Fairfax India new issue

[Hoodlum]

Fairfax increasing stake in IIFL Capital to 51%. 
 

https://www.reuters.com/world/india/fairfax-raise-stake-indias-iifl-capital-with-211-million-investment-2026-05-07/

[Hoodlum]

The IIFL Capital transaction is expected to close in Q4.

 

https://www.fairfaxindia.ca/press-releases/fairfax-india-to-acquire-additional-equity-interest-in-iifl-capital-services-limited-2026-05-07/

 

[gfp]

It's interesting as some of the early rumors hinted at a partial preferred equity structure for the new investment.  I wonder why 51% was so important to them on this one?  Either way, less of companies like Sanmar and more of companies like IIFL Capital should be a good recipe going forward.

[Madpawn]

There are also sources claiming Kotak and Emirates NBD are dropping out of the IDBI bid - wondering what’s FIH’s position on this 

[SafetyinNumbers]

2 hours ago, Hoodlum said:

The IIFL Capital transaction is expected to close in Q4.

 

https://www.fairfaxindia.ca/press-releases/fairfax-india-to-acquire-additional-equity-interest-in-iifl-capital-services-limited-2026-05-07/

 

How are they going to pay for this? Seems like a good sized cheque.

[Crip1]

27 minutes ago, SafetyinNumbers said:

How are they going to pay for this? Seems like a good sized cheque.

The knee-jerk is that they expect to be able to monetize a certain asset of theirs's. IF that's the case, and I really don't think it is, than it's a pretty bold move or they have a high degree of certainty that regulators will approve said monetization.

 

Absent of that, your guess is as good as mine.

 

-Crip

[Hoodlum]

4 hours ago, gfp said:

It's interesting as some of the early rumors hinted at a partial preferred equity structure for the new investment.  I wonder why 51% was so important to them on this one?  Either way, less of companies like Sanmar and more of companies like IIFL Capital should be a good recipe going forward.

 

Here are some further details of how the shares will be acquired.  The 51% looks to provide a better credit rating to IIFL Capital.  Nirmal Jain will sell some of his share so that Fairfax can reach 51%.  

 

https://www.livemint.com/companies/news/fairfax-inject-rs-2-000-crore-into-nirmal-jains-iifl-capital-majority-stake-11778137001798.html

 

Fairfax India Holdings Corp., the investment firm founded by Canadian billionaire Prem Watsa, has agreed to inject ₹2,000 crore into IIFL Capital Services Ltd. through a preferential allotment of shares, a transaction that will increase its holding in the company and trigger a mandatory open offer to public shareholders.

 

IIFL Capital’s board approved the issuance of 5.71 crore shares at ₹350 apiece to Fairfax entity FIH Mauritius Investments Ltd, the company said in a filing to the exchanges on Thursday. The price represents a 6% premium to Wednesday’s closing price of ₹331.45 in Mumbai.

 

The allotment will raise FIH Mauritius’ stake in the financial services firm from 27.18% to 38.47%. Fairfax’s combined holding through FIH Mauritius and HWIC Asia Fund will rise to 41.8%.

 

The transaction will trigger a mandatory open offer under takeover regulations set by the Securities and Exchange Board of India. Nirmal Jain, promoter of IIFL Capital, told Mint that through the open offer, the Canadian investment firm’s stake will further increase and promoters will cooperate to help Fairfax achieve a minimum 51% stake over time.

 

Following completion of the transaction and the open offer, Fairfax will be classified as a promoter of the company. Existing co-promoters Jain and R. Venkataraman, who founded the broader India Infoline group in 1995, will retain their roles within the company.

 

"Fairfax is a globally respected investment group with a long-term track record of building and supporting high-quality financial services businesses across markets. Their capital infusion and support will further strengthen our outreach and enable IIFL to access a broader global network of clients, which we believe can meaningfully enhance the company’s revenues over time," Jain told Mint. “We also expect the transaction to support an improvement in our credit rating going forward, subject to necessary regulatory approvals and closures.”

[gfp]

Thanks - so what I was reading as rumors of preferred shares was probably actually accurately describing a "preferential allotment" of common stock.

[SafetyinNumbers]

I missed this insider buy by Ben earlier in the week. He picked up 40k shares at $17.55 on May 11.

 

 

[mananainvesting]

https://economictimes.indiatimes.com/news/company/corporate-trends/fairfax-india-makes-open-offer-to-buy-additional-26-in-iifl-capital-services/articleshow/131170147.cms?from=mdr

[giulio]

https://www.hindustantimes.com/india-news/centre-looks-to-revive-stalled-idbi-bank-sale-process-report-101779091726437-amp.html

Efforts are underway to make a deal feasible, including setting a price that captures the bank’s intrinsic value and lowers the reliance on its share price, the people said

[Madpawn]

India may opt to lower its reserve price for the divestment of a majority holding in state-run IDBI bank by 20%, a newswire reported, citing undisclosed source. 

[giulio]

https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/bengaluru-airport-operator-bial-hands-over-rs-16-crore-dividend-to-karnataka-govt-arm/articleshow/131309196.cms?from=mdr

BIAL paid a dividend of Rs3 per share.

FIH share should be $3.6M.

[SafetyinNumbers]

19 minutes ago, giulio said:

https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/bengaluru-airport-operator-bial-hands-over-rs-16-crore-dividend-to-karnataka-govt-arm/articleshow/131309196.cms?from=mdr

BIAL paid a dividend of Rs3 per share.

FIH share should be $3.6M.

At the AGM I came away thinking small and soon and it looks like that’s what we got. 
 

This suggests ~$1.6m for 13% so shouldn’t FIH’s share be bigger than $3.6m?

Edited May 25 by SafetyinNumbers

[giulio]

You were absolutely spot on.

I used fih 30.4% stake and 15crore (after tax as reported in the article I linked). 43.6% is held by Anchorage, I assumed they got the rest.

I am looking forward to know how they financed the increased stake in IIFL capital...

[SafetyinNumbers]

A friend of mine (and very good analyst) thinks BIAL hits $500m in EBITDA as early as calendar 2027 and should hit it by 2028. On that basis fair value for the airport would be $10-15b. Assuming $2b in debt, that’s an equity value north of $50/share for FIH’s stake 12-18 months from now assuming a realistic multiple. 
 

Anyone have a different view on EBITDA? The multiple of 20-30x can be debated but it seems fair given comps and growth expectations. 

Edited May 28 by SafetyinNumbers

[Txvestor]

3 hours ago, SafetyinNumbers said:

A friend of mine (and very good analyst) thinks BIAL hits $500m in EBITDA as early as calendar 2027 and should hit it by 2028. On that basis fair value for the airport would be $10-15b. Assuming $2b in debt, that’s an equity value north of $50/share for FIH’s stake 12-18 months from now assuming a realistic multiple. 
 

Anyone have a different view on EBITDA? The multiple of 20-30x can be debated but it seems fair given comps and growth expectations. 

I think that might be a challenge if nothing else due to the weakness in the rupee which is approaching 100:1. The split between domestic v International is still around 5:1, although international is climbing as a share it's still going to be much smaller in 27/28. 
International passengers spend on average 3 or 4x a domestic passenger on concessions and airport fees are likewise. We'd be lucky to get to a 50/50 split in revenues by then. So the weak rupee impact will be significant. 
Likewise cargo fees are unlikely to keep pace. As they're already with a large share of that and more regional airports are opening up. Lastly the real estate is a huge component of the value potential here but again mostly domestic economy and real estate valuation driven. Whilst I do see growth, I think a 60% EBITDA increase is wildly optimistic. A $400M in 2yrs I could see. Their EBITDA margin is already near 70%. The good thing is whatever is earned is mostly going to be reinvested in the development of the airport so the capital investment side might be a little lower, and eventually valuations catch up.

This is unfortunately one of those really long term plays that will test every investors patience. 

[SafetyinNumbers]

31 minutes ago, Txvestor said:

A $400M in 2yrs I could see

They were at $374m last year so I’m surprised you think it will take two years to get to $400m. Presumably inflation offsets a lot of the rupee decline. I do think the war and the problems with IndiGo probably hurt near term growth. Although post war, BLR might take some international slots away from the Gulf.

 

 

[Txvestor]

20 hours ago, SafetyinNumbers said:

They were at $374m last year so I’m surprised you think it will take two years to get to $400m. Presumably inflation offsets a lot of the rupee decline. I do think the war and the problems with IndiGo probably hurt near term growth. Although post war, BLR might take some international slots away from the Gulf.

 

 

Forex rate will impact this. And it's unclear to me how much of this are one time gains from the airport city real estate gains. They cite 13.8x cash flow multiple on a 3B valuation. That's a $217M number. So yeah, I do think 500M is aggressive. 

[SafetyinNumbers]

2 hours ago, Txvestor said:

Forex rate will impact this. And it's unclear to me how much of this are one time gains from the airport city real estate gains. They cite 13.8x cash flow multiple on a 3B valuation. That's a $217M number. So yeah, I do think 500M is aggressive. 

We’ll check back in two years!

[TwoCitiesCapital]

3 hours ago, Txvestor said:

Forex rate will impact this. And it's unclear to me how much of this are one time gains from the airport city real estate gains. They cite 13.8x cash flow multiple on a 3B valuation. That's a $217M number. So yeah, I do think 500M is aggressive. 

 

53 minutes ago, SafetyinNumbers said:

We’ll check back in two years!

 

I think what I take from this all is that 14x is still cheap relative to comparables - and this is growing much faster than comparables. 

 

I don't know if they'll hit $500M in two years time and I don't know if Fairfax India's investment in BIAL alone is worth $50/share. 

 

But I'm quite certain that $18 is the wrong price and not even in the right ballpark given comparables - and I think BIAL is probably better than those comparables given the land/city surrounding it, the development opportunity/optionality there, as well as organic growth at the airport/population itself. 

 

Buying a high growth opportunity with a ton of optionality at a low growth multiple (and then a discount to that NAV!) seems setting to be setting up for a homerun even if actual business results are mediocre. And I don't expect them to be mediocre. 

Edited Friday at 08:46 PM by TwoCitiesCapital

[Hoodlum]

BIAL surpassed Mumbai Airport for domestic passenger traffic during April.  This trend is expected to continue as new Mumbai traffic will go to the Navi Mumbai airport as the runways at Mumbai Airport are now saturated.  BAIL overall passenger traffic is within 10% of Mumbai Airport's total traffic (including international), so I could BIAL become the 2nd largest Airport for Total Passenger volume in India within the next 2 years.  

 

https://timesofindia.indiatimes.com/city/mumbai/bengaluru-airport-edges-past-mumbai-in-domestic-passenger-traffic-but-mmr-stays-ahead/articleshow/131373046.cms

 

 

Edited Friday at 10:21 PM by Hoodlum

[gfp]

When a stock gets harder to successfully buy that's usually a good sign.  I had all kinds of order in today from $17.70 down to 17.25 and got a fill on only 100 shares.  Chart looks very good compared to the mothership's chart.

[dartmonkey]

1 hour ago, gfp said:

When a stock gets harder to successfully buy that's usually a good sign.  I had all kinds of order in today from $17.70 down to 17.25 and got a fill on only 100 shares.  Chart looks very good compared to the mothership's chart.

Yes, it's been a very long wait, but we may wake up one of these days to see that our shares have gone from $18 to $45, when the IPO gets priced, or maybe just when the IPO happens. Even that would only take this 11-year investment from being bad to being about average (I get 15% annualized if it went to $45 tomorrow), but it sure would make a big difference to my returns this year! 

[TwoCitiesCapital]

42 minutes ago, dartmonkey said:

Yes, it's been a very long wait, but we may wake up one of these days to see that our shares have gone from $18 to $45, when the IPO gets priced, or maybe just when the IPO happens. Even that would only take this 11-year investment from being bad to being about average (I get 15% annualized if it went to $45 tomorrow), but it sure would make a big difference to my returns this year! 

 

In Q4 of 2023 this was $12-13/USD and then 12-15 months later it was $20. People seem to forget that pop - perhaps because it didn't prove entirely sustainable. 

 

But the precedent is there, and I can see a 75-100% gain from here over the next ~15-18 months on a successful IPO of Anchorage. 

 

Edited 22 hours ago by TwoCitiesCapital