Fairfax India new issue

[netcash1]

I believe they 49% but that does not include their CCPS which if allowed moves Fairfax to over 60% as I recall.

[Hoodlum]

The IDBI Bank divestment seems to be moving again.  New sealed bids are now being reviewed by the government with a possible decision in August.

 

https://www.ndtvprofit.com/markets/idbi-bank-shares-jump-over-3-percent-as-government-receives-revised-bids-for-stake-sale-11768041/amp/1

 

Shares of IDBI Bank rose as much as 4.08% to an intraday high of Rs 87.50 on Tuesday after the government received revised financial bids from two foreign bidders for its stake sale in the lender, according to official sources familiar with the matter.

 

Fairfax Holdings and Emirates NBD remain in the race to acquire the government's stake in IDBI Bank. Sources told NDTV Profit that Fairfax Holdings' revised bid is closer to the government's reserve price, with the Centre targeting around Rs 50,000 crore from the strategic disinvestment.

The winning bidder has not yet been finalised, with a decision likely over the next month, sources said.

 

According to Bloomberg, the government is close to accepting Fairfax Financial Holdings' offer after the Canadian insurer reportedly raised its bid by a few rupees per share following the rejection of its earlier offer, which was below the reserve price. The report added that the transaction will require approvals from the Union Cabinet and the Reserve Bank of India before it can be completed.

[yesman182]

Here is a story from the economist about Indian airports. Several references to BALI. India is adding a lot more airport capacity than I was aware of, but it sounds like they don't typically have good ground transportation. Isn't BALI working on having a train come to the terminal from the city center? 

 

https://archive.is/wQwsN

[Hoodlum]

It looks like Fairfax has upped their offer again.  We may be getting close to an official announcement.  

 

https://economictimes.indiatimes.com/industry/banking/finance/banking/fairfax-to-acquire-idbi-bank-stake-in-5-5-billion-deal-biggest-foreign-investment-in-indian-bank/articleshow/132400419.cms?from=mdr

 

The government has finalised Fairfax Holdings for the sale of its stake in IDBI Bank after the Canadian firm sweetened its offer, people aware of the development said.

The decision was made Tuesday after meetings at the finance ministry.
 

“Fairfax is now offering ₹81 per share, which is higher than their offer of ₹75 given last year,” one of the people said.

“After much discussion, the government and Fairfax have agreed to shake hands and the official announcement could be made anytime now,” the person said.

 

An empowered group of ministers that includes finance minister Nirmala Sitharaman has been apprised of the revised bids and subsequent developments, another person aware of the matter said. “A formal notification will come soon and post that a letter of intent will be issued, followed by signing of the share-purchase agreement.”

 

Edited 8 hours ago by Hoodlum

[Hoodlum]

12 hours ago, yesman182 said:

Here is a story from the economist about Indian airports. Several references to BALI. India is adding a lot more airport capacity than I was aware of, but it sounds like they don't typically have good ground transportation. Isn't BALI working on having a train come to the terminal from the city center? 

 

https://archive.is/wQwsN

The new Airport Metro station is expected to be completed in the next 12 months. 
 

https://www.thehindu.com/news/national/karnataka/bangalore-international-airport-limited-confidentthat-bengaluru-airport-will-be-secondlargest-in-india/article71222027.ece/amp/

 

 

Edited 8 hours ago by Hoodlum

[TwoCitiesCapital]

3 hours ago, Hoodlum said:

It looks like Fairfax has upped their offer again.  We may be getting close to an official announcement.  

 

https://economictimes.indiatimes.com/industry/banking/finance/banking/fairfax-to-acquire-idbi-bank-stake-in-5-5-billion-deal-biggest-foreign-investment-in-indian-bank/articleshow/132400419.cms?from=mdr

 

The government has finalised Fairfax Holdings for the sale of its stake in IDBI Bank after the Canadian firm sweetened its offer, people aware of the development said.

The decision was made Tuesday after meetings at the finance ministry.
 

“Fairfax is now offering ₹81 per share, which is higher than their offer of ₹75 given last year,” one of the people said.

“After much discussion, the government and Fairfax have agreed to shake hands and the official announcement could be made anytime now,” the person said.

 

An empowered group of ministers that includes finance minister Nirmala Sitharaman has been apprised of the revised bids and subsequent developments, another person aware of the matter said. “A formal notification will come soon and post that a letter of intent will be issued, followed by signing of the share-purchase agreement.”

 

 

 

Nice! Now we await the details! Huge! 

[EgonKuhn]

When I look at the raw USD figures for IDBI Bank on TIKR, I find it a bit hard to understand the enthusiasm surrounding a potential takeover. Even if one generously overlooks the fact that the bank had some serious issues a few years ago due to non performing loans (after having the same problems in 2001-2003, so it seems recurring), its book value per share has shrunk to a third of what it was twenty years ago. Earnings per share are currently around half of what they were two decades ago. There is not even growth to speak of, adjusted for inflation the volume of loans currently being issued is barely higher than it was twenty years ago.

If we assume for a moment that the Indian stock market were open to foreign investors, IDBI would not be an obvious buy for me personally, neither in terms of operational performance nor current valuation levels.

 

What am I missing here?

[SafetyinNumbers]

1 hour ago, EgonKuhn said:

What am I missing here?

I assume the thought is that Fairfax will run it more efficiently and grow it faster than the government. Higher growth, ROE and multiple will follow accordingly. 

[EgonKuhn]

13 minutes ago, SafetyinNumbers said:

I assume the thought is that Fairfax will run it more efficiently and grow it faster than the government. Higher growth, ROE and multiple will follow accordingly. 

So essentially the same strategy as in the early days, taking over (let’s put it diplomatically ) "insurers with room for improvement" in order to get them on track? Just adapted for banks in this case? They really don't like low hurdles. Were they able to get at least a brief look at the current loan book before submitting their offer? To be honest, I am a bit concerned that they are repeating the non-performing loan episodes of the past here.

[Haryana]

https://www.screener.in/company/IDBI/consolidated/

"Company has delivered good profit growth of 43.5% CAGR over last 5 years" ?

(Could be wrong, good if right.)

[SafetyinNumbers]

12 minutes ago, EgonKuhn said:

So essentially the same strategy as in the early days, taking over (let’s put it diplomatically ) "insurers with room for improvement" in order to get them on track? Just adapted for banks in this case? They really don't like low hurdles. Were they able to get at least a brief look at the current loan book before submitting their offer? To be honest, I am a bit concerned that they are repeating the non-performing loan episodes of the past here.

I don’t think the bank is doing badly now at a ~13% ROE. Analysis based on 20 years ago doesn’t make a lot of sense. If you don’t think they are good investors, you probably shouldn’t invest with them. That doesn’t mean they won’t make mistakes. 

[nwoodman]

1 hour ago, SafetyinNumbers said:

I assume the thought is that Fairfax will run it more efficiently and grow it faster than the government. Higher growth, ROE and multiple will follow accordingly. 

I also think it’s a national banking platform that’s ready to go. CSB was always a good plan, but it remains predominantly a southern/regional franchise. IDBI potentially gives Fairfax a national platform overnight. At ₹81 it looks like a reasonable deal rather than the deal of the century, but with a meaningful right tail if they can leverage it across their broader Indian financial ecosystem.

To your point, I suspect they’ve learnt a tremendous amount from both Eurobank and, importantly, the Bank of Cyprus. Those weren’t just banking investments, they were lessons in what a well-capitalised, well-managed banking platform can become. Bringing Hafize Gaye Erkan into the group also makes me wonder whether Fairfax’s ambitions extend well beyond simply lifting IDBI’s ROE. I’m not suggesting this automatically signals a banking roll-up, but it does feel like they’re assembling the people and platforms for something larger over the long term.

 

Finally, if this gets over the line, it says a lot about Fairfax’s reputation and credibility in India that they were trusted with such a strategically important asset.  No doubt the market will but it’s a sensible move (at the right price) and arguably a move that only Fairfax can make at this point in time.

Edited 2 minutes ago by nwoodman

[Haryana]

https://www.screener.in/company/IDBI/consolidated/

Click on PE Ratio on their chart, it shows that PE has fallen from 25 to 10 while EPS has grown from 2 to 8.5 over last 5 years. 

Edited 28 minutes ago by Haryana
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[backtothebeach]

22 hours ago, Hoodlum said:

with the Centre targeting around Rs 50,000 crore from the strategic disinvestment.

 

Crore is confusing the hell out of me, I'm probably not the only one. So I just looked it up (again):

 

1 Crore is 10 million.

1 USD is currently 96 INR.

 

So 50,000 crore is:
50,000 x 10 million. Then divided by 96 = $ 5.2B.

 

Fairly soon 1 USD will probably be 100 Rupees. Then 10,000 crore will be $ 1B.