Fairfax Financial Shareholder's India Trip

[Parsad]

I will be doing a blog in this thread for 7 days regarding the Fairfax Financial Shareholder's India Trip.  About 45 of us are going on this tour, which will include tours of Indian cultural sites and meetings with Fairfax India company executives.  I will record our adventure, including photos of the trip.  Cheers!

 

[petec]

Outstanding. Thanks Parsad. If they do another I might have to sign up!

[Parsad]

Flew into Delhi's Mahatma Ghandhi Airport on Cathay Pacific.  As we approach our landing, it becomes very obvious that there is a tremendous amount of smog...you could see it at night, hovering over the city and its residents! 

 

Delhi Airport looks a bit dated, but is cleaner than I expected.  Our attendant from the Leela Palace Hotel in Delhi greets us after the baggage pickup and guides us to our BMW 5 Series car and driver.  As we walk through the terminal, it is much more modern than the area we walked through after disembarking the plane.

 

As we exit the Airport parking, Delhi's traffic becomes glaringly obvious.  It's about 10:30pm, but the roads look like rush hour in New York.  Drivers jostle for space, as there is no such thing as lanes anymore...the lines are there for foreign rental car drivers...Indians don't seem to use them as cars, motorbikes, trucks, tuk-tuks all fight for their little gap to drive through.  Unlike North America where a honk usually is accompanied with the "finger", the honks here in Delhi's traffic are simply a warning to let other driver's know you are there.

 

We drive into the Leela Palace Hotel's driveway, and there is a security checkpoint.  The staff open our doors after the checkpoint, and we get out and are greeted warmly, and then guided to the security screening and metal detector.  The staff opens the hotel doors and we are led into the hotel, where a hostess continues the warm salutations and places a fresh flower garland around our necks. 

 

The lobby is magnificent!  I struggle once again with the concept of seeing the two very diverse sides of India...the vast amount of wealth and luxury, and the abject poverty that breaks ones heart.  Tonight is luxury...I'm certainly not complaining!

 

The next morning, after a nice breakfast in the hotel, we hired a driver for two hours to take us around Delhi.  We visited Humayan's Tomb, the Presidental Palace, Parliament Buildings, Connaught Place, India Gate, etc.  For my Mom, who I brought with me, this was a trip of contrasts.  She last came to India 36 years earlier with my Father back in 1982.  The Ambassador cars and tuk-tuks were mostly replaced now with Hyundai's, Kias, Tatas, BMW's, Mercedes and Suzuki's.  While the historical sites remain, it is clear that Delhi is going through something.  The question is whether it is China 15 years ago, or just India going through another cycle. 

 

For me, the smog is the most obvious characteristic.  It is noticeable in every way possible...visually, by smell, and literally touch as the residue shows up  each morning when you take a shower and blow your nose!  I remember the smog over Los Angeles in the 70's.  It was bad, but was never as thick as what floats above Delhi.  Beijing after a 5-day dry spell around summer comes closest to mind.  Contrary to opinion, the Chinese have done a remarkable  job in terms of air quality over the last decade...India will have to do the same...more electric/hybrid cars, buses, scrubbers and clean energy.  It's not a question of "if", but "when" India will pour more money into these initiatives.  After 60 years, like China, India under Modi is being forced to change. 

 

Disposable income is increasing, the obvious young population of India is optimistic and driven...and like China, India is going to have to pour massive amounts of capital into infrastructure, housing and energy.  Prem estimated at the last AGM, that India needs 40 km of new roads every single day.  That may actually be an understatement!  Along with roads you need all other components of infrastructure to complement it...schools, hospitals, sewers, water, electricity, etc.  There is a trickle down effect when the country spends enormous amounts of capital on infrastructure, and India either has to spend trillions or fall behind. 

 

After touring the city, we make our way back to the hotel.  I decided to go for a swim in the Leela Palace Hotel's rooftop infinity pool.  As I swim in the stunning pool with nearly 360 degree views of Delhi city,, listening to the feint honks of cars 14 stories below,  I can only wonder what India will look like 10-20-30 years down the road.  Total population between India and China is relatively close today, yet less than 400M Indians have internet access, while over 750M Chinese have internet access.  India's population is far younger than China's, and while there remains rampant corruption,  India does have the rule of law, democratic elections, enforceable courts and strong property rights.  That can't be said about China!

 

Change is here!  Can we identify what and who succeeds in India over the next 20-30 years?  Cheers!

[Cardboard]

"Can we identify what and who succeeds in India over the next 20-30 years?"

 

Copper and most commodities will be greatly needed.

 

Cardboard

[wondering]

Thanks for the post Sanjeev.  Please keep them coming.

 

Your experiences of India match mine, when I worked there several years ago for a total of 8 months.  Great wealth - great poverty.  Crazy traffic.  Luckily, the pollution in Bangalore (where I worked) wasn't as bad, but this pretty terrible compared to Canadian standards.

 

IMO, the young people of India will lead the charge to change the country significantly, especially the young women.  It is a very exciting country with tons of potential.

[FairFacts]

Great post Parsad, please keep them coming.

[Spekulatius]

I see a great market for luxury goods, pollution control, infrastructure, public transportation equipment, housing,  airplanes , travel/ hotels, cars, social media/ advertising. It will be interesting how this country managed the growth?

 

Did you notice any security or terrorism issues? Those things can really mess with growth and stall a country.

[Jurgis]

Did you notice any security or terrorism issues? Those things can really mess with growth and stall a country.

 

Apart from security checkpoint, security screening, and metal detector going into hotel?  ::)

[bearprowler6]

It would also be very helpful if those individuals on the trip in India could report back on the current political atmosphere in the country. Especially, as it relates to the likelihood of Modi`s re-election later this year. As we all know---a big reason for Prem`s decision to invest so much capital into India was due to the benefits that he believed a Modi led government would bring to the country. From what I have been reading---Modi`s re-election is less than a certainty. Any insight into this area would be greatly appreciated.

[OracleofCarolina]

Thanks Sanjeev for the posts. Looking forward to your updates!

[DocSnowball]

Thanks for sharing your journey Sanjeev, it's a treat. As someone who was born and grew up in Delhi, I really appreciate and enjoy your very astute perspectives!

[Parsad]

Sorry folks, I've been fighting a bad case of Montezuma's Revenge for the last three days, and am taking antibiotics.  I have a ton of posts and pictures I will put up probably in the next couple of days while in Mumbai.  The trip has been extraordinary...barring the stomach issues...I think all participants have been blown away by what we've seen.  BIAL alone in the Fairfax India portfolio would have been great, but add Catholic Syrian Bank, IIFL, SanMar, etc and it's a great portfolio.  But you have to on the ground here...you cannot do it just from overseas...knowing the culture, politics, economics, etc all play a part.  Cheers!

[Parsad]

After breakfast in the Qube Restaurant at the Leela Palace Hotel in Delhi, we made our way on coaches to Old Delhi.  A significant amount of spice, nut, grain trading still occurs here in the wholsale market.  At one time, India accounted for 25% of global GDP...I suspect India and China combined, will do that once again within a couple of decades.

 

Old Delhi and our rickshaw rides through it, were in stark contrast to the modern, sophisticated touch of say the Leela Palace Hotel.  This was India as well, very different than what we saw previously and what we will see going forward.  If nothing, India truly is a study in contrasts...it's people, economies, cities, culture, dialects, etc!  Old Delhi was a clear view of what will have to change in the future.  Modi's attempts at getting accountability from all citizens is essential...pay your taxes, pay your fair share of utilities, etc.  The barrage of utility wires you see intertwined between small low-rise buildings and hanging over the central walkways and thoroughfares is mind boggling.  How do you even tell which wire leads to which home?!

 

From Old Delhi, we headed over to a terrific Asian cuisine restaurant called Spice Route.  There we met up with the team from Fairfax India, including Chandran Ratnaswami, head of Fairfax India.  After lunch, we made a visit to UNESCO heritage site Qutab Minar, which was built in the 12th century.  A spiraling, majestic minaret, that showcased the tip of the iceberg of Indian engineering and construction feats!

 

After a brief respite back at the hotel, we all made our way to Canada House, where the High Commissioner of Canada in India, Nadir Patel, was waiting for us.  We had a wonderful dinner in an open courtyard of Canada House.  Nadir spoke about the potential of Indian-Canadian relationships, and we met a number of Canadian who offered their contacts to help facilitate business in India.

 

From Canada House, we headed back to the Leela Palace Hotel for some rest before departing to Agra the next morning!

[Parsad]

We arrived bright and early at the Delhi Train Station.  Looked relatively empty until we got closer to departure time.  Suddenly, the throng of commuters became apparent and we were surrounded by people.  We quickly boarded our private car in the Gatiman Express and made our way to Agra at a top speed of 160 km/h. 

 

After arriving in Agra, our coaches took us on a short trip to the entry way of the Taj Mahal complex.  We then shifted to small golf carts that took us right to the Taj Mahal Gateway.  Agra was quite different than Delhi.  The air was much cleaner, and the city less dense.  The one thing we noticed while travelling on the train to Agra was that there was huge amounts of land between the cities where the population was far less dense. 

 

As we disembarked our golf carts and made our way through the Gateway, the stunning view of the Taj Mahal left us all breathless.  Magnificent, grand, towering, gleaming in a white alabaster aura as the sun reflected off of it.  It was a postcard moment, and again, a nod to the stunning architectural brilliance of India.  Shah Jahan built the Taj Mahal over 22 years with his own private wealth in memory of his favorite wife, Mumtaz.  The laborers were all paid very well in their time, and the engineering marvel was their crowning glory!  How could Indians not look on the Taj Mahal, and believe that anything is possible for them!

 

After the Taj Mahal, our coaches took us for lunch, and then on to a military airport, where we caught our private chartered flight to Jaipur.  After arriving in Jaipur, we made our way to the historic and stunning Rambaugh Palace, which is an oasis smack in the middle of the city.  We are warmly greeted by the staff of the Rambaugh Palace and performers.  Everyone has a specific staff member who guides them to their room and gives an overview of the hotel.  What was originally the living quarters of the Prince of Jaipur, became a hotel after the Prince realized he needed to improve his cash flow to maintain his lifestyle.  The grounds are stunning, and one can only imagine how a single person lived on this property with only his staff waiting on him!  Again, the disparity between the "haves" and the "have nots" is deafening...more so than in North America! 

[Parsad]

We awake for breakfast and then depart by coach to the Amer Fort.  Jaipur's traffic seems a bit more serene than Delhi's with much less honking and cars running red lights.  We arrive at the base of the Amer Fort and Jeeps are used to ascend the winding and steep pathway to the entrance.  The interesting thing about the Fort is its self sufficiency.  It was meant to withstand a siege, with grain and food storage, it's own water supply from deep wells and secure ramparts. 

 

From the Amer Fort we travel to a fairly large jewelry shop, and are given a crash course in precious, semi-precious stones, and how they are cut.  After the presentation, we are provided the opportunity to purchase jewelry from the store, while being served refreshments.  It's both amazing and sad to remember that India at one time had vast resources of gems, gold, silver, etc...it was the richest nation several times in the last 2,000 years for centuries at a time. 

 

From the jewelry store, we travel to to hotel Samode Haveli, where we enjoyed a beautiful lunch on a sunny, open, courtyard terrace.  There was a festival in Jaipur, and residents were flying hand-made kites all over the city.  Some would cut off other kites, and we had a few land on the terrace.  Quite an Indian experience!

 

After a brief respite back at Rambaugh Palace, everyone prepared for an evening visit to the City Palace, where the Prince of Jaipur resides.  Fairfax (TCI) adorned all of the men with colorful turbans and the women received beautiful scarves.  We loaded up the coaches and made our way to City Palace.  As we enter City Palace, a large procession of elephants, horses, riders, and drummers lead us around the Palace courtyard a couple of times. 

 

We then enter an area that illuminates what the Prince's living room would have looked like in the past.  After which, we are guided to a huge beautiful open courtyard, lit up and prepared for a banquet.  A handful of performers dance for us, and then the entire crowd is pulled into a large dance circle.  After which, we are provided a sumptuous dinner, drinks and dessert.

 

We leave City Palace and are transported back to Rambaugh Palace.  The night leaves everyone thrilled and mesmerized!

 

[shalab]

Very useful insights - thanks for sharing!

 

Looks like the places you stayed are the top two for luxurious experience in India. https://traveljee.com/destination/asia/india-asia/most-expensive-hotels-in-india/

 

 

[petec]

Sanjeev do you plan on sharing your notes & thoughts on the investments? It would be greatly appreciated if you can.

[Parsad]

Very useful insights - thanks for sharing!

 

Looks like the places you stayed are the top two for luxurious experience in India. https://traveljee.com/destination/asia/india-asia/most-expensive-hotels-in-india/

 

We stayed at four of the top ten...also Taj Palace Mumbai and Oberoi Mumbai.  The Oberoi Mumbai was not part of the tour, but I stayed a couple of extra days in Mumbai and added it.  Extraordinary hotels, but the service put them all over the top.  You have very nice hotels in the U.S., but the service is nothing like what we experienced in India!  Cheers!

[Parsad]

After an exhilarating night in Jaipur, we awake and make our way to Jaipur Airport for our flight to Bangalore.  We arrive at the Bengaluru Airport...incredibly modern and very well designed.  We are greeted by the entire BIAL executive team who walk us through the airport and outside to the Quad...their outdoor retail complex. 

 

Fairfax has essentially paid for 51% of BIAL's profits for the next 30 years, plus an option of another 30 years.  They have 4,000 acres of land to work with and are pushing ahead with a much needed 2nd runaway and terminal, as well as a city centre with residential and commercial development.  BIAL does about 25M passengers a year, putting it in the top 10, and is expected to hit 60M passengers in a little over a decade.  It is as sophisticated as any top airport in the world, and it's outdoor plaza is an enormous outdoor retail centre where passengers are picked up and dropped.  It keeps passenger traffic spread out and doesn't clog up the terminal.  Also encourages visitors to spend dollars at the airport.  From the Quad, we walk over to the Taj Bengaluru Airport for a fantastic lunch and presentation by BIAL's CEO, Hari Marar.

 

From the airport, we travelled to the Taj Westend where we stayed overnight.  In the evening, we had an amazing dinner hosted by Quess and its CEO, Ajit Issac.  Quess is owned by Thomas Cook India and Fairfax directly, not through Fairfax India. 

 

The next morning, we flew from Bengaluru to Mumbai and arrived at the Taj Mahal Palace Hotel...right across from the Gateway of India.  Really a beautiful and fantastic hotel!  The Leela Palace in Delhi, Rambaugh Palace in Jaipur and the Taj Mahal Palace in Mumbai...three extraordinary hotels with service to match!  We had lunch and then went on a double-decker tour of Mumbai.  Mumbai is extremely cosmopolitan.  It is a city rich in history, architecture, art, food, music and people!  25M people coexisting, surviving and thriving...I loved it!  In evening, we had a dinner hosted by Madhaven Menon, Chair of Thomas Cook India, at the Konkon Cafe.

 

The next morning we enjoyed a presentation by the Dabbawala's and the great-great-grandson of the founder.  The Dabbawala's are a cooperative of 5,000 employees who collect tiffin containers of lunch from the homes of 200,000 patrons, and deliver them by 1pm to the patron's office.  They have a 99.999999% accuracy rate, and have been studied by Google, Amazon, Fedex, Harvard and a whole host of researchers and corporations.  They employ a decades old color key code system that helps identify, location, building, address and patron.  We learned about how they operate, their service to the community and visited one of their sorting sites during the lunch hour rush.  Their existence comes from the fact that patrons cannot carry their lunch containers onto the frantic rush of people when they board trains and buses, as they need both hands to climb aboard and hold on...the essentially have 10 seconds to board.

 

During lunch we enjoyed expansive presentations by Chandran Ratnaswami, Head of Fairfax India, Madhaven Menon, and CEO's of other Fairfax India companies, including the youngest CEO, Ragahav Agarwalia, CEO of Saurashtra Shipping.  We covered Thomas Cook India, Sanmar, Fairchem, Saurashtra and Catholic Syrian Bank.  I was most interested in Thomas Cook India and Catholic Syrian Bank.  Two terrific businesses and Fairfax is the first foreign investor granted a majority stake in an Indian bank.  They will have to dilute their ownership over time, but CSB (they are rebranding) will naturally be multiple times bigger as the do so. 

 

In the evening, we were taken to an old abandoned mill (Mukesh Mills) which was staged and decorated for a soiree hosted by Nirmal Jain and IIFL.  It was stunning as we approached the mills, and inside was a beautiful event staged in pink hues, a jazz band/singer playing, bar and fantastic dinner.  We enjoyed an extensive presentation by IIFL.  Very, very exciting around its business and prospects.  Stunning growth, and we all know what a great business the wealth management business is! 

 

All 45 attendees had a spectacular time.  Other than the occasional bout of stomach flu, no one had been on such a trip in their lifetime.  We packed a ton into each day, and saw, heard and experienced the wonders of India.  For investors, we walked away understanding India better and the opportunities available.  For travellers, they enjoyed such a broad and diverse culture, food, art, music and history.  I cannot thank enough Vinodh Loganadhan, Madhaven Menon and his team at Thomas Cook India, and Manoj Pamneja!  They made this a trip of a lifetime for everyone that went, and took special care of each and everyone of us.  It was executed with near military precision and we walked away changed forever!  Thanks to Fairfax and everyone involved!  Cheers!

[shalab]

Congrats - indeed experience of a life time! I can totally see how service would be in a different league compared to USA and Canada. The highest I have paid for a hotel is around $400/day on biz trip and had no time to check out different aspects of the property.  I stayed at a top hotel in Thailand for a few days and it was a very different (in a nice way) experience as well.

 

Rambagh palace hotel:

 

Leela palace hotel:

 

 

 

Very useful insights - thanks for sharing!

 

Looks like the places you stayed are the top two for luxurious experience in India. https://traveljee.com/destination/asia/india-asia/most-expensive-hotels-in-india/

 

We stayed at four of the top ten...also Taj Palace Mumbai and Oberoi Mumbai.  The Oberoi Mumbai was not part of the tour, but I stayed a couple of extra days in Mumbai and added it.  Extraordinary hotels, but the service put them all over the top.  You have very nice hotels in the U.S., but the service is nothing like what we experienced in India!  Cheers!

[Luckyone77]

Great job, Parsad! I feel like I just went to India.

[investmd]

Parsad,

as a conclusion to this thread, could you please summarize a few key points you now know about FFH future that you didn't appreciate before the trip.

 

FFH returns have been flat for past 4 years. During the 10 year bull market FFH has not quite achieved 2x (Price in Feb 2009 was approx C$350 vs. $640 today). Returns not terrible, but expectation of Prem, the insurance business, equity and bond allocation were higher.  After this trip are you more convinced than ever that long term FFH investors are in good hands and that the future is likely brighter than the past?

Thanks,

[LC]

Sanjeev, those photos look incredible. Those hotels look awesome. I wish I had seen this earlier - we have a team in Mumbai and I may have been able to justify a trip. Perhaps next year.

[Parsad]

Parsad,

as a conclusion to this thread, could you please summarize a few key points you now know about FFH future that you didn't appreciate before the trip.

 

FFH returns have been flat for past 4 years. During the 10 year bull market FFH has not quite achieved 2x (Price in Feb 2009 was approx C$350 vs. $640 today). Returns not terrible, but expectation of Prem, the insurance business, equity and bond allocation were higher.  After this trip are you more convinced than ever that long term FFH investors are in good hands and that the future is likely brighter than the past?

Thanks,

 

Hi Investmd,

 

I think the one conclusion you can draw about Fairfax, say compared to Berkshire, Markel, etc is that the talent pool at Fairfax is very deep.  You have layer of quality manager upon layer, so succession is not an issue at Fairfax unlike Berkshire and Markel.  Fairfax's investment and operations teams are huge!  While the decisions are made at the top with the core group of managers at Hamblin-Watsa, you have managers below them that are very capable and have the expertise in regional markets. 

 

I also don't think you are going to get the huge swings we used to see earlier in Fairfax or Berkshire, where Prem or Buffett would make that one big acquisition/investment over and over.  I see Fairfax now as a vehicle that will take the occasional big swing, but a lot of smaller swings in succession that will create returns and value over time.  So imagine a less volatile Fairfax, and probably very diverse in terms of regional investments and insurance operations.  That era of huge bets by Prem or Brian Bradstreet is coming to an end.  It will be many smaller decisions that will move the needle in the future and a globally diversified entity...much earlier than Berkshire.  Cheers!