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Brooklyn Investor post on Fairfax India


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http://brooklyninvestor.blogspot.ca/2017/05/fairfax-india-holdings-ffxdf.html

 

(Also about a lot of other things... FFH equity hedges, reflexivity, etc)

 

 

It would have been even better if he had actually gotten around to talking about, you know, Fairfax India a bit. Ok, he mentioned HWIC's good track record in India, and the highish fees, and the fact that India may be a promising place to invest in general, but that's about it.

 

I think he might have also usefully mentioned that the fund is tiny ($1.5b of capital invested, now $1.8b book value) in a big market and their small size means they can invest in quite small things if they want. And that that they quite quickly invested most of that in ventures of about $200m each, at what seem like pretty good prices typically with P/E multiples in the low teens) for companies with rapid growth and what seem like good prospects. And that their initial results have been impressive, to the point that the performance fees to FFH just last quarter were $45m.

 

I think this is a very promising fund in itself, but from Fairfax's point of view, it really has the potential to be a home run. Like Brookfield's asset management business, they get paid twice - once with a good return on their own investment (half the FFI capital is from FFH), and then again from the fees on the other half of the capital. Seems like a much more promising venture than the Ashley/Sporting Life/Cara kind of ventures where the return is likely to be ordinary, with no real track record of operating excellence. More Brookfield, less Berkshire.

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http://brooklyninvestor.blogspot.ca/2017/05/fairfax-india-holdings-ffxdf.html

 

(Also about a lot of other things... FFH equity hedges, reflexivity, etc)

 

 

It would have been even better if he had actually gotten around to talking about, you know, Fairfax India a bit. Ok, he mentioned HWIC's good track record in India, and the highish fees, and the fact that India may be a promising place to invest in general, but that's about it.

 

This blog's M.O. is to basically be a sream-of-consciousness loosely centered around a topic. It wasn't really a writeup about Fairfax India, sorry for the disappointment.

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http://brooklyninvestor.blogspot.ca/2017/05/fairfax-india-holdings-ffxdf.html

 

(Also about a lot of other things... FFH equity hedges, reflexivity, etc)

sorry for the disappointment.

 

Not your fault, and still interesting. I was just hoping for some specifics about the businesses. But as you say, it was more a stream of consciousness thing than an analysis thing.

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Isn't it just tracking India market results and underperforming it too?

 

Not sure if this works: http://www.marketwatch.com/investing/stock/iif/charts?symb=IIF&countrycode=US&time=8&startdata-ipsquote-timestamp=1%2F4%2F1999&enddata-ipsquote-timestamp=5%2F5%2F2017&freq=1&compidx=none&compind=none&comptemptext=FFXDF&comp=FFXDF&uf=7168&ma=1&maval=50&lf=1&lf2=4&lf3=0&type=2&size=2&style=1013

 

I compared to IIF since that's the fund I know from way past. There might be better India funds currently.

 

Maybe not completely Fair  ;) comparison since they had a bunch of cash in the beginning...

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Isn't it just tracking India market results and underperforming it too?

 

...

 

I compared to IIF since that's the fund I know from way past. There might be better India funds currently.

 

Maybe not completely Fair  ;) comparison since they had a bunch of cash in the beginning...

 

No, I don't think that's a fair comparison: as you say, there's the cash position, and there's the fact that they started earlier than that chart, in 2015, and the Indian market was actually down in 2015. https://www.bloomberg.com/quote/NIFTY:IND Plus, I think it is better to look at how their investments are doing, than where FFI shares are trading.

 

Here is the simple version of their story so far:

Nov 2014 company founded

Jan 2015 $1b IPO

Jul 2015 $202m purchase IIFL ($75m more in Feb 2017) (The date is when the transaction is announced, the price is in USD at the value when it closed)

Jul 2015 $149m Natl Collateral Mgmt

Nov 2015 $19m Fairchem ($55m more in Jul 2016, via Privi which merged w Fairchem)

Mar 2016 $386m Bangalore Intl Airport

Apr 2016 $300m mostly bonds in Sanmar Chemicals

3q2016 $27 m Natl Stock Exchange of India

Sep 2016 $225m credit facility (they had run out of $ to invest!)

Oct 2016 $40m buyback authorization (!?), not used yet; shares were at $11

Jan 2017 $493m cash raise @$11.75/share

 

Shares now at $13.85 (all $ values, including share price, in USD, even though shares trade on Toronto Stock Exchange); mkt cap $2.04b; book value $1.80b, so trading at a 13% premium to book.

 

So if you take their word for the fair value of their holdings, they have basically accumulated $300m from their $1.5b capital invested, even after performance fees. And a third of that capital has only been invested 4 months, with the other 2/3 invested from about mid-2015 to mid-2016. Might as well ignore the $500m from this Jan, and that would give them a 30% return on the initial $1b, which doesn't seem crazy when you read the descriptions of the companies they bought. Eyeballing the Nifty, it is up probably less than 10% from its average value over the same 2015-2016 period. I think the premium is justified.

 

D

 

 

 

 

 

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  • 5 weeks later...

Isn't it just tracking India market results and underperforming it too?

 

...

 

I compared to IIF since that's the fund I know from way past. There might be better India funds currently.

 

Maybe not completely Fair  ;) comparison since they had a bunch of cash in the beginning...

 

No, I don't think that's a fair comparison: as you say, there's the cash position, and there's the fact that they started earlier than that chart, in 2015, and the Indian market was actually down in 2015. https://www.bloomberg.com/quote/NIFTY:IND Plus, I think it is better to look at how their investments are doing, than where FFI shares are trading.

 

Here is the simple version of their story so far:

Nov 2014 company founded

Jan 2015 $1b IPO

Jul 2015 $202m purchase IIFL ($75m more in Feb 2017) (The date is when the transaction is announced, the price is in USD at the value when it closed)

Jul 2015 $149m Natl Collateral Mgmt

Nov 2015 $19m Fairchem ($55m more in Jul 2016, via Privi which merged w Fairchem)

Mar 2016 $386m Bangalore Intl Airport

Apr 2016 $300m mostly bonds in Sanmar Chemicals

3q2016 $27 m Natl Stock Exchange of India

Sep 2016 $225m credit facility (they had run out of $ to invest!)

Oct 2016 $40m buyback authorization (!?), not used yet; shares were at $11

Jan 2017 $493m cash raise @$11.75/share

 

Shares now at $13.85 (all $ values, including share price, in USD, even though shares trade on Toronto Stock Exchange); mkt cap $2.04b; book value $1.80b, so trading at a 13% premium to book.

 

So if you take their word for the fair value of their holdings, they have basically accumulated $300m from their $1.5b capital invested, even after performance fees. And a third of that capital has only been invested 4 months, with the other 2/3 invested from about mid-2015 to mid-2016. Might as well ignore the $500m from this Jan, and that would give them a 30% return on the initial $1b, which doesn't seem crazy when you read the descriptions of the companies they bought. Eyeballing the Nifty, it is up probably less than 10% from its average value over the same 2015-2016 period. I think the premium is justified.

 

D

 

Upped the stake in Kempegowda.

 

How do you think this looks in 5 years?

 

Total ownership of the airport & a spinco?

 

Rollup of the CHA / CFS industry & another spinco?

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