Indian Economy

[This2ShallPass]

7 hours ago, SafetyinNumbers said:

I continue to think we’ll see an SIB or a large buyback before year end which will offset the performance fee and shrink the float

This would be a good indication of how they think about minority shareholders. 287M in cash, no reason not to do a SIB and take out 10% of shares. But, if they buyback at significant discount, wouldn't BV increase which means Fairfax gets even more performance fees?

 

7 hours ago, SafetyinNumbers said:

The group that really let us down so far are the original shareholders (OMERS, Markel etc…) that negotiated the original terms.

Is omers and Markel not willing to participate (even at this discount) a cause for concern?

 

[hardcorevalue]

I think at this stage with Fairfax finally going so well that India’s single digit book value growth and 35% discount (at a time when India is all the rage) is just a bit of an embarrassment. I figured it’s so small they might just take out shareholders at book. But yes it’s in their financial incentive to just keep scraping fees and the capital wouldn’t be treated as well by regulators, so I doubt much will change. I also don’t get why they kept talking about an upcoming IPO even though it was years away. If the BIAL valuation is real they should be selling down stocks and aggressively buying back shares. Sure they have done buybacks but just keep going at it with SIBs. This was supposed to be a vehicle that could raise but after this long at a huge discount it seems like they should just be more fair with their non fee collecting shareholders. Sorry just venting.

[SafetyinNumbers]

Mr. Market can embarrass the best. If it was just FIH.U that had a big discount, I can understand being frustrated with the BOD but it’s across the board. Look at E-L Financial, they bought back over 40% of the float, paid two special dividends and increased the regular dividend by 300%. Its discount has grown from ~45% to over 50% in the past 3 years. Their portfolio is even more liquid than Fairfax India as it’s ~80% liquid stocks. There are numerous examples. Please share if you have them. Seems like a good way to find cheap businesses to buy but not necessarily great stocks in the short term.
 

The only way the discount financially matters is with the performance fee. It’s why I think an SIB is likely before year end and potentially next week based on the June 15, 2021 tender announcement. But they could wait until later in the year so the VWAP has a better chance of being at or near the tender price. At the very least it negates the impact of the performance fee dilution but more importantly for the share price it removes another big chunk of float.

 

Also, given all of the private marks, to complain about the book value growth is to argue for more aggressive marks and higher performance fees sooner. Sure that would help performance (or make the discount bigger) but it’s not in the best interests of long term holders. It is, however, potentially in the best interest of short term holders.

[ICUMD]

The SIBs for Fairfax India are interesting.

 

1. They run counter to the BV performance fee generating structure of Fairfax. (Ie. They derive less performance fees)

 

2.  They have failed to close the discount to BV and share price thus far.

 

3. They require capital which can be used to fund other purchases, therefore an opportunity cost.

 

Yet, they have bought back via the SIBs in substantial quantity. 

 

My read on this is that the goal is to ultimately take this FIH.U private.  Aren't all these SIBs essentially doing just that in piecemeal?

 

Alternatively, they want to support share price and close the discount to help raise funds in the future, perhaps via Anchorage.

 

Most certainly, the final chapter in this story hasnt yet been written.  Hopefully some interesting deals and developments will be coming down the pipeline.

[glider3834]

By my calcs in Q3 so far, FIH public equities are up by around USD$161M (pre-tax) , so potentially a $1 or so impact on BVPS - not sure what MTM will be on their private equities.

 

[gfp]

Another RBI central bank intervention to prop up the Rupee from breaking down against the dollar overnight.  Lots of dollar strength in Asia.

[UK]

14 hours ago, gfp said:

Lots of dollar strength in Asia.

 

“The dollar is a beast again,”

 

https://www.bloomberg.com/news/articles/2023-09-19/dollar-rally-is-crushing-one-of-the-most-popular-trades-of-2023#xj4y7vzkg

 

Yet, I don't now how many times I have read in the 1H and at the start of the year how USD was supposed getting much weaker this year. It was very strong consensus.

[Xerxes]

 

 

Depending on how the diplomatic row evolves between Ottawa and Delhi, we will see if the discount was actually justified !!

 

Edited September 21, 2023 by Xerxes

[SafetyinNumbers]

This seems like great news for India and Indian issuers. Passive capital will force active managers benchmarked to the index to also buy Indian bonds. Seems positive for the Rupee and credit spreads.

 

 

Edited September 22, 2023 by SafetyinNumbers

[Viking]

Balanced summary of how messed up Canadian / Indian relationship is.
 

- https://www.theglobeandmail.com/opinion/article-the-real-reasons-canadas-relationship-with-india-is-broken/#comments

[whatstheofficerproblem]

LOL.. Pierre literally turned a blind eye to a known terrorist even after Indian authorities warned him, the consequence of that was the 1985 Air India bombing. Terry Milewski was probably the only reporter who covered these 'Khalistan' forces, before the Canadians opened their eyes, they were already in bed with them. What is even more f'ed up is CNN and other media literally calling a known terrorist an activist. God save Canada, then again, I doubt he can do much at this point.

Edited September 22, 2023 by whatstheofficerproblem

[Xerxes]

Mujahedin Khalq is considered as a terrorist organization by the Iranian government. Now I don’t give a rat’ a&& to what Iranian government thinks and who they consider as Bad Guys, but I myself consider the Mujahedin Khalq as traitors to the nation, since they took arm when the country was its weakest point and actively fought against their homeland during the Iran-Iraq War. 
 

Yet, both John Bolton (whom I somewhat respect) and that Pompeiiyo (spell) were courting this gang of traitors and giving speeches on their behalf. Bolton collected i think $180,000 in total. Poor guy probably been invested in bonds in the past 10 years. 

 

Who said democracy is perfect. 
 

https://amp.theguardian.com/world/2018/jul/02/iran-mek-cult-terrorist-trump-allies-john-bolton-rudy-giuliani

Edited September 22, 2023 by Xerxes

[rohitc99]

3 hours ago, Viking said:

Balanced summary of how messed up Canadian / Indian relationship is.
 

- https://www.theglobeandmail.com/opinion/article-the-real-reasons-canadas-relationship-with-india-is-broken/#comments

well laid out. If an indian citizen, is agitating for something, atleast that has some reasoning behind it. If a non citizen supports a movement in some other country based on his faith, funds violence  and uses its domestic leverage, what do you call him ? we know what the US calls them

 

Its easy to see this through a western lens as this article is also, but you have to know the history of the past 50 years to understand the context. There have been regular bombings and shooting by islamic terrorist and ofcourse this. All the representation etc was of no use because India had no economic weight and could be ignored

 

Now some of these governments are being forced to face up to it because they cannot ignore it as the article says so

 

There is a lot of good will between the citizens of the two countries. Hope it doesn't go down the drain in the future

[StubbleJumper]

9 minutes ago, rohitc99 said:

If a non citizen supports a movement in some other country based on his faith, funds violence  and uses its domestic leverage, what do you call him ?

 

Irish American?

 

 

SJ

[sundin]

India has failed to identify any evidence that there was any funding toward violence by the Canadian killed. There are extradition processes in place that ought to be followed if India could prove that or had legitimate evidence. On the other hand there seems to be legitimate evidence that the national sovereignty of Canada was violated which is unacceptable. 

 

Modi has a history of suppressing minority voices, including being implicated in the genocide of Muslims which lead to the Western nations barring his entry. Even worse Indian media has shifted to accepting and justifying the fact they killed a Canadian citizen on Canadian soil - equating it to killing Bin Laden. 

 

I don't know where this goes but this is a key risk for any investment in India as its looking closer and closer to becoming a rogue state like its partner Russia. 

[ICUMD]

https://www.hindustantimes.com/india-news/hardeep-singh-nijjar-faked-marriage-to-get-canada-citizenship-in-1997-report-101695397465458-amp.html

 

Interesting character for Trudeau to support and risk trade relations. If the above was true, seems like he should have been deported back to India.

 

Still awaiting to hear the 'evidence'  India committed a crime on Canadian soil. Wonder why the delay?

 

 

[Spekulatius]

On 9/22/2023 at 4:28 PM, sundin said:

India has failed to identify any evidence that there was any funding toward violence by the Canadian killed. There are extradition processes in place that ought to be followed if India could prove that or had legitimate evidence. On the other hand there seems to be legitimate evidence that the national sovereignty of Canada was violated which is unacceptable. 

 

Modi has a history of suppressing minority voices, including being implicated in the genocide of Muslims which lead to the Western nations barring his entry. Even worse Indian media has shifted to accepting and justifying the fact they killed a Canadian citizen on Canadian soil - equating it to killing Bin Laden. 

 

I don't know where this goes but this is a key risk for any investment in India as its looking closer and closer to becoming a rogue state like its partner Russia. 

This is true, but Trudeau also did not produce evidence for his accusations, which is what makes this situations messed up.

 

I do agree on Modi, he has autocratic tendencies. Works great as a foreign investor if they leave you alone or even better they nurture you, but if they turn against you, you are looking at a zero.

 

Now Modi did get elected fairly, so one can only hope that checks and balances are intact in India.

[ICUMD]

Interestingly, Canada has in its history a heavy hand dealing with separatists during the FLQ crisis in the 1970s.  In fact, Pierre Trudeau himself invoked the war measures act to suspend civil liberties.

 

https://en.wikipedia.org/wiki/Front_de_libération_du_Québec#:~:text=It was considered a terrorist,people and injured many more.

 

Seems to me that even Western nations can also have autocratic tendencies from time to time.

 

On the other hand, that's what I expect from any good leader. Be it Pierre Trudeau or Modi - using autocracy selectively to maintain the unity and stability of a nation.  Broken nations are not peaceful ones, nor ones that are safe to invest in.

[Haryana]

 

[hardcorevalue]

do we have another Xi on our hands? Obviously not there yet but things are drifting in the wrong direction in terms of personal freedoms and democracy. 

 

Prem praising Modi at every turn but this guy is acting like a nationalist and increasingly authoritarian. 

"At least 46 people were questioned during the raids and their devices, including laptops and cellphones, and documents were taken away for examination.

 

India’s anti-terrorism law has stringent requirements for bail, which mean individuals often spend months, sometimes years, in custody without being found guilty. Successive Indian governments have invoked the law, but it has been used with increasing frequency in recent years.

 

Reporters Without Borders, an advocacy group for journalists, ranked India 161st in its press freedom rankings this year, writing that the situation has deteriorated from “problematic” to “very bad.”"

 

https://apnews.com/article/india-press-freedom-newsclick-arrest-raid-3faa0830e9f3bcd4e75f1b7df404f432

 

 

[Spekulatius]

1 hour ago, hardcorevalue said:

do we have another Xi on our hands? Obviously not there yet but things are drifting in the wrong direction in terms of personal freedoms and democracy. 

 

Prem praising Modi at every turn but this guy is acting like a nationalist and increasingly authoritarian. 

"At least 46 people were questioned during the raids and their devices, including laptops and cellphones, and documents were taken away for examination.

 

India’s anti-terrorism law has stringent requirements for bail, which mean individuals often spend months, sometimes years, in custody without being found guilty. Successive Indian governments have invoked the law, but it has been used with increasing frequency in recent years.

 

Reporters Without Borders, an advocacy group for journalists, ranked India 161st in its press freedom rankings this year, writing that the situation has deteriorated from “problematic” to “very bad.”"

 

https://apnews.com/article/india-press-freedom-newsclick-arrest-raid-3faa0830e9f3bcd4e75f1b7df404f432

 

 

India's press has become increasingly an extension of the government - Modi plays them like a fiddle. You can easily check this out watching WION etc on youtube. Lot's of disinformation going on with foreign politics topics.

[Xerxes]

On Ukraine-Russia war related topics, it is either Ukraine single handily destroying some many Russian assets or Russia amazingly competently doing it to the Ukrainians. (As per WION) 

 

both cannot be true at the same time 

[rajpgokul]

For whatever it's worth, I am sharing my views as someone who lives in Tier-2 India and invests globally, I believe that a lot of the inputs in this thread recently are so out of touch with reality. We may not like Modi's social policies, but to think that he is taking India in the direction of Russia or China is totally absurd. India has a democracy that is so deep rooted with enough checks and balances for many of you to fully appreciate. You just need to check the electoral track record of Modi's party in state elections (India has a very federal structure). To put it in perspective, even at the peak of his popularity now, Modi's party is not in power in almost all major cities - Delhi, Bangalore, Kolkata, Chennai, Hyderabad. The only large city they control is Mumbai and even that is through 2 allies and the local civic body is with the opposition. A lot of the western media writing about India is similar to what media houses write about Trump. You can hate Trump or Boris Johnson, but to believe that, electing them is equivalent to US/ UK becoming Russia slowly is non-sense. The reason why Prem Watsa writes so positively about Modi (other than earning brownie points with the establishment) is because most reasonable Indians and close India watchers would know that he is taking the right decisions to grow the economy and build the base for the next 1-2 decades by investing in large scale infrastructure, running tight government budgets, reforming key policies, making India more capitalistic etc etc. I too genuinely believe Modi is transforming the country in the right direction even though I may not vote for him. People with skin in the game like domestic investors or westerns firms investing large sums in India understand the positive change that is happening in the country. Please do not take the Economist or FT editorials so seriously. 

[hardcorevalue]

Thanks Raj, how do you think the alleged modi government killing a canadian citizen will shake out? I don’t know enough on Nijjar but if true, then it’s pretty crazy that a country like Canada would be so cool with a foreign government murdering one of its own. Obviously, Trudea tried to get ahead of the story but when/if the evidence finally comes out, does Canada just pretend it didn’t happen? or will there be a back channel solution?

[rajpgokul]

Your guess on this issue is as good as mine. My personal opinion is that no one will even remember about this in the next 1-2 years. The long term trend of India becoming a very close ally of the Western countries in Asia is certain. India is certainly not China or Russia (people who equate them have zero understanding of how India operates) and would continue to be a great market for stock pickers. As investors, our focus should be to buy the right businesses at attractive valuations and spend as little time as possible on the irrelevant news cycles.