updated figures. 

 

Fees paid out to FFH now total $572 million.  That compares to market cap added or value created of $778 million. In 11+ years what have shareholders received? ~4.5% compound return.

 

Including G&A fees paid, to subsidize the super-voting shares (50 to 1 vote thus are more valuable), fees paid out now total $648 million.  Is it ethical to charge G&A fees pari passu when the value creation is disproportionate? What happens at Berkshire? Should FFH be charging G&A fees on top of Investment & Advisory?

 

In the last three years, FFH has been paid close to $150mm, excl performance fees. They've made ONE new investment, Global Aluminum in late 2024. One.

Investment Portfolio Review

 

 

 

 

 

With the panoply of fees, FFH share basis is now negative $0.78 to negative $2.29 depending on how you want to look at it. Shareholders have received nothing. Zero.

Share Issuance Service

 

 

 

Does it matter what the fees are if we are getting a good risk adjusted return? or a return as indicated by PW to be expected of 15% net to invest in India?

 

Is it gaslighting by management, and servile rabid mouthpieces on various platforms when touting shareholder friendly buybacks, when for the last two years, the pace has dropped off to anything but significant? Half a percent of shares outstanding per year? Mgmt has issued 149mm shares over 11 years, and 134mm remain outstanding today.  Is that much different from the SBC equivalent buybacks criticism against tech companies? Particularly when you shout out value being much higher than book, and the shares trade at a fraction of book?

 

 

The excuses of low share repurchases due to illiquidity does not hold water...its already there, has been for a while, and wont change. That ship has sailed a while ago. The likelyhood of trading at fair value, to be able to issues shares and enhance liquidity fairly is miniscule.

 

Today the implied value of BIAL in the share price is $380mm, a discount of 80+% to marked value, or higher to theoretical intrinsic value. Should management be doing anything but buying back their own shares, hand over fist? Just interest and dividends added up to over $115mm over the last two years relative to ~$20mm spent on buybacks, never mind Net realized gains of $270mm. With single digit compounding of bvps, relative to the risk, and objectives, have they earned the right to invest elsewhere with the shares trading at perhaps close to 50% or less of intrinsic value? While there are other forward thinking steps to get the shares to fair value, a discussion for another day, no investment they will find could be superior to BIAL at this discount. 

Stock Price Forecast

 

 

Silence equates to complicity? 

 

 

 

 

The market structure changed. The market became less efficient. They prefer making investments over buying back stock but the only capital they have access to are dividends from existing holdings unless they make sales. They could mark up the portfolio to full value like their private equity peers would do. The stock price would probably be higher, the discount bigger and the fees much bigger.

 

I assume you will be at the AGM to air your grievances?

Edited April 1 by SafetyinNumbers

[SafetyinNumbers]

What do people think BIAL will be worth in 10 years?

[gfp]

11 minutes ago, SafetyinNumbers said:

What do people think BIAL will be worth in 10 years?

 

I was worried this was a trick question and that was when the airport concession ended and that meant ZERO but I looked it up and they extended the lease to 2068 back in 2024 so I think BIAL will still have value in 10 years.  Phew

[Viking]

58 minutes ago, CoGreenwich&Laight said:

As the Annual meeting is coming up, below are some updated figures. 

 

Fees paid out to FFH now total $572 million.  That compares to market cap added or value created of $778 million. In 11+ years what have shareholders received? ~4.5% compound return.

Market Valuation Service

 

 

Including G&A fees paid, to subsidize the super-voting shares (50 to 1 vote thus are more valuable), fees paid out now total $648 million.  Is it ethical to charge G&A fees pari passu when the value creation is disproportionate? What happens at Berkshire? Should FFH be charging G&A fees on top of Investment & Advisory?

 

In the last three years, FFH has been paid close to $150mm, excl performance fees. They've made ONE new investment, Global Aluminum in late 2024. One.

 

 

 

 

With the panoply of fees, FFH share basis is now negative $0.78 to negative $2.29 depending on how you want to look at it. Shareholders have received nothing. Zero.

 

 

Does it matter what the fees are if we are getting a good risk adjusted return? or a return as indicated by PW to be expected of 15% net to invest in India?

 

Is it gaslighting by management, and servile rabid mouthpieces on various platforms when touting shareholder friendly buybacks, when for the last two years, the pace has dropped off to anything but significant? Half a percent of shares outstanding per year? Mgmt has issued 149mm shares over 11 years, and 134mm remain outstanding today.  Is that much different from the SBC equivalent buybacks criticism against tech companies? Particularly when you shout out value being much higher than book, and the shares trade at a fraction of book?

Share Price Tracking

 

 

 

The excuses of low share repurchases due to illiquidity does not hold water...its already there, has been for a while, and wont change. That ship has sailed a while ago. The likelyhood of trading at fair value, to be able to issues shares and enhance liquidity fairly is miniscule.

 

Today the implied value of BIAL in the share price is $380mm, a discount of 80+% to marked value, or higher to theoretical intrinsic value. Should management be doing anything but buying back their own shares, hand over fist? Just interest and dividends added up to over $115mm over the last two years relative to ~$20mm spent on buybacks, never mind Net realized gains of $270mm. With single digit compounding of bvps, relative to the risk, and objectives, have they earned the right to invest elsewhere with the shares trading at perhaps close to 50% or less of intrinsic value? While there are other forward thinking steps to get the shares to fair value, a discussion for another day, no investment they will find could be superior to BIAL at this discount. 

 

Silence equates to complicity? 

 

 

 

 

I am not sure what all the outrage is about the fee structure at Fairfax India. It was communicated to shareholders when the company was created. And it has remained the same since then. If an investor doesn't like the fee structure there is a really simple solution: don't invest in the company. There are so many great opportunities out there why waste time and energy yelling and shaking your fist at the clouds?

 

Investors who owned Fairfax India and were unhappy with management (pick the reason) all had a wonderful opportunity to exit their position in 2025 when the stock traded above $19 for over a month. Make a decision. Live your best life.  

 

The management team at Fairfax India is very good. The proof is the return they have generated on all the positions that have been monetized since the company was created. Many positions have been monetized over the years so can be used as one performance measure.

 

Another performance measure? Look at the biggest holding (by far) BIAL. 

 

Of course, the crown jewel of Fairfax India is BIAL. Fairfax India has done an outstanding job of managing and growing their ownership of this amazing asset over the past 7 years. This asset has a carrying value that is well below it fair value. Yes, the IPO of Anchorage has been continuously delayed over the past 4 years (welcome to doing business in India). But BIAL has been growing nicely in value every year - so no IPO has actually worked out well for long term shareholders.

 

I am not saying Fairfax India is perfect (no company is). The management team at Fairfax India are exceptional. The structure of the company is what it is.  

Edited April 1 by Viking

[SafetyinNumbers]

Just now, gfp said:

 

I was worried this was a trick question and that was when the airport concession ended and that meant ZERO but I looked it up and they extended the lease to 2068 back in 2024 so I think BIAL will still have value in 10 years.  Phew

I’m asking because most analysis is done statically looking at what BIAL intrinsic value is now or where it might trade on a listing as opposed to what it might be worth in 10 years. Probably less relevant for those trading $16-20 price range.

[gfp]

I buy a lot of stuff that has a lot of passionate complaints against it.  A lot of stuff that management does that I don't think they should do for various reasons.  Usually that "hair" is the primary reason the security trades cheap enough to become a really safe investment where I can own a lot and not have a big risk of losing any money permanently.  So the opportunity wouldn't exist (for a cheapskate like me who needs a big margin of safety because I take really big positions in relatively few things) without the "hair."  

 

It's like one of those old parables.  Do you curse the "hair" or are you thankful for the "hair" ?

 

Investing in a bunch of companies where I think management is doing things they shouldn't also highlights the rare cases where I see a management that I don't have any criticisms - guys like Jorge & Marek and Tal & Francisco.  Rare birds!

[Munger_Disciple]

44 minutes ago, Viking said:

 

I am not sure what all the outrage is about the fee structure at Fairfax India. It was communicated to shareholders when the company was created.

 

I don't have a dog in this fight but I do feel sorry for LT shareholders of FIH based on the thorough analysis done by @CoGreenwich&Laight. It's true that fees were disclosed when they IPOed this thing. However the right thing for Prem to do is to reduce the GP fees at this point. I am aware of at least one very well known VC firm on Sand Hill Road which had done this (after the fund closed, mid-way thru' the life of the fund). 

 

Just my 2c

Edited April 1 by Munger_Disciple

[TwoCitiesCapital]

3 minutes ago, Munger_Disciple said:

 

I don't have a dog in this fight but I do feel sorry for LT shareholders of FIH. It's true that fees were disclosed when they IPOed this thing. However the right thing for Prem to do is to reduce the GP fees. I am aware of at least one very well known VC firm on Sand Hill Road which had done this (after the fund closed, mid-way thru' the life of the fund). 

 

It's hard to blame management for this. 

 

The ONLY reason the LT holders have suffered is 1) because they didn't sell at a premium to NAV pre-covid and 2) the fund now trades at a discount to NAV post COVID

 

Premiums/discounts to NAV are inherent in the CEF structure and should have been a well known possibility to shareholders.

 

Is why I WASN'T buying at massive premiums pre-covid and AM buying at massive discounts since. 

 

I'd love to see the discount close. I'd also love to see Fairfax have the ability to do another large tender at a massive discount post-Anchorage. I'll wait and see which comes first and not blame management for a change in sentiment. They're doing what they should be which has been buying shares and continuing business as usual. 

 

 

Edited April 1 by TwoCitiesCapital

[SafetyinNumbers]

17 minutes ago, Munger_Disciple said:

 

It's true that fees were disclosed when they IPOed this thing. However the right thing for Prem to do is to reduce the GP fees at this point. I am aware of at least one very well known VC firm on Sand Hill Road which had done this (after the fund closed, mid-way thru' the life of the fund). 

 

Just my 2c

Management fees aren’t high compared to most PE funds. In fact, the fees are lower than would be paid on most PE funds when the conservative valuation of the portfolio is included. Further, the cheap leverage at the holdco also is a net benefit to owners so should be included in the analysis. 

[This2ShallPass]

8 hours ago, TwoCitiesCapital said:

Significant buy acks DID occur in 2021. And the discount to NAV remained. The management is not responsible for the discount nor are they responsible for closing it as long as they're making reasonable capital allocation decisions in the meantime. 

Surely they do. If your shares are deeply undervalued then buying them should be reasonable (basic) capital allocation. I guess if you charge fees in BV then maybe you don't care enough to close it, especially when you also get paid in discounted shares.

 

9 hours ago, TwoCitiesCapital said:

 

9 hours ago, CoGreenwich&Laight said:

In the last three years, FFH has been paid close to $150mm, excl performance fees. They've made ONE new investment, Global Aluminum in late 2024. One.

 

Is investment performance determined by returns? Or how many new investments one makes over time? 

Not making investments is fine, but charging $150M (to a $2.2B company) for sitting on your behinds is ridiculous!

I love the potential of BIAL like everyone else. But this is FF not doing right by minority investors as has so often been the case with many other investments.

 

[SafetyinNumbers]

7 hours ago, This2ShallPass said:

Surely they do. If your shares are deeply undervalued then buying them should be reasonable (basic) capital allocation. I guess if you charge fees in BV then maybe you don't care enough to close it, especially when you also get paid in discounted shares.

They have bought some shares back but they are in the business of assessing investment opportunities and making investments. If they don’t have the capital to execute then they hurt the value of the network they have built. Having worked in a fund, when the capital is turned off, analyst morale collapses. 

 

7 hours ago, This2ShallPass said:

Not making investments is fine, but charging $150M (to a $2.2B company) for sitting on your behinds is ridiculous!

I love the potential of BIAL like everyone else. But this is FF not doing right by minority investors as has so often been the case with many other investments.

The discount between the share price and book value is well understood given the market structure. The growing discount between book value and intrinsic value is less understood but it shouldn’t be surprising given Fairfax’s conservative approach to asset valuation. It’s happening at FFH too. Comparing the fees to intrinsic value might help with framing. 

[gfp]

I've done pretty well in this security over the years just paying attention to "peak complaining" on this thread.

 

Fairfax took their last fee in cash instead of underpriced shares - that was the first time they had that option per the contract and that's probably the closest you are going to get to Fairfax voluntarily / unilaterally deciding to reduce the fee structure.

 

I'm surprised it hasn't been brought up more, but what initially turned me off was the Nepo-hire.  Like many, I was fine with Ben on the FFH board of directors to represent the family's control shares and keep the culture just like I am fine with Farmer Howie and his weird sister sitting on the board of directors of $1 trillion systemically important Berkshire for similar reasons.

 

But making Ben chairman of FIH was a big turn off for me.  So I was paying very close attention at his first annual meeting and I was pleasantly surprised and now I have no issue with Ben the nepo-hire at the top of FIH.u...

 

Keep an open mind and take advantage of opportunities when they present themselves.  Opportunities to make money without a material risk of losing money are not so ample that you can waste them and spend all your time complaining about your stock being undervalued.  It's a "value investor" message board LOL.. Every stock we are interested in should be "under valued" and that would mean every thread was full of complaining "why is my stock price not reflecting intrinsic value as calculated on my spreadsheet!!!"  UNFAIR!

[SafetyinNumbers]

21 hours ago, SafetyinNumbers said:

What do people think BIAL will be worth in 10 years?

No one has a view on this?

[Crip1]

13 minutes ago, SafetyinNumbers said:

No one has a view on this?

Man, I can barely tell what it's worth now...10 years from now is a crap shoot for me.

 

That said, there look to be more catalysts to the upside (India's economic progress, room to expand the airport) than to the downside (business part becomes an albatross, another airport springs up, India's economy trails that of the rest of the planet). If one assumes that it's currently undervalued and that value is more likely to increase than decrease, the risk-reward analysis tilts to reward.

 

That said, I DEFINITELY welcome alternate views...that's how we learn.

 

-Crip

[Hsmpanl]

1 hour ago, Crip1 said:

Man, I can barely tell what it's worth now...10 years from now is a crap shoot for me.

 

That said, there look to be more catalysts to the upside (India's economic progress, room to expand the airport) than to the downside (business part becomes an albatross, another airport springs up, India's economy trails that of the rest of the planet). If one assumes that it's currently undervalued and that value is more likely to increase than decrease, the risk-reward analysis tilts to reward.

 

That said, I DEFINITELY welcome alternate views...that's how we learn.

 

-Crip

 

Yep, I'm with Crip on this one. Guessing it will be worth alot more in 10 years than it is today, but I also think alot depends on the negotiation with Karnataka on HAL reactivation v. a new, competing airport owned by others once their exclusivity expires. In general it doesn't seem like recent items (IDBI, Anchorage IPO, and airport negotiations) have been going Fairfax way, which does give me some pause. 

[giulio]

2 hours ago, SafetyinNumbers said:

No one has a view on this?

I have written my thoughts in a previous post and on twitter

 

If they double pax, I see a path to $1B in EBITDA. That should happen by 2029. They aim to 90M pax capacity by 2033. Shouldn't this be worth 15-20B? I don't know what will happen to the INR relative to the $ though

 

[SafetyinNumbers]

2 hours ago, Hsmpanl said:

Guessing it will be worth alot more in 10 years than it is today,

The quantum and probabilities is what makes it interesting. @giuliooutlines a good case for $1b of EBITDA.
 

What if the multiple is 30x instead of 15 or 20x? What happens if Anchorage wins a lot of concessions? How do they reinvest dividends from BIAL once they start potentially as soon as 2029 once the expansion is done?
 

Of course, things can go wrong but the downside seems very low at this valuation but it might require at least a 3 year view and reasonable return expectations. Another recent positive that I don’t think is appreciated is that BIAL is now getting marked up every quarter. While, the high discount rates keep valuation down, that also means the carrying value grows fast. The currency move and performance of the public stocks may obscure it in Q1 but it seems like BV growth is more dependable over one year periods.
 

A catalyst that could happen in the relative short term is the IDBI deal. I’m not an expert on Indian capital markets but the stock is likely trading below the bid price now. Certainly the reserve price is dropping every day. If I could buy Indian stocks, I would buy close to 1x BV. Depending on how that deal is structured, it could offset the management fees that FIH is currently paying FFH which is why a lot of investors say they don’t own the stock.

[This2ShallPass]

9 hours ago, SafetyinNumbers said:

They have bought some shares back but they are in the business of assessing investment opportunities and making investments. If they don’t have the capital to execute then they hurt the value of the network they have built. Having worked in a fund, when the capital is turned off, analyst morale collapses. 

 

The discount between the share price and book value is well understood given the market structure. The growing discount between book value and intrinsic value is less understood but it shouldn’t be surprising given Fairfax’s conservative approach to asset valuation. It’s happening at FFH too. Comparing the fees to intrinsic value might help with framing. 

I agree if you starve the investment management team they'll leave. But they have only made 1 investment in the last 18 months.

Your second point on IV being much higher means they should be proactive in finding ways to buyback stock. Get creative (which we know they can do well) or sell some existing investments. If IV is $35-40 and your stock is selling for $15, then buying back becomes your hurdle rate with which you evaluate new and existing public investments.

Irrespective, don't you guys think $150M in fees ex performance is excessive?
 

[This2ShallPass]

9 hours ago, gfp said:

I've done pretty well in this security over the years just paying attention to "peak complaining" on this thread.

 

Fairfax took their last fee in cash instead of underpriced shares - that was the first time they had that option per the contract and that's probably the closest you are going to get to Fairfax voluntarily / unilaterally deciding to reduce the fee structure.

 

I'm surprised it hasn't been brought up more, but what initially turned me off was the Nepo-hire.  Like many, I was fine with Ben on the FFH board of directors to represent the family's control shares and keep the culture just like I am fine with Farmer Howie and his weird sister sitting on the board of directors of $1 trillion systemically important Berkshire for similar reasons.

 

But making Ben chairman of FIH was a big turn off for me.  So I was paying very close attention at his first annual meeting and I was pleasantly surprised and now I have no issue with Ben the nepo-hire at the top of FIH.u...

 

Keep an open mind and take advantage of opportunities when they present themselves.  Opportunities to make money without a material risk of losing money are not so ample that you can waste them and spend all your time complaining about your stock being undervalued.  It's a "value investor" message board LOL.. Every stock we are interested in should be "under valued" and that would mean every thread was full of complaining "why is my stock price not reflecting intrinsic value as calculated on my spreadsheet!!!"  UNFAIR!

@gfp clearly you have done much better than most of us here. If I look at the chart, it has been pretty range bound since 2018-24. Have you been trading within the $10-15 range. If yes, what has been your markers to buy / sell (other than using our complaining to buy) and why are you holding now at higher prices.

 

[73 Reds]

19 minutes ago, This2ShallPass said:

@gfp clearly you have done much better than most of us here. If I look at the chart, it has been pretty range bound since 2018-24. Have you been trading within the $10-15 range. If yes, what has been your markers to buy / sell (other than using our complaining to buy) and why are you holding now at higher prices.

 

Has the setup for this ever been better?  

[gfp]

I'm buying.  I suppose I'm also holding?  I last sold (some, not all) over $18.  I sold twice (almost everything) around $20, the first time from the top deck of a ferry to Isla Mujeres so I remember that one clearly.  Then we got a wonderful dip back to the 14's and I bought a ton while you all were sitting in the FIH annual meeting not bidding for shares.  And then it went to $20 again over the summer.  A total gift!

 

Has the setup ever been better?  Possibly, since we still don't know the effects this war / supply disruption is going to have on the Indian economy & listed Indian equity prices.

 

But the delay in IPO-ing the airport has only helped shareholders, not hurt them.  I say stack some more stuff on Modi's desk and keep our Anchorage IPO form buried...

[This2ShallPass]

2 hours ago, 73 Reds said:

Has the setup for this ever been better?  

I think the setup is getting better as BIAL markups will continue at the pace of the last 2 quarters. In terms of the stock, without an IPO it'll continue to trade at a discount or the discount could get bigger as the potential buyer pool is small(fees turnoff many investors).

 

I have got this to a position size where I can live with it being sideways for a while. I also don't mind reducing the position a bit when I need to buy something that's more compelling in the short term (sold some last week to buy Constellation).

 

 

[TwoCitiesCapital]

7 hours ago, This2ShallPass said:

I agree if you starve the investment management team they'll leave. But they have only made 1 investment in the last 18 months.

 

They were also working through a bid process to buy a company that was way larger than anything they can take on by themselves. And that may still be an option. Perhaps all of the creative financing flexibility has been dedicated to IBDI bank and not buying back their own shares to jeopardize their ability to do that? 

 

7 hours ago, This2ShallPass said:

Irrespective, don't you guys think $150M in fees ex performance is excessive?
 

 

Not particularly. I think they've delivered on the promise and if we take a less conservative approach to the valuations, I think they're earning it. 

 

I also only buy at significant discounts to NAV to compensate me for the fee structure. 

 

It's not like they're sitting around doing nothing. Anchorage IPO is work. IBDI bidding is work. Indian stocks had a really good run in 2023/2024, decent 2025, and a tear into early 2026. I can appreciate Fairfax may be expressing price discipline instead of chasing returns just to be buying something. 

 

I expect the energy shock may present opportunities and any closure around IDBI one way or another may open up the ability to be able to do some additional deals as a result. 

Edited April 3 by TwoCitiesCapital

[This2ShallPass]

1 hour ago, TwoCitiesCapital said:

 

I expect the energy shock may present opportunities and any closure around IDBI one way or another may open up the coasci to be able to do some additional deals as a result. 

Maybe. If they think the drop in IDBI stock price will reduce the reserve price they might be willing to wait 6-12 months.