Author Topic: "Fairfax enters India to invest in local firms"  (Read 7380 times)

bluedevil

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"Fairfax enters India to invest in local firms"
« on: July 14, 2011, 02:45:55 PM »
Interesting news.

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http://www.livemint.com/2011/07/14223323/Fairfax-enters-India-to-invest.html?atype=tp

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Fairfax Financial Holdings Ltd, a $30 billion (Rs.1.3 trillion)-plus diversified financial services company that owns stakes in Kraft Foods Inc. and Dell Inc., is entering India to invest in listed and unlisted Indian companies, a senior company official said.

It will buy both minority as well as controlling stakes.

Founded by Indian-born Prem Watsa, 61, popularly known as the Warren Buffett of Canada, Fairfax has appointed Harsha Raghavan, former India head of private equity firm Candover Investments Plc, as head of the unit.

The investments in Indian companies will be made through Fairbridge Capital Pvt. Ltd, an affiliate of Fairfax.

“We have the ability to invest long-term, patient capital into Indian businesses,” said Raghavan who, before moving to Candover, was executive director at the Principal Investment Area (PIA), the flagship $20 billion private equity fund sponsored by Goldman Sachs.

“We are free of any constraints around stage, capital structure, industry, etc. as long as the investment makes long-term business sense,” he said. “We strongly believe in the India growth story and particularly see opportunities in consumer products, consumer services and niche manufacturing sectors.”

Fairfax will also selectively incubate companies or build platform companies from scratch alongside partners—a strategy the firm follows in global markets. For instance, ICICI Lombard General Insurance Co. Ltd, the largest private sector general insurance company in India, is a 74:26 joint venture between ICICI Bank Ltd, India’s largest private lender by assets, and Fairfax.

Some private equity funds see merit in Fairfax’s strategy while others say there are challenges.

“New entrants in India are trying to take (a) diversified approach to investing,” said Raja Parthasarathy, partner at IDFC Private Equity Co. Ltd. “A lot of them feel that the valuations have run up in India, so they have a ground-up approach so that all the value is accrued by them, even though it takes time.”

According to him, incubation or platform deals happen in fragmented sectors, which offer robust growth potential in the long term. The financial services sector is one such area.

“They seem to have a lot more flexibility in investing, but when it comes to deals where specialization is needed or operational value has to be added, they will face competition from private equity firms that have entered the market earlier,” said Avinash Gupta, head (financial advisory) at audit and consulting firm Deloitte Touche Tohmatsu India Pvt. Ltd.

“Fairfax got its name due to its philosophy of doing fair and friendly acquisitions. We decided to use the name Fairbridge to reflect this philosophy as well as the need for long-term capital,” said Raghavan, who had helped Goldman Sachs PIA purchase low-cost cast metal parts maker Sigma Electric Manufacturing Corp. for $172 million.

Fairfax, in a way, is similar to Buffett’s investment firm Berkshire Hathaway Inc., which in March announced that it will enter India’s insurance turf as a corporate agent for Bajaj Allianz General Insurance Co. Ltd.

Apart from the insurance and reinsurance businesses, Fairfax has interests in other North American companies.

The Canadian firm has invested in pulp and paper maker AbitibiBowater Inc., American bank Wells Fargo and Co. and coal miner International Coal Group Inc., among others.

Berkshire owns stakes in a diverse range of businesses—confectionery, retail, railroad, home furnishings, vacuum cleaners, jewellery and media.

In 2008, Berkshire and Fairfax announced their first co-investment—Chicago-based building materials company USG Corp., in which Fairfax invested $100 million and Berkshire $300 million.

Fairfax’s book value has grown 25% every year, compounded, in the last 25 years, while its stock price has compounded by 21% every year, Watsa, a chemical engineer from India who founded the company in 1985, told his shareholders after its 2010 annual results.


Parsad

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Re: "Fairfax enters India to invest in local firms"
« Reply #1 on: July 14, 2011, 03:04:31 PM »
Very interesting and exciting!  Cheers!
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Alekbaylee

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Re: "Fairfax enters India to invest in local firms"
« Reply #2 on: July 14, 2011, 06:50:47 PM »
This is great news!
They know the country, its culture, the business community, etc.
Considering India's social and demographic trends, their business ventures should do well.

biaggio

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Re: "Fairfax enters India to invest in local firms"
« Reply #3 on: July 15, 2011, 07:07:05 AM »

I think it would be wise to migrate positions of BRK into FAIRFAX FINANCIAL when the opportunity presents itself.

I would like to continue owning both.

What proportion do folks here think would be good? I am now FFH:BRK 2:1 but am looking to add BRK here as it appears to be a good buy.

FFH seems fairly priced. I would like it to go on sale so I can pick up some.

Liberty

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Re: "Fairfax enters India to invest in local firms"
« Reply #4 on: July 15, 2011, 07:19:35 AM »
This is great news. Fairfax needs to keep going into sectors of the economy where they have an edge and can identify inefficient prices. India seems like such a place.
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rmitz

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Re: "Fairfax enters India to invest in local firms"
« Reply #5 on: July 19, 2011, 08:40:00 AM »
America is restricting innovation, India thrives on it!

U.S. Lobbyist pay off politicians to stifle progress and keep Americans trapped in 2 year contracts.

Hopefully Prem Watsa can assist Indian businesses, to show America how to advance and grow into the great internet brave new world.

Fairfax will also selectively incubate companies or build platform companies from scratch alongside partners—a strategy the firm follows in global markets

Cisco Anthem - Welcome to the Human Network

http://www.youtube.com/watch?v=hAdfYgEapT8

Are you seriously saying that India has fewer barriers to business?  Maybe Kerala, but most places there have HUGE requirements in greasing the right palms and bureaucracy.

vinod1

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Re: "Fairfax enters India to invest in local firms"
« Reply #6 on: July 19, 2011, 10:03:29 AM »
From what I've witnessed in America, all internet access providers have been deliberately slowing the flow of bandwidth and preventing innovation from the use of that available bandwidth, to flourish. Internet2 is just the opposite and that is what the U.S. needs.

India wants to bring in the future, America wants to try to stop it from growing exponentially.

Here is an example of a great business that would be an excellent model for the Bells. If America had this company instead of AT&T or Verizon, we'd have a truly completely internet, not this greasy mess we have now.    

Dhirubhai the founder of Reliance preached — and personally practiced — one mantra throughout his life: Dream with conviction.

He built the Reliance empire from scratch and, in a short span of 25 years, it catapulted to become one of the top Fortune 500 corporations of the world — an achievement unparalleled in history. 

http://www.rcom.co.in/Rcom/aboutus/overview/overview_ourfounder.html


"Robber baron". The mantra would be "Dream with conviction and corruption".

 
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vinod1

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Re: "Fairfax enters India to invest in local firms"
« Reply #7 on: July 19, 2011, 10:08:46 AM »
America is restricting innovation, India thrives on it!

U.S. Lobbyist pay off politicians to stifle progress and keep Americans trapped in 2 year contracts.

Hopefully Prem Watsa can assist Indian businesses, to show America how to advance and grow into the great internet brave new world.

Fairfax will also selectively incubate companies or build platform companies from scratch alongside partners—a strategy the firm follows in global markets

Cisco Anthem - Welcome to the Human Network

http://www.youtube.com/watch?v=hAdfYgEapT8

From the comfort of living in N. America it is easy to romanticize India from afar.   
The fundamental algorithm of life: repeat what works. –Charlie Munger

Parsad

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Re: "Fairfax enters India to invest in local firms"
« Reply #8 on: July 19, 2011, 10:55:23 AM »
From the comfort of living in N. America it is easy to romanticize India from afar. 

Or China for that matter!  Every decade, North American's go through how good things are elsewhere.  First it was Hong Kong, then the Japanese, then Europe, after that China...now India.  Yet all these countries went through their boom and bust...China and India the exceptions.  Although China is getting close and at some point India will also. 

The system here works.  People are panicking about the debt ceiling debate, but the system of checks and balances is actually working.  I can't stand the Tea Party idiots, but they are actually forcing the Democrats and moderate conservatives to really look at getting the country's fiscal house in order.  But the Tea Partiers may be dumb enough to take it too far, and that is my only concern. 

I think at the end of the day, the majority of them will come to their senses and we will have a compromise.  But it will be compromise that would not have occurred if you only had one party controlling both houses.  America has its problems, but it also has the ability to overcome them.  Some people were complaining about the bailouts, but the Americans in two years have done what Japan couldn't do in ten years.  Wash 'em, hang 'em out to dry, and then start all over. 

Look at Europe...they still haven't strengthened their financial institutions.  The worst banks in America are stronger than the best banks in Europe.  Other countries love to save face, but they don't want to get down and dirty.  Fortunately, or unfortunately, America loves to get dirty and they don't get embarrassed easily.  You screw up and then you go fix it.  Cheers!
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rmitz

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Re: "Fairfax enters India to invest in local firms"
« Reply #9 on: July 19, 2011, 11:03:19 AM »
From what I've witnessed in America, all internet access providers have been deliberately slowing the flow of bandwidth and preventing innovation from the use of that available bandwidth, to flourish. Internet2 is just the opposite and that is what the U.S. needs.

What does this have to do with America in general?  The government doesn't control those companies.

You seem to be talking about India and America as some big monolithic things.  This is obviously inaccurate.  And telecom is only one sector.

Quote
Here is an example of a great business that would be an excellent model for the Bells. If America had this company instead of AT&T or Verizon, we'd have a truly completely internet, not this greasy mess we have now.    

Of course, we have a greasy mess in telecom because we were here first.  Startup periods are always easier.  Having abundant and cheap labor resources is a huge benefit for those other countries--in most cases they succeed in spite of rather than because of their overall structure.  India especially, but China too.