Fairfax India new issue

[giulio]

And it is still VERY cheap! Probably their 50+% stake in BIAL covers today's market cap of $2.2B. Get the rest for free. 

Btw I just read some Marval fund letters and surely Ben Watsa shares his father optimism re: India and the investment opportunities there. Worth a read!

 

Best,

G

[Junior R]

I think I know why this jumped yesterday

Quote

Celebrating +5 yrs of the Marval Guru Fund! Our 5yr 21.9% net CAGR (as of Sept. 30, 2024) ranks 6th among >3,000 institutional funds in hashtag#Canada which is a testament to hashtag#India. Deep gratitude to people of India, our clients, and team.

 

Quote

The Fund's five-year net compound annual returns of 21.9% means that invested capital doubled approximately every three and a half years. The Fund is currently the only India-focused fund in Canada with such a strong track record. In an investment world that often focuses on short-term gains and frequent trading, Marval has demonstrated the Fund's long-term, buy-and-hold investment strategy remains highly effective. 

 

marval-capital-s-india-focused-fund-with-169-total-net-return-over-5-years-outperforms-global-competitors

Edited November 8, 2024 by Junior R

[gfp]

Sorry I had to shut that rally down by channelling my inner Bruce.  My apologies to the Johnny-come-latelies.

[This2ShallPass]

Is that Fairfax India making a move? Wow finally

 

On 11/7/2024 at 9:57 AM, SafetyinNumbers said:

I don’t think it would be that surprising if someone in India had an informational edge. 

Doubt it, the timing is an election driven rally, probably tied to Trumps' pro India messages (we all know he'll flip on a dime, but will take the 8% pop!).

 

On 11/7/2024 at 10:02 AM, gfp said:

The potential large bank deal looks like a 2025 announcement.  I'm OK not winning that one.

This one is mostly done, the optics of a Canadian company winning one of the high profile deals will be too much for Modi govt. I'm also ok with not winning this one, too big for FFI.

Edited November 9, 2024 by This2ShallPass

[gfp]

On 11/8/2024 at 10:50 AM, gfp said:

Sorry I had to shut that rally down by channelling my inner Bruce.  My apologies to the Johnny-come-latelies.

 

None shall pass!

[backtothebeach]

Already bounced back...something is going on with FIH.U.

[gfp]

1 minute ago, backtothebeach said:

Already bounced back...something is going on with FIH.U.

 

It is usually so illiquid.  Any new interest will move the price in the short term.  The speculation here that it was Indian ex-pats buying on the perception of a great Modi-Trump relationship sounded plausible.  But the Indian markets have been down lately.  The airport is a hit so it doesn't matter to FIH.U but I'm selling these newcomers stock every time they bid it into the upper 16's

[giulio]

108K shares were bought back and canceled in October. Max price paid $15.

https://www.sedi.ca/sedi/SVTItdSelectIssuer?locale=en_CA

 

[hobbit]

For anyone interested in a deep dive in Bangalore airport

 

https://www.icra.in/Rating/RatingDetails?CompanyId=14175&CompanyName=Bangalore International Airport Limited

[Hoodlum]

Fairfax India increases ownership in BIAL from 64% to 74% with $255m purchase of shares. 
 

https://www.globenewswire.com/news-release/2024/12/03/2990662/0/en/Fairfax-India-to-Acquire-an-Additional-10-Interest-in-Bangalore-International-Airport-Limited.html

[UK]

7 minutes ago, Hoodlum said:

Fairfax India increases ownership in BIAL from 64% to 74% with $255m purchase of shares. 
 

https://www.globenewswire.com/news-release/2024/12/03/2990662/0/en/Fairfax-India-to-Acquire-an-Additional-10-Interest-in-Bangalore-International-Airport-Limited.html

 

Too much of a good thing can be wonderful:)

[Junior R]

Quote

The transaction is subject to approval by Fairfax India’s shareholders in accordance with the terms of the Company’s by-laws, third party consents and other customary closing conditions.

Why does it require shareholders approval? Are they going issue more shares to buy the stake?

[Crip1]

38 minutes ago, Hoodlum said:

Fairfax India increases ownership in BIAL from 64% to 74% with $255m purchase of shares. 
 

https://www.globenewswire.com/news-release/2024/12/03/2990662/0/en/Fairfax-India-to-Acquire-an-Additional-10-Interest-in-Bangalore-International-Airport-Limited.html

This values the 74% stake at $1.85B meaning that the rest of FFI is valued by the market at $254M. 

 

-Crip

[gfp]

25 minutes ago, Crip1 said:

This values the 74% stake at $1.85B meaning that the rest of FFI is valued by the market at $254M. 

 

-Crip

 

Didn't they already sell 11.5% of Anchorage to OMERS?  Meaning the look-through ownership Fairfax India shareholders have in BIAL is less than 74%?  Or did the  OMERS / Anchorage deal never happen?

[Xerxes]

24 minutes ago, gfp said:

 

Didn't they already sell 11.5% of Anchorage to OMERS?  Meaning the look-through ownership Fairfax India shareholders have in BIAL is less than 74%?  Or did the  OMERS / Anchorage deal never happen?

it happened and you are correct. 
technically look-through is at a smaller %. 

[hobbit]

3 hours ago, Junior R said:

Why does it require shareholders approval? Are they going issue more shares to buy the stake?

yah I am also confused by that , what's the need for special shareholder meeting?

[Crip1]

2 hours ago, gfp said:

 

Didn't they already sell 11.5% of Anchorage to OMERS?  Meaning the look-through ownership Fairfax India shareholders have in BIAL is less than 74%?  Or did the  OMERS / Anchorage deal never happen?

I appreciate the correction (completely forgot the OMERS piece, clearly). That changes the math. It reduces the 74% to 68.97%, which changes FFI's share of BIAL to be worth US$1.759B resulting in the rest of FFI to be valued at US$337M based on the share price mid-day. 

[Viking]

3 hours ago, Hoodlum said:

Fairfax India increases ownership in BIAL from 64% to 74% with $255m purchase of shares. 
 

https://www.globenewswire.com/news-release/2024/12/03/2990662/0/en/Fairfax-India-to-Acquire-an-Additional-10-Interest-in-Bangalore-International-Airport-Limited.html

 

Don't get me wrong... I love the fact that Fairfax is vacuuming up a significant amount of BIAL at a very attractive prices. My question is why is Siemens selling 10% for 'only' $255 million?

 

Could it be:

1.) I think Fairfax has right of first refusal if partners sell their stake to external party... could that be it? Effectively stopping serious bids from coming?

2.) BIAL already has a majority owner... Fairfax. So anyone buying will be a minority owner... minority stakes are valued at a discount?

3.) Siemens wants out - so forced seller with limited buyers?

4.) Other?

Edited December 3, 2024 by Viking

[Hoodlum]

22 minutes ago, Viking said:

 

Don't get me wrong... I love the fact that Fairfax is vacuuming up a significant amount of BIAL at a very attractive prices. My question is why is Siemens selling 10% for 'only' $255 million?

 

Could it be:

1.) I think Fairfax has right of first refusal if partners sell their stake to external party... could that be it? Effectively stopping serious bids from coming?

2.) BIAL already has a majority owner... Fairfax. So anyone buying will be a minority owner... minority stakes are valued at a discount?

3.) Siemens wants out - so forced seller with limited buyers?

4.) Other?

 

I wonder if Siemens believes it could be a long while before there is an IPO.  This transaction with Siemens doesn't close until July 2026.  

[SafetyinNumbers]

1 hour ago, hobbit said:

yah I am also confused by that , what's the need for special shareholder meeting?

Maybe because of the concentration? 
 

Bylaws are here:

 

https://www.fairfaxindia.ca/wp-content/uploads/Corporate-By-laws.pdf

[dartmonkey]

2 hours ago, Crip1 said:

5 hours ago, gfp said:

Didn't they already sell 11.5% of Anchorage to OMERS?  Meaning the look-through ownership Fairfax India shareholders have in BIAL is less than 74%?  Or did the  OMERS / Anchorage deal never happen?

I appreciate the correction (completely forgot the OMERS piece, clearly). That changes the math. It reduces the 74% to 68.97%, which changes FFI's share of BIAL to be worth US$1.759B resulting in the rest of FFI to be valued at US$337M based on the share price mid-day. 

This seems to be correct, and corresponds to the statement in the Q3 report:

 

At September 30, 2024 the company held 43.6% out of its 64.0% (December 31, 2023 - 43.6% out of its 64.0%) equity interest in BIAL through Anchorage. As a result, the company's fully-diluted equity interest in BIAL was 59.0% (December 31, 2023 - 59.0%). Refer to note 8 (Total Equity, under the heading Non-controlling interests) for further discussion on Anchorage.

 

However, it is hard to understand why Fairfax India would issue a press release saying its ownership is going from 64% to 74%, with this transaction:

 

Fairfax India’s equity interest in BIAL will increase from 64% to 74% (30.4% to be held by its wholly-owned subsidiary and 43.6% to continue to be held by its subsidiary, Anchorage Infrastructure Investments Holdings Limited).

 

is is standard to say that you have a 64% equity interest in BIAL (going to 74%), when OMERS has a 5% interest? Clearly, that is the situation, because we know that OMERS has 11.5% of Anchorage, and Anchorage has 43.6% of BIAL, so that means OMERS has 11.5%*43.6% = 5.014% of BIAL. The PR also mentions that 2 Indian state entities, Airports Authority of India and Karnataka State Industrial and Infrastructure Development Corporation Limited, will continue to own 13% each, i.e. 26%, so Fairfax owns the rest, with OMERS having 11.5% of Anchorage, i.e. 4.98% of BIAL, leaving Fairfax with the rest, 100-13-13-5.014=68.986%. (Right? you say 68.97%, there must be a tiny error somewhere.)

[TwoCitiesCapital]

1 minute ago, dartmonkey said:

This seems to be correct, and corresponds to the statement in the Q3 report:

 

At September 30, 2024 the company held 43.6% out of its 64.0% (December 31, 2023 - 43.6% out of its 64.0%) equity interest in BIAL through Anchorage. As a result, the company's fully-diluted equity interest in BIAL was 59.0% (December 31, 2023 - 59.0%). Refer to note 8 (Total Equity, under the heading Non-controlling interests) for further discussion on Anchorage.

 

However, it is hard to understand why Fairfax India would issue a press release saying its ownership is going from 64% to 74%, with this transaction:

 

Fairfax India’s equity interest in BIAL will increase from 64% to 74% (30.4% to be held by its wholly-owned subsidiary and 43.6% to continue to be held by its subsidiary, Anchorage Infrastructure Investments Holdings Limited).

 

is is standard to say that you have a 64% equity interest in BIAL (going to 74%), when OMERS has a 5% interest? Clearly, that is the situation, because we know that OMERS has 11.5% of Anchorage, and Anchorage has 43.6% of BIAL, so that means OMERS has 11.5%*43.6% = 5.014% of BIAL. The PR also mentions that 2 Indian state entities, Airports Authority of India and Karnataka State Industrial and Infrastructure Development Corporation Limited, will continue to own 13% each, i.e. 26%, so Fairfax owns the rest, with OMERS having 11.5% of Anchorage, i.e. 4.98% of BIAL, leaving Fairfax with the rest, 100-13-13-5.014=68.986%. (Right? you say 68.97%, there must be a tiny error somewhere.)

 

Perhaps they're forced to consolidate the ownership since they have the controlling interest in Anchorage as well and thus 'control' 74% w/o the matching  economic ownership? 

 

Similar to financial results where they have to disclose the full look through P&L and then adjust for minority interests in a separate line item? 

[dartmonkey]

2 hours ago, Crip1 said:

That changes the math. It reduces the 74% to 68.97%, which changes FFI's share of BIAL to be worth US$1.759B resulting in the rest of FFI to be valued at US$337M based on the share price mid-day. 

 It's worth pointing out that the US$337m of the 'Rest of FIH (RoF)' is to be compared to the public equity stake of $1.1b and the private, non-BIAL stake of $0.7b. If a $2.55b valuation for BIAL is anything like a sane estimate, the RoF is being valued at about  20c on the dollar. Or alternatively, if the assessment of the RoF assets is right, it means the airport is only worth $1.95b, and they just bought another 10% at a valuation of $2.55b. Just goes to show what we knew already, is that FIH is really just about the airport, for the moment.

[kodiak]

I am wonderfully excited about Fairfax India buying another 10% of the airport. I think this is great news. I understand that some are concerned that the price Siemens is selling for represents 10% of the fair market value of the asset. I don't believe this is the right way to value the asset. This is a minority sale in which the possible buyers are a relatively small number of potential entities. Siemens has a strategy in which they make initial investments in airport type assets to insure that their technology systems are used in the infrastructure. They typically make these kinds of investments as a way to guarantee that they become the dominant technology/communications partner in the airport. Once the infrastructure asset is built and completed, they no longer need to be an investor in the project. Hence, the selling of their interests in this asset. Of course, we are the only real logical buyer and are able to buy the asset for a quite reasonable and below market value. Minority investors in general don't get a great execution on price and this is another example of that occurrence. Siemens will then likely recycle these proceeds to anchor their next infrastructure investment. 

 

I went on the Fairfax India tour in January of 2020 and I am scheduled to go on the tour again this January. I believe the airport and the monopolistic characteristics make this one of the finest assets to own in the entire world. The airport is growing quickly, the country is growing quickly and we are back to pre-Covid travel levels. This is a world class asset. Plus we have very strong management of the asset led by Hari Marar, CEO of the airport. 

 

I also believe that Fairfax India will have to have a shareholder vote as outlined in a previous post by Safety in Numbers, since they have a 25% asset threshold. I believe the vote will only cover this issue and I don't expect the company to issue extra shares or anything else that shareholders might be worried about right now. In fact, I have recently been slowly adding to my Fairfax India position as the valuation story seems too compelling. I have attached a picture of the airport taken in 202o from the control tower. It is much bigger today with the new terminal. 

 

On final note, while Fairfax Financial is about the 25th largest company based upon market capitalization and that alone should make us the most likely next company to be added to the TSX 60, we are the 7th most profitable public company in Canada. I learned that fact today and it makes perfect sense. What other big company in Canada is trading for 8 times earnings. I still think Fairfax Financial and Fairfax India represent two of my absolute favorite investments in my portfolio. 

[glider3834]

40 minutes ago, kodiak said:

I also believe that Fairfax India will have to have a shareholder vote as outlined in a previous post by Safety in Numbers, since they have a 25% asset threshold.

yes I think thats likely reason as well subject to official confirmation from FIH  - see clause below https://www.fairfaxindia.ca/wp-content/uploads/Corporate-By-laws.pdf - at Dec'23 they had invested $903M cash (or 23.6% of FV of total assets $3822M) for 64% of BIAL - this next $255M should take them over 25% threshold

Edited December 4, 2024 by glider3834