Fairfax India new issue

[Viking]

4 hours ago, ICUMD said:

Out of curiosity Viking, would you sell to a buyback at say $18? Or hold shares waiting for return to parity with BV?

@ICUMD i would sell and flip the proceeds into FFH  

 

I wonder if Fairfax India does not start to utilize its NCIB in Q4. Because the stock is not very liquid they are pretty restricted in the number of shares they can purchase (12,264/day). But soaking up 25% of the average daily trading volume would likely help get a more consistent bid under the shares. Chug, chug, chug…

 

The Dutch auction allowed them to remove a larger number of shares more quickly (than via NCIB) but it did nothing to help the actual stock price  as once the auction was over the stock promptly fell back to where it was trading pre-auction.

————————————————

The notice provides that Fairfax India’s board of directors has approved the purchase on the TSX, during the period commencing September 30, 2021 and ending September 29, 2022, of up to 3,500,000 Subordinate Voting Shares representing approximately 5.1% of Fairfax India’s public float of 68,470,912 Subordinate Voting Shares as at September 16, 2021. As at September 16, 2021, Fairfax India had outstanding 112,276,777 Subordinate Voting Shares. Under the bid, Fairfax India may purchase up to 12,264 Subordinate Voting Shares on the TSX (or other alternative Canadian trading systems) during any trading day, which represents 25% of the average daily trading volume on the TSX for the prior six months (being 49,056 Subordinate Voting Shares), all as calculated in accordance with the rules of the TSX. This limitation does not apply to purchases made pursuant to block purchase exemptions.

Edited November 4, 2021 by Viking

[ICUMD]

5 hours ago, Viking said:

@ICUMD i would sell and flip the proceeds into FFH  

 

I wonder if Fairfax India does not start to utilize its NCIB in Q4. Because the stock is not very liquid they are pretty restricted in the number of shares they can purchase (12,264/day). But soaking up 25% of the average daily trading volume would likely help get a more consistent bid under the shares. Chug, chug, chug…

 

The Dutch auction allowed them to remove a larger number of shares more quickly (than via NCIB) but it did nothing to help the actual stock price  as once the auction was over the stock promptly fell back to where it was trading pre-auction.

————————————————

The notice provides that Fairfax India’s board of directors has approved the purchase on the TSX, during the period commencing September 30, 2021 and ending September 29, 2022, of up to 3,500,000 Subordinate Voting Shares representing approximately 5.1% of Fairfax India’s public float of 68,470,912 Subordinate Voting Shares as at September 16, 2021. As at September 16, 2021, Fairfax India had outstanding 112,276,777 Subordinate Voting Shares. Under the bid, Fairfax India may purchase up to 12,264 Subordinate Voting Shares on the TSX (or other alternative Canadian trading systems) during any trading day, which represents 25% of the average daily trading volume on the TSX for the prior six months (being 49,056 Subordinate Voting Shares), all as calculated in accordance with the rules of the TSX. This limitation does not apply to purchases made pursuant to block purchase exemptions.

That's definitely a sound option. Having said that, i had originally purchased a few shares of FFH alongside a heavy heap of Fairfax India a few years ago.  Interestingly, both have had the same dismal performance.  Almost identical cagr.  Let us see if the catalysts are now in place to see both rise. If the ncib is in place, the share price has not reacted at all.

[Viking]

Fairfax India had another good quarter. Here are a few things i found interesting:
 

1.) BV was up nicely to $20.37/share

At September 30, 2021 common shareholders' equity was $2,894.9 million, or book value per share of $20.37, compared to $2,446.9 million, or book value per share of $16.37, at December 31, 2020, an increase of 24.4% (an increase of 29.5% prior to accounting for the performance fee recorded during the first nine months of 2021). At September 30, 2021 there were 112,083,127 subordinate voting shares and 30,000,000 multiple voting shares outstanding.

 

2.) Big sale in ‘other’ bucket booking gain of $58.9 million
In the third quarter and first nine months of 2021 the company sold investments in Other Public Indian Investments for total net proceeds of $117,602 and $122,013 and as a result the company recorded realized gains of $58,942 and $58,944.

 

3.) Share purchases continue in Q4

Subsequent to September 30, 2021, under the terms of the automatic share purchase plan, 757,869 subordinate voting shares were purchased for cancellation on behalf of the company for a net cost of $10,000 ($13.20/share) and the automatic share purchase plan liability of $10,000 recognized at September 30, 2021 was reversed.

 

4.) Company is pretty flush with cash

Fairfax India remains in strong financial health, with undeployed cash and marketable securities of approximately $310 million.

5.) Details of Chemplast Sanmar IPO. Proceeds $519 million used to pay down debt. Ownership in Chemplast is 55% (publicly traded)

On August 24, 2021 Chemplast Sanmar Limited ("Chemplast"), a subsidiary within Sanmar completed an IPO, issuing 24,029,574 common shares to the public for proceeds of 13.0 billion Indian rupees (approximately $175 million at exchange rates on that date). The IPO also included a secondary offering, whereby Sanmar sold 47,134,935 common shares of Chemplast to the public for proceeds of 25.5 billion Indian rupees (approximately $344 million at exchange rates on that date). As a result of the IPO, Sanmar's ownership interest in Chemplast was diluted from 100.0% to 55.0%. The proceeds from the IPO were used to repay Chemplast's debt and Sanmar's holding company debt. Chemplast is engaged in specialty PVC manufacturing, suspension PVC manufacturing and the production of specialty chemicals for pharmaceutical, agro-chemical and fine chemical sectors, in India. Chemplast is listed on both the BSE and NSE of India. Following the listing of shares of Chemplast the share price increased by 13.2% from the IPO price of 541.00 Indian rupees per share to 612.45 Indian rupees per share at September 30, 2021.

6.) Details of Anchorage sale to OMERS

In 2019 the company formed Anchorage as a wholly-owned subsidiary of FIH Mauritius, intended to provide investment related services to support the company in investing in companies, businesses and opportunities in the airport and infrastructure sectors in India as well as its platform for bidding on airport privatization projects in India. On September 16, 2021 the company transferred 43.6% of its 54.0% equity interest in BIAL such that it is held through Anchorage and subsequently sold 11.5% (on a fully-diluted basis) of its interest in Anchorage to OMERS for gross proceeds of 9.5 billion Indian rupees ($129,221), implying an equity valuation for 100% of BIAL of approximately 189.7 billion Indian rupees (approximately $2.6 billion at exchange rates on that date). Upon closing of the transaction, the company's effective ownership interest in BIAL decreased to approximately 49.0% on a fully-diluted basis, while its actual ownership remained unchanged. As a result of the transaction, the company recorded non-controlling interests of $129,076 and a benefit to retained earnings of $145.

 

The company shall use commercially reasonable efforts to list Anchorage by way of an IPO in India, subject to regulatory approvals and market conditions on or before September 2025. If the valuation of Anchorage upon closing of the IPO is below 91.6 billion Indian rupees (approximately $1.2 billion at period end exchange rates), then OMERS' ownership in Anchorage will increase to a maximum of 15.0% and the company's effective ownership interest in BIAL will decrease to maximum of 47.5% on a fully-diluted basis. Management has assessed the possibility of the company listing Anchorage during unfavourable market conditions to be remote and therefore no value has been attributed to this feature.

Edited November 8, 2021 by Viking

[ICUMD]

21 minutes ago, Viking said:

Fairfax India had another good quarter. Here are a few things i found interesting:
 

1.) BV was up nicely to $20.37/share

At September 30, 2021 common shareholders' equity was $2,894.9 million, or book value per share of $20.37, compared to $2,446.9 million, or book value per share of $16.37, at December 31, 2020, an increase of 24.4% (an increase of 29.5% prior to accounting for the performance fee recorded during the first nine months of 2021). At September 30, 2021 there were 112,083,127 subordinate voting shares and 30,000,000 multiple voting shares outstanding.

 

2.) Big sale in ‘other’ bucket booking gain of $58.9 million
In the third quarter and first nine months of 2021 the company sold investments in Other Public Indian Investments for total net proceeds of $117,602 and $122,013 and as a result the company recorded realized gains of $58,942 and $58,944.

 

3.) Share purchases continue in Q4

Subsequent to September 30, 2021, under the terms of the automatic share purchase plan, 757,869 subordinate voting shares were purchased for cancellation on behalf of the company for a net cost of $10,000 ($13.20/share) and the automatic share purchase plan liability of $10,000 recognized at September 30, 2021 was reversed.

 

4.) Company is pretty flush with cash

Fairfax India remains in strong financial health, with undeployed cash and marketable securities of approximately $310 million.

5.) Details of Chemplast Sanmar IPO. Proceeds $519 million used to pay down debt. Ownership in Chemplast is 55% (publicly traded)

On August 24, 2021 Chemplast Sanmar Limited ("Chemplast"), a subsidiary within Sanmar completed an IPO, issuing 24,029,574 common shares to the public for proceeds of 13.0 billion Indian rupees (approximately $175 million at exchange rates on that date). The IPO also included a secondary offering, whereby Sanmar sold 47,134,935 common shares of Chemplast to the public for proceeds of 25.5 billion Indian rupees (approximately $344 million at exchange rates on that date). As a result of the IPO, Sanmar's ownership interest in Chemplast was diluted from 100.0% to 55.0%. The proceeds from the IPO were used to repay Chemplast's debt and Sanmar's holding company debt. Chemplast is engaged in specialty PVC manufacturing, suspension PVC manufacturing and the production of specialty chemicals for pharmaceutical, agro-chemical and fine chemical sectors, in India. Chemplast is listed on both the BSE and NSE of India. Following the listing of shares of Chemplast the share price increased by 13.2% from the IPO price of 541.00 Indian rupees per share to 612.45 Indian rupees per share at September 30, 2021.

6.) Details of Anchorage sale to OMERS

In 2019 the company formed Anchorage as a wholly-owned subsidiary of FIH Mauritius, intended to provide investment related services to support the company in investing in companies, businesses and opportunities in the airport and infrastructure sectors in India as well as its platform for bidding on airport privatization projects in India. On September 16, 2021 the company transferred 43.6% of its 54.0% equity interest in BIAL such that it is held through Anchorage and subsequently sold 11.5% (on a fully-diluted basis) of its interest in Anchorage to OMERS for gross proceeds of 9.5 billion Indian rupees ($129,221), implying an equity valuation for 100% of BIAL of approximately 189.7 billion Indian rupees (approximately $2.6 billion at exchange rates on that date). Upon closing of the transaction, the company's effective ownership interest in BIAL decreased to approximately 49.0% on a fully-diluted basis, while its actual ownership remained unchanged. As a result of the transaction, the company recorded non-controlling interests of $129,076 and a benefit to retained earnings of $145.

 

The company shall use commercially reasonable efforts to list Anchorage by way of an IPO in India, subject to regulatory approvals and market conditions on or before September 2025. If the valuation of Anchorage upon closing of the IPO is below 91.6 billion Indian rupees (approximately $1.2 billion at period end exchange rates), then OMERS' ownership in Anchorage will increase to a maximum of 15.0% and the company's effective ownership interest in BIAL will decrease to maximum of 47.5% on a fully-diluted basis. Management has assessed the possibility of the company listing Anchorage during unfavourable market conditions to be remote and therefore no value has been attributed to this feature.

I applaud this tremendous performance.  But I assure you, I am clapping very slowly for obvious reasons...

[hobbit]

https://www.cnbc.com/2021/11/07/sydney-airport-signs-17point5-billion-buyout-deal-one-of-the-biggest-buyouts-ever-in-australia.html

 

bodes well for Bangalore airport . 

[Viking]

1 hour ago, ICUMD said:

I applaud this tremendous performance.  But I assure you, I am clapping very slowly for obvious reasons...

 

1 hour ago, ICUMD said:

I applaud this tremendous performance.  But I assure you, I am clapping very slowly for obvious reasons...

The management team at Fairfax India is hitting the ball out of the park in terms of driving quality growth in BV. The fact they have stepped up with significant share buybacks in 2021 is another very good move; take advantage of the very low share price. I hope they continue to buy back shares in volume given the discount to BV and the future prospects of the business. Buybacks in volume at these prices greatly benefits both Fairfax India and Fairfax shareholders.

 

Quality growth in BV combined with large reduction in shares outstanding (purchased at a substantial discount to BV) looks good to me  

Edited November 8, 2021 by Viking

[modiva]

53 minutes ago, Viking said:

Quality growth in BV combined with large reduction in shares outstanding (purchased at a substantial discount to BV) looks good to me  

+1. Hoping Fairfax also follows this strategy. 

[Viking]

1 hour ago, hobbit said:

https://www.cnbc.com/2021/11/07/sydney-airport-signs-17point5-billion-buyout-deal-one-of-the-biggest-buyouts-ever-in-australia.html

 

bodes well for Bangalore airport . 

The buyout price (A$8.45) is where the stock was trading pre-pandemic. The buyers are obviously looking through covid and very poor near term results in coming up with their value for the asset. 
 

Purchase price is A$23.6 billion. 
For reference, in 2018 and 2019 avg EBITDA was about A$1.3 billion.

1H 2021 EBITDA = A$210 million

https://assets.ctfassets.net/v228i5y5k0x4/79DMHWTVxNhRH4Ke80DdK6/c7a2a1dc55198167b88f2faa57deb795/Sydney_Airport_-_2021_Half_Year_Results_Presentation.pdf

 

Hopefully we see Fairfax India/Anchorage being opportunistic with IPO in India in 2022 (given how bubbly the IPO environment is currently). 
 

Regardless, as travel, especially international travel, opens up in 2022 we should see much improved results from BIAL moving forward.

 

Edited November 8, 2021 by Viking

[glider3834]

Media report that NSE IPO could happen soon

 

The bourse is likely to be valued at over ₹2-lakh crore

The much-awaited initial public offering of the National Stock Exchange (NSE) could be rolled out in the next few weeks since market regulator SEBI is all set to allow the bourse to re-file its prospectus for the share sale.

https://www.thehindubusinessline.com/markets/stock-markets/nses-big-ticket-ipo-set-to-get-clearance-from-sebi/article37493243.ece

[wondering]

A possible monetization within IIFL Finance

 

https://www.moneycontrol.com/news/business/mergers-acquisitions/fairfax-backed-iifl-finance-looks-to-sell-stake-in-housing-finance-unit-7749421.html

[Viking]

1 hour ago, wondering said:

A possible monetization within IIFL Finance

 

https://www.moneycontrol.com/news/business/mergers-acquisitions/fairfax-backed-iifl-finance-looks-to-sell-stake-in-housing-finance-unit-7749421.html

IIFL is but one of many recent examples of where Fairfax has simply been hitting the ball out of the park. Smart initial purchase. Split into 4 separate companies that are all thriving. Delivering significant value creation for shareholders. With solid future prospects. Smarts. Vision. Execution. Patience. Well managed.
 

The positions are owned primarily through Fairfax India with smaller positions also owned directly by Fairfax. My rough math for Fairfax India only owned positions has the 4 companies worth about $750 million (Sept 30) with a cost of about $300 million. Initial investment was made in Dec 2015.

 

But i know, i know. It doesn’t matter what is actually going on under the hood at Fairfax today. What matters is that shitty Abitibi purchase in 2008. Or that shitty RIM purchase in 2010. What a bunch of dummies… Woof!
——————

From 2020AR: “Under the exceptional leadership of Nirmal Jain and R. Venkataraman, IIFL, another important Fairfax India (and Fairfax Financial) investment, has established a leading national financial services company serving over 6 million customers from over 2,400 branches in India. You will recall that in 2018, IIFL announced its intention to divide its three business groups into three separate companies, with each to be listed on the Indian stock exchanges, as IIFL believed that this was the best structure for its business and would further enhance value. In May 2019 IIFL Holdings, the company that Fairfax and Fairfax India had originally invested in, was, as planned, divided into three separate companies: IIFL Finance (the non-bank financial corporation), IIFL Wealth (the wealth and asset management company) and IIFL Securities (the retail and institutional broker, financial products distribution and investment banking company). Prior to this, 5paisa, which literally means ‘‘5 cents’’, was spun off from IIFL Holdings in 2017, and Fairfax and Fairfax India own a 36% equity interest in it. It is one of India’s fastest growing technology-led financial services companies and offers an array of financial products and services through a digital platform and mobile application. All of these companies are well established with excellent management teams and we expect each of them to do very well as independent listed companies under the IIFL brand umbrella.”

Edited November 22, 2021 by Viking

[StubbleJumper]

The stock price for Fairfax India is really getting stupid again.  It's $12.02 as I type.  Anyone buying these days?

 

 

SJ

[TwoCitiesCapital]

21 minutes ago, StubbleJumper said:

The stock price for Fairfax India is really getting stupid again.  It's $12.02 as I type.  Anyone buying these days?

 

 

SJ

 

Slowly accumulating. Already own a hefty position though so only adding in drips and drabs as I recover cash from covered call sales (on other positions). 

Edited November 30, 2021 by TwoCitiesCapital

[ICUMD]

Definitely I'm watching closely.  Already hold a large position.  Further weakness if fear takes hold with the Omicron variant could push this to single digits again. 

 

Logical exit from FIH.U seems to be when Prem does his auctions.  I suspect he will offer to buy back at 30% discount to BV ie. ~$18  So current values indicate a 50% discount to that.  Not a bad return at current levels!

[hobbit]

https://economictimes.indiatimes.com/prime/transportation/privatisation-of-airports-heres-why-patience-will-be-the-most-prudent-strategy-for-aai/primearticleshow/88058633.cms?from=mdr

 

Excellent article . Fairfax India's airport valuation is most likely conservatively marked.

[Viking]

On 11/30/2021 at 2:32 PM, ICUMD said:

Definitely I'm watching closely.  Already hold a large position.  Further weakness if fear takes hold with the Omicron variant could push this to single digits again. 

 

Logical exit from FIH.U seems to be when Prem does his auctions.  I suspect he will offer to buy back at 30% discount to BV ie. ~$18  So current values indicate a 50% discount to that.  Not a bad return at current levels!

i agree, the shares are crazy cheap. But i would be very surprised if Fairfax took out the rest of Fairfax India any time soon. Better to let Fairfax India buy back 6-8% of stock every year moving forward at prices of 0.75 X BV or lower (and grow ownership materially over time and at no cost to Fairfax). Chug, chug. 
 

Now i own some Fairfax India so i would love to see the stock price move higher. But i own much more Fairfax  

[glider3834]

1 hour ago, Viking said:

But i would be very surprised if Fairfax took out the rest of Fairfax India any time soon. Better to let Fairfax India buy back 6-8% of stock every year moving forward at prices of 0.75 X BV or lower (and grow ownership materially over time and at no cost to Fairfax).

Yes agree - also as Fairfax repurchases its common stock (via SIB & NCIB), existing holders will effectively end up owning a bigger percentage of Fairfax India via Fairfax's stake.

 

Fairfax is repurchasing its common stock at up to 80% of BV & in that BV Fairfax India's shares are being carried at close 0.5x BV or around $10 per share. So assuming Fairfax repurchases at 0.8x BV multiple (and we feel that Fairfax's BV is at a minimum being carried appropriately - its fair value is higher IMO ) then we can say that Fairfax are effectively buying Fairfax India shares at 0.4xBV or approx $8 per share.

 

Edited December 8, 2021 by glider3834

[glider3834]

6 hours ago, hobbit said:

https://economictimes.indiatimes.com/prime/transportation/privatisation-of-airports-heres-why-patience-will-be-the-most-prudent-strategy-for-aai/primearticleshow/88058633.cms?from=mdr

 

Excellent article . Fairfax India's airport valuation is most likely conservatively marked.

looks like a subscription required :(

[ICUMD]

4 hours ago, Viking said:

i agree, the shares are crazy cheap. But i would be very surprised if Fairfax took out the rest of Fairfax India any time soon. Better to let Fairfax India buy back 6-8% of stock every year moving forward at prices of 0.75 X BV or lower (and grow ownership materially over time and at no cost to Fairfax). Chug, chug. 
 

Now i own some Fairfax India so i would love to see the stock price move higher. But i own much more Fairfax  

That's certainly a valid play Viking.  Otoh, the NCIB for Fairfax India is for up to 12k shares /day with a plan to purchase up to another 2 million outstanding shares until Sept 2022.  Recently daily trading volumes have been falling- only about 20k shares traded today.  I think this alone bodes well for share price support.  Just a guess, but I think the airport is quite undervalued on the books.  Once Anchorage goes public BV will rise significantly. With small trading volumes, it won't take much for share prices to rise.  I know how much Prem loves FIH from his annual reports.  Good chances for another Dutch auction soon, prior to the Anchorage IPO IMHO. Also one of the better plays in India for any investor.  Of course, time will tell the story.

[hobbit]

HWIC which owned 7%approx of IIFL finance sold the entire stake in the past few days. Wonder what this means for FIH's stake...signs of underlying issues at IIFL finance maybe? optically it looks cheap but there might be hidden stress in their book

 

https://www.business-standard.com/article/companies/prem-watsa-backed-fairfax-group-sells-iifl-finance-shares-worth-rs-180-cr-121120801251_1.html 

[glider3834]

1 hour ago, hobbit said:

HWIC which owned 7%approx of IIFL finance sold the entire stake in the past few days. Wonder what this means for FIH's stake...signs of underlying issues at IIFL finance maybe? optically it looks cheap but there might be hidden stress in their book

 

https://www.business-standard.com/article/companies/prem-watsa-backed-fairfax-group-sells-iifl-finance-shares-worth-rs-180-cr-121120801251_1.html 

could be they are raising liquidity due to their share buyback at holdco level or to make another portfolio purchase - may be different reasons 

Edited December 9, 2021 by glider3834

[Xerxes]

Fairfax India is getting Tapered-Tantrumed 

[ICUMD]

14 minutes ago, Xerxes said:

Fairfax India is getting Tapered-Tantrumed 

As it goes down, it becomes a better and better bet for auction buyback arbitrage IMO.  Plus there is the Anchorage book value catalyst once it goes IPO.

[ICUMD]

New 175M Credit Line.

Acquisitions or buybacks I wonder...

 

https://ca.finance.yahoo.com/news/fairfax-india-completes-175-million-220900138.html

 

 

[StubbleJumper]

Today it was selling at like 0.6x Sept 30 BV.  Let's hope they are scheming to buy some shares back at that price!

 

 

SJ