Corner of Berkshire & Fairfax Message Board

General Category => Fairfax Financial => Topic started by: thrifty on January 09, 2015, 10:41:08 AM

Title: Fairfax India new issue
Post by: thrifty on January 09, 2015, 10:41:08 AM
Anyone interested or participating?
Title: Re: Fairfax India new issue
Post by: karthikpm on January 09, 2015, 01:19:49 PM
How do you buy this? It just looks like a subsidiary of FFH
Title: Re: Fairfax India new issue
Post by: nodnub on January 09, 2015, 09:42:55 PM
Karthikpm, it's an IPO which hasn't occurred yet, so you can't trade it yet. It looks like an offering for a SPAC focused on India. It's not technically a SPAC.

The Company has applied to have the Subordinate Voting Shares listed on the TSX.


The Company anticipates that its portfolio will be concentrated, provided that the Net Proceeds of the Offerings will be invested in at least six different Indian Investments, such that no single investment is expected to have an overly undue impact on the performance of the Company.

Title: Re: Fairfax India new issue
Post by: Pauly on January 23, 2015, 11:27:33 AM
https://ca.finance.yahoo.com/news/fairfax-india-prices-us-500-154800683.html

Looks like it should start trading soon. I'm very optimistic about India's future and having Prem directly running some money there sounds pretty good to me.
Title: Re: Fairfax India new issue
Post by: moody202 on January 28, 2015, 11:29:08 AM
Is this still on schedule for Jan 30th?
Title: Re: Fairfax India new issue
Post by: valueinvesting101 on January 29, 2015, 07:56:47 AM
An application has been granted for the original listing in the Industrial category of up to 108,078,947 subordinate voting shares (the "Shares"), of which up to 70,578,947 Shares will be issued and outstanding, and up to 37,500,000 Shares will be reserved for issuance upon completion of an initial public offering (the "Offering") and the concurrent private placements.

The Shares will be traded in U.S. funds. Accordingly, they will appear under the heading U.S. funds in newspapers and the Exchange's Daily Record and Monthly Review.

Listing of the Shares will become effective at 5:01 p.m. on Thursday, January 29, 2015 in anticipation of the Offering closing on Friday, January 30, 2015. The Shares will be posted for trading at the opening on Friday, January 30, 2015 upon confirmation of closing.
Title: Re: Fairfax India new issue
Post by: bearprowler6 on January 30, 2015, 05:27:52 AM
Trading in Fairfax India to commence today on the TSX:

http://www.fairfax.ca/news/press-releases/press-release-details/2015/Fairfax-India-Completes-US1-Billion-Offering-Comprised-of-US500-Million-Initial-Public-Offering-and-US500-Million-Private-Placements-and-Will-Commence-Trading-Today-on-the-TSX/default.aspx
Title: Re: Fairfax India new issue
Post by: Pauly on January 30, 2015, 04:04:44 PM
Did anyone buy in today? There doesn't seem to be a way to value this besides Prem Watsa + India = $$$.

I'm tempted to start a position soon for two reasons.

1) Prem Watsa + India = $$$  ;)

2) This has the faint air of a spinoff of the Fairfax brand. As such it might take time to be recognized properly by the market. The less than explosive debut today reinforces this feeling.

Speculative? I suppose it is since it has no holdings. But it's FFH, how speculative could it be?

Can anyone dissuade me?

Title: Re: Fairfax India new issue
Post by: Hawks on January 30, 2015, 04:27:54 PM
Added to my position today. Good entry point into India imo. Can't wait for Prem to make his picks.
Title: Re: Fairfax India new issue
Post by: karthikpm on January 30, 2015, 05:06:25 PM
Anyone know if there is a OTC equivalent yet in the US?
Title: Re: Fairfax India new issue
Post by: netnet on January 30, 2015, 06:25:04 PM
Did anyone buy in today? There doesn't seem to be a way to value this besides Prem Watsa + India = $$$.

I'm tempted to start a position soon for two reasons.

1) Prem Watsa + India = $$$  ;)

2) This has the faint air of a spinoff of the Fairfax brand. As such it might take time to be recognized properly by the market. The less than explosive debut today reinforces this feeling..

Speculative? I suppose it is since it has no holdings. But it's FFH, how speculative could it be?

Can anyone dissuade me?

This is like buying into an Indian company at book value, i.e. cash on hand. If you believe that Prem Watsa is a great investor, then you are buying in at a fair price, exactly book. It is no more speculative than a mutual fund. It is most certainly not a spinoff unless it trades down versus the cash on hand.  (I suspect it might trade somewhat over book.)
Title: Re: Fairfax India new issue
Post by: notorious546 on January 30, 2015, 09:35:28 PM
Did anyone buy in today? There doesn't seem to be a way to value this besides Prem Watsa + India = $$$.

I'm tempted to start a position soon for two reasons.

1) Prem Watsa + India = $$$  ;)

2) This has the faint air of a spinoff of the Fairfax brand. As such it might take time to be recognized properly by the market. The less than explosive debut today reinforces this feeling.

Speculative? I suppose it is since it has no holdings. But it's FFH, how speculative could it be?

Can anyone dissuade me?
What multiples does it trade at currently?
Title: Re: Fairfax India new issue
Post by: BlueSkull on February 03, 2015, 04:42:21 PM
Multiples?  As far as I can tell, they've raised the equivalent of $10/share and it's pricing just below that post-ipo.  But I think it's all just cash now waiting for Watsa, et al. to deploy it.  It does appear to be available to US investors via Fidelity through their international desk, though they basically have to manually route the trade from what I heard.

I'm curious what you all think about the fee structure.  From the prospectus, it looks like a 1.5% on AUM invested, 0.5% on the remaining cash, and 20% of performance above the larger of a high-water mark, or hurdle rate --- which seems to be 5% annualized.  Does that seem like a reasonable fee to hire Prem and his team to manage your Indian investments?
Title: Re: Fairfax India new issue
Post by: notorious546 on February 03, 2015, 08:44:15 PM
Multiples?  As far as I can tell, they've raised the equivalent of $10/share and it's pricing just below that post-ipo.  But I think it's all just cash now waiting for Watsa, et al. to deploy it.  It does appear to be available to US investors via Fidelity through their international desk, though they basically have to manually route the trade from what I heard.

I'm curious what you all think about the fee structure.  From the prospectus, it looks like a 1.5% on AUM invested, 0.5% on the remaining cash, and 20% of performance above the larger of a high-water mark, or hurdle rate --- which seems to be 5% annualized.  Does that seem like a reasonable fee to hire Prem and his team to manage your Indian investments?

on second thought its not so bad you don't pay any fees for a while, until the deploy some capital. I like who they are partnered with in India.
Title: Re: Fairfax India new issue
Post by: satish00 on February 03, 2015, 09:09:23 PM
I read the fee structure as 0.5% for undeployed capital and 1.5% for deployed portion of capital. Also, its accrued and paid 3 years at a time and Fairfax could choose to get paid in stock vs cash.

"The Administration and Advisory Fee will be an amount equal to the sum of: (i) 1.5% of the Net Asset Value of the Company less the aggregate fair value of any Undeployed Capital; and (ii) 0.5% of the aggregate fair value of any Undeployed Capital. "

I did buy a few shares through Fidelity. Yes. I had to call it in since it's US$ traded on Toronto exchange which cannot be handled online by them - they did charge $50 fee for tine international transaction + $7.95 commission (matched online commission since they do not allow this transaction online).

Title: Re: Fairfax India new issue
Post by: petec on February 04, 2015, 07:09:08 AM
Is there a conflict of interest here between Fairfax India and TCIL?   Given that TCIL is meant to be buying things in India on Fairfax's behalf?
Title: Re: Fairfax India new issue
Post by: notorious546 on February 04, 2015, 08:29:41 AM
Is there a conflict of interest here between Fairfax India and TCIL?   Given that TCIL is meant to be buying things in India on Fairfax's behalf?

i guess so, but i feel like this is often the case with any investment manager runs multiple portfolio's or entities. ie)Pabrai with Pabrai Funds, Dakshana Foundation, and now Dhandho holdings.
Title: Re: Fairfax India new issue
Post by: wisdom on February 04, 2015, 11:00:19 AM
I do not have any specific knowledge but recall reading that this fund would be more focused on infrstructure type of projects. I would imagine this would be better for insurance companies or pension funds to invest in.

TCIL is into buying businesses.
Title: Re: Fairfax India new issue
Post by: netnet on February 04, 2015, 01:37:32 PM
I do not have any specific knowledge but recall reading that this fund would be more focused on infrstructure type of projects. I would imagine this would be better for insurance companies or pension funds to invest in.

TCIL is into buying businesses.

Fairfax India is not restricted to infrastructure.  From the prospectus:

The Company will invest in businesses that are expected to benefit from India’s current pro-business
political environment, its growing middle class and its demographic trends that are expected to underpin strong
growth for several years. Sectors of the Indian economy that the Company believes will benefit most from such
trends include infrastructure, the consumer services and retail sectors and the export sector. The Company,
however, will not be limited to investing solely in these sectors and intends to invest in other sectors as
opportunities arise.
Title: Re: Fairfax India new issue
Post by: notorious546 on February 13, 2015, 10:15:02 AM
does it make sense to pay anything above 10 dollars for this?
Title: Re: Fairfax India new issue
Post by: A_Hamilton on February 13, 2015, 12:04:42 PM
does it make sense to pay anything above 10 dollars for this?

You're definitely paying over NAV to do so.

However, there is likely to be a scarcity premium...how many India only PE-style funds with a value manager that has a track record do you have access to? This is all to say...if you think they will generate great returns and you don't think you can replicate the asset for less it may make sense to buy...

All this said, I don't own any directly and 1.5% and a 20% incentive are steep.
Title: Re: Fairfax India new issue
Post by: TwoCitiesCapital on February 13, 2015, 01:16:04 PM
The value investor in me doesn't like those fees. Just buy more Fairfax: each share has quite a bit of exposure to the Indian economy/stocks if you consider their 74% of Thomas Cook, the 26% of ICICI Lombard, and the 300M they have invested in this fund, and the fees they'll generate for the AUM in the fund.
Title: Re: Fairfax India new issue
Post by: ourkid8 on February 13, 2015, 01:42:37 PM
+1

The value investor in me doesn't like those fees. Just buy more Fairfax: each share has quite a bit of exposure to the Indian economy/stocks if you consider their 74% of Thomas Cook, the 26% of ICICI Lombard, and the 300M they have invested in this fund, and the fees they'll generate for the AUM in the fund.
Title: Re: Fairfax India new issue
Post by: Pauly on February 13, 2015, 02:09:28 PM
Or, if you're extra bullish on India, own both. Whatever FIH pays to FFH will accrue to Fairfax shareholders, will it not? So if you own both you're kind of paying yourself 1.5 and 20...
Title: Re: Fairfax India new issue
Post by: notorious546 on February 13, 2015, 05:36:50 PM
Or, if you're extra bullish on India, own both. Whatever FIH pays to FFH will accrue to Fairfax shareholders, will it not? So if you own both you're kind of paying yourself 1.5 and 20...

ok thanks everyone. that 1.5% and 20 goes watsa not shareholders i thought?...
Title: Re: Fairfax India new issue
Post by: dartmonkey on February 16, 2015, 11:12:00 AM
Or, if you're extra bullish on India, own both. Whatever FIH pays to FFH will accrue to Fairfax shareholders, will it not? So if you own both you're kind of paying yourself 1.5 and 20...

ok thanks everyone. that 1.5% and 20 goes watsa not shareholders i thought?...

Or, if you're extra bullish on India, own both. Whatever FIH pays to FFH will accrue to Fairfax shareholders, will it not? So if you own both you're kind of paying yourself 1.5 and 20...

ok thanks everyone. that 1.5% and 20 goes watsa not shareholders i thought?...

The fees go to Fairfax, of course, not Watsa.

Fairfax owns 30 million shares in the fund, so for every share of FFH you own, you indirectly own 1.5 shares of FIH. So if you own 1000 shares of FFH, you already own 1500 shares of FIH, and you are paying yourself somewhere between 1.5% (if FIH gets a return of 5% or less) and 4.5% (if FIH gets a 20% return). If you buy more FIH, you will pay more fees to FFH shareholders, but you will not get any more of them as a FFH shareholder. So no, buying FIH shares is not paying from one pocket to the other, and you should be concerned about the fees.

Not that that stopped me from quadrupling my FIH stake. The fund seems attractive to me from both sides.

Title: Re: Fairfax India new issue
Post by: learner on February 16, 2015, 02:38:50 PM
I had a follow-up question regarding investing in FIH.  Indian equity markets have generated ~15% return over the last 15 years or so.  Because of the hefty fee structure, FIH has to generate an alpha of 5% just to get market return.  Because of the large fund size of FIH, I think it is fairly difficult to do that.  How have you guys gotten comfortable with the fee structure?
Title: Re: Fairfax India new issue
Post by: petec on February 17, 2015, 01:11:57 AM
I had a follow-up question regarding investing in FIH.  Indian equity markets have generated ~15% return over the last 15 years or so.  Because of the hefty fee structure, FIH has to generate an alpha of 5% just to get market return.  Because of the large fund size of FIH, I think it is fairly difficult to do that.  How have you guys gotten comfortable with the fee structure?

Remember the 15% is local fx, including inflation.   The real numbers are going to be different.
Title: Re: Fairfax India new issue
Post by: petec on February 17, 2015, 04:31:24 AM
Does anybody understand the way the high water mark is calculated?!   P90?
Title: Re: Fairfax India new issue
Post by: dartmonkey on February 17, 2015, 06:17:54 AM
Does anybody understand the way the high water mark is calculated?!   P90?

Look at pp 90-91 of the final prospectus, available on sesar.ca. Basically,  the starting highwater  mark is the NAV at the IPO, i.e. About $9.63 per share. Then NAV  +  total distributions in the just completed 3-yr period is calculated, the first calculation date being Dec 31, 2017 and then every 3 yrs. The difference between that amount and the current highwater mark is the appreciation. If that appreciation is positive, a performance fee of 20% of the amount exceeding 5% per annum goes to FFH, and the current NAV becomes the new highwater amount. If the NAV + distributions is not higher than the highwater mark, then there is no performance fee and no modification of the highwater mark.
Title: Re: Fairfax India new issue
Post by: petec on February 17, 2015, 06:25:03 AM
Does anybody understand the way the high water mark is calculated?!   P90?

Look at pp 90-91 of the final prospectus, available on sesar.ca. Basically,  the starting highwater  mark is the NAV at the IPO, i.e. About $9.63 per share. Then NAV  +  total distributions in the just completed 3-yr period is calculated, the first calculation date being Dec 31, 2017 and then every 3 yrs. The difference between that amount and the current highwater mark is the appreciation. If that appreciation is positive, a performance fee of 20% of the amount exceeding 5% per annum goes to FFH, and the current NAV becomes the new highwater amount. If the NAV + distributions is not higher than the highwater mark, then there is no performance fee and no modification of the highwater mark.

That's what I thought - I just found the wording confusing.   Thanks.
Title: Re: Fairfax India new issue
Post by: dartmonkey on February 17, 2015, 06:37:53 AM
I had a follow-up question regarding investing in FIH.  Indian equity markets have generated ~15% return over the last 15 years or so.  Because of the hefty fee structure, FIH has to generate an alpha of 5% just to get market return.  Because of the large fund size of FIH, I think it is fairly difficult to do that.  How have you guys gotten comfortable with the fee structure?

Remember the 15% is local fx, including inflation.   The real numbers are going to be different.

Exactly. Indian rates have exceeded US rates by about 6-7% in the last 15 years, and by 8-9% in the last 5-6 years, so a 15% nominal return would get FIH only about 6-7% in USD.

Of course, there's still the 1.5% management fee. Investing in FIH is tantamount to expecting at least 2.5% alpha. If FIH gets 17.5% in INR instead of 15% in the SENSEX, that might be 9.5% in USD, and FIH would pay FFH 1.5% + (9.5-5)*20% = 2.4%, and FIH would break even with the Indian market index; higher alpha is gravy.
Title: Re: Fairfax India new issue
Post by: petec on February 17, 2015, 07:23:47 AM
I had a follow-up question regarding investing in FIH.  Indian equity markets have generated ~15% return over the last 15 years or so.  Because of the hefty fee structure, FIH has to generate an alpha of 5% just to get market return.  Because of the large fund size of FIH, I think it is fairly difficult to do that.  How have you guys gotten comfortable with the fee structure?

Remember the 15% is local fx, including inflation.   The real numbers are going to be different.

Exactly. Indian rates have exceeded US rates by about 6-7% in the last 15 years, and by 8-9% in the last 5-6 years, so a 15% nominal return would get FIH only about 6-7% in USD.

Of course, there's still the 1.5% management fee. Investing in FIH is tantamount to expecting at least 2.5% alpha. If FIH gets 17.5% in INR instead of 15% in the SENSEX, that might be 9.5% in USD, and FIH would pay FFH 1.5% + (9.5-5)*20% = 2.4%, and FIH would break even with the Indian market index; higher alpha is gravy.

Assuming, of course, that the Indian market continues to do what it's done before ;)   
Title: Re: Fairfax India new issue
Post by: dartmonkey on February 17, 2015, 09:53:57 AM

I had a follow-up question regarding investing in FIH.  Indian equity markets have generated ~15% return over the last 15 years or so.  Because of the hefty fee structure, FIH has to generate an alpha of 5% just to get market return.  Because of the large fund size of FIH, I think it is fairly difficult to do that.  How have you guys gotten comfortable with the fee structure?

Remember the 15% is local fx, including inflation.   The real numbers are going to be different.

Exactly. Indian rates have exceeded US rates by about 6-7% in the last 15 years, and by 8-9% in the last 5-6 years, so a 15% nominal return would get FIH only about 6-7% in USD.

Of course, there's still the 1.5% management fee. Investing in FIH is tantamount to expecting at least 2.5% alpha. If FIH gets 17.5% in INR instead of 15% in the SENSEX, that might be 9.5% in USD, and FIH would pay FFH 1.5% + (9.5-5)*20% = 2.4%, and FIH would break even with the Indian market index; higher alpha is gravy.

Assuming, of course, that the Indian market continues to do what it's done before ;)   

Admittedly, there are a lot of assumptions here, but the assumption that the Indian market might go up 15% a year, or 6-7% in real terms, is not a heroic one. This is almost exactly the average real total stock market return, according to Siegel.
Title: Re: Fairfax India new issue
Post by: petec on February 17, 2015, 10:15:58 AM

I had a follow-up question regarding investing in FIH.  Indian equity markets have generated ~15% return over the last 15 years or so.  Because of the hefty fee structure, FIH has to generate an alpha of 5% just to get market return.  Because of the large fund size of FIH, I think it is fairly difficult to do that.  How have you guys gotten comfortable with the fee structure?

Remember the 15% is local fx, including inflation.   The real numbers are going to be different.

Exactly. Indian rates have exceeded US rates by about 6-7% in the last 15 years, and by 8-9% in the last 5-6 years, so a 15% nominal return would get FIH only about 6-7% in USD.

Of course, there's still the 1.5% management fee. Investing in FIH is tantamount to expecting at least 2.5% alpha. If FIH gets 17.5% in INR instead of 15% in the SENSEX, that might be 9.5% in USD, and FIH would pay FFH 1.5% + (9.5-5)*20% = 2.4%, and FIH would break even with the Indian market index; higher alpha is gravy.

Assuming, of course, that the Indian market continues to do what it's done before ;)   

Admittedly, there are a lot of assumptions here, but the assumption that the Indian market might go up 15% a year, or 6-7% in real terms, is not a heroic one. This is almost exactly the average real total stock market return, according to Siegel.

Fair point.   I was thinking about it from the perspective of the -ve correlation between stock market returns and GDP growth.  It's a complex relationship, but if Modi does transform India I think it's quite possible that the overall market will disappoint as markets are opened up to competition and capital floods in.   
Title: Re: Fairfax India new issue
Post by: roughlyright on February 17, 2015, 11:12:42 AM
Or, if you're extra bullish on India, own both. Whatever FIH pays to FFH will accrue to Fairfax shareholders, will it not? So if you own both you're kind of paying yourself 1.5 and 20...

ok thanks everyone. that 1.5% and 20 goes watsa not shareholders i thought?...

Or, if you're extra bullish on India, own both. Whatever FIH pays to FFH will accrue to Fairfax shareholders, will it not? So if you own both you're kind of paying yourself 1.5 and 20...

ok thanks everyone. that 1.5% and 20 goes watsa not shareholders i thought?...

The fees go to Fairfax, of course, not Watsa.

Fairfax owns 30 million shares in the fund, so for every share of FFH you own, you indirectly own 1.5 shares of FIH. So if you own 1000 shares of FFH, you already own 1500 shares of FIH, and you are paying yourself somewhere between 1.5% (if FIH gets a return of 5% or less) and 4.5% (if FIH gets a 20% return). If you buy more FIH, you will pay more fees to FFH shareholders, but you will not get any more of them as a FFH shareholder. So no, buying FIH shares is not paying from one pocket to the other, and you should be concerned about the fees.

Not that that stopped me from quadrupling my FIH stake. The fund seems attractive to me from both sides.




Dartmonkey,

   I am curious as to why you find the FIH attractive, when we are already owning a shares of indirectly via FFH ownership. Particularly, I did not understand what you mean by "The fund seems attractive to me from both sides". do you mind sharing your thesis on FIH, Please?

Roughlyright
Title: Re: Fairfax India new issue
Post by: dartmonkey on February 17, 2015, 01:33:31 PM

Dartmonkey,

   I am curious as to why you find the FIH attractive, when we are already owning a shares of indirectly via FFH ownership. Particularly, I did not understand what you mean by "The fund seems attractive to me from both sides". do you mind sharing your thesis on FIH, Please?

Roughlyright

I have about 25% of my portfolio in FFH (that number is a fair bit higher today than it was last week) so I indirectly have about 0.5% in FIH as you say. It is easy to see why getting 1.5 and 20 is attractive from the FFH side, since it immediately adds a minimum of $15 million going straight to FFH (albeit 30% of that is going from one FFH pocket to another).

Why do I find it attractive from the FIH side? There can not be a more pure jockey play than investing in a billion dollar fund that is as  yet entirely undeployed. So the only possible explanation is my high regard for Watsa in general and for Fairfax's Indian operations in particular, and the chance that a small, highly regarded fund with extensive local connections may be able to find good opportunities for investing capital in India, particularly with a business-friendly regime in place and a lot of catching up to do with other less developed countries. Combining that with the complete absence of Indian investments in my portfolio (apart from FFH), and my concerns that equity markets in North America may be overvalued, I added 2% of directly held FIH to my indirect 0.5% stake via FFH.
Title: Re: Fairfax India new issue
Post by: roughlyright on February 17, 2015, 05:20:41 PM
Thank you so much Dartmonkey. I appreciate the explanation.
It is like owning the hedgefund and the management company. I like the deal  :)
Title: Re: Fairfax India new issue
Post by: bluedevil on February 18, 2015, 10:08:32 AM
Does anyone know if buying FIH from an American Roth IRA account might subject any gains to Canadian capital gains taxes?
Title: Re: Fairfax India new issue
Post by: Zorrofan on March 12, 2015, 11:59:53 AM
what's up with the share price today?  it is a pretty hefty premium at this point!

cheers
Zorro
Title: Re: Fairfax India new issue
Post by: original mungerville on March 12, 2015, 03:14:58 PM
what's up with the share price today?  it is a pretty hefty premium at this point!

cheers
Zorro

Did the fund raise $US or Cnd?
Title: Re: Fairfax India new issue
Post by: barsax on March 12, 2015, 03:39:06 PM
FIH.U.TO trades in Toronto in $USD
Title: Re: Fairfax India new issue
Post by: RichardGibbons on March 12, 2015, 06:26:04 PM
what's up with the share price today?  it is a pretty hefty premium at this point!

It was mentioned in a (non-subscriber) mass email from the The Motley Fool Canada. That may account for it.
Title: Re: Fairfax India new issue
Post by: giofranchi on March 13, 2015, 08:41:55 AM
Is the NAV $10 USD per share?

Thank you! :)

Gio
Title: Re: Fairfax India new issue
Post by: bearprowler6 on March 13, 2015, 09:14:29 AM
Hi Gio,

Yes---the NAV at the time the company went public was $10 USD---in late January.

The US dollar has strengthened somewhat against the Indian Rupee since the issue date so the "purchasing power" of the funds raised has increased.

The investment mandate is quite broad -- giving the Hamblin Watsa team a lot of latitude. Although no acquisitions have been announced publically it is impossible to know at this point whether any of the funds raised have been deployed or fully remain in USD.

I would highly recommend a read through the prospectus if you haven't had a chance to do so already. It can be found by searching the company's documents on Sedar.

Take care,

BP6
Title: Re: Fairfax India new issue
Post by: giofranchi on March 13, 2015, 09:20:47 AM
Hi Gio,

Yes---the NAV at the time the company went public was $10 USD---in late January.

The US dollar has strengthened somewhat against the Indian Rupee since the issue date so the "purchasing power" of the funds raised has increased.

The investment mandate is quite broad -- giving the Hamblin Watsa team a lot of latitude. Although no acquisitions have been announced publically it is impossible to know at this point whether any of the funds raised have been deployed or fully remain in USD.

I would highly recommend a read through the prospectus if you haven't had a chance to do so already. It can be found by searching the company's documents on Sedar.

Take care,

BP6

Yes, I have found on the prospectus Equity per share was $10 USD, but I was not sure if the $billion raised is still parked in cash or already invested… in part at least. Though I guess, if they had made an acquisition, they would also have published a press release, right?

Why are prospectuses always so incredibly long?!... I will try to read this one anyway! ;)

Thank you! :)

Gio
Title: Re: Fairfax India new issue
Post by: hillfronter83 on March 13, 2015, 09:28:13 AM
There was a $0.5/share underwriting fee, which was eliminated or discounted for large order. So I would imagine NAV is slightly under $10/share.
Title: Re: Fairfax India new issue
Post by: FFHWatcher on March 13, 2015, 10:28:22 AM
Hi Gio,

Yes---the NAV at the time the company went public was $10 USD---in late January.

The US dollar has strengthened somewhat against the Indian Rupee since the issue date so the "purchasing power" of the funds raised has increased.

The investment mandate is quite broad -- giving the Hamblin Watsa team a lot of latitude. Although no acquisitions have been announced publically it is impossible to know at this point whether any of the funds raised have been deployed or fully remain in USD.

I would highly recommend a read through the prospectus if you haven't had a chance to do so already. It can be found by searching the company's documents on Sedar.

Take care,

BP6

Yes, I have found on the prospectus Equity per share was $10 USD, but I was not sure if the $billion raised is still parked in cash or already invested… in part at least. Though I guess, if they had made an acquisition, they would also have published a press release, right?

Why are prospectuses always so incredibly long?!... I will try to read this one anyway! ;)

Thank you! :)

Gio

Why would they issue a press release?  They certainly don't at Fairfax, so unless it is required under law, I wouldn't expect that they issue press releases, just quarterly Sedar filings.  If they take more than 10% or so, perhaps they might have too. Not sure if that would be governed under Cdn Securities laws are Indian Laws?  Cdn Security laws I assume, meaning if they acquire >10% of a particular company, they may have to report it on Sedar.
Title: Re: Fairfax India new issue
Post by: barsax on March 13, 2015, 12:06:52 PM
Despite the 10 $USD issue price I found an insider report posted March 12th on the TMX market site:

http://www.tmxmoney.com/TMX/HttpController?GetPage=SearchInsiderTrade&Language=en&Submit=Submit&QuerySymbol=fih.u&x=28&y=18ftp://

Someone bought 7099 shares @ an average price of $10.82 per share
Title: Re: Fairfax India new issue
Post by: giofranchi on March 16, 2015, 07:29:48 AM
I have just put 8% of my firm’s stock market investments portfolio in FIH.

Maybe I have paid a bit more than many people on this board are used to and like…

But we all know the kind of growth Watsa & Company are purchasing in India and at which prices. Not to act on such an opportunity imo would have been a serious mistake of omission! ;)

Furthermore, I have left plenty of room to average down: at the right price I would gladly double the percentage of my firm’s portfolio invested in FIH.

Cheers,

Gio
Title: Re: Fairfax India new issue
Post by: petec on March 23, 2015, 02:31:27 AM
I have just put 8% of my firm’s stock market investments portfolio in FIH.

Maybe I have paid a bit more than many people on this board are used to and like…

But we all know the kind of growth Watsa & Company are purchasing in India and at which prices. Not to act on such an opportunity imo would have been a serious mistake of omission! ;)

Furthermore, I have left plenty of room to average down: at the right price I would gladly double the percentage of my firm’s portfolio invested in FIH.

Cheers,

Gio

I wondered who'd been pushing it up ;)
Title: Re: Fairfax India new issue
Post by: giofranchi on March 23, 2015, 05:47:44 AM
I wondered who'd been pushing it up ;)

What I like most about FIH is its great optionality, because I guess a very large percentage of its capital is still parked in cash (USD). And also the fact India is a place quite insulated from what’s happening to the rest of the world: they have a low level of overall indebtedness, and are experiencing inflation… The exact opposite to what we are seeing in practically all developed economies!

This facts, and of course the ability of Watsa & Company to buy great growth at reasonable prices, are the reasons I am quite interested to see what FIH could achieve in the medium and long term. ;)

Gio
Title: Re: Fairfax India new issue
Post by: giofranchi on March 24, 2015, 03:23:06 AM
Yesterday I bought more: 12% of my firm's stock market investments portfolio.

Gio
Title: Re: Fairfax India new issue
Post by: petec on March 24, 2015, 03:28:16 AM
I like it too.   I am just being cheap about paying a 15% premium to cash.   No doubt I will regret this.
Title: Re: Fairfax India new issue
Post by: giofranchi on March 24, 2015, 05:37:39 AM
I like it too.   I am just being cheap about paying a 15% premium to cash.   No doubt I will regret this.

Well, you surely will get the chance to buy it later closer to NAV, or even below NAV… of course, what nobody can be sure about is how much that NAV would be by then… ;)

Cheers,

Gio
Title: Re: Fairfax India new issue
Post by: petec on March 24, 2015, 07:01:05 AM
I like it too.   I am just being cheap about paying a 15% premium to cash.   No doubt I will regret this.

Well, you surely will get the chance to buy it later closer to NAV, or even below NAV… of course, what nobody can be sure about is how much that NAV would be by then… ;)

Cheers,

Gio

Exactly.   So I just bought a starter position ;)

No discipline, that's my problem!
Title: Re: Fairfax India new issue
Post by: giofranchi on March 24, 2015, 07:11:37 AM
No discipline, that's my problem!

Discipline is not buying above IV... What does that have to do with not buying above NAV?! ;)

Cheers,

Gio
Title: Re: Fairfax India new issue
Post by: notorious546 on March 24, 2015, 08:18:35 AM
No discipline, that's my problem!

Discipline is not buying above IV... What does that have to do with not buying above NAV?! ;)

Cheers,

Gio

well right now you're giving them credit for things the haven't done.
Title: Re: Fairfax India new issue
Post by: giofranchi on March 24, 2015, 08:32:14 AM
well right now you're giving them credit for things the haven't done.

Not exactly… What about Thomas Cook? What about IKYA? What about ICICI? Etc.? ;)

Cheers,

Gio
Title: Re: Fairfax India new issue
Post by: notorious546 on March 24, 2015, 10:52:29 AM
well right now you're giving them credit for things the haven't done.

Not exactly… What about Thomas Cook? What about IKYA? What about ICICI? Etc.? ;)

Cheers,

Gio

doesn't a premium to a NAV (which is composed of only cash/cash equivalents) exclude the above mentioned things?
Title: Re: Fairfax India new issue
Post by: mcliu on March 24, 2015, 04:38:30 PM
Gio, how much of a premium to NAV would you pay for this?  ???
Title: Re: Fairfax India new issue
Post by: giofranchi on March 27, 2015, 06:45:02 AM
Gio, how much of a premium to NAV would you pay for this?  ???

Well, that clearly depends on the rate of growth we are expecting for the next several years.

Take a look at IKYA’s rate of growth in attachment.

Do you think FIH could be able to find just one business per year for the next 5 years, which could grow like IKYA? (or almost?)

If the answer is yes, I think 2 x NAV could still turn out to be a worthwhile investment! ;)

Cheers,

Gio
Title: Re: Fairfax India new issue
Post by: frommi on March 27, 2015, 09:10:43 AM
I can understand that there is some premium (3-5%) because its hard to invest yourself in india without being an indian person yourself, but a premium for public stock holdings?
For me this sounds like wishful thinking and FFI looks at the moment like a hyped investment that comes down to NAV when the first official report is public.
Title: Re: Fairfax India new issue
Post by: original mungerville on March 27, 2015, 09:20:43 AM
I can understand that there is some premium (3-5%) because its hard to invest yourself in india without being an indian person yourself, but a premium for public stock holdings?
For me this sounds like wishful thinking and FFI looks at the moment like a hyped investment that comes down to NAV when the first official report is public.

Can FFI only invest in public stock holdings in India?... or does their prospectus say they can also buy private businesses and do joint-ventures, etc?
Title: Re: Fairfax India new issue
Post by: frommi on March 27, 2015, 09:56:05 AM
I can understand that there is some premium (3-5%) because its hard to invest yourself in india without being an indian person yourself, but a premium for public stock holdings?
For me this sounds like wishful thinking and FFI looks at the moment like a hyped investment that comes down to NAV when the first official report is public.

Can FFI only invest in public stock holdings in India?... or does their prospectus say they can also buy private businesses and do joint-ventures, etc?

Does it matter? They will certainly pay a premium for growth and that is already reflected in the NAV. A premium on FFI is like a premium on a premium. (And you pay fees for that luxury, so in reality it should trade at a slight discount to NAV.). Otherwise FFH could just setup a hedgefund on a hedgefund on a hedgefund on a hedgefund and in the end you pay a 1000x premium on the original business. The stock market crash of 1929 came through this type of packaging.
Title: Re: Fairfax India new issue
Post by: original mungerville on March 27, 2015, 10:03:27 AM
I can understand that there is some premium (3-5%) because its hard to invest yourself in india without being an indian person yourself, but a premium for public stock holdings?
For me this sounds like wishful thinking and FFI looks at the moment like a hyped investment that comes down to NAV when the first official report is public.

Can FFI only invest in public stock holdings in India?... or does their prospectus say they can also buy private businesses and do joint-ventures, etc?

Does it matter? They will certainly pay a premium for growth and that is already reflected in the NAV. A premium on FFI is like a premium on a premium. (And you pay fees for that luxury, so in reality it should trade at a slight discount to NAV.). Otherwise FFH could just setup a hedgefund on a hedgefund on a hedgefund on a hedgefund and in the end you pay a 1000x premium on the original business. The stock market crash of 1929 came through this type of packaging.

Ya it matters because private businesses might sell for 5x earnings whereas the stock indices aren't exactly that cheap in India. I wasn't trying to argue, I just was asking whether or not they could invest in private businesses or not. Do you know the answer to that off hand?
Title: Re: Fairfax India new issue
Post by: rohitc99 on March 27, 2015, 10:05:11 AM
I can understand that there is some premium (3-5%) because its hard to invest yourself in india without being an indian person yourself, but a premium for public stock holdings?
For me this sounds like wishful thinking and FFI looks at the moment like a hyped investment that comes down to NAV when the first official report is public.

Can FFI only invest in public stock holdings in India?... or does their prospectus say they can also buy private businesses and do joint-ventures, etc?

Does it matter? They will certainly pay a premium for growth and that is already reflected in the NAV. A premium on FFI is like a premium on a premium. (And you pay fees for that luxury, so in reality it should trade at a slight discount to NAV.). Otherwise FFH could just setup a hedgefund on a hedgefund on a hedgefund on a hedgefund and in the end you pay a 1000x premium on the original business. The stock market crash of 1929 came through this type of packaging.

I think you are making an assumption here. Look at thomas cook - fairfax was able to buy it at 10X cash flow. IKYA was around at sub 10 levels and a lot of other tuckin accquisitions in IKYA have happened at fair decent valuations. same for sterling holiday resorts

As an indian investor i can tell you that growth may be overvalued in a lot of cases, but not always. So fairfax india can always find attractive deals
Title: Re: Fairfax India new issue
Post by: frommi on March 27, 2015, 10:06:08 AM
Ya it matters because private businesses might sell for 5x earnings whereas the stock indices aren't exactly that cheap in India. I wasn't trying to argue, I just was asking whether or not they could invest in private businesses or not. Do you know the answer to that off hand?

No, sorry. :)
Title: Re: Fairfax India new issue
Post by: frommi on March 27, 2015, 10:08:53 AM
I think you are making an assumption here. Look at thomas cook - fairfax was able to buy it at 10X cash flow. IKYA was around at sub 10 levels and a lot of other tuckin accquisitions in IKYA have happened at fair decent valuations. same for sterling holiday resorts

As an indian investor i can tell you that growth may be overvalued in a lot of cases, but not always. So fairfax india can always find attractive deals

Yeah thats fine, after some years of operating and buying private businesses it might trade at a premium to NAV because NAV doesn`t reflect the reality anymore. But not in the first years of operating and surely not before they bought the first business.
Title: Re: Fairfax India new issue
Post by: bearprowler6 on March 27, 2015, 10:43:55 AM
We do not know whether $10 USD (less underwriter's fees) is still reflective of the current NAV since we do not know for sure whether any investments have been made since the IPO on January 30th.

Also---the investment mandate is very wide---not limited to just public or private equities. Public and private debt as well as infrastructure investments are possible  investment choices. They can also utilize leverage.

They raised USD during the IPO which means that one also needs to  be mindful of the USD/India Rupee exchange rate fluctuations.

As for the management fees --- these were negotiated on behalf of all investors by Fidelity (one of the cornerstone investors) so they reflect hard bargained market rates for these services.

Full disclosure --- I acquired my shares in Fairfax India during the IPO and for my wife a few days after the IPO. I strongly believe buying at even the current market price offers an investor a rare opportunity for significant long-term growth however time will tell on this point.
Title: Re: Fairfax India new issue
Post by: Zorrofan on March 27, 2015, 11:24:09 AM
I can understand that there is some premium (3-5%) because its hard to invest yourself in india without being an indian person yourself, but a premium for public stock holdings?
For me this sounds like wishful thinking and FFI looks at the moment like a hyped investment that comes down to NAV when the first official report is public.

Not to worry, I bought a very modest amount today, therefore the price should drop by Monday at the latest.....your welcome

cheers
Zorro
Title: Re: Fairfax India new issue
Post by: thepupil on March 27, 2015, 01:06:45 PM
Gio, how much of a premium to NAV would you pay for this?  ???

Well, that clearly depends on the rate of growth we are expecting for the next several years.

Take a look at IKYA’s rate of growth in attachment.

Do you think FIH could be able to find just one business per year for the next 5 years, which could grow like IKYA? (or almost?)

If the answer is yes, I think 2 x NAV could still turn out to be a worthwhile investment! ;)

Cheers,

Gio

Gio, I realize you are just throwing numbers out there with a smiley but if one paid a 2X NAV multiple with an investment period of a full 20 yrs (assuming liquidation and or slowing down of compounding to be worth NAV at yr 20), FFH India would have to make a gross return of 20% in order for the guy who paid 2X NAV to generate a 12% return.

The math is a 20% gross return becomes an 18.5% after mgt fees becomes 15.8% after incentive fees (assuming the 5% is  hard hurdle after mgt fees, is it soft or hard?).

$1 of NAV becomes $18.8 of NAV for which you paid $2 multiplying your capital by 9.4X which comes out to 12% annualized.

Of course as your time period shortens from a lengthy 20 yrs to anything less, the math becomes even less favorable. 10 yrs of 15% gross returns before normalization/liquidation/rerating to NAV would come out to 11.8% returns on NAV after fees and a 4.3% return to investors who paid a 2X NAV multiple. 10 yrs of 15% returns is nothing to sneeze at.

 At a 1.3X NAV multiple and 15% gross returns, the return to the investor is about 9% (using 10 yrs again, at 20 it's 10.3%, at infinity it is equal to the net return of 11.8% since you have no re-rating effect).

When you pay a premium for a NAV vehicle that charges decently high fees, you need very high gross return or multiple expansion to make a good return.  I know you expect Mr. Watsa and crew to do very well in India and I have no reason to think they won't, but I wouldn't count on NAV multiple expansion since the math really starts to work against you as the multiple moves up.
Title: Re: Fairfax India new issue
Post by: glavacem on March 28, 2015, 08:11:31 AM
Is this only listed in Canada, or is it listed on a US exchange also?

Thanks

glav
Title: Re: Fairfax India new issue
Post by: original mungerville on March 28, 2015, 08:32:46 AM
We do not know whether $10 USD (less underwriter's fees) is still reflective of the current NAV since we do not know for sure whether any investments have been made since the IPO on January 30th.

Also---the investment mandate is very wide---not limited to just public or private equities. Public and private debt as well as infrastructure investments are possible  investment choices. They can also utilize leverage.

They raised USD during the IPO which means that one also needs to  be mindful of the USD/India Rupee exchange rate fluctuations.

As for the management fees --- these were negotiated on behalf of all investors by Fidelity (one of the cornerstone investors) so they reflect hard bargained market rates for these services.

Full disclosure --- I acquired my shares in Fairfax India during the IPO and for my wife a few days after the IPO. I strongly believe buying at even the current market price offers an investor a rare opportunity for significant long-term growth however time will tell on this point.

I agree, I am also a strong believer in India's future. The demographics are amazing relative to other economies.

About 12 years ago, I started a very small business there which was operated for a couple years after which we shut it down. My partner, however, went looking to buy commercial land on city borders thereafter and I invested with him. This land now, even with the prior government in place, is now worth multiples of what we paid and our plan is eventually to put a large multi-floor condo building on it - say 5 years down the road. We also bought other smallish plots of urban and rural/agricultural land that have done quite well. All that to say, it looks like I am already quite heavily invested in India relative to my net worth (assuming this land continues to appreciate). This is the main reason I am hesitating with this Fairfax fund because I agree that this seems like a special opportunity despite the management fees.

Importantly,
Title: Re: Fairfax India new issue
Post by: giofranchi on March 30, 2015, 12:32:55 AM
Gio, I realize you are just throwing numbers out there with a smiley

No, I was not.

Instead, I ask you: have you seen the numbers posted by IKYA?

Gio
Title: Re: Fairfax India new issue
Post by: giofranchi on March 30, 2015, 12:44:14 AM
FFH India would have to make a gross return of 20% in order for the guy who paid 2X NAV to generate a 12% return.

By the way, I guess your numbers are backed by the assumption that 20 years from now FIH will be selling at NAV, right?
Well… something that has grown NAV at 12% for 20 years?! Using a discount rate of 9%, it would be worth 1.72xNAV; using a discount rate of 10%, it would be worth 1.43xNAV.

Gio
Title: Re: Fairfax India new issue
Post by: giofranchi on March 30, 2015, 01:01:29 AM
I think you are making an assumption here. Look at thomas cook - fairfax was able to buy it at 10X cash flow. IKYA was around at sub 10 levels and a lot of other tuckin accquisitions in IKYA have happened at fair decent valuations. same for sterling holiday resorts

As an indian investor i can tell you that growth may be overvalued in a lot of cases, but not always. So fairfax india can always find attractive deals

Yeah thats fine, after some years of operating and buying private businesses it might trade at a premium to NAV because NAV doesn`t reflect the reality anymore. But not in the first years of operating and surely not before they bought the first business.

The fact NAV reflects reality is a generalization… Instead, imo, it depends on how efficiently priced the growth FIH is going to buy in the near future might actually be.
Of course, my best guess is it will be very inefficiently priced! (Like it has been for Thomas Cook and IKYA)

Gio
Title: Re: Fairfax India new issue
Post by: giofranchi on March 30, 2015, 01:18:22 AM
FFI looks at the moment like a hyped investment that comes down to NAV when the first official report is public.

Of course it might come down to NAV, and it probably will (great opportunity to buy more!). But that doesn’t mean I agree FIH is a hyped investment right now.

Gio
Title: Re: Fairfax India new issue
Post by: petec on March 30, 2015, 01:29:21 AM
Seems perfectly reasonable to me to pay a small premium to NAV on the basis, quote simply, that cash in Prem's hands is worth more than cash in mine.

The premium to NAV in the future will depend entirely on whether the businesses they buy are listed or private.   If they're listed, then you can replicate the portfolio at 1x NAV without paying fees, so the fund should trade at around NAV (a bit less if you focus on the fact you pay fees, a bit more if you focus on the fact that you don't know what gloriously value-added deal they will do next).   But if they're private businesses then there is no more reason for the fund to trade at 1x NAV than there is for any other business to trade at 1x BV.
Title: Re: Fairfax India new issue
Post by: giofranchi on March 30, 2015, 01:46:45 AM
If they're listed, then you can replicate the portfolio at 1x NAV without paying fees, so the fund should trade at around NAV (a bit less if you focus on the fact you pay fees, a bit more if you focus on the fact that you don't know what gloriously value-added deal they will do next).

In theory... But, when they bought into Thomas Cook, I didn’t follow… When they bought into IKYA, I didn’t follow either…

Who was smart enough to do so? Recognizing how mispriced their prospects for growth were?

Gio
Title: Re: Fairfax India new issue
Post by: petec on March 30, 2015, 01:57:34 AM
If they're listed, then you can replicate the portfolio at 1x NAV without paying fees, so the fund should trade at around NAV (a bit less if you focus on the fact you pay fees, a bit more if you focus on the fact that you don't know what gloriously value-added deal they will do next).

In theory... But, when they bought into Thomas Cook, I didn’t follow… When they bought into IKYA, I didn’t follow either…

Who was smart enough to do so? Recognizing how mispriced their prospects for growth were?

Gio

If you're prepared to buy the fund at >1x NAV, then you clearly think the underlying assets are mispriced.   Why would you pay more for them than you have to?

To put it another way, if you are 'smart' enough to see the value in FIH at (say) 1.5x NAV, why would you not see the value in the underlying assets at 1x?   Both ways round you get Prem's genius, but why would you choose the method that requires you to pay more for the same assets?   

Clearly this does not hold if for some reason you can't invest in the underlying.

It's like looking at a company trading on 3x book.   If I could buy the underlying factories at 1x book I clearly would, but since I can't I settle for buying the company.

EDIT: I am talking about when the fund is invested.
Title: Re: Fairfax India new issue
Post by: giofranchi on March 30, 2015, 03:05:45 AM
Pete,
this is my idea of a fair price today: the value I will own 20 years from now discounted to the present with a sensible rate.
If I am right about the business opportunities, NAV might grow at a CAGR higher than 12%, and a discount rate in between 9% and 10% seems sensible to me.

Cheers,

Gio
Title: Re: Fairfax India new issue
Post by: petec on March 30, 2015, 03:19:37 AM
Pete,
this is my idea of a fair price today: the value I will own 20 years from now discounted to the present with a sensible rate.
If I am right about the business opportunities, NAV might grow at a CAGR higher than 12%, and a discount rate in between 9% and 10% seems sensible to me.

Cheers,

Gio

I don't disagree with that.   I'm just saying the market won't may 2x for a portfolio it can replicate at 1x.   Because, clearly, the expected return is higher with the latter option.
Title: Re: Fairfax India new issue
Post by: giofranchi on March 30, 2015, 04:12:25 AM
I'm just saying the market won't may 2x for a portfolio it can replicate at 1x.   Because, clearly, the expected return is higher with the latter option.

Of course, you are right! :)

Gio
Title: Re: Fairfax India new issue
Post by: thepupil on March 30, 2015, 06:32:53 AM
FFH India would have to make a gross return of 20% in order for the guy who paid 2X NAV to generate a 12% return.

By the way, I guess your numbers are backed by the assumption that 20 years from now FIH will be selling at NAV, right?
Well… something that has grown NAV at 12% for 20 years?! Using a discount rate of 9%, it would be worth 1.72xNAV; using a discount rate of 10%, it would be worth 1.43xNAV.

Gio

yep, in order to value something that is going to grow at a rate that is above your required return, you have to somehow deal with the fact that, in theory, if you assume something will grow forever at an above RoR rate you would pay an infinite price (like something with above market earnings growth). An imperfect way of dealing with this is to say "I will make above market returns for 5, 10, 20...etc. years and then this thing will make market returns or be liquidated and worth NAV. 20 yrs is a long time. Over the past 20 yrs we've seen plenty of capital allocator/guru stocks fall from grace to prices at or below NAV. I think to assume a permanent premium to NAV on a fee laden vehicle is pretty optimistic, but faith/optimism is your style so that's fine. I would just note that you probably could've made an argument for great returns and big premiums to book/NAV on any of these when they traded at big premiums 10 -20 yrs ago.

Loews (founders died, a shadow of what it once was, 80% of NAV)
Berkshire (has re-rated from as high as 3X book to more reasonable multiple as it has matured, if you marked wholly owned subs to market, it would probably be at about 1X NAV)
Leucadia (2X book to 80% over past 10 or so yrs)

I don't think you'll hurt yourself at today's modest premium to NAV, but if I saw a manager double AUM with one capital raise right after a year of Modi-induced euphoria (India Small Cap was up like 90% last year, right?), I'd be wary, rather than get excited and say that 2X NAV may be the right price. I'm skeptical of everyone out there that is monetizing their track record; there seem to be more public GP's/asset managers and permanent capital vehicles every week.

As for IKYA, I don't really see how 1 company's spectacular growth in earnings justifies anything or makes an argument either way. High quality fast growing businesses in India trade for lofty multiples in my limited experience (check out the subs of multi-nationals like Unilever and Nestle or some smaller cap niche businesses); it's not like the sellers over there are idiots and are going to give away companies for free. Now lots of those same high multiple companies have historically made great returns despite their valuations because they've grown at very fast rates, but that doesn't mean you'd want to pay a large NAV premium on top of fees for them at a time when every institutional investor in the world and every Indian out there is super bulled up and excited about India.

But it's tough to argue about an investment that is 100% cash because there aren't many thingss to analyze here (except for HWIC India excellent track record on much smaller $).

I could probably use a little more of your faith and optimism, but I'll venture to say you could probably use a touch more skepticism


http://in.reuters.com/article/2015/02/06/hedgefunds-india-performance-idINKBN0LA1UY20150206
http://www.wsj.com/articles/india-hedge-funds-best-global-performers-this-year-1415789542
http://www.cnbc.com/id/102220187
Title: Re: Fairfax India new issue
Post by: thepupil on March 30, 2015, 06:37:35 AM
btw, is FIH's hurdle hard or soft?

And is the 5% hurdle in growth of NAV in rupees or dollars?
Title: Re: Fairfax India new issue
Post by: giofranchi on March 30, 2015, 07:15:10 AM
faith/optimism is your style so that's fine.

Usually I like neither faith/optimism nor skepticism.
If I am wrong about the business, I am ready to make no money or to lose some. But, if I am right, I think I deserve to make some.

I don't think you'll hurt yourself at today's modest premium to NAV, but if I saw a manager double AUM with one capital raise right after a year of Modi-induced euphoria (India Small Cap was up like 90% last year, right?), I'd be wary, rather than get excited and say that 2X NAV may be the right price. I'm skeptical of everyone out there that is monetizing their track record; there seem to be more public GP's/asset managers and permanent capital vehicles every week.

That, of course, is not the way I think about the business.

As for IKYA, I don't really see how 1 company's spectacular growth in earnings justifies anything or makes an argument either way.

Of course I don’t know either… But Thomas Cook and IKYA are two wonderful examples, and as I have said, you just need a few more choices like those two to build lots of value.
The demographics are there, a new pro-business government is there, India’s overall debt level is quite low: those are three wonderful tailwinds for business!
The stock market is ebullient right now? Well, we have lots of cash, don’t we? And will be ready to use it when opportunities come. Imo they will.

Then, again, if I am wrong and great opportunities won’t come FIH’s way, I am ready to accept the consequences.

Gio

Title: Re: Fairfax India new issue
Post by: frommi on March 30, 2015, 08:49:24 AM
Of course I don’t know either… But Thomas Cook and IKYA are two wonderful examples, and as I have said, you just need a few more choices like those two to build lots of value.
The demographics are there, a new pro-business government is there, India’s overall debt level is quite low: those are three wonderful tailwinds for business!
The stock market is ebullient right now? Well, we have lots of cash, don’t we? And will be ready to use it when opportunities come. Imo they will.


And who doesn`t know that? :)
Anyway its irrelevant for the pricing of FFI relative to its NAV. What should matter is the fees, arbitrage and the possibility to sell it any day and based on that it deserves to trade a slight discount to NAV or at NAV. Its the same reason Ackman can talk all day long that PSH deserves a premium to NAV, but probably will never get it. (Except in times of exuberance)
Title: Re: Fairfax India new issue
Post by: netnet on March 30, 2015, 02:33:04 PM
Quote
The math is a 20% gross return becomes an 18.5% after mgt fees becomes 15.8% after incentive fees (assuming the 5% is  hard hurdle after mgt fees, is it soft or hard?).

I get a different number at 20% gross return,

Also it seems to be trading just about  NAV anyway, with the C$ at 1.27 to 1.  I don't know what the exact proceeds are.
Title: Re: Fairfax India new issue
Post by: thepupil on March 30, 2015, 04:29:04 PM
my calc was assuming the incentive fee was a hard hurdle after the mgt. fee. I don't know whether it is or not. I just assumed the most investor friendly way possible since I didn't want to look like I was trying to skew it either way.

I have no objection to FIH at this price. I do think people should be a little more wary / skeptical of diving into a full fees permanent capital vehicle that represents a doubling of a manager's AUM after the first 60% or so of a nice bull run in India. I was just pointing out the unfavorable math of paying a steep premium to NAV of a vehicle with fees.

Gio, it's difficult to argue with "if I'm right, I'll be right, if I'm wrong, I'll be wrong". I've always heard you say in the past you look for mid teens returns or something like that. Then you say you might pay 2X NAV for this. To make mid teen's paying 2X NAV would require some absolutely fantastic investment results. To make 8 or 9% would require pretty damn good investments results (15% or so) if you paid a big NAV premium. I've always found statement that you make like this to be a little incongruous to your stated return goals. But I really just need to resist commenting. You have your way of investing and it works for you and once you like a capital allocator/stock, you stick to it. There's a lot to be said for that.
Title: Re: Fairfax India new issue
Post by: giofranchi on March 31, 2015, 01:11:41 AM
Gio, it's difficult to argue with "if I'm right, I'll be right, if I'm wrong, I'll be wrong". I've always heard you say in the past you look for mid teens returns or something like that. Then you say you might pay 2X NAV for this. To make mid teen's paying 2X NAV would require some absolutely fantastic investment results. To make 8 or 9% would require pretty damn good investments results (15% or so) if you paid a big NAV premium. I've always found statement that you make like this to be a little incongruous to your stated return goals.

No.

I repeat what I have said: if FIH can find one investment like IKYA each year for the next 5 years… than 2xNAV could probably turn out to be a good investment.

FFH bought IKYA for 10x fcf while IKYA increased net earnings more than 200% YoY for the next two years... IKYA's net earnings in 2014 have been 3 times its 2013 net earnings! And revenues have doubled last year!

Gio
Title: Re: Fairfax India new issue
Post by: giofranchi on March 31, 2015, 01:14:22 AM
Its the same reason Ackman can talk all day long that PSH deserves a premium to NAV, but probably will never get it. (Except in times of exuberance)

And it is also the same reason why investors in PSH (and FIH) will make a disproportionate amount of money! :) (imo!)

Gio
Title: Re: Fairfax India new issue
Post by: thepupil on March 31, 2015, 04:35:20 AM
Gio, it's difficult to argue with "if I'm right, I'll be right, if I'm wrong, I'll be wrong". I've always heard you say in the past you look for mid teens returns or something like that. Then you say you might pay 2X NAV for this. To make mid teen's paying 2X NAV would require some absolutely fantastic investment results. To make 8 or 9% would require pretty damn good investments results (15% or so) if you paid a big NAV premium. I've always found statement that you make like this to be a little incongruous to your stated return goals.

No.

I repeat what I have said: if FIH can find one investment like IKYA each year for the next 5 years… than 2xNAV could probably turn out to be a good investment.

FFH bought IKYA for 10x fcf while IKYA increased net earnings more than 200% YoY for the next two years... IKYA's net earnings in 2014 have been 3 times its 2013 net earnings! And revenues have doubled last year!

Gio

Ikya looks like it was a $47mm check and so far is a 3x, correct?. If you paid $2b for $1b of NAV, 5 $50mm deals would turn $250mm of NAV into $750mm, increasing your NAV, pre-fees, by $500mm which is less than the NAV premium you paid. To make up your NAV premiuj you would need 5  5X's before fees. So, I disagree, once again with your statemt , but who cares because FIH doesn't trade at 2x NAV.
Edit: or for there deal size to increase, ii know nothing if competitiveness of Indian PE market, so maybe there is no problem with increased size of deal
Title: Re: Fairfax India new issue
Post by: giofranchi on March 31, 2015, 04:48:15 AM
So, I disagree, once again with your statemt

5 businesses in 5 years which become a 3x investments in 2 to 3 years won’t justify a 2xNAV price?!
Sincerely… I have not done the math!
Therefore, I trust what you say, and I hope this ends a discussion I guess no one really cares about! ;)

Cheers,

Gio
Title: Re: Fairfax India new issue
Post by: frommi on March 31, 2015, 05:58:06 AM
And it is also the same reason why investors in PSH (and FIH) will make a disproportionate amount of money! :) (imo!)

Gio

Maybe :)
Title: Re: Fairfax India new issue
Post by: giofranchi on April 01, 2015, 01:07:44 AM
And it is also the same reason why investors in PSH (and FIH) will make a disproportionate amount of money! :) (imo!)

Gio

Maybe :)

Well, what I mean is that it just boils down to a business judgment: if those businesses can increase NAV per share at a CAGR of 15% for many years, and they always sell at NAV per share (or below), then it automatically follows that their owners will make a disproportionate amount of money.
The role of valuation in investing in this case ceases to be meaningful…

Gio
Title: Re: Fairfax India new issue
Post by: SoonParted on April 05, 2015, 12:09:22 AM
Doesn't the Canadian home of FIH make it a PFIC for US investors?  At least, it would seem to be a risk that it could be deemed one.
Title: Re: Fairfax India new issue
Post by: Jurgis on April 05, 2015, 07:09:06 AM
Doesn't the Canadian home of FIH make it a PFIC for US investors?  At least, it would seem to be a risk that it could be deemed one.

It likely will be unless it acquires controlled operating businesses fast.
Title: Re: Fairfax India new issue
Post by: giofranchi on April 10, 2015, 07:32:43 AM
So, I disagree, once again with your statemt , but who cares because FIH doesn't trade at 2x NAV.

By the way, Fairfax will receive the Performance Fee in the form of Subordinate Voting Shares if their price is below 2xNAV… To me that sounds like Fairfax doesn’t think any price below 2xNAV is too high… Of course Fairfax doesn’t pay any fee, therefore the price it is willing to receive and hold shares might be higher than outside investors…

Gio
Title: Re: Fairfax India new issue
Post by: Packer16 on April 10, 2015, 01:36:23 PM
One question I have is what are the fees on the illustrative India fund returns they include in the prospectus?

Packers
Title: Re: Fairfax India new issue
Post by: giofranchi on April 11, 2015, 08:23:50 AM
One question I have is what are the fees on the illustrative India fund returns they include in the prospectus?

Packers

Packer,
I don't know the answer to your question... But please consider:
20.5% is net of fees and expenses... Therefore, gross CAGR should be higher.
How much higher? I don't know... To be conservative, let's say 21%.
That was before the government of Mr. Modi was elected.
How much could a pro-business environment help?
I don't know... Let's say another 1%? I think that assumption might turn out to be conservative too.

If we could except a 22% gross CAGR, I think you might agree this is a very good vehicle and a worthwhile investment.

Cheers,

Gio
Title: Re: Fairfax India new issue
Post by: Packer16 on April 11, 2015, 10:43:51 AM
The reason I ask is the carry reduces the rate of return significantly even to the point of making the investment less than the index over almost all time periods if the investment fund returns have no carry associated with them.

Packer
Title: Re: Fairfax India new issue
Post by: Zorrofan on April 11, 2015, 04:14:00 PM
The reason I ask is the carry reduces the rate of return significantly even to the point of making the investment less than the index over almost all time periods if the investment fund returns have no carry associated with them.

Packer

MKL invested in this fund too, they would pay the same fees no?  So I can't see them being willing to under-perform the index. Or am I missing something??

cheers
Zorro
Title: Re: Fairfax India new issue
Post by: original mungerville on April 12, 2015, 12:33:09 PM
The reason I ask is the carry reduces the rate of return significantly even to the point of making the investment less than the index over almost all time periods if the investment fund returns have no carry associated with them.

Packer

You are saying the investment fund returns need to have "carry" associated with them to beat the index...I'm not following.

What carry are you referring to?
Title: Re: Fairfax India new issue
Post by: Packer16 on April 12, 2015, 02:12:17 PM
Fairfax India pays a carry of 20% of the return above 6% to Fairfax in addition to a 1.5% asset management fee.  If the HWIC Asia fund does not have this carry, then the net return to Fairfax India may be materially less the HWIC Asia fund.  The fees for the HWIC Asia fund are not disclosed in the prospectus so I was wondering what these fee were so a comparison could be made.

Packer
Title: Re: Fairfax India new issue
Post by: bearprowler6 on April 12, 2015, 04:15:18 PM
I suspect the HWIC Asia fund performance numbers were meant to be indicative rather than an absolute reflection of Fairfax India's future performance. Accordingly, I am not sure that one needs to make the direct comparison being suggested. Furthermore, the investment mandate within Fairfax India is far broader than in the HWIC Asia fund as the latter must adhere to investment insurance regulations of the various investee companies in that fund.
Title: Re: Fairfax India new issue
Post by: original mungerville on April 12, 2015, 08:03:38 PM
Fairfax India pays a carry of 20% of the return above 6% to Fairfax in addition to a 1.5% asset management fee.  If the HWIC Asia fund does not have this carry, then the net return to Fairfax India may be materially less the HWIC Asia fund.  The fees for the HWIC Asia fund are not disclosed in the prospectus so I was wondering what these fee were so a comparison could be made.

Packer

But Gio was talking about 22% gross return which presumably means before all fees and expenses.

My understanding is it is a 20% performance fee above 5% plus a 1.5% management fee.

So 22% - 5% = 17% * 0.2 = 3.4% performance fee plus 1.5% = 4.9% or roughly 5% total.

So 22% gross becomes 17% net.

One critical question here is does FIH plan to hedge the dollar/rupee exchange rate or not? (And were the HWIC Asia Fund investments hedged or not?) As one poster previously alluded to, currency hedging or exchange rate losses could be an important cost over time given India's past inflation rates. Has anyone dug into this?








Title: Re: Fairfax India new issue
Post by: giofranchi on April 13, 2015, 12:15:38 AM
One critical question here is does FIH plan to hedge the dollar/rupee exchange rate or not? (And were the HWIC Asia Fund investments hedged or not?) As one poster previously alluded to, currency hedging or exchange rate losses could be an important cost over time given India's past inflation rates. Has anyone dug into this?

I don’t know the answer to this either…

But I know:
1)   Fairfax thinks the new Indian government has taken the right measures to check inflation,
2)   The 20.5% CAGR net of fees and expenses of the HWIC Asia Fund was in USD, therefore they did quite a good job to shelter themselves from an inflation environment that presumably has been far worse than the one we should expect in the future.

Cheers,

Gio
Title: Re: Fairfax India new issue
Post by: Packer16 on April 13, 2015, 03:54:54 AM
In running the numbers the impact of the carry is only about 3% plus 2% for the other investment gets an adjustment of 5% assuming the fund has a 1.5% asset management fee.  From the table then the illustrative fund would only outperform on a life and 1-yr basis.  Good performance but not one I am willing to pay a premium to NAV for.

Packer
Title: Re: Fairfax India new issue
Post by: giofranchi on April 13, 2015, 04:25:04 AM
From the table then the illustrative fund would only outperform on a life and 1-yr basis.  Good performance but not one I am willing to pay a premium to NAV for.

Packer,
let me understand better, because I think I am missing something.
If you are not willing to pay a premium to NAV, it means you think the 22% gross CAGR I hinted at is not achievable (not even a 20% gross CAGR for that matter! Which is lower than what the HWIC Asia Fund earned NET).
Why?
You are saying that performance of the HWIC Asia Fund is distorted by last year results which have been too high?

Thank you,

Gio
Title: Re: Fairfax India new issue
Post by: giofranchi on April 13, 2015, 04:31:00 AM
Moreover, why do you assume the HWIC Asia Fund results are all we should be looking at? Fairfax invested very successfully in Thomas Cook, in IKYA, and in Sterling Resorts too, which are not included in the performance of the HWIC Asia Fund.

Gio
Title: Re: Fairfax India new issue
Post by: Packer16 on April 13, 2015, 04:45:34 AM
I am assuming the 20.5% in the prospectus is for a fund with no carry after fees.  In the footnotes it states that 2.2% of the performance is due to securities from other countries so India performance is 18.3%.  Less a carry of about 2.5% gets us to 15.8% versus an index of 9.0%.  Now this 4.7% less than the stated performance.  So for 10-yr and 5-yr periods the illustrative investment would have lagged the index for the 3-yr it is about breakeven and exceeds clearly only over the life of fund.  Another consideration is the size of the fund throughout the period versus the size of Fairfax India.  If in the earlier periods the fund was smaller than Fairfax India then I think replicating these returns will be difficult.  Most of the return was generated from 2001 to 2007. 


Packer
Title: Re: Fairfax India new issue
Post by: giofranchi on April 13, 2015, 05:34:51 AM
So for 10-yr and 5-yr periods the illustrative investment would have lagged the index for the 3-yr it is about breakeven and exceeds clearly only over the life of fund. 

This doesn’t bother me at all. I am used to very lumpy results and have come to accept by now that events which lead to market beating results don’t come often and materialize only once in a while… Still they make a very important difference over time!

Another consideration is the size of the fund throughout the period versus the size of Fairfax India.  If in the earlier periods the fund was smaller than Fairfax India then I think replicating these returns will be difficult.

This also doesn’t bother me much: the Indian stock market is over $1 trillion, and on top of that there is the private market to which FIH will surely have access. Both the Indian stock market and the private market will grow with the economy. I think there will be plenty of opportunities for many years to come.

15.8% annual imo is nothing to complain about! ;)

Moreover FIH will have access to private equity type of dealings, which probably were precluded to the HWIC Asia Fund. And it will operate in a more business friendly environment (also inflation is clearly trending down since 2012).

Cheers,

Gio
Title: Re: Fairfax India new issue
Post by: frommi on April 13, 2015, 06:28:56 AM
Gio by your logic Senvest Capital should trade at 1.5-1.8x bookvalue, too. But it doesn`t, has never and probably will never, despite the fact that it has a similar fee/expense structure and CAGR like FIH.
Title: Re: Fairfax India new issue
Post by: giofranchi on April 13, 2015, 06:42:11 AM
Gio by your logic Senvest Capital should trade at 1.5-1.8x bookvalue, too. But it doesn`t, has never and probably will never, despite the fact that it has a similar fee/expense structure and CAGR like FIH.

It is not “my logic”… It is math.
If Senvest Capital has the same CAGR I expect of FIH, and I am using here the number Packer has calculated 15.8%, an investor who bought at 1.2xNAV 15 years ago has enjoyed a CAGR for his/her investment of 14.4%, provided Senvest Capital trades at BV today.
Would you call a 14.4% CAGR sustained for 15 years a bad investment? I don’t think so.

Gio
Title: Re: Fairfax India new issue
Post by: frommi on April 13, 2015, 06:52:14 AM
Yes but that is history, you can`t be sure to get these results in the future.
Title: Re: Fairfax India new issue
Post by: giofranchi on April 13, 2015, 07:00:39 AM
Yes but that is history, you can`t be sure to get these results in the future.

And that's exactly why I invest in FIH, while I don't invest in Senvest Capital (with all due respect for Senvest!). ;)

Gio
Title: Re: Fairfax India new issue
Post by: giofranchi on April 13, 2015, 07:50:15 AM
I think there are at least three features which could not be easily copied by a single investor, nor by another investment fund:
1) FIH’s proprietary research capabilities and broad network in India
2) FIH’s attractive structure for long-term investments (permanent capital)
3) FIH’s access to private equity type investments

Gio
Title: Re: Fairfax India new issue
Post by: original mungerville on April 13, 2015, 12:08:54 PM
I think there are at least three features which could not be easily copied by a single investor, nor by another investment fund:
1) FIH’s proprietary research capabilities and broad network in India
2) FIH’s attractive structure for long-term investments (permanent capital)
3) FIH’s access to private equity type investments

Gio

I largely agree. One poster was suggesting FIH NAV could be recreated buying Indian public equities and therefore a premium to NAV for FIH is not warranted. Meanwhile, my feeling is that

1) several of these deals are going to be purchases of private businesses which can be purchased at far lower p/e ratios relative to public equities in India. Further, they will tend to seek out
2) trustworthy management whereas many managements of public businesses in India can be corrupt to a degree (this also happens in other countries, including developed countries) and
3) with managerial rather than entrepreneurial skills/tendencies (ie the private businesses purchased by FIH will be more entrepreneurial).

I could then see FIH trying to take these public to realize the NAV increase upfront rather than wait to have earnings build over many years. So buy at 8x earnings, operate for a few years and once major expansion plans are in place, take public to fund those plans while moving the p/e from 8x to 16x or higher.
 
Title: Re: Fairfax India new issue
Post by: giofranchi on April 18, 2015, 07:32:25 AM
Quote
We wouldn't be doing this (FIH) if we did't think we could achieve 20% annual gross, or 15% annual net, for our shareholders.
--Prem Watsa at the 2015 FFH Annual Meeting


Gio
Title: Re: Fairfax India new issue
Post by: giofranchi on April 24, 2015, 07:03:28 AM
Why the jump in share price yesterday and today? Any noteworthy piece of news that I have missed? ???

Gio
Title: Re: Fairfax India new issue
Post by: Alekbaylee on April 24, 2015, 07:48:12 AM
Dunno but Fairfax is poised to gain big if a Canada-India free trade were to materialize...
http://www.theglobeandmail.com/report-on-business/international-business/canada-chases-ambitious-free-trade-pact-with-india/article23906875/
Title: Re: Fairfax India new issue
Post by: notorious546 on April 24, 2015, 08:27:50 AM
Quote
We wouldn't be doing this (FIH) if we did't think we could achieve 20% annual gross, or 15% annual net, for our shareholders.
--Prem Watsa at the 2015 FFH Annual Meeting
Gio

*cough* sales pitch *cough*
Title: Re: Fairfax India new issue
Post by: petec on April 27, 2015, 12:55:18 AM
Quote
We wouldn't be doing this (FIH) if we did't think we could achieve 20% annual gross, or 15% annual net, for our shareholders.
--Prem Watsa at the 2015 FFH Annual Meeting
Gio

*cough* sales pitch *cough*

It's a closed end fund and they've already sold it.   And they say the same for FFH itself.   So much as I appreciate the cynicism, and I do, I suspect they believe this.
Title: Re: Fairfax India new issue
Post by: giofranchi on May 04, 2015, 08:52:06 AM
Q1 2015 Results

Quote
Fairfax India Holdings Corporation (TSX: FIH.U) announces net earnings of $4.01 million in the first quarter of 2015 ($0.06 per basic share). Book value per basic share (which equals the Net Asset Value Per Share used in calculating fees payable by Fairfax India) was $9.59 at March 31, 2015.

Quote
Subsequent to its initial public offering, Fairfax India, pending identifying and completing longer term investments in Indian businesses, invested most of the net proceeds of the offerings in permitted investments. At March 31, 2015, Fairfax India held $40.4 million of cash and cash equivalents and permitted investments of $976.9 million.

Gio
Title: Re: Fairfax India new issue
Post by: giofranchi on May 04, 2015, 11:59:47 PM
Quote
Assets

Cash of $40.4 million at March 31, 2015 included Indian rupees of $29.4 million (INR 1.8 billion), with the remainder denominated in U.S. dollars.

The company's investments totaled $976.8 million at March 31, 2015, and was comprised of U.S. treasury bills of $269.4 million, Indian corporate bonds of $633.5 million (INR 39.6 billion), Government of India bonds of $24.1 million (INR 1.5 billion) and investment funds of $49.8 million.

Interest receivable of $8.0 million at March 31, 2015 principally related to accrued interest on the company's bond portfolio.

Deferred income taxes of $1.8 million at March 31, 2015 primarily reflected operating losses for tax purposes that arose in the first quarter of 2015 because the company computes its corporate income tax liability in Canadian dollars pursuant to the requirements of Canadian taxation authorities, whereas the functional currency of the company is the U.S. dollar. The company has not recorded deferred tax assets of approximately $6.6 million primarily related to costs of the offerings.

Cheers,

Gio
Title: Re: Fairfax India new issue
Post by: Zorrofan on May 05, 2015, 04:14:21 AM
Quote
Assets

Cash of $40.4 million at March 31, 2015 included Indian rupees of $29.4 million (INR 1.8 billion), with the remainder denominated in U.S. dollars.

The company's investments totaled $976.8 million at March 31, 2015, and was comprised of U.S. treasury bills of $269.4 million, Indian corporate bonds of $633.5 million (INR 39.6 billion), Government of India bonds of $24.1 million (INR 1.5 billion) and investment funds of $49.8 million.

Interest receivable of $8.0 million at March 31, 2015 principally related to accrued interest on the company's bond portfolio.

Deferred income taxes of $1.8 million at March 31, 2015 primarily reflected operating losses for tax purposes that arose in the first quarter of 2015 because the company computes its corporate income tax liability in Canadian dollars pursuant to the requirements of Canadian taxation authorities, whereas the functional currency of the company is the U.S. dollar. The company has not recorded deferred tax assets of approximately $6.6 million primarily related to costs of the offerings.

Cheers,

Gio

Thanks for posting this! I am excited to see what Prem can do with this as India may be the most exciting place to invest in the next few years.....
cheers
Zorro
Title: Re: Fairfax India new issue
Post by: glavacem on May 06, 2015, 06:15:14 PM
If Fairfax expects to compound at 15% over the long term, why would one take the risk of India if Fairfax is expecting 15% after fees. Why not just hold Fairfax.

Am I misunderstanding something on this?

Thanks guys
Title: Re: Fairfax India new issue
Post by: giofranchi on May 06, 2015, 11:28:27 PM
If Fairfax expects to compound at 15% over the long term, why would one take the risk of India if Fairfax is expecting 15% after fees. Why not just hold Fairfax.

The way I see it Watsa has built FFH to thrive in an environment in which we will have both very low stock prices and very low bond yields. That’s a very rare occurrence, and the last two times it happened were in the US during the ‘30s and in Japan during the ‘90s. Otherwise, like Buffett and Tepper say, very low bond yields justify higher stock prices.

If the environment Watsa is preparing for never materializes, FFH won’t compound at 15% annual for many years to come… Its results might be much lower than that!

So what would I do?

1)   If you are sure that the environment Watsa is preparing for will never materialize, I would invest only in FIH.
2)   If you are sure the environment Watsa is preparing for will materialize, I would invest only in FFH.
3)   If you have no certainties regarding the environment Watsa is preparing for, like me, I would invest both in FFH and in FIH.

Cheers,

Gio
Title: Re: Fairfax India new issue
Post by: KinAlberta on May 07, 2015, 10:59:20 AM
Does FFH need protracted conditions for its bets to begin to pay off? (As in the 1930s or Japan) 

Couldn't a recession and/or a major market decline possibly price in to the market the necessary "payoff" expectations, which of course could completely reverse six months later sending the world the opposite direction?     
Title: Re: Fairfax India new issue
Post by: glavacem on May 07, 2015, 12:22:19 PM
Thanks for the response Gio. Your answer helped clarify some things for me.....:)
Title: Re: Fairfax India new issue
Post by: giofranchi on May 21, 2015, 01:14:50 AM
Thanks for the response Gio. Your answer helped clarify some things for me.....:)

My pleasure! :)

Cheers,

Gio
Title: Re: Fairfax India new issue
Post by: giofranchi on May 21, 2015, 01:15:39 AM
http://blogs.wsj.com/indiarealtime/2015/05/15/11-numbers-showing-india-has-a-long-way-to-go-to-become-the-next-china/


Gio
Title: Re: Fairfax India new issue
Post by: SoonParted on May 24, 2015, 10:49:01 AM
This is a question for American investors in FIH.  It was noted earlier in this thread that FIH could well be deemed a PFIC by the IRS.  Jurgis commented, "It likely will be [a PFIC] unless it acquires controlled operating businesses fast."  So I'm wondering how others are dealing with this issue.  Possible strategies:

(1) Ignore the risk and hope the IRS either doesn't notice or decides it's not a PFIC.  Might work if you're a small shareholder.  Huge losses if it doesn't work.

(2) Try to figure out the PFIC rules, and go by them.  My impression is that the taxes one would then owe would make the investment much less attractive--I think essentially, all unrealized gains are taxed like ordinary income each year.  Also it's unclear to me what information is needed for tax filing, and how to get it if the company doesn't help out. 

I've only owned one PFIC, and the (Canadian) company provided Americans a sheet each year with the necessary information to deal with PFIC filing. 

Useful link:

https://ustaxcompliance.wordpress.com/tax-triggers/a-pfic-primer/
Title: Re: Fairfax India new issue
Post by: KinAlberta on May 26, 2015, 09:08:43 AM
http://blogs.wsj.com/indiarealtime/2015/05/15/11-numbers-showing-india-has-a-long-way-to-go-to-become-the-next-china/


Gio

Now that is an interesting article! It says more about the author than the subject. It's like the question:

- - - - - - - - - - - - - - - - -   "Is the cup half empty or half full?"  - - - - - - - - - - - - - - - - -   with "empty" representing pessimism and "full" representing optimism.


Well, all those hypothetical cups are likely full: half air and half water. And since it's a hypothetical question, and we are "value investors", let us reflect on the fact that you can live a long time without water but only minutes without air. :-) So, again, as value investors all know, it's the hidden, invisible or overlooked quantities that can in the right circumstances prove far more valuable than the obvious. Those people seeing and walking away from "half empty" cups may someday be gasping breaths of disbelief in their missed opportunities.

People hearing the half full half empty question should maybe put more thought into the original premise of the inventor than into thought about the question itself, and people reading the article above need to think more about the original premise of the author of this article too.  That author needs to realize that India's cup of today, like China's in the early 1980s, is finally being seen as full, and not just perceived as half empty.
Title: Re: Fairfax India new issue
Post by: gfp on May 26, 2015, 09:34:03 AM
I didn't see any mention of an IRA account in your question.  If you are US-based and have some of your investable capital in IRAs, that would be the place to park a potential PFIC.  I would not ignore it and hope the IRS doesn't notice.  I put Pershing Square Holdings, Kennedy Wilson Europe and Fairfax India in IRA accounts with no issues.

This is a question for American investors in FIH.  It was noted earlier in this thread that FIH could well be deemed a PFIC by the IRS.  Jurgis commented, "It likely will be [a PFIC] unless it acquires controlled operating businesses fast."  So I'm wondering how others are dealing with this issue.  Possible strategies:

(1) Ignore the risk and hope the IRS either doesn't notice or decides it's not a PFIC.  Might work if you're a small shareholder.  Huge losses if it doesn't work.

(2) Try to figure out the PFIC rules, and go by them.  My impression is that the taxes one would then owe would make the investment much less attractive--I think essentially, all unrealized gains are taxed like ordinary income each year.  Also it's unclear to me what information is needed for tax filing, and how to get it if the company doesn't help out. 

I've only owned one PFIC, and the (Canadian) company provided Americans a sheet each year with the necessary information to deal with PFIC filing. 

Useful link:

https://ustaxcompliance.wordpress.com/tax-triggers/a-pfic-primer/
Title: Re: Fairfax India new issue
Post by: Jurgis on May 26, 2015, 10:01:01 AM
This is a question for American investors in FIH. 

SoonParted, you really have to ask FIH directly. Let us know if you get a response. :)
Title: Re: Fairfax India new issue
Post by: SoonParted on May 26, 2015, 10:09:26 AM
Thanks, globalfinancepartners.  The IRS seems to have changed the rules recently on PFIC's in IRA's so that you don't have to file form 8621 and so on, so that helps a lot.  The downside is that in an IRA, if there's foreign tax paid (taken out of a dividend), then you can't get a credit for it.
Title: Re: Fairfax India new issue
Post by: giofranchi on May 27, 2015, 06:04:28 AM
http://www.theguardian.com/news/2015/may/27/why-india-is-captured-by-carbon?


Gio
Title: Re: Fairfax India new issue
Post by: jimjam on June 05, 2015, 02:44:09 PM
Karthikpm: There does now appear to be a US based OTC ticker for Fairfax India:

   http://www.morningstar.com/stocks/PINX/FFXDF/quote.html

I wonder if this is an ADR?

Interactive Brokers doesn't seem to list FFXDF though, only FIH.U.

Theoretically, does anyone know if buying an OTC stock instead of a Canadian one might be a way of getting around the potential FPIC tax problem referred to earlier in this thread for US investors?

Warmly,
jimjam
Title: Re: Fairfax India new issue
Post by: Jurgis on June 05, 2015, 03:08:56 PM
if buying an OTC stock instead of a Canadian one might be a way of getting around the potential FPIC tax problem referred to earlier in this thread for US investors?

No.
Title: Re: Fairfax India new issue
Post by: Txvestor on June 06, 2015, 08:36:28 PM
Probably a worthy read for those of you invested in this, Watsa talks about his long view and shares some general themes.

http://m.economictimes.com/opinion/interviews/corruption-at-highest-levels-in-india-has-disappeared-says-prem-watsa/articleshow/47535814.cms
Title: Re: Fairfax India new issue
Post by: Jurgis on June 07, 2015, 02:11:22 PM
Color me skeptical about:

Quote
Corruption at India's top level has "disappeared" in the year

I don't know India. But I know corrupt societies. And corruption does not disappear in a year even with best people working for change. Maybe Watsa is just promoting a positive message.

I hope I am wrong and he's right. That would be great. :)
Title: Re: Fairfax India new issue
Post by: Txvestor on June 07, 2015, 02:22:12 PM
I think he is referring to the top level ie PM, Cabinet, and so on. Of course the habits of bureaucrats and the sclerotic effects of corruption on society will take a lot longer to improve but any change has to start somewhere. One thing is certain for me. India is a massive market, with a young population, with very entrepreneurial people, decent and nurturable links to the global economy, who have elected a PM who has little personally to gain and everything to lose from any whiff of corruption coming from anywhere close to him.
To be sure the obstacles are very high. Time will tell how much progress can be made. I suspect India can generate 6-7% growth over the next decade and that might be far better than most economies.
I believe Prem is in India to look at a few opportunities. He said he expects to complete one before year end. I doubt he would say that unless he had a couple of good leads. Thus far the acquisitions they have done there via Thomas Cook have been brilliant. 
Title: Re: Fairfax India new issue
Post by: giofranchi on June 08, 2015, 12:17:18 AM
I think he is referring to the top level ie PM, Cabinet, and so on. Of course the habits of bureaucrats and the sclerotic effects of corruption on society will take a lot longer to improve but any change has to start somewhere. One thing is certain for me. India is a massive market, with a young population, with very entrepreneurial people, decent and nurturable links to the global economy, who have elected a PM who has little personally to gain and everything to lose from any whiff of corruption coming from anywhere close to him.
To be sure the obstacles are very high. Time will tell how much progress can be made. I suspect India can generate 6-7% growth over the next decade and that might be far better than most economies.
I believe Prem is in India to look at a few opportunities. He said he expects to complete one before year end. I doubt he would say that unless he had a couple of good leads. Thus far the acquisitions they have done there via Thomas Cook have been brilliant.

+1! :)

Gio
Title: Re: Fairfax India new issue
Post by: wisdom on June 25, 2015, 09:13:27 PM
http://finance.yahoo.com/news/fairfaxs-watsa-buy-indian-logistics-035558426.html
Title: Re: Fairfax India new issue
Post by: giofranchi on June 25, 2015, 10:55:53 PM
http://finance.yahoo.com/news/fairfaxs-watsa-buy-indian-logistics-035558426.html

Thank you very much! :)

Gio
Title: Re: Fairfax India new issue
Post by: SoonParted on June 27, 2015, 08:47:29 PM
btw, is FIH's hurdle hard or soft?

And is the 5% hurdle in growth of NAV in rupees or dollars?

Has anyone been able to find out about the currency used when calculating NAV growth?  Seems like a make-or-break question.  I asked Investor Relations recently, they didn't have an answer(!), said they'd get back to me. 
Title: Re: Fairfax India new issue
Post by: giofranchi on June 30, 2015, 02:37:53 AM
btw, is FIH's hurdle hard or soft?

And is the 5% hurdle in growth of NAV in rupees or dollars?

Has anyone been able to find out about the currency used when calculating NAV growth?  Seems like a make-or-break question.  I asked Investor Relations recently, they didn't have an answer(!), said they'd get back to me.

In USD, of course! FIH reports results in USD!

Watsa has commented he doesn’t think this will be a problem, because he sees the rupee appreciate against the USD from now on… Despite, or perhaps in part because of, what has happened during the last few years.

Gio
Title: Re: Fairfax India new issue
Post by: bearprowler6 on July 14, 2015, 05:00:23 AM
http://www.fairfaxindia.ca/news/press-releases/press-release-details/2015/Offer-to-Acquire-26-of-IIFL-Holdings-Limited/default.aspx
Title: Re: Fairfax India new issue
Post by: giofranchi on July 14, 2015, 05:41:08 AM
http://www.fairfaxindia.ca/news/press-releases/press-release-details/2015/Offer-to-Acquire-26-of-IIFL-Holdings-Limited/default.aspx

It seems to be a very large investment! More than 25% of AUM. After all non-banking finance, housing finance, wealth management, retail broking, institutional equities, investment banking and insurance distribution, certainly are in Fairfax’s sweet spot, and backed by a rapidly growing market. Of course I like it! ;)

Cheers,

Gio
Title: Re: Fairfax India new issue
Post by: giofranchi on July 15, 2015, 05:32:29 AM
Skill India Mission

http://timesofindia.indiatimes.com/india/Skill-India-Mission-Highlights-of-PM-Modis-speech/articleshow/48085324.cms?utm_source=twitter.com&utm_medium=referral&utm_campaign=TOIIndiaNews

Cheers,

Gio
Title: Re: Fairfax India new issue
Post by: MarkS on July 16, 2015, 05:28:00 PM
I’m brand new to this board - and very impressed with the quality of the posts.  I would love to pick up some of these shares, but I would need to hold them in an IRA.   l’ve been researching whether dividends issued by Canadian companies paid to owners of shares held in an American IRA are subject to Canadian withholding tax.  First, let me state that I’m neither a tax attorney nor a CPA.  I’m just an ordinary Joe trying to make a little money.  I’m offering the pitiful results of my research in the hope that someone might find it helpful.

A tax treaty exists between the United States and Canada.  An American can file form NR301 with their brokerage firm and get a reduction in Canadian withholding tax from 25% to 15%. As I understand the process, NR301 applies to ordinary brokerage accounts not retirement accounts.
See:  http://www.cra-arc.gc.ca/E/pbg/tf/nr301/README.html
As stated in form NR301, if you are seeking a tax exemption, you must “apply to the CRA for a Letter of Exemption. Refer to guide T4016, Exempt U.S. Organizations – Under Article XXI of the Canada-United States Tax Convention.”

The Canadian Revenue Agency states that you can seek a tax exemption for Canadian Dividends paid to owners of shares held in an IRA:

“Individual Retirement Accounts (IRAs) are also exempt under Paragraph 2 of Article XXI. In order for an IRA plan to qualify for purposes of a Letter of Exemption, the custodian/trust/individual must provide the CRA with the following information:
•   The name of the beneficial owners of the IRAs
•   The Tax Identification Number of the beneficial owners
•   The addresses of the beneficial owners
•   A notarized affidavit as to the country of residence of the holder of the IRAs and either
i.   a hard copy of the IRAs approved adoption agreement of an Individual Retirement Plan/Trust Agreement
ii.   a hard copy of the custodian’s Individual Retirement Plan/Trust Agreement, and
iii.   a hard copy of the fully completed IRS Form 5305 or 5305A”
 
See:    http://www.cra-arc.gc.ca/E/pub/tg/t4016/t4016-e.html

Obviously, an individual would have a difficult time complying with these requirements.  A brokerage firm would need to spend a significant amount of time and money complying with the rules for the benefit of their clients.  I wasted two hours of my time today on the phone with TD Ameritrade and MerrillEdge, two hours which I will never get back, trying to get someone on the phone that was willing and/or able to help.  If you have accounts with either of the above, an exemption is probably not in the cards.  I cannot speak for other brokerage accounts.  Anyone interested should contact their own brokerage firm. I would love to know if other firms are more interested in helping their clients.
Title: Re: Fairfax India new issue
Post by: beerbaron on July 16, 2015, 07:20:27 PM
I live in Canada, if I buy US equities thru my retirement account dividends are exempt from the US witholding tax. I believe it's part of a tax treaty between both countries. I did not have to fill in any paperwork, the broker just "knows" not to withhold anything. I would believe that it would be the same thing in the US. It might just be that the persons you talked to know very little about those details. If I were you I'd do a test and buy a dividend stock a few days before the dividend and see what happens when you get your statement. It will cost you 5$ in fees maybe but you won't lose another 2 hours at least.

BeerBaron
Title: Re: Fairfax India new issue
Post by: giofranchi on July 17, 2015, 04:26:25 AM
A republic of greed: Why PM Modi must crack the whip on India’s snowballing corruption

http://economictimes.indiatimes.com/news/politics-and-nation/a-republic-of-greed-why-pm-modi-must-crack-the-whip-on-indias-snowballing-corruption/articleshow/48108824.cms


Gio


Title: Re: Fairfax India new issue
Post by: MarkS on July 17, 2015, 04:37:43 AM
Thanks beerbaron.  That's not a  bad idea. 
Title: Re: Fairfax India new issue
Post by: Tommm50 on July 17, 2015, 07:34:33 PM
Mark S. and Beer Baron, I've been getting Fairfax dividends for years into my IRA (I live in the U.S.) and never had any withholding.
Title: Re: Fairfax India new issue
Post by: MarkS on July 19, 2015, 10:10:47 AM
Thanks Tommm50. Appreciate the info.
Title: Re: Fairfax India new issue
Post by: bearprowler6 on July 20, 2015, 05:17:02 AM
Another deal by the Fairfax India team:

http://www.stockhouse.com/news/press-releases/2015/07/20/fairfax-india-to-acquire-national-collateral-management-services-india-s
Title: Re: Fairfax India new issue
Post by: giofranchi on July 20, 2015, 05:38:09 AM
Another deal by the Fairfax India team:

http://www.stockhouse.com/news/press-releases/2015/07/20/fairfax-india-to-acquire-national-collateral-management-services-india-s

Another large investment: more than 12% of AUM.

Quote
National Collateral is a leading private-sector agricultural commodities storage company in India that has operated for over 10 years and is now preparing to expand to take advantage of the significant market potential in India's under-developed agricultural storage industry. The company operates in the mid-stream agriculture value chain by offering end-to-end solutions in grain procurement, testing, storage and collateral management. As a result of recent fiscal and non-fiscal policy announcements in India, private sector players such as National Collateral (www.ncml.com) are enhancing the range of solutions provided to Indian farmers, traders, food processors, banks and governments and to the businesses connected to the agriculture supply chain, thereby generating significant efficiencies to help India achieve its stated national objective of greater food security.

Sounds like another opportunity for significant growth.

Cheers,

Gio
Title: Re: Fairfax India new issue
Post by: bearprowler6 on July 20, 2015, 06:02:15 AM
For those wanting to do a deeper dive---here is a link to the NCMSL's website:

http://www.ncmsl.com/index.asp

Title: Re: Fairfax India new issue
Post by: giofranchi on July 31, 2015, 01:23:20 AM
Q2 2015 Results.

The two meaningful investments recently announced were made after the end of the quarter.

Cheers,

Gio
Title: Re: Fairfax India new issue
Post by: giofranchi on July 31, 2015, 02:13:23 AM
Some not so great news...

http://www.forbes.com/sites/dougbandow/2015/07/30/india-losing-opportunity-to-become-next-great-power-narendra-modis-faltering-revolution/


Gio
Title: Re: Fairfax India new issue
Post by: gym97 on November 04, 2015, 09:39:21 AM
for anybody that is interested.

http://www.fairfaxindia.ca/news/press-releases/press-release-details/2015/Fairfax-India-to-Acquire-45-of-ADI-Finechem-Limited-and-to-Make-an-Open-Offer-for-an-Additional-26-of-ADI-Finechem-Limited/default.aspx

Title: Re: Fairfax India new issue
Post by: Viking on December 29, 2015, 10:13:22 PM
The price dipped below $10/unit this morning, which is about where it ipo'd at the beginning of the year. I like the idea of getting some exposure in my portfolio to India; can't think of a better way than Fairfax. The key will be to give FFH 3-5 years; I think it will take that long to build a very good portfolio of businesses.

My guess is FFH will be focused on buying positions in quality businesses (given the other risks such as corruption etc). The stock market in India has also been on a tear the last few years. It looks to me like FFH will be making purchases at fair prices. This means the benefit to FIH shareholders will take years to show through earnings growth at the acquired companies.  :-)
Title: Re: Fairfax India new issue
Post by: wondering on January 15, 2016, 09:34:17 AM
Now that the company is over its IPO honeymoon stage, and the stock is trading very close to book value, and I am considering buying a little.

My question is regarding the currency.  The reporting currency is in USD.  The functional currency is in INR.  I am Canadian with Canadian dollars.  I am concerned if the Canadian rises against the US dollar, it will greatly diminish my investment.  Upon greater reflection, I am thinking my bigger concern should be how the Canadian dollar performs vs. the Indian rupee because the US dollar is essentially "in" and "out".

Is my thinking correct?
Title: Re: Fairfax India new issue
Post by: giofranchi on February 19, 2016, 04:52:56 AM
2015 Results:

http://www.fairfaxindia.ca/news/press-releases/press-release-details/2016/Fairfax-India-Holdings-Corporation-Financial-Results-for-the-Year-Ended-December-31-2015/default.aspx

Fairfax India is selling exactly at BV: not bad for a company very well positioned to capitalize on India's strong demographic trend.

Cheers,

Gio
Title: Re: Fairfax India new issue
Post by: ourkid8 on March 28, 2016, 04:54:06 AM
http://www.bloomberg.com/news/articles/2016-03-28/fairfax-to-buy-bangalore-airport-stake-for-322-million-from-gvk?cmpid=yhoo.headline

Fairfax to Buy Bangalore Airport Stake for $322 Million From GVK.

Title: Re: Fairfax India new issue
Post by: obtuse_investor on March 28, 2016, 05:29:16 AM
A toll bridge purchase. Wonderful!
Title: Re: Fairfax India new issue
Post by: Jurgis on March 28, 2016, 06:57:29 AM
A toll bridge purchase. Wonderful!

It's not a bridge. It's an airport.  ::)



jk
Title: Re: Fairfax India new issue
Post by: hobbit on October 15, 2017, 03:25:11 PM
http://www.fairfaxindia.ca/news/press-releases/press-release-details/2017/Fairfax-India-Holdings-Corporation-Intention-to-Make-a-Normal-Course-Issuer-Bid-for-Subordinate-Voting-Shares/default.aspx
Title: Re: Fairfax India new issue
Post by: WneverLOSE on October 16, 2017, 03:24:39 AM
Selling shares at 11.75$ and buying them back just a few months later for 18$.

This will surely create a ton of value.
Title: Re: Fairfax India new issue
Post by: obtuse_investor on October 16, 2017, 03:48:57 AM
This is a typical NCIB announcement. It gives management the right to repurchase stock, should they choose to exercise it.

Title: Re: Fairfax India new issue
Post by: WneverLOSE on October 16, 2017, 05:00:14 AM
Ya it was part joke part true criticism, they actually did prove the theory when they bought 1.7m shares just above the price they issues the shares (add the friction costs and it becomes material)
Title: Re: Fairfax India new issue
Post by: DooDiligence on October 16, 2017, 12:36:46 PM
Ya it was part joke part true criticism, they actually did prove the theory when they bought 1.7m shares just above the price they issues the shares (add the friction costs and it becomes material)

Does anyone know if they have any repurchase agreements with OMERS from the last offering?
Title: Re: Fairfax India new issue
Post by: reader on October 31, 2017, 09:40:14 AM
Hi guys,
a longtime holder of FFH looking to invest directly in FIH-U.
any reason for the wide gap between FFXDF and FIH-U? +30%
thanks

Title: Re: Fairfax India new issue
Post by: dartmonkey on October 31, 2017, 02:00:25 PM
Hi guys,
a longtime holder of FFH looking to invest directly in FIH-U.
any reason for the wide gap between FFXDF and FIH-U? +30%
thanks

FFXDF is the over-the-counter ticker in US markets; FIH.U is the ticker on the Toronto exchange (TSE). In both cases, they are in US dollars, but the FFXDF trades very infrequently and you can get some wonky prices. In principle, they should have the same value. But you are probably better off to buy the shares on the Toronto exchange if that is possible with your broker, and if not, perhaps put in a limit order for FFXDF with a price that closely matches the value you see for FIH.U.
Title: Re: Fairfax India new issue
Post by: reader on October 31, 2017, 02:53:24 PM
Hi guys,
a longtime holder of FFH looking to invest directly in FIH-U.
any reason for the wide gap between FFXDF and FIH-U? +30%
thanks

FFXDF is the over-the-counter ticker in US markets; FIH.U is the ticker on the Toronto exchange (TSE). In both cases, they are in US dollars, but the FFXDF trades very infrequently and you can get some wonky prices. In principle, they should have the same value. But you are probably better off to buy the shares on the Toronto exchange if that is possible with your broker, and if not, perhaps put in a limit order for FFXDF with a price that closely matches the value you see for FIH.U.

thanks, dartmonkey
now it makes sense. I was under the impression that FIH.U trades in CADs.
Title: Re: Fairfax India new issue
Post by: DooDiligence on November 01, 2017, 07:05:42 AM
I'd love to see FFXDF <=$12 (purely arbitrary anchor based number)

PVW's last shareholder letter is intoxicating (awesome storyteller / DRM & copy hooked me.)
Title: Re: Fairfax India new issue
Post by: Txvestor on November 20, 2017, 12:30:26 AM
Prem plugging India Inc. And its growth potential. Some insights into his thoughts on fairfax india here.

https://economictimes.indiatimes.com/opinion/interviews/businesses-we-have-invested-in-are-growing-by-leaps-and-bounds-prem-watsa/articleshow/61716345.cms
Title: Re: Fairfax India new issue
Post by: hobbit on November 21, 2017, 05:35:49 AM
the potential for bangalore airport is massive..that alone should be worth the current market cap 5 years down the line
Title: Re: Fairfax India new issue
Post by: petec on November 22, 2017, 12:44:32 AM
the potential for bangalore airport is massive..that alone should be worth the current market cap 5 years down the line

Do you have any supporting maths for this claim? ;)
Title: Re: Fairfax India new issue
Post by: hobbit on November 22, 2017, 03:50:27 AM
the potential for bangalore airport is massive..that alone should be worth the current market cap 5 years down the line

Do you have any supporting maths for this claim? ;)

Yes, Bangalore Airport publishes an annual report with all the numbers.. I have read a couple ..they are way ahead of their targets put out in 2007-08 period. You can also find some of these numbers in Fairfax India annual meeting presentation..you can find it here http://www.fairfaxindia.ca/news/Events/default.aspx

slide 31
Title: Re: Fairfax India new issue
Post by: rohitc99 on November 22, 2017, 05:54:10 AM
the potential for bangalore airport is massive..that alone should be worth the current market cap 5 years down the line

Do you have any supporting maths for this claim? ;)

Yes, Bangalore Airport publishes an annual report with all the numbers.. I have read a couple ..they are way ahead of their targets put out in 2007-08 period. You can also find some of these numbers in Fairfax India annual meeting presentation..you can find it here http://www.fairfaxindia.ca/news/Events/default.aspx

slide 31
I lived in bangalore for a long time and have often travelled through the airport. The 3% growth assumptions by the company is very conservative. air traffic is growing low double digits. also the land around the airport has a large optionality and future value as the city is expanding towards the airport too
Title: Re: Fairfax India new issue
Post by: petec on November 22, 2017, 06:09:40 AM
Thanks both of you. I knew the basics but had not found the annual report.
Title: Re: Fairfax India new issue
Post by: wondering on December 08, 2017, 07:41:34 AM
http://www.fairfaxindia.ca/news/press-releases/press-release-details/2017/Fairfax-India-Files-Final-Universal-Shelf-Prospectus/default.aspx

Looks like Fairfax India is going to raise more money ($1.5B in debt and equity).  I guess they are very bullish on India.
Title: Re: Fairfax India new issue
Post by: menlo on December 08, 2017, 10:23:11 AM
15 minute video on Fairfax India.  Anyone know Peters MacGregor?

https://petersmacgregor.com/news-insights/stock-stories/look-fairfax-india/
Title: Re: Fairfax India new issue
Post by: DooDiligence on December 08, 2017, 03:33:22 PM
15 minute video on Fairfax India.  Anyone know Peters MacGregor?

https://petersmacgregor.com/news-insights/stock-stories/look-fairfax-india/

Seems like a less compelling version of Watsa's shareholder letter.
Title: Re: Fairfax India new issue
Post by: DooDiligence on December 08, 2017, 03:34:23 PM
http://www.fairfaxindia.ca/news/press-releases/press-release-details/2017/Fairfax-India-Files-Final-Universal-Shelf-Prospectus/default.aspx

Looks like Fairfax India is going to raise more money ($1.5B in debt and equity).  I guess they are very bullish on India.

They should hire Masayoshi Son.
Title: Re: Fairfax India new issue
Post by: obtuse_investor on December 20, 2017, 06:21:38 AM
FIH is scraping 1.1x Q3 book value once again.

It is looking interesting again.
Title: Re: Fairfax India new issue
Post by: no_free_lunch on December 21, 2017, 12:03:46 PM
It is around 1.05x book today.

When I look at this thing, I wonder though if it is a good investment.  The performance fees seem huge and I am a bit concerned how they can perform given that hurdle.  For instance they have $2.5B assets or $2B equity against $105M in performance/advisory fees in the first 9 months of the year.  That is over 5% of equity in just 9 months.   These fees are a bit lumpy and so it is tough to gauge what they will be going forward.  However that seems to be a high take relative to the equity stake.

I can't help but think of GLRE or TPRE when I look at this.  Two companies backed by excellent managers that yet have failed to deliver.  Fees are not the whole story in those cases but they definitely cut into the returns.
Title: Re: Fairfax India new issue
Post by: thepupil on December 21, 2017, 01:55:23 PM
have they ever mentioned potentially decreasing the management fee as the entity scales?

Not that that's standard PE / HF practice or anything, but standard PE practice also involves a defined fund life and paying only on realizations (not permanent capital / unrealized) and HF's allow for redemption at NAV (quarterly to 3 years).

As this goes from $2B to more, the argument for the 1.5% management fee weakens.

Let's say they get to $6B in AUM in 10 years from equity offerings + returns. Will shareholders be okay with sending a cool $80 million / year large to a 77 year old Prem Watsa and his team.

He's already grown share count significantly and there's more to come on the follow plus they've generated a lot of returns. They've got to run a business and should be paid well if they're delivering value...but at a point the argument breaks down.

People won't care if they continue to do well, of course, but there will be the inevitable stumbles at some point.
Title: Re: Fairfax India new issue
Post by: investmd on December 21, 2017, 02:15:21 PM
Wondering if the 1.5% management fee and the performance bonuses get paid to "Prem Watsa & team" or to Fairfax Financial ? Do FFH shareholders benefit from fees paid by FIH.U?
Thanks,
Jehangir
Title: Re: Fairfax India new issue
Post by: thepupil on December 21, 2017, 02:17:38 PM
sorry should be more precise with language. They get paid to Hamblin Watsa, which is wholly owned by Fairfax.
Title: Re: Fairfax India new issue
Post by: hobbit on December 29, 2017, 04:04:31 AM
selling at less than book value ..
Title: Re: Fairfax India new issue
Post by: obtuse_investor on December 29, 2017, 06:35:51 AM
Hobbit: how do you figure that? Q3 bvps was 13.54. Current price is 14.78

Book value would have grown over 10% in q4 alone for FIH to be selling at below book value.
Title: Re: Fairfax India new issue
Post by: wondering on December 29, 2017, 08:49:23 AM
Now I am confused.

December 7, they said they are going to issue more debt and equity
http://www.fairfaxindia.ca/news/press-releases/press-release-details/2017/Fairfax-India-Files-Final-Universal-Shelf-Prospectus/default.aspx

December 29, they say they are going to repurchase shares.
http://www.fairfaxindia.ca/news/press-releases/press-release-details/2017/Fairfax-India-Enters-Into-Automatic-Share-Purchase-Plan/default.aspx

Are they doing this to give themselves the flexibility if the prices gets too high (issue more shares) or it gets too low (buy back shares)? I am almost sure I am not understanding things 100%.
Title: Re: Fairfax India new issue
Post by: StubbleJumper on December 29, 2017, 09:04:14 AM
Now I am confused.

December 7, they said they are going to issue more debt and equity
http://www.fairfaxindia.ca/news/press-releases/press-release-details/2017/Fairfax-India-Files-Final-Universal-Shelf-Prospectus/default.aspx

December 29, they say they are going to repurchase shares.
http://www.fairfaxindia.ca/news/press-releases/press-release-details/2017/Fairfax-India-Enters-Into-Automatic-Share-Purchase-Plan/default.aspx

Are they doing this to give themselves the flexibility if the prices gets too high (issue more shares) or it gets too low (buy back shares)? I am almost sure I am not understanding things 100%.


The universal shelf prospectus doesn't necessarily mean that there will be a share issuance or a debt flotation.  It's just a filing to enable that possibility just in case they actually want to, or just in case it becomes attractive to do so.  FFH files one for the holdco every year.


SJ
Title: Re: Fairfax India new issue
Post by: hobbit on December 29, 2017, 09:30:09 AM
Hobbit: how do you figure that? Q3 bvps was 13.54. Current price is 14.78

Book value would have grown over 10% in q4 alone for FIH to be selling at below book value.

The book value stated by fairfax india is a bit misleading in lieu of the additional 10% BIAL stake bought by Ffxind for 200 million earlier this year.  This additional stake values the entire bangalore airport at 2bn which should put ffxind stake at 1.2 bn instead of 600 million being reported currently .
Title: Re: Fairfax India new issue
Post by: no_free_lunch on December 29, 2017, 09:39:58 AM
Not to doubt you hobbit but even fairfax india isn't pricing in $1.2B for BIAL.  In their latest 10q they run a dcf model and estimate their stake in BIAL at $592m.   There is some verbage around the additional purchase that they basically overpaid to convince BIAL to sell.
Title: Re: Fairfax India new issue
Post by: ICUMD on December 29, 2017, 04:13:19 PM
BIAL may be on the books for 600 million with a 1.2 billion valuation. But it is reasonable to think that the airport is worth far more than that - I doubt you can build a state of the art airport serving 20 million passengers per yr for that price.  It is also growing at > 25% yoy.  Book value is understated,  in my books.....  I think it is worth at least 100% more - ~ 2 - 3 billion, pre expansion costs.
Title: Re: Fairfax India new issue
Post by: zippy1 on December 30, 2017, 12:16:20 AM
So in the earlier discussion, there were concerns that Fairfax India may be a PFIC. I am wondering whether this turned out to be true or false?  Does one (a US citizen) need to file any special tax document or put it inside an IRA?

I assume if there is an issue people may have to deal with it during the tax season earlier this year?

Will appreciate any insight and suggestions!
Title: Re: Fairfax India new issue
Post by: DooDiligence on December 30, 2017, 03:20:33 AM
So in the earlier discussion, there were concerns that Fairfax India may be a PFIC. I am wondering whether this turned out to be true or false?  Does one (a US citizen) need to file any special tax document or put it inside an IRA?

I assume if there is an issue people may have to deal with it during the tax season earlier this year?

Will appreciate any insight and suggestions!

It is & you should own it in a tax advantaged account.
Title: Re: Fairfax India new issue
Post by: zippy1 on December 30, 2017, 04:25:04 AM
So in the earlier discussion, there were concerns that Fairfax India may be a PFIC. I am wondering whether this turned out to be true or false?  Does one (a US citizen) need to file any special tax document or put it inside an IRA?

I assume if there is an issue people may have to deal with it during the tax season earlier this year?

Will appreciate any insight and suggestions!

It is & you should own it in a tax advantaged account.

many thanks!  :)
Title: Re: Fairfax India new issue
Post by: dartmonkey on January 01, 2018, 03:17:37 PM
They follow IFRS rules in their valuation of BIAL, using a DCF model, giving a calculated value $1.2b, but that does not mean that is what they really think the thing is really worth. It is not their style to buy at almost twice the price they really think its worth, even if they have to call this 'fair value' in their verbiage:

"The cash consideration paid for the additional 10.0% equity interest in BIAL exceeded the fair value of those additional shares acquired, as a result $74,202 (approximately 4.8 billion Indian rupees) of the cash consideration paid was attributable to the costs incurred to (i) motivate GVK to sell its remaining 10.0% equity interest in BIAL, (ii) increase the company's holdings in BIAL to enhance the company's investment returns, and (iii) accelerate the development of a second runway and terminal, and make improvements to the existing runway".

I would call this legalese verbiage. Yes, they paid more because they really wanted it, and a high price is often what is required to get the owner of a good asset to sell, but that is all perfectly obvious. I have been able to obtain their first draft, nixed by the lawyers, which said:

"We bought 38% in March, for an implied value of $1.01b, IFRS rules force us to apply crazily conservative DCF parameters like 10-13% discount rates, 3% growth rates even though is is growing like a weed, over 20% growth in traffic in recent years, not counting the value of commercial development on sited. Using those estimates, the value comes out at $1.23b - garbage in, garbage out. On the other hand, we love it so much, we were happy to buy another 10% of this fantastic asset at an implied valuation of over $2b in July. You be the judge of whether it is worth $1.2b or $2b or much more."
Title: Re: Fairfax India new issue
Post by: rohitc99 on January 01, 2018, 03:36:40 PM
They follow IFRS rules in their valuation of BIAL, using a DCF model, giving a calculated value $1.2b, but that does not mean that is what they really think the thing is really worth. It is not their style to buy at almost twice the price they really think its worth, even if they have to call this 'fair value' in their verbiage:

"The cash consideration paid for the additional 10.0% equity interest in BIAL exceeded the fair value of those additional shares acquired, as a result $74,202 (approximately 4.8 billion Indian rupees) of the cash consideration paid was attributable to the costs incurred to (i) motivate GVK to sell its remaining 10.0% equity interest in BIAL, (ii) increase the company's holdings in BIAL to enhance the company's investment returns, and (iii) accelerate the development of a second runway and terminal, and make improvements to the existing runway".

I would call this legalese verbiage. Yes, they paid more because they really wanted it, and a high price is often what is required to get the owner of a good asset to sell, but that is all perfectly obvious. I have been able to obtain their first draft, nixed by the lawyers, which said:

"We bought 38% in March, for an implied value of $1.01b, IFRS rules force us to apply crazily conservative DCF parameters like 10-13% discount rates, 3% growth rates even though is is growing like a weed, over 20% growth in traffic in recent years, not counting the value of commercial development on sited. Using those estimates, the value comes out at $1.23b - garbage in, garbage out. On the other hand, we love it so much, we were happy to buy another 10% of this fantastic asset at an implied valuation of over $2b in July. You be the judge of whether it is worth $1.2b or $2b or much more."

+ 1
air traffic is growing 15%+ across india. Most airlines are operating with a PLF of 85% and still growing. I have been to the airport several times over the last 10 years and the traffic is up several times. when the airport was built, it was way out of the city and with expansion of the city, it wont be long before the airport comes within the city.
A 3% growth in anything in india is almost equivalent to 0 growth or recession. when i looked at the DCF assumptions for BIAL, it was more than obvious they are very very conservative. Look at IIFL ..they are growing 30% and thats not really too high in the space they operate. A lot of other well managed financial services companies of the same size are growing at the same rate. It may sound odd to call 30% growth as conservative, but the tailwinds in the financial services space is quite high
Title: Re: Fairfax India new issue
Post by: hobbit on January 05, 2018, 01:38:46 PM
Not to doubt you hobbit but even fairfax india isn't pricing in $1.2B for BIAL.  In their latest 10q they run a dcf model and estimate their stake in BIAL at $592m.   There is some verbage around the additional purchase that they basically overpaid to convince BIAL to sell.

if you buy X% stake at 1 billion mkt cap and then buy another 0.1X% stake at 2 billion mkt cap , accounting principles wont let u hold the entire investment at 2 bn mktcap until and unless there is another independent deal in the market that confirms ur valuation. if u trust fairfax management its a no brainer that the investment is already worth1.2 billion with a much higher intrinsic value.
Title: Re: Fairfax India new issue
Post by: ICUMD on January 05, 2018, 07:41:53 PM
One point however is that BIAL holds a considerable amount of debt on its books.  Furthermore, it is expanding the airport with a new runway and terminal, at a cost I believe of ~600 million USD.  They have made good strides to reduce this debt over the past year and I think they will continue to do so under Fairfax's prudent management and rapid revenue growth.  As they pay down this debt, they should be able to increase BV and induce a rise in Fairfax India's share price.

Title: Re: Fairfax India new issue
Post by: chrispy on January 13, 2018, 06:04:59 AM
I am very happy about it as I was able to pickup shares but is there any reason why ffxdf plummeted going into Dec 31 and then took off?
Title: Re: Fairfax India new issue
Post by: obtuse_investor on January 13, 2018, 06:53:45 AM
No idea. I assume since the Indian composite index dipped a little, fih fell too.

Title: Re: Fairfax India new issue
Post by: rohitc99 on January 13, 2018, 09:21:29 AM
Not really, indian markets were up in december, including IIFL which was up close to 10%. again quite a few of the assets such as BIAL are not listed. irrespective of the reason, the drop was good to raise the position
Title: Re: Fairfax India new issue
Post by: obtuse_investor on January 13, 2018, 03:19:53 PM
You’re probably right. I don’t follow the Indian market. And trying to attribute reason to some of mr market’s actions is not really worth the time.

I happily used this buying opportunity to substantially increase my exposure.
Title: Re: Fairfax India new issue
Post by: hobbit on February 01, 2018, 07:04:54 AM
https://economictimes.indiatimes.com/markets/stocks/news/iifl-holdings-to-be-soon-divided-into-three/articleshow/62737383.cms

IIFL is the biggest investment
Title: Re: Fairfax India new issue
Post by: dartmonkey on February 09, 2018, 03:07:55 PM
Just to come back to the share repurchase, the NCIB was announced on Oct 4, with the shares at about $18, presumably indicating that management was confident that it was undervalued there. Since then, we had the Qe report (Nov 2nd) indicating holding that were about half public and half private.

On the public side, 2 holdings: IIFL (85m shares, worth $787m on Sep 30th), and Fairchem (19m shares, worth $113m). Then there is the private side, with Sanmar bonds ($323m), BIAL (very conservatively valued at $592m), NCML ($184m, Saurashtra ($34m), NSE ($40m) and Sanmar equity ($1m) for a private company total of $1173m.

I just looked at the 2 public holdings, and if my calculations are right, they were at the same value on Dec 31st (for the purposes of the Q4 report, due next week I think), but they have gone up over 20% since then, mostly because of IIFL. Meanwhile, the other big holding, BIAL, is very likely worth substantially more, at least FIH thinks so, since the price they paid for the latest 10% stake gives their whole stake an implied valuation of close to $1b.

It will be interesting to see if they took advantage of the Nov/Dec price dip in FIH shares to buy back some of their 3.5 million share NCIB (4% of the public float). I certainly bought some - now my #3 position.
 
Title: Re: Fairfax India new issue
Post by: gokou3 on March 14, 2018, 05:20:52 PM
For Canadian shareholders of Fairfax India, I wonder if there is any special tax for this Indian-focused investment vehicle.  Is there any difference between holding FIH in a non-RSP vs RSP vs TFSA account?  Any withholding taxes?  Thanks,
Title: Re: Fairfax India new issue
Post by: wondering on March 15, 2018, 06:09:31 AM
Fairfax India is a Canadian domiciled company for Canadian taxpayers purposes. No different than Royal Bank from an investor - taxpayer perspective.  In the future, if FIH starts paying dividends, they will be considered eligible Canadian dividends. FIH can be held within a TFSA or RRSP.  No withholding tax on FIH dividends (should they start to pay dividends). No foreign reporting (ie T1135) required either.

I hope this helps.
Title: Re: Fairfax India new issue
Post by: gokou3 on March 15, 2018, 09:30:10 AM
Fairfax India is a Canadian domiciled company for Canadian taxpayers purposes. No different than Royal Bank from an investor - taxpayer perspective.  In the future, if FIH starts paying dividends, they will be considered eligible Canadian dividends. FIH can be held within a TFSA or RRSP.  No withholding tax on FIH dividends (should they start to pay dividends). No foreign reporting (ie T1135) required either.

I hope this helps.
Thanks, you have answered all the questions that I haven't put in words. :)
Title: Re: Fairfax India new issue
Post by: petec on March 16, 2018, 12:04:46 PM
What are the odds of Fairfax's Thomas Cook and Quess stakes being swapped for Fairfax India shares at some point?
Title: Re: Fairfax India new issue
Post by: rohitc99 on March 16, 2018, 02:37:19 PM
What are the odds of Fairfax's Thomas Cook and Quess stakes being swapped for Fairfax India shares at some point?

that would require fairfax india to list in india for the minority shareholders of these companies? not sure about the exact rules, but as an investor in the indian markets, i dont know of any foreign company being dual listed in india. the reverse exists where a few indian companies are listed in the US via ADRs
Title: Re: Fairfax India new issue
Post by: racemize on March 16, 2018, 02:42:05 PM
What are the odds of Fairfax's Thomas Cook and Quess stakes being swapped for Fairfax India shares at some point?

that would require fairfax india to list in india for the minority shareholders of these companies? not sure about the exact rules, but as an investor in the indian markets, i dont know of any foreign company being dual listed in india. the reverse exists where a few indian companies are listed in the US via ADRs

I think he's saying that FFH would give the shares to FFH india in exchange for FFH india shares.  Since they are both in Canada, I don't think there would be an issues?
Title: Re: Fairfax India new issue
Post by: rohitc99 on March 16, 2018, 03:24:54 PM
What are the odds of Fairfax's Thomas Cook and Quess stakes being swapped for Fairfax India shares at some point?

that would require fairfax india to list in india for the minority shareholders of these companies? not sure about the exact rules, but as an investor in the indian markets, i dont know of any foreign company being dual listed in india. the reverse exists where a few indian companies are listed in the US via ADRs



I think he's saying that FFH would give the shares to FFH india in exchange for FFH india shares.  Since they are both in Canada, I don't think there would be an issues?

oh ok, got it. just change of control for thomas cook.
Title: Re: Fairfax India new issue
Post by: buylowersellhigh on March 16, 2018, 09:45:29 PM
What securities do u like in India? Any suggestions?

Not set up for trading in India yet.
Title: Re: Fairfax India new issue
Post by: petec on March 17, 2018, 12:02:06 AM
What are the odds of Fairfax's Thomas Cook and Quess stakes being swapped for Fairfax India shares at some point?

that would require fairfax india to list in india for the minority shareholders of these companies? not sure about the exact rules, but as an investor in the indian markets, i dont know of any foreign company being dual listed in india. the reverse exists where a few indian companies are listed in the US via ADRs



I think he's saying that FFH would give the shares to FFH india in exchange for FFH india shares.  Since they are both in Canada, I don't think there would be an issues?

oh ok, got it. just change of control for thomas cook.

Yeah I was merely wondering if they would "tidy up" the Indian holdings into FIH - partly to avoid the impression of a conflict of interest and partly to make my notes neater ;)
Title: Re: Fairfax India new issue
Post by: ourkid8 on March 27, 2018, 05:28:57 PM
As a FFH shareholders, I would love if they "tidy up" their Indian holdings so that we can have the same upside AND receive a 1.5/20. :-)   It's a beautiful win/win scenario!!!  (Hint hint, did you forget you just paid Fairfax US$114.4 million)

What are the odds of Fairfax's Thomas Cook and Quess stakes being swapped for Fairfax India shares at some point?

that would require fairfax india to list in india for the minority shareholders of these companies? not sure about the exact rules, but as an investor in the indian markets, i dont know of any foreign company being dual listed in india. the reverse exists where a few indian companies are listed in the US via ADRs



I think he's saying that FFH would give the shares to FFH india in exchange for FFH india shares.  Since they are both in Canada, I don't think there would be an issues?

oh ok, got it. just change of control for thomas cook.

Yeah I was merely wondering if they would "tidy up" the Indian holdings into FIH - partly to avoid the impression of a conflict of interest and partly to make my notes neater ;)
Title: Re: Fairfax India new issue
Post by: petec on March 29, 2018, 02:54:32 AM
As a FFH shareholders, I would love if they "tidy up" their Indian holdings so that we can have the same upside AND receive a 1.5/20. :-)   It's a beautiful win/win scenario!!!  (Hint hint, did you forget you just paid Fairfax US$114.4 million)

Ha - I am an FFH holder not an FIH one! So I agree. But it's a good point.

Problem is consolidating it all it is a bigger job than it seems  - for example you could argue their 49% in Quantum Advisors should go in to FIH too, but that's unlisted so there is no easy way to price it. Probably just too complex so I suspect they keep it as is, although I wonder if they will take Thomas Cook private once the Quess spin is done.
Title: Re: Fairfax India new issue
Post by: ourkid8 on March 29, 2018, 07:13:28 AM
https://www.fairfaxindia.ca/news/press-releases/press-release-details/2018/Fairfax-India-to-Acquire-Additional-6-Interest-in-Bangalore-International-Airport-Limited/default.aspx

Fairfax acquired an additional 6% stake in BIAL and now they own a 54% interest. 
Title: Re: Fairfax India new issue
Post by: dartmonkey on March 30, 2018, 07:25:58 AM
By my reckoning, they have bought their 54% stake in 3 steps:
38% in March 2017 at an implied value of INR 65-67b (from GVK and Flughafen Zürich)
10% in July 2017 at INR 122-136b (from GVK)
6% in March 2018 at INR 67-80 (from Siemens)

Last summer, I figured the value had somehow appreciared substantially in the 4 months since they purchased their initial stake, but now it seems they just paid more for that stake for some other reason, and are still able to get the same terms 12 months after the initial buy. Perhaps the value has appreciated but Siemens needed the cash? Or perhaps they overpaid last summer for some other strategic reason?
Title: Re: Fairfax India new issue
Post by: Spekulatius on March 31, 2018, 05:59:02 AM
By my reckoning, they have bought their 54% stake in 3 steps:
38% in March 2017 at an implied value of INR 65-67b (from GVK and Flughafen Zürich)
10% in July 2017 at INR 122-136b (from GVK)
6% in March 2018 at INR 67-80 (from Siemens)

Last summer, I figured the value had somehow appreciared substantially in the 4 months since they purchased their initial stake, but now it seems they just paid more for that stake for some other reason, and are still able to get the same terms 12 months after the initial buy. Perhaps the value has appreciated but Siemens needed the cash? Or perhaps they overpaid last summer for some other strategic reason?

I highly doubt that Siemens needed a bit of change all of a sudden.
Title: Re: Fairfax India new issue
Post by: TwoCitiesCapital on April 02, 2018, 05:35:29 PM
By my reckoning, they have bought their 54% stake in 3 steps:
38% in March 2017 at an implied value of INR 65-67b (from GVK and Flughafen Zürich)
10% in July 2017 at INR 122-136b (from GVK)
6% in March 2018 at INR 67-80 (from Siemens)

Last summer, I figured the value had somehow appreciared substantially in the 4 months since they purchased their initial stake, but now it seems they just paid more for that stake for some other reason, and are still able to get the same terms 12 months after the initial buy. Perhaps the value has appreciated but Siemens needed the cash? Or perhaps they overpaid last summer for some other strategic reason?

I can't find the source, but if my memory serves me correct, Watsa addressed the premium and suggested that in the long-term even that price would be a bargain and that it was purchased with long-term in mind. My guess is that they want to own as much of it as they can and they probably offered a substantial premium to get GVK to sell their minority interest. Not necessarily my type of investing, but they've proven themselves in India and they may be right about owning the airport at any price.

Wish I could find the actual quote for you though :/
Title: Re: Fairfax India new issue
Post by: petec on April 03, 2018, 03:54:52 AM
I can't find the source, but if my memory serves me correct, Watsa addressed the premium.

It's in the Fairfax India 2018 letter. The second bloc was at a higher price because it enabled them to remake the board, name the CEO, and "generally to allow it to be managed according to Fairfax India's standards of corporate governance and guiding principles".

The first bloc was at 8.7x FCF excluding the land bank so even the second bloc, at almost twice the price, was inexpensive.
Title: Re: Fairfax India new issue
Post by: FairFacts on April 03, 2018, 01:30:33 PM
According to the press release last week, FIH is paying $67mil for the additional 6% of BIA.

At 12/31/17 in their Shareholders letter they were holding 48% of BIA at a cost of $585mil and a MV of $608mil. If this is correct they picked up the 6% at a discount both to their12/31/17  cost and MV.

Am I missing something?

Title: Re: Fairfax India new issue
Post by: petec on April 04, 2018, 01:07:59 AM
See above. They paid a higher price for the bloc that enabled them to remake the board and name the CEO. So that has inflated YE17 average cost. I'm not sure what the MV is off the top of my head - it's not listed.
Title: Re: Fairfax India new issue
Post by: hobbit on April 09, 2018, 12:49:42 PM
https://www.bloomberg.com/news/articles/2018-04-09/new-york-s-jfk-booted-out-of-world-s-top-20-busiest-airports

wrt to india and bial...delhi is at 16 with 63 million passengers growing at 14% yoy...

also below is a recent conversation where watsa discusses fairfax India..interesting insights into role of Deepak Parekh as well.

https://www.youtube.com/watch?v=4XuBysRnGNc
Title: Re: Fairfax India new issue
Post by: alpha on April 09, 2018, 04:05:24 PM
https://www.bloomberg.com/news/articles/2018-04-09/new-york-s-jfk-booted-out-of-world-s-top-20-busiest-airports

wrt to india and bial...delhi is at 14 with 63 million passengers growing at 14% yoy...

also below is a recent conversation where watsa discusses fairfax India..interesting insights into role of Deepak Parekh as well.

https://www.youtube.com/watch?v=4XuBysRnGNc

Great interview, thanks
Title: Re: Fairfax India new issue
Post by: hobbit on May 22, 2018, 06:54:34 AM
Harsha Raghavan leaving

https://globenewswire.com/news-release/2018/05/21/1509329/0/en/Fairfax-India-Executive-Announcement.html
Title: Re: Fairfax India new issue
Post by: Lakesider on July 29, 2018, 01:52:15 PM
This has come back down to about P/B (31 march) of 1.1, Indian markets have recovered from the dip in since so todays PB likely even better.

Keeping my eye on this thinking about adding more.
Title: Re: Fairfax India new issue
Post by: tradevestor on August 02, 2018, 02:47:47 PM
As of June 30, 2018,   common shareholders' equity was $13.26 per share.  That sets the P/B at 1.22, with the current price of $16.12
Title: Re: Fairfax India new issue
Post by: Lakesider on August 02, 2018, 03:05:32 PM
Thanks tradevestor, not sure why i was looking at march..
Title: Re: Fairfax India new issue
Post by: valueinvesting101 on August 09, 2018, 09:01:16 AM
Kempegowda international airport sees 32.8% jump in passenger traffic

Read more at:
http://timesofindia.indiatimes.com/articleshow/65295980.cms

KIA has also reported a record 98,869 passenger arrivals and departures on June 30, making it the busiest day since the airport commenced operations in 2008. KIA recorded a footfall of 26.9 million passengers in 2017-18.

Domestic and international passengers grew by 35.8% and 16.8%, respectively, between April and June this year. As many as 6.94 million domestic flyers and 1.08 million international travellers passed through the airport.

Fairfax India has paid for $653 million so far for 54% stake in the airport but currently carrying on the book at $643. I believe this significantly undervalues the airport which is growing at such a high rate and expected to grow with addition of new terminal and growth in Indian economy and especially Bangalore.


Title: Re: Fairfax India new issue
Post by: rohitc99 on August 09, 2018, 09:32:18 AM
Kempegowda international airport sees 32.8% jump in passenger traffic

Read more at:
http://timesofindia.indiatimes.com/articleshow/65295980.cms

KIA has also reported a record 98,869 passenger arrivals and departures on June 30, making it the busiest day since the airport commenced operations in 2008. KIA recorded a footfall of 26.9 million passengers in 2017-18.

Domestic and international passengers grew by 35.8% and 16.8%, respectively, between April and June this year. As many as 6.94 million domestic flyers and 1.08 million international travellers passed through the airport.

Fairfax India has paid for $653 million so far for 54% stake in the airport but currently carrying on the book at $643. I believe this significantly undervalues the airport which is growing at such a high rate and expected to grow with addition of new terminal and growth in Indian economy and especially Bangalore.

also what gets missed is the land around the airport ..the pace at which the city is expanding (exploding is a better term), this land is going to be very valuable.

air travel has become affordable for a very large segment of the population and its going to grow for some time
Title: Re: Fairfax India new issue
Post by: tradevestor on August 10, 2018, 08:33:26 AM
BIAL annual report: http://www.bengaluruairport.com/bial/pdf/Annual_Report_2016_17.pdf

(slow site, takes more than a minute to load)
Title: Re: Fairfax India new issue
Post by: chrispy on September 05, 2018, 02:39:03 PM
Nearing the 52 week low
Title: Re: Fairfax India new issue
Post by: obtuse_investor on September 05, 2018, 02:56:16 PM
Still not at the lowest price to book value it has been at before.

It's a good buy if you can convincingly argue that book value is understated. Book value is in US dollars, while earnings are in rupees.

USDINR is hitting all time highs lately. Most likely that is not permanent, considering the long growth path the country has.
Title: Re: Fairfax India new issue
Post by: chrispy on September 10, 2018, 02:04:23 PM
Since June 30th IIFL has decreased by 4-5%, Bangalore has not been reappraised (I believe), and the currency has plummeted. The q2 decrease in book value was due to the rupee so that would mean book value may very well decrease this quarter (short sighted thoughts)
Title: Re: Fairfax India new issue
Post by: petec on September 20, 2018, 03:11:50 PM
Deal announced today values Sanmar at $1.5bn of which FIH will own 43%. BVPS rises by $1.62 although I don’t understand why they get to revalue the equity based on their own follow-on price.
Title: Re: Fairfax India new issue
Post by: chrispy on September 26, 2018, 05:08:42 AM
Value Stocks podcast most recent episode covers Fairfax India for about 45 minutes. Enjoyed listening to it but the topics and conclusions are very similar to what has been mentioned here.

My cost basis is right around this price level and is only a few percentage of my total holdings. I don't feel an urge to add unless it drops one or two more dollars which may not happen.
Title: Re: Fairfax India new issue
Post by: TwoCitiesCapital on September 26, 2018, 08:15:38 AM
I've decided to dip my toes in here. It diversifies my major EM exposure and it has a clear track record. Still not ecstatic about the fee structure, but one does deserve to get paid for their talent...

Small holding at the moment - ~0.5% but will likely be rolling other profits into it if it stays near current levels as other things run.
Title: Re: Fairfax India new issue
Post by: Fairfaxnut on September 27, 2018, 05:07:50 AM
Brian Bradstreet is buying again....

https://www.canadianinsider.com/node/7?menu_tickersearch=FIH+%7C+Fairfax+India+Holdings (https://www.canadianinsider.com/node/7?menu_tickersearch=FIH+%7C+Fairfax+India+Holdings)
Title: Re: Fairfax India new issue
Post by: chrispy on September 27, 2018, 07:48:34 AM
Almost half a mile, wow.
Title: Re: Fairfax India new issue
Post by: valueinvesting101 on September 29, 2018, 03:40:23 PM
Brian Bradstreet is buying again....

https://www.canadianinsider.com/node/7?menu_tickersearch=FIH+%7C+Fairfax+India+Holdings (https://www.canadianinsider.com/node/7?menu_tickersearch=FIH+%7C+Fairfax+India+Holdings)

What are those number for Fairfax India holding in July and August? Does it mean company repurchased and cancelled those shares?
Title: Re: Fairfax India new issue
Post by: bluejoseph on September 29, 2018, 04:40:39 PM
What are those number for Fairfax India holding in July and August? Does it mean company repurchased and cancelled those shares?

Book value targets were met in the previous period and an earned but yet to be paid performance fee was finally paid to FFH in the form of almost 800k new shares in March. Last month the company rebought about a million shares on the open market. So they primarily offset.
Title: Re: Fairfax India new issue
Post by: ourkid8 on October 05, 2018, 06:41:52 AM
Fairfax India recently repurchased and cancelled 21,240 shares.  Let the good times roll...

Title: Re: Fairfax India new issue
Post by: rohitc99 on October 05, 2018, 07:27:51 AM
You may want to keep an eye on what is happening in india. Currency has depreciated by close to 15% YTD. There is some level of liquidity squeeze and also financial firms like IIFL have seen their stock price drop a lot. It may all work out in the long run, but in the short term several headwinds
Title: Re: Fairfax India new issue
Post by: chrispy on October 18, 2018, 06:54:59 AM
It is startibg to look like it has been oversold.

I need to do some reviewing this weekend but a few back of the envelope numbers that are from MEMORY:

Currency depreciation: -20%
IIFL: 50% drop / 10% of holdings = -10%
I need to review what other percentage of holdings are publicly listed but a lot are private.

Ffxdf is down nearly 60% from high which was probably a bit expensive at the time.

Edit: I'll add that I have not convinced myself to buy more yet... Emerging markets funds seem to plummet and stay down for a while and I did not have the stomach for it back in 2015.
Title: Re: Fairfax India new issue
Post by: lessthaniv on October 18, 2018, 08:23:30 AM
I’m a buyer for the long term here..

I think some volatility, in addition to the financial firms as previously mentioned, is being caused by the upcoming election next April...

Title: Re: Fairfax India new issue
Post by: wondering on October 19, 2018, 08:22:50 AM
https://www.fairfaxindia.ca/news/press-releases/press-release-details/2018/Fairfax-India-Completes-Initial-Investment-in-The-Catholic-Syrian-Bank-Ltd/default.aspx
Title: Re: Fairfax India new issue
Post by: alpha on October 24, 2018, 07:44:53 PM
Now down -14% YTD, at this level it's getting close to where OMERS initiated their position in 2017.

I am not sure why it declined another 3% today, most of the public holdings look like they had a green day, and the Rupee didn't decline.

Anyone buying at these levels?
Title: Re: Fairfax India new issue
Post by: Lakesider on October 31, 2018, 03:10:21 PM
I've added here, I think IIFL issue will blow over and risk is being overstated. Fairfax can offer them a safety net given the size of the investment.
Title: Re: Fairfax India new issue
Post by: chrispy on November 01, 2018, 05:07:24 PM
"At September 30, 2018 common shareholders' equity was $2,014.4 million, or $13.08 per share, compared to $2,132.5 million, or $14.46 per share, at December 31, 2017, a decrease of 9.5% primarily related to unrealized foreign currency translation losses as a result of the weakening of the Indian rupee relative to the U.S. dollar, partially offset by net earnings in the first nine months of 2018."

A decrease by 10% over the past nine months seems to me to be a win. A benefit to holding private companies
Title: Re: Fairfax India new issue
Post by: DocSnowball on November 20, 2018, 01:25:31 PM
Started a small position (1% of portfolio) with long timeframe >10 years hopefully.

How does one find out about IIFL possible outcomes, I didn't see much detail in the letter. Wondering how well capitalized/ indebted their other investments are given rising interest rates?
Title: Re: Fairfax India new issue
Post by: thowed on November 21, 2018, 04:43:02 AM
I struggle to understand all the businesses in detail, but believe in the long-term India story, and hope that Fairfax should be in place to benefit.

Asian Airports can be fine businesses (Shanghai International is a case in point at the moment), but I don't know enough about the Bengaluru management to feel confident about how how well they'll execute the expansion.  I'm sure I just need to sit down and research more.

The Finechem chemicals business had a decent reputation (so I heard, but not from primary research) before Fairfax got involved.

Stock exchanges are great businesses I think if you believe in long-term capitalism.

I need to do a lot more work, but overall the sectors they've gone into look very appealing.

Having said that, don't forget there are a heap load of well-run family companies in India to choose from - it's not tricky to create a small basket, or find a fund manager who knows what they're doing.
Title: Re: Fairfax India new issue
Post by: DocSnowball on November 26, 2018, 09:56:25 AM
I struggle to understand all the businesses in detail, but believe in the long-term India story, and hope that Fairfax should be in place to benefit.

Asian Airports can be fine businesses (Shanghai International is a case in point at the moment), but I don't know enough about the Bengaluru management to feel confident about how how well they'll execute the expansion.  I'm sure I just need to sit down and research more.

The Finechem chemicals business had a decent reputation (so I heard, but not from primary research) before Fairfax got involved.

Stock exchanges are great businesses I think if you believe in long-term capitalism.

I need to do a lot more work, but overall the sectors they've gone into look very appealing.

Having said that, don't forget there are a heap load of well-run family companies in India to choose from - it's not tricky to create a small basket, or find a fund manager who knows what they're doing.

One thing I am noting from the latest filing is Sanmar common equity went from 554 (million Indian rupees) to 208,854. There is a section that gives reasoning but it is a 376 fold increase in a quarter and holds up the shareholder equity and book value per share in the bottom line for the year and the quarter. How does such a dramatic increase work out?

https://s1.q4cdn.com/293822657/files/doc_financials/quarterly_reports/2018/2018-Q3-Interim-Report-(FIH)-(Final).pdf (https://s1.q4cdn.com/293822657/files/doc_financials/quarterly_reports/2018/2018-Q3-Interim-Report-(FIH)-(Final).pdf)
"Sanmar Common Shares
At September 30, 2018 the company estimated the fair value of its investment in Sanmar common shares using a discounted cash flow analysis based on multi-year free cash flow projections with assumed after-tax discount rates ranging from 13.4% to 16.6% and long term growth rates ranging from 3.0% to 4.0% (December 31, 2017 - 15.2% to 19.5% and 2.0% to 3.6%, respectively). Free cash flow projections were based on EBITDA estimates derived from financial information for Sanmar's four business units (with additional financial information and analysis completed for Chemplast's underlying business units involved in new capital projects) prepared in the third quarter of 2018 by Sanmar's management. Discount rates were based on the company's assessment of risk premiums to the appropriate risk-free rate of the economic environment in which Sanmar operates. In the third quarter of 2018 Fairfax India recorded unrealized gains of $225,013 on its investment in Sanmar common shares primarily as a result of: (i) positive operational developments at Sanmar Egypt (successful completion of its increased capacities in Egypt) and Chemplast (will benefit from the completion of new capital projects); (ii) continued strong demand for PVC and related products in India, Europe, the Middle East and North Africa; and (iii) the decrease in the after-tax discount rates (principally related to the decreased risk at Sanmar Egypt as a result of the completion of its capital expenditure project to increase capacity). At September 30, 2018 the company's internal valuation model indicated that the fair value of the company's investment in Sanmar common shares was $208,854 (December 31, 2017 - $556). The changes in fair value of the company's investment in Sanmar common shares for the third quarters and first nine months of 2018 and 2017 are presented in the tables disclosed earlier in note 5."
Title: Re: Fairfax India new issue
Post by: petec on November 26, 2018, 10:14:16 AM
I struggle to understand all the businesses in detail, but believe in the long-term India story, and hope that Fairfax should be in place to benefit.

Asian Airports can be fine businesses (Shanghai International is a case in point at the moment), but I don't know enough about the Bengaluru management to feel confident about how how well they'll execute the expansion.  I'm sure I just need to sit down and research more.

The Finechem chemicals business had a decent reputation (so I heard, but not from primary research) before Fairfax got involved.

Stock exchanges are great businesses I think if you believe in long-term capitalism.

I need to do a lot more work, but overall the sectors they've gone into look very appealing.

Having said that, don't forget there are a heap load of well-run family companies in India to choose from - it's not tricky to create a small basket, or find a fund manager who knows what they're doing.

One thing I am noting from the latest filing is Sanmar common equity went from 554 (million Indian rupees) to 208,854. There is a section that gives reasoning but it is a 376 fold increase in a quarter and holds up the shareholder equity and book value per share in the bottom line for the year and the quarter. How does such a dramatic increase work out?

https://s1.q4cdn.com/293822657/files/doc_financials/quarterly_reports/2018/2018-Q3-Interim-Report-(FIH)-(Final).pdf (https://s1.q4cdn.com/293822657/files/doc_financials/quarterly_reports/2018/2018-Q3-Interim-Report-(FIH)-(Final).pdf)
"Sanmar Common Shares
At September 30, 2018 the company estimated the fair value of its investment in Sanmar common shares using a discounted cash flow analysis based on multi-year free cash flow projections with assumed after-tax discount rates ranging from 13.4% to 16.6% and long term growth rates ranging from 3.0% to 4.0% (December 31, 2017 - 15.2% to 19.5% and 2.0% to 3.6%, respectively). Free cash flow projections were based on EBITDA estimates derived from financial information for Sanmar's four business units (with additional financial information and analysis completed for Chemplast's underlying business units involved in new capital projects) prepared in the third quarter of 2018 by Sanmar's management. Discount rates were based on the company's assessment of risk premiums to the appropriate risk-free rate of the economic environment in which Sanmar operates. In the third quarter of 2018 Fairfax India recorded unrealized gains of $225,013 on its investment in Sanmar common shares primarily as a result of: (i) positive operational developments at Sanmar Egypt (successful completion of its increased capacities in Egypt) and Chemplast (will benefit from the completion of new capital projects); (ii) continued strong demand for PVC and related products in India, Europe, the Middle East and North Africa; and (iii) the decrease in the after-tax discount rates (principally related to the decreased risk at Sanmar Egypt as a result of the completion of its capital expenditure project to increase capacity). At September 30, 2018 the company's internal valuation model indicated that the fair value of the company's investment in Sanmar common shares was $208,854 (December 31, 2017 - $556). The changes in fair value of the company's investment in Sanmar common shares for the third quarters and first nine months of 2018 and 2017 are presented in the tables disclosed earlier in note 5."

Didn’t Sanmar repay a big loan to FFH? My recollection was the original equity investment was valued almost at 0 and most of the financing was the loan, so when the company repaid the loan the equity value will have risen dramatically.
Title: Re: Fairfax India new issue
Post by: DocSnowball on November 30, 2018, 11:23:00 AM
@thowed and @petec Thank you for your replies.
Title: Re: Fairfax India new issue
Post by: hobbit on January 10, 2019, 02:11:46 PM
Significant insider buying in the last 3-4 months
Title: Re: Fairfax India new issue
Post by: chrispy on January 13, 2019, 11:56:33 AM
Hobbit, where did you see this? I am having trouble finding anything besides Bradstreet with my quick search
Title: Re: Fairfax India new issue
Post by: hobbit on January 14, 2019, 07:47:28 AM
https://www.canadianinsider.com/node/7?ticker=FIH
Title: Re: Fairfax India new issue
Post by: gfp on January 14, 2019, 08:12:51 AM
Significant insider buying in the last 3-4 months

Is this "insider buying" or issuer repurchase activity?
Title: Re: Fairfax India new issue
Post by: Cigarbutt on January 14, 2019, 10:09:07 AM
Significant insider buying in the last 3-4 months
Is this "insider buying" or issuer repurchase activity?
Looking back at the last 6 months or so in the canadianinsider reports, most to all share purchase activity is corporate repurchasing, including the last part where the maximum (25% of volume per trading day) number of shares is repurchased for eventual cancellation.

https://www.fairfaxindia.ca/news/press-releases/press-release-details/2018/Fairfax-India-Holdings-Corporation-Intention-to-Make-a-Normal-Course-Issuer-Bid-for-Subordinate-Voting-Shares/default.aspx

The only insiders I see in that period (# of shares):
-J. Cloutier        -6350
-D. Bonham      +800
-B. Bradstreet   net +28500

Note to "gfp", since your name modification:
what's changed: I used to picture you as an international executive and now I think of Grandmothers For Peace.
what's the same: the level of interest I have for your posts.
Title: Re: Fairfax India new issue
Post by: Jurgis on January 14, 2019, 12:07:19 PM
Note to "gfp", since your name modification:
what's changed: I used to picture you as an international executive and now I think of Grandmothers For Peace.
what's the same: the level of interest I have for your posts.

Gross Financial Product?  8)
Title: Re: Fairfax India new issue
Post by: rohitc99 on January 18, 2019, 10:20:58 AM
i tried to put in an order in fidelity and it was blocked with a 144A restriction. as per fidelity, the stock has been placed on a restricted list for retail in the US as the company did not register its public issue from 2017. does anyone have any information on it ?

the fidelity rep checked on bloomberg terminal and confirmed that this is not a fidelity issue
Title: Re: Fairfax India new issue
Post by: DocSnowball on January 19, 2019, 04:17:47 PM
i tried to put in an order in fidelity and it was blocked with a 144A restriction. as per fidelity, the stock has been placed on a restricted list for retail in the US as the company did not register its public issue from 2017. does anyone have any information on it ?

the fidelity rep checked on bloomberg terminal and confirmed that this is not a fidelity issue

I have bought FFXDF from JPM Chase Investment account in Dec 2018 without any issues.
Title: Re: Fairfax India new issue
Post by: eclecticvalue on January 19, 2019, 10:37:03 PM
Rohitc99- This is the same problem I have been experiencing. Supposedly Fairfax India needs to file statements with a U.S. authority in order to be current.
Title: Re: Fairfax India new issue
Post by: rohitc99 on January 20, 2019, 10:27:06 AM
docsnowball - i did that a few months ago too and it worked then. Per fidelity, there was no hold then and was done recently. you can sell your stock now, but not buy

eclecticvalue - how do we get this fixed. is there anyone in the company we write to ? this seems to be an issue from 2017. seems to be very sloppy and careless on their part to miss something so basic
Title: Re: Fairfax India new issue
Post by: eclecticvalue on January 20, 2019, 11:39:32 AM
I would think the Exec team or Prem.
Title: Re: Fairfax India new issue
Post by: obtuse_investor on January 21, 2019, 03:43:04 AM
FIH is only listed in Canada. Why would the management have to report to SEC?

This is a genuine question. I don’t know what form the US listed entity is. It’s not an ADR. It’s a Wall Street manufactured trading instrument of some type.
Title: Re: Fairfax India new issue
Post by: gfp on January 21, 2019, 05:24:47 AM
Might be easier to get your fidelity account approved to purchase the Toronto shares directly vs. waiting for something to be 'fixed' on an unsponsored adr.
Title: Re: Fairfax India new issue
Post by: rohitc99 on January 21, 2019, 07:31:29 AM
FIH is only listed in Canada. Why would the management have to report to SEC?

This is a genuine question. I don’t know what form the US listed entity is. It’s not an ADR. It’s a Wall Street manufactured trading instrument of some type.

It trades as FFXDF on the OTCmarkets. is this not a US traded instrument. sorry, i am not clear about it, but i thought its traded in the US and hence needs to registered with the SEC
Title: Re: Fairfax India new issue
Post by: rohitc99 on January 21, 2019, 07:42:03 AM
Might be easier to get your fidelity account approved to purchase the Toronto shares directly vs. waiting for something to be 'fixed' on an unsponsored adr.

I have access to purchase toronto shares and tried that. It gives the same message : 144A restriction
Title: Re: Fairfax India new issue
Post by: petec on February 11, 2019, 10:35:40 PM
IIFL down 60% over 6 months to below 10x forward earnings. Anyone following it? I know there were liquidity concerns last year but I thought they’d passed.
Title: Re: Fairfax India new issue
Post by: ourkid8 on February 28, 2019, 12:17:47 PM
Anyone buying? I could not help myself today.
Title: Re: Fairfax India new issue
Post by: obtuse_investor on February 28, 2019, 08:00:24 PM
I nibbled last week.

I am getting uncomfortable with the size of this position for me. I will likely only add if price drops substantially (and value is not impacted).
Title: Re: Fairfax India new issue
Post by: Zorrofan on March 01, 2019, 04:24:43 AM
Anyone else have concerns about what happens to reforms if Modi should lose upcoming elections?
Title: Re: Fairfax India new issue
Post by: petec on March 01, 2019, 06:07:35 AM
I always have been!
Title: Re: Fairfax India new issue
Post by: obtuse_investor on March 01, 2019, 03:15:17 PM
If the FIH thesis depends on Modi being in power, I’d recommend this not be a long term holding. As far as I know, Modi is mortal. I expect the basket of well bought growing businesses will outlast him or any other politicians.

The reality is that Indians have seen and tasted the future. They have tasted capitalistic progress and all the trappings that come with it. Even if the Congress comes back in power I don’t expect India to close its borders again.
Title: Re: Fairfax India new issue
Post by: Pauly on March 01, 2019, 04:09:57 PM
Haven't Modi's reforms been somewhat lackluster anyway? I'm no expert on Indian politics, but from what I've read Modi isn't in trouble because people are sick of his reforms, it's that many people haven't seen any real progress. Though I'd be skeptical that the new Ghandi's could produce better results.
Title: Re: Fairfax India new issue
Post by: Txvestor on March 02, 2019, 11:00:53 PM
Modi reforms considered to favor the billionaire class and hurt the middle class. So some sheen has come off d agenda. In addition as mentioned here progress has been slower than people had hoped. It is correct that Congress and Gandhi unlikely to do anything positive. Most sensible people do realize that. Most likely scenario is a Modi minority gov't.
Title: Re: Fairfax India new issue
Post by: shalab on March 03, 2019, 09:06:21 AM
+1
India is essentially run by a couple of hundred billionaire families and their businesses. They are called the modern maharajas.

Modi government hasn't delivered on some of the reforms they promised (e.g:, removing retro-active tax on mergers) and they change the law to favor some of the above families. This was also the case with the previous government.

USA/India trade has gone up to 150B/year in 2018. Direct foreign investment is at 45 Billion in 2017. It won't matter who comes to power, this trend will continue.

If the FIH thesis depends on Modi being in power, I’d recommend this not be a long term holding. As far as I know, Modi is mortal. I expect the basket of well bought growing businesses will outlast him or any other politicians.

The reality is that Indians have seen and tasted the future. They have tasted capitalistic progress and all the trappings that come with it. Even if the Congress comes back in power I don’t expect India to close its borders again.
Title: Re: Fairfax India new issue
Post by: wondering on March 29, 2019, 06:29:20 AM
https://www.fairfaxindia.ca/news/press-releases/press-release-details/2019/Fairfax-India-Completes-Investment-in-Seven-Islands-Shipping-Limited/default.aspx
Title: Re: Fairfax India new issue
Post by: alpha on March 29, 2019, 06:21:34 PM
https://www.fairfaxindia.ca/news/press-releases/press-release-details/2019/Fairfax-India-Completes-Investment-in-Seven-Islands-Shipping-Limited/default.aspx

I don't know anything about the shipping industry but purchasing a tanker company in a country dependent on oil imports seems like a smart move. Hopefully it can expand like Saurashtra.
Title: Re: Fairfax India new issue
Post by: Lakesider on March 29, 2019, 08:08:37 PM
I don't know anything about the shipping industry but purchasing a tanker company in a country dependent on oil imports seems like a smart move. Hopefully it can expand like Saurashtra.

I think its likely a good time to be investing in the sector, rates have been in a trough over the past couple of years and operators have been taking losses. New deliveries are at a turning point in 2019 and capacity should start decreasing over the next few years, rates have steadied and could continue upwards.  New legislation in 2020 for low sulphur fules will increase the cost of running older ships so scrapping could increase further.

A lot of these tanker operators have been trading at discounts to the liquidation value, hard to tell at first glance but they could have got a very good price.
Title: Re: Fairfax India new issue
Post by: eclecticvalue on March 30, 2019, 02:51:53 PM
If anyone going to the Fairfax India AGM. Can anyone ask about why U.S. investors can't buy either the OTC or Canadian shares? When will it be fixed.
Title: Re: Fairfax India new issue
Post by: Spekulatius on April 09, 2019, 06:06:55 PM
Having said that, don't forget there are a heap load of well-run family companies in India to choose from - it's not tricky to create a small basket, or find a fund manager who knows what they're doing.

Can you name some examples of well run family business conglomerates?
Title: Re: Fairfax India new issue
Post by: tradevestor on August 01, 2019, 03:17:57 PM
Second quarter results:

https://www.fairfaxindia.ca/news/press-releases/press-release-details/2019/Fairfax-India-Holdings-Corporation-Second-Quarter-Financial-Results/default.aspx
Title: Re: Fairfax India new issue
Post by: SnarkyPuppy on August 10, 2019, 03:19:59 PM
This is a question for American investors in FIH.  It was noted earlier in this thread that FIH could well be deemed a PFIC by the IRS.  Jurgis commented, "It likely will be [a PFIC] unless it acquires controlled operating businesses fast."  So I'm wondering how others are dealing with this issue.  Possible strategies:

(1) Ignore the risk and hope the IRS either doesn't notice or decides it's not a PFIC.  Might work if you're a small shareholder.  Huge losses if it doesn't work.

(2) Try to figure out the PFIC rules, and go by them.  My impression is that the taxes one would then owe would make the investment much less attractive--I think essentially, all unrealized gains are taxed like ordinary income each year.  Also it's unclear to me what information is needed for tax filing, and how to get it if the company doesn't help out. 

I've only owned one PFIC, and the (Canadian) company provided Americans a sheet each year with the necessary information to deal with PFIC filing. 

Useful link:

https://ustaxcompliance.wordpress.com/tax-triggers/a-pfic-primer/

Did you ever receive any closure on this issue?
Title: Re: Fairfax India new issue
Post by: EricSchleien on August 13, 2019, 04:59:34 PM
From Oct 19, 2018 - an email from Fairfax India

Hello Eric
Fairfax India is considered a PFIC for tax purposes.
Thank you
John Varnell
VP


This is a question for American investors in FIH.  It was noted earlier in this thread that FIH could well be deemed a PFIC by the IRS.  Jurgis commented, "It likely will be [a PFIC] unless it acquires controlled operating businesses fast."  So I'm wondering how others are dealing with this issue.  Possible strategies:

(1) Ignore the risk and hope the IRS either doesn't notice or decides it's not a PFIC.  Might work if you're a small shareholder.  Huge losses if it doesn't work.

(2) Try to figure out the PFIC rules, and go by them.  My impression is that the taxes one would then owe would make the investment much less attractive--I think essentially, all unrealized gains are taxed like ordinary income each year.  Also it's unclear to me what information is needed for tax filing, and how to get it if the company doesn't help out. 

I've only owned one PFIC, and the (Canadian) company provided Americans a sheet each year with the necessary information to deal with PFIC filing. 

Useful link:

https://ustaxcompliance.wordpress.com/tax-triggers/a-pfic-primer/

Did you ever receive any closure on this issue?
Title: Re: Fairfax India new issue
Post by: TwoCitiesCapital on August 13, 2019, 08:46:38 PM
For U.S. shareholders - the rules have been clarified where those who own shares in PFICs in tax-free and tax-deferred accounts are exempt from the tax treatment and reporting required by taxable PFIC investors.

I'm having trouble locating any official documentation on it. I can find text in a google search from PWC, but can't identify the source of the quote on their actual website or from their publications.

Quote from PWC google results
Quote
s a result, US persons that are beneficiaries of or have interests in an organization or account exempt from tax (e.g., an individual retirement account (IRA) or a Section 529 plan) that own stock of a PFIC will not be subject to tax and reporting obligations under the PFIC rules.


I did find the below on some Cohen & Steers CPA site:
Quote
The final regulations codify prior IRS guidance related to the definition of a shareholder of a PFIC. Specifically, owners of an interest in a PFIC that is held through a tax-exempt entity are removed from the definition of PFIC shareholders. Therefore, for example, neither beneficiaries of pension funds nor owners of an IRA should be treated as shareholders of a PFIC if the pension or IRA is invested in an offshore feeder fund (blocker) that is formed as a foreign corporation. This clarified definition should be a welcome relief to a significant portion of alternative investors who are now exempt from filing Form 8621, Information Return by a Shareholder of a Passive Foreign Investment Company or Qualified Electing Fund.

https://www.cohencpa.com/insights/articles/updated-pfic-rules-and-relaxed-reporting (https://www.cohencpa.com/insights/articles/updated-pfic-rules-and-relaxed-reporting)
Title: Re: Fairfax India new issue
Post by: SnarkyPuppy on August 14, 2019, 05:05:10 PM
Thank you both, appreciate it.
Title: Re: Fairfax India new issue
Post by: obtuse_investor on August 20, 2019, 02:18:03 PM
FIH.U keeps on hitting 52 week lows lately: https://web.tmxmoney.com/quote.php?qm_symbol=fih.u

Do you think it is a macro thing? I haven't seen any news from holdings.
Title: Re: Fairfax India new issue
Post by: wondering on August 21, 2019, 07:10:48 AM
It is currently selling at 85% of book value.  I will put myself on the line and say the stock is cheap now and it's a good to buy (I have bought some more shares recently and I intend to add more).  I am not too worried about these short-term quarter losses and marco-economic noise in the news.

The portfolio of investments - airport, chemical company, financial services, grain storage, banking, shipping etc... are all companies and industries that will grow with the India.

Added Prem's 20-30 year experience of doing business in India makes me very comfort to be shareholder.

In other news (I am not sure if anyone has posted yet).  CSB formerly Catholic Syrian Bank is going public.

https://www.fairfaxindia.ca/news/press-releases/press-release-details/2019/Fairfax-India-Announces-Filing-of-IPO-Prospectus-by-CSB-Bank-Limited/default.aspx
Title: Re: Fairfax India new issue
Post by: petec on August 22, 2019, 12:45:49 AM

In other news (I am not sure if anyone has posted yet).  CSB formerly Catholic Syrian Bank is going public.

https://www.fairfaxindia.ca/news/press-releases/press-release-details/2019/Fairfax-India-Announces-Filing-of-IPO-Prospectus-by-CSB-Bank-Limited/default.aspx

Ha - IPO prospectuses have been nicknamed red herrings for a long time but I have never seen it used as an official term. Very funny!

https://en.wikipedia.org/wiki/Red_herring

Title: Re: Fairfax India new issue
Post by: TwoCitiesCapital on September 03, 2019, 12:04:16 PM
Did I miss some major headline or something? Up 15% today?
Title: Re: Fairfax India new issue
Post by: tradevestor on September 03, 2019, 12:15:10 PM
Interview with Prem Watsa over the weekend, maybe:

https://economictimes.indiatimes.com/markets/expert-view/i-see-money-coming-into-india-left-right-and-centre-prem-watsa/articleshow/70941492.cms (https://economictimes.indiatimes.com/markets/expert-view/i-see-money-coming-into-india-left-right-and-centre-prem-watsa/articleshow/70941492.cms)

https://economictimes.indiatimes.com/news/economy/finance/fairfax-to-invest-5-billion-more-in-india-in-next-5-years/articleshow/70942015.cms (https://economictimes.indiatimes.com/news/economy/finance/fairfax-to-invest-5-billion-more-in-india-in-next-5-years/articleshow/70942015.cms)
Title: Re: Fairfax India new issue
Post by: TwoCitiesCapital on September 03, 2019, 12:21:33 PM
Interview with Prem Watsa over the weekend, maybe:

https://economictimes.indiatimes.com/markets/expert-view/i-see-money-coming-into-india-left-right-and-centre-prem-watsa/articleshow/70941492.cms (https://economictimes.indiatimes.com/markets/expert-view/i-see-money-coming-into-india-left-right-and-centre-prem-watsa/articleshow/70941492.cms)

https://economictimes.indiatimes.com/news/economy/finance/fairfax-to-invest-5-billion-more-in-india-in-next-5-years/articleshow/70942015.cms (https://economictimes.indiatimes.com/news/economy/finance/fairfax-to-invest-5-billion-more-in-india-in-next-5-years/articleshow/70942015.cms)

Doubtful. It opened near flat. Only been the last 2-3 hours that it's rocketed higher. The only India related headline I've seen has been speculation that India is joining the global recession - nothing to send this bad boy up 15%.

Was hoping it'd continue to trend lower so I could buy more :/
Title: Re: Fairfax India new issue
Post by: elliott on September 05, 2019, 11:59:45 AM
I struggle to understand all the businesses in detail, but believe in the long-term India story, and hope that Fairfax should be in place to benefit.

Asian Airports can be fine businesses (Shanghai International is a case in point at the moment), but I don't know enough about the Bengaluru management to feel confident about how how well they'll execute the expansion.  I'm sure I just need to sit down and research more.

The Finechem chemicals business had a decent reputation (so I heard, but not from primary research) before Fairfax got involved.

Stock exchanges are great businesses I think if you believe in long-term capitalism.

I need to do a lot more work, but overall the sectors they've gone into look very appealing.

Having said that, don't forget there are a heap load of well-run family companies in India to choose from - it's not tricky to create a small basket, or find a fund manager who knows what they're doing.

One thing I am noting from the latest filing is Sanmar common equity went from 554 (million Indian rupees) to 208,854. There is a section that gives reasoning but it is a 376 fold increase in a quarter and holds up the shareholder equity and book value per share in the bottom line for the year and the quarter. How does such a dramatic increase work out?

https://s1.q4cdn.com/293822657/files/doc_financials/quarterly_reports/2018/2018-Q3-Interim-Report-(FIH)-(Final).pdf (https://s1.q4cdn.com/293822657/files/doc_financials/quarterly_reports/2018/2018-Q3-Interim-Report-(FIH)-(Final).pdf)
"Sanmar Common Shares
At September 30, 2018 the company estimated the fair value of its investment in Sanmar common shares using a discounted cash flow analysis based on multi-year free cash flow projections with assumed after-tax discount rates ranging from 13.4% to 16.6% and long term growth rates ranging from 3.0% to 4.0% (December 31, 2017 - 15.2% to 19.5% and 2.0% to 3.6%, respectively). Free cash flow projections were based on EBITDA estimates derived from financial information for Sanmar's four business units (with additional financial information and analysis completed for Chemplast's underlying business units involved in new capital projects) prepared in the third quarter of 2018 by Sanmar's management. Discount rates were based on the company's assessment of risk premiums to the appropriate risk-free rate of the economic environment in which Sanmar operates. In the third quarter of 2018 Fairfax India recorded unrealized gains of $225,013 on its investment in Sanmar common shares primarily as a result of: (i) positive operational developments at Sanmar Egypt (successful completion of its increased capacities in Egypt) and Chemplast (will benefit from the completion of new capital projects); (ii) continued strong demand for PVC and related products in India, Europe, the Middle East and North Africa; and (iii) the decrease in the after-tax discount rates (principally related to the decreased risk at Sanmar Egypt as a result of the completion of its capital expenditure project to increase capacity). At September 30, 2018 the company's internal valuation model indicated that the fair value of the company's investment in Sanmar common shares was $208,854 (December 31, 2017 - $556). The changes in fair value of the company's investment in Sanmar common shares for the third quarters and first nine months of 2018 and 2017 are presented in the tables disclosed earlier in note 5."

Didn’t Sanmar repay a big loan to FFH? My recollection was the original equity investment was valued almost at 0 and most of the financing was the loan, so when the company repaid the loan the equity value will have risen dramatically.

I am not sure that can be the reason. Fairfax India reports loans and stocks separately. Indeed, the report for that year included another, specific, line for the loan to Sanmar. Additionally, FIH explained the reason for the difference; more specifically, it provided three reasons. None of them related to the loan.
But maybe I am not understanding you correctly, and what you mean is that part of the loan was repaid, and that repayment was in kind, actually, stocks. There is actually some comments that might point to that, but then why did the loan line "Sanmar bonds" not decrease accordingly? It actually increased...
Jan 1, 2018 - Dec 31, 2018
Sanmar equity: 556 - 217,000 (increase classified as net change in unrealized gains on investments)
Sanmar bonds: 333,000 - 392,000 (increase classified as net change in unrealized gains on investments 60,000, and net unrealized currency translation loss (30,000))

EDIT Well, apparently the bonds were a very good investment, and the amount Sanmar owed to FIH at their maturity was ca $600,000 From that we can easily see how "Sanmar equity" increased to $200,000 even when "Sanmar bonds" did also increase by ca $100,000 Chapeaux for FIH
Title: Re: Fairfax India new issue
Post by: no_free_lunch on October 17, 2019, 11:36:20 AM
Stupid question.  Is FIH-U.TO listed in USD or CAD?
Title: Re: Fairfax India new issue
Post by: gokou3 on October 17, 2019, 11:40:26 AM
Stupid question.  Is FIH-U.TO listed in USD or CAD?

Listed and quoted in USD on the TSX.  They report in USD as well.
Title: Re: Fairfax India new issue
Post by: no_free_lunch on October 17, 2019, 11:41:59 AM
Thank you gokou3.  I bought a starter position and saw it was pulling from my USD balance.  Based on what you have described it makes sense.
Title: Re: Fairfax India new issue
Post by: petec on October 21, 2019, 01:24:41 AM
I struggle to understand all the businesses in detail, but believe in the long-term India story, and hope that Fairfax should be in place to benefit.

Asian Airports can be fine businesses (Shanghai International is a case in point at the moment), but I don't know enough about the Bengaluru management to feel confident about how how well they'll execute the expansion.  I'm sure I just need to sit down and research more.

The Finechem chemicals business had a decent reputation (so I heard, but not from primary research) before Fairfax got involved.

Stock exchanges are great businesses I think if you believe in long-term capitalism.

I need to do a lot more work, but overall the sectors they've gone into look very appealing.

Having said that, don't forget there are a heap load of well-run family companies in India to choose from - it's not tricky to create a small basket, or find a fund manager who knows what they're doing.

One thing I am noting from the latest filing is Sanmar common equity went from 554 (million Indian rupees) to 208,854. There is a section that gives reasoning but it is a 376 fold increase in a quarter and holds up the shareholder equity and book value per share in the bottom line for the year and the quarter. How does such a dramatic increase work out?

https://s1.q4cdn.com/293822657/files/doc_financials/quarterly_reports/2018/2018-Q3-Interim-Report-(FIH)-(Final).pdf (https://s1.q4cdn.com/293822657/files/doc_financials/quarterly_reports/2018/2018-Q3-Interim-Report-(FIH)-(Final).pdf)
"Sanmar Common Shares
At September 30, 2018 the company estimated the fair value of its investment in Sanmar common shares using a discounted cash flow analysis based on multi-year free cash flow projections with assumed after-tax discount rates ranging from 13.4% to 16.6% and long term growth rates ranging from 3.0% to 4.0% (December 31, 2017 - 15.2% to 19.5% and 2.0% to 3.6%, respectively). Free cash flow projections were based on EBITDA estimates derived from financial information for Sanmar's four business units (with additional financial information and analysis completed for Chemplast's underlying business units involved in new capital projects) prepared in the third quarter of 2018 by Sanmar's management. Discount rates were based on the company's assessment of risk premiums to the appropriate risk-free rate of the economic environment in which Sanmar operates. In the third quarter of 2018 Fairfax India recorded unrealized gains of $225,013 on its investment in Sanmar common shares primarily as a result of: (i) positive operational developments at Sanmar Egypt (successful completion of its increased capacities in Egypt) and Chemplast (will benefit from the completion of new capital projects); (ii) continued strong demand for PVC and related products in India, Europe, the Middle East and North Africa; and (iii) the decrease in the after-tax discount rates (principally related to the decreased risk at Sanmar Egypt as a result of the completion of its capital expenditure project to increase capacity). At September 30, 2018 the company's internal valuation model indicated that the fair value of the company's investment in Sanmar common shares was $208,854 (December 31, 2017 - $556). The changes in fair value of the company's investment in Sanmar common shares for the third quarters and first nine months of 2018 and 2017 are presented in the tables disclosed earlier in note 5."

Didn’t Sanmar repay a big loan to FFH? My recollection was the original equity investment was valued almost at 0 and most of the financing was the loan, so when the company repaid the loan the equity value will have risen dramatically.

I am not sure that can be the reason. Fairfax India reports loans and stocks separately. Indeed, the report for that year included another, specific, line for the loan to Sanmar. Additionally, FIH explained the reason for the difference; more specifically, it provided three reasons. None of them related to the loan.
But maybe I am not understanding you correctly, and what you mean is that part of the loan was repaid, and that repayment was in kind, actually, stocks. There is actually some comments that might point to that, but then why did the loan line "Sanmar bonds" not decrease accordingly? It actually increased...
Jan 1, 2018 - Dec 31, 2018
Sanmar equity: 556 - 217,000 (increase classified as net change in unrealized gains on investments)
Sanmar bonds: 333,000 - 392,000 (increase classified as net change in unrealized gains on investments 60,000, and net unrealized currency translation loss (30,000))

EDIT Well, apparently the bonds were a very good investment, and the amount Sanmar owed to FIH at their maturity was ca $600,000 From that we can easily see how "Sanmar equity" increased to $200,000 even when "Sanmar bonds" did also increase by ca $100,000 Chapeaux for FIH

On the face of it you're right and my comment was dumb (if they paid off ther loan with cash on hand, which is what I was thinking, it would have no impact on BV. D'oh).

Wopuld need to go back and look closely to ascertain the answer but one thought is that IIRC the terms of the loan were pretty attractive and I wonder if it might have been on Sanmar's books at more than face value, causing a gain to be booked when it was repaid. I will check.
Title: Re: Fairfax India new issue
Post by: wondering on December 02, 2019, 06:40:08 AM
It appears that things are going well with the CSB (Catholic Syrian Bank) IPO.  See third paragraph

https://economictimes.indiatimes.com/markets/ipos/fpos/bumper-ipos-bring-grey-market-alive-strong-listing-seen-for-csb/articleshow/72326645.cms
Title: Re: Fairfax India new issue
Post by: TwoCitiesCapital on December 02, 2019, 10:59:48 AM
It appears that things are going well with the CSB (Catholic Syrian Bank) IPO.  See third paragraph

https://economictimes.indiatimes.com/markets/ipos/fpos/bumper-ipos-bring-grey-market-alive-strong-listing-seen-for-csb/articleshow/72326645.cms

Fingers crossed.
Title: Re: Fairfax India new issue
Post by: Lakesider on December 04, 2019, 02:04:21 AM
https://www.moneycontrol.com/news/business/markets/csb-bank-surges-57-on-debut-day-should-investors-buy-sell-or-hold-4698961.html
Title: Re: Fairfax India new issue
Post by: lessthaniv on December 16, 2019, 08:31:07 AM
Nice bump to book value today.

—-


Fairfax India Holdings Corp
Symbol   FIH
Shares Issued   122,631,481
Close 2019-12-13   U$ 11.97
Recent Sedar Documents
View Original Document
Fairfax India to sell 11.5% of Anchorage for $134M


2019-12-16 09:11 ET - News Release

Mr. John Varnell reports

FAIRFAX INDIA SELLS MINORITY POSITION OF ANCHORAGE INFRASTRUCTURE

Fairfax India Holdings Corp. has entered into an agreement to sell an interest in Anchorage Infrastructure Investments Holdings Ltd. of approximately 11.5 per cent on a fully diluted basis for gross proceeds of approximately 9.5 billion Indian rupees (approximately $134-million at current exchange rates). The interest in Anchorage will be sold by way of a private investment agreement. (Note: All dollar amounts in this news release are expressed in U.S. dollars, except as otherwise noted).

Anchorage is a subsidiary of Fairfax India and will be its flagship company for investing in companies, businesses and opportunities in the airport sector in India. Anchorage is also Fairfax India's platform for bidding on airport privatization projects in India. Currently, Fairfax India, through its wholly-owned subsidiary, FIH Mauritius Investments Ltd, owns a 54.0% interest in Bangalore International Airport ("BIAL"). As part of the transaction, Fairfax India will restructure its interest in BIAL such that a portion of such interest will be held through Anchorage and, following closing of the transaction, Fairfax India's effective ownership interest in BIAL will decrease to approximately 49.0% on a fully-diluted basis.

The transaction is subject to customary closing conditions, including various third-party consents, and is expected to close in the first half of 2020.

As a result of the transaction, Fairfax India will record investment gains of approximately $506 million (approximately INR 35.6 billion at current exchange rates) implying an increase in book value per share of approximately $3.30 per share. The investment gains are supported by positive operational developments at BIAL. For the 12-month period ending October 2019, total traffic at BIAL was approximately 33.7 million passengers. The second runway commenced operations in December 2019, making BIAL the first airport in India to operate independent parallel runways that enable aircraft to land or take-off simultaneously on both runways. In addition, the expansion project for a second terminal at BIAL is expected to be completed in 2021.

Fairfax India is an investment holding company whose objective is to achieve long-term capital appreciation, while preserving capital, by investing in public and private equity securities and debt instruments in India and Indian businesses or other businesses with customers, suppliers or business primarily conducted in, or dependent on, India.
Title: Re: Fairfax India new issue
Post by: petec on December 16, 2019, 10:22:24 AM
By my maths that implies that 43.5% of Bial has been transferred to Anchorage and 10.5% remains at FIH. That sound right?

My thinking is that 5% of BIAL must equal 11.5% of Anchorage.
Title: Re: Fairfax India new issue
Post by: Lakesider on December 16, 2019, 05:45:32 PM
So they sold BIAL to themselves and realised a $3 gain?  ::)
Title: Re: Fairfax India new issue
Post by: Viking on December 16, 2019, 07:03:30 PM
I am not sure who the buyer is. “The interest in Anchorage will be sold by way of a private investment agreement.”

My guess is the problem with private investments like BIAL is coming up with a proper valuation. If they sold a portion of BiAL to an outside investor this would perhaps give then an opportunity to update their internal valuation.
Title: Re: Fairfax India new issue
Post by: petec on December 16, 2019, 11:48:07 PM
I am not sure who the buyer is. “The interest in Anchorage will be sold by way of a private investment agreement.”

My guess is the problem with private investments like BIAL is coming up with a proper valuation. If they sold a portion of BiAL to an outside investor this would perhaps give then an opportunity to update their internal valuation.

Agreed. In an ideal world (given the stated intent to bid on other airports) the investor is an established airport operator, but if that was the case I imagine both sides would want that fact publicised.
Title: Re: Fairfax India new issue
Post by: TwoCitiesCapital on December 17, 2019, 09:10:55 AM
Crazy that this transaction has resulted in the massive pop over the last two days.

Same BIAL that it's always been, but the accounting change allows them to bump up the book value and start charging fees now that book value is above high water mark. If anything, shareholders are WORSE off after the transaction with regard to fees, but that didn't stop the price from ripping 10%.
Title: Re: Fairfax India new issue
Post by: hobbit on December 17, 2019, 09:26:40 AM
Crazy that this transaction has resulted in the massive pop over the last two days.

Same BIAL that it's always been, but the accounting change allows them to bump up the book value and start charging fees now that book value is above high water mark. If anything, shareholders are WORSE off after the transaction with regard to fees, but that didn't stop the price from ripping 10%.

if you compare BIAL with other publiclty traded airports around the world , it still seems quite a bit undervalued even more so with a second terminal coming up soon.
Title: Re: Fairfax India new issue
Post by: TwoCitiesCapital on December 17, 2019, 09:35:52 AM
Crazy that this transaction has resulted in the massive pop over the last two days.

Same BIAL that it's always been, but the accounting change allows them to bump up the book value and start charging fees now that book value is above high water mark. If anything, shareholders are WORSE off after the transaction with regard to fees, but that didn't stop the price from ripping 10%.

if you compare BIAL with other publiclty traded airports around the world , it still seems quite a bit undervalued even more so with a second terminal coming up soon.

Absolutely agree. That is, in part, why I was a buyer at $13, and $12, and $11. All I'm saying is this transaction is just an accounting entry - it's the same BIAL it was 2-days ago, but the shares are 10% higher and Fairfax can now charge fees again as this pushes NAV substantially higher.

I get why Fairfax did it. I just don't understand why this would pop the stock or why the people buying it today weren't aware of the value of BIAL two days ago. 
Title: Re: Fairfax India new issue
Post by: obtuse_investor on December 17, 2019, 03:41:47 PM
I find it interesting that this group assumed this transaction is an attempt by FFH to draw fees from FIH. Peak pessimism on FFH management?

Has anyone looked into foreign ownership rules? They did decrease beneficial ownership to 49%.
Title: Re: Fairfax India new issue
Post by: lessthaniv on December 17, 2019, 04:31:23 PM
Crazy that this transaction has resulted in the massive pop over the last two days.

Same BIAL that it's always been, but the accounting change allows them to bump up the book value and start charging fees now that book value is above high water mark. If anything, shareholders are WORSE off after the transaction with regard to fees, but that didn't stop the price from ripping 10%.

if you compare BIAL with other publiclty traded airports around the world , it still seems quite a bit undervalued even more so with a second terminal coming up soon.

Absolutely agree. That is, in part, why I was a buyer at $13, and $12, and $11. All I'm saying is this transaction is just an accounting entry - it's the same BIAL it was 2-days ago, but the shares are 10% higher and Fairfax can now charge fees again as this pushes NAV substantially higher.

I get why Fairfax did it. I just don't understand why this would pop the stock or why the people buying it today weren't aware of the value of BIAL two days ago.

For me, a better question is why investors sold the stock so low. At September 30, 2019 common shareholders' equity was $2,064.7 million, or book value per share of $13.53 (us). Add to that the $3.30 (us) for the current revaluation and we have book value $16.83 (us). So, if it's the same BIAL as it's always been, then the low was ~ 65% of book. With clarity on the financials coming, I think a retracement towards book value is in the cards. I'm not scratching my head as the stock recovers back up, I was scratching my head on the way down.
Title: Re: Fairfax India new issue
Post by: obtuse_investor on December 17, 2019, 05:12:14 PM
As value investors we know that Mr market has his mood swings. Head scratching moments are the precise opportunities to make money.

Good for you for taking advantage of the situation! :-)
Title: Re: Fairfax India new issue
Post by: TwoCitiesCapital on December 18, 2019, 08:58:42 AM
I find it interesting that this group assumed this transaction is an attempt by FFH to draw fees from FIH. Peak pessimism on FFH management?

Has anyone looked into foreign ownership rules? They did decrease beneficial ownership to 49%.

Why wouldn't we assume that?

They charge fees for performance and deserve to be paid them if they perform. In this case, they performed, but the accounting nature prevented that performance from being realized for fee calculations. This transaction changes that. 

I'm certainly not saying it's a bad thing or an immoral thing - they deserve to be paid. Only that us investors we're getting a free ride before, and we're not now and the stock is up on that news.
Title: Re: Fairfax India new issue
Post by: wondering on December 23, 2019, 04:27:56 PM
https://www.fairfaxindia.ca/news/press-releases/press-release-details/2019/Fairfax-India-Completes-Transaction-With-Sanmar-Chemicals-Group/default.aspx
Title: Re: Fairfax India new issue
Post by: Viking on February 04, 2020, 11:17:51 AM
Crazy that this transaction has resulted in the massive pop over the last two days.

Same BIAL that it's always been, but the accounting change allows them to bump up the book value and start charging fees now that book value is above high water mark. If anything, shareholders are WORSE off after the transaction with regard to fees, but that didn't stop the price from ripping 10%.

if you compare BIAL with other publiclty traded airports around the world , it still seems quite a bit undervalued even more so with a second terminal coming up soon.

Absolutely agree. That is, in part, why I was a buyer at $13, and $12, and $11. All I'm saying is this transaction is just an accounting entry - it's the same BIAL it was 2-days ago, but the shares are 10% higher and Fairfax can now charge fees again as this pushes NAV substantially higher.

I get why Fairfax did it. I just don't understand why this would pop the stock or why the people buying it today weren't aware of the value of BIAL two days ago.

For me, a better question is why investors sold the stock so low. At September 30, 2019 common shareholders' equity was $2,064.7 million, or book value per share of $13.53 (us). Add to that the $3.30 (us) for the current revaluation and we have book value $16.83 (us). So, if it's the same BIAL as it's always been, then the low was ~ 65% of book. With clarity on the financials coming, I think a retracement towards book value is in the cards. I'm not scratching my head as the stock recovers back up, I was scratching my head on the way down.

The stock is on sale again :-) trading today at under $12.50. With the second terminal at BIAL scheduled to open next year there is more near term upside for that asset to continue to grow much more in value.

Given the disconnect in where the stock is trading ($12.50) and likely reported Q4 book value ($16.50 to $17.00) it will be interesting to see how Fairfax India (and Fairfax) responds. I see in the past Fairfax India has bought back stock; perhaps they get more aggressive and use some of the proceeds from recent transactions to buy back a big chunk of stock. Or perhaps Fairfax increases its stake?
Title: Re: Fairfax India new issue
Post by: DocSnowball on February 04, 2020, 01:38:48 PM
are you able to purchase this in the US? I tried via Fidelity but wasn't able to complete the transaction. Thanks in advance for sharing your experience and a solution if there is one!
Title: Re: Fairfax India new issue
Post by: Viking on February 04, 2020, 04:57:29 PM
Have you tried FFXDF (OTC)? It is very thinly traded.

My issues is i would like to buy on the Canadian side (FIH.U) in a Can$ account but it is traded on the TSX as a US$ stock. So to avoid currency charges i have to buy in my US$ account which it picks up as FFXDF. Not sure why the company listed the stock on the TSX as a US$ stock.
Title: Re: Fairfax India new issue
Post by: Viking on February 14, 2020, 09:47:03 AM
Fairfax India reported yesterday. As expected, the increase in 'fair value' of BIAL increased BV to $16.89/share (from $13.86 at Sept 30).

Key development: "The net change in unrealized gains on BIAL of $751.5 million are supported by positive operational developments and the finalization of BIAL's real estate development plan."

The other piece of good news with Fairfax India is what is going on with its triplet investments in IIFL (Wealth, Finance and Securities) to start the new year. These three companies had been in a bear market for about 24 months (falling in value by more than 50%). However, they all look to have bottomed in price last Oct and have been moving higher since then. And so far in 2020 (6 weeks) they are up +45% or about $180 million. Fairfax India has 153 million shares outstanding so this increase (more than $1.00 per Fairfax India share) is significant. This will be worth monitoring moving forward. 

Shares are up a little today to $12.94

Attached is an Excel spreadsheet that can be used to track all of Fairfax India's publicly traded holdings (tab 2 of the spreadsheet is a tracker for FFH holdings). Let me know if you see any errors :-)
Title: Re: Fairfax India new issue
Post by: Xerxes on February 14, 2020, 04:29:04 PM
Viking
Thanks for the posting.

When i added up the gain on the IIFL family capital gains from close of the year through today, it comes to $187 million, which is what you have. But that gain belongs to all IIFL shareholders and not just FIH's 150 million shares.

Did you make that adjustment ?
Or is #shares shown on column Q is number of share owned entirely by FIH ?
Title: Re: Fairfax India new issue
Post by: Xerxes on February 14, 2020, 04:32:13 PM
BTW the FFH tab of your excel is a work of art
Title: Re: Fairfax India new issue
Post by: Viking on February 14, 2020, 10:32:35 PM
Viking
Thanks for the posting.

When i added up the gain on the IIFL family capital gains from close of the year through today, it comes to $187 million, which is what you have. But that gain belongs to all IIFL shareholders and not just FIH's 150 million shares.

Did you make that adjustment ?
Or is #shares shown on column Q is number of share owned entirely by FIH ?

Xerxes, nice to hear that you are finding the spreadsheets useful :-) The Fairfax information is much more 'hairy' and I plan on updating it when the Annual report comes out. The share count (for all companies) is shares owned by Fairfax India. If you are interested the Fairfax India quarterly reports do a great job of clearly laying out all investments they hold (with lots of different perspectives). I wish Fairfax would do the same. I have attached a screen shot of page 30 of the Q3 report as an example (hopefully it opens in a format you can see).
Title: Re: Fairfax India new issue
Post by: bizaro86 on February 15, 2020, 08:54:42 AM
Thanks Viking! Super helpful for someone getting up to speed here. I have always had this one in the "too many fees" pile, but took a deeper look based on this thread.

The increase in reported book seems like an easy obvious catalyst here. I dont think the airport is overvalued now (although I couldn't find the full 2018 annual report, would appreciate a link if anyone has). Biggest risks there seem to be an unfavorable regulatory determination when their 5 year rate set period is up in 2021, and big inflation in India which would debase the value of their capital for regulatory purposes when converted to hard currency. The development land seems like upside as well.

I like the container port asset (infrastructure, probably barrier to entry). The other assets, (chemicals, banking) seem fine. Although between the airport and the banks if inflation breaks out in India a bunch of their assets would be directly denominated in rupees and wouldn't re-base.

I've taken a good sized starter position here.
Title: Re: Fairfax India new issue
Post by: obtuse_investor on February 15, 2020, 09:11:13 AM
I am wondering what the market sentiment for FIH is. As of this writing it is selling at 0.76 times year end book value. The assets are earning cash and are profitable. Whenever there is a relevant transaction they get marked to market. So the book value is likely a good approximation.

Why the discount? No faith in management? Fees do not justify the discount. Is the market thinking that Indian assets are overpriced on the books?

I am incredibly patient. Just wondering what the narrative is to justify the large discount to book.
Title: Re: Fairfax India new issue
Post by: Xerxes on February 15, 2020, 09:22:05 AM
I think it is just due to lack of inflows funds into EM with EM being out of fashion as whole; and nothing to do with FFH management.
i am very content with the discount. Have been buying since 2017.

i think it is one of those investment, that once inflows to EM picks up some years from now, the same folks that refuse to buy it at current depressed prices would willing to pay 1.5x book. 

And i like the fact that the volatility of IIFL (it being mark to market) creates discount opportunities in the stock, with the private holdings acting as a dampener or a floor, when FIH stock falls.
Title: Re: Fairfax India new issue
Post by: bizaro86 on February 15, 2020, 10:10:59 AM
I am wondering what the market sentiment for FIH is. As of this writing it is selling at 0.76 times year end book value. The assets are earning cash and are profitable. Whenever there is a relevant transaction they get marked to market. So the book value is likely a good approximation.

Why the discount? No faith in management? Fees do not justify the discount. Is the market thinking that Indian assets are overpriced on the books?

I am incredibly patient. Just wondering what the narrative is to justify the large discount to book.

I think you can make a case that the fees justify a pretty significant discount. The fees are basically 1.5% plus 20% of returns over 5%. That is guaranteed to be more than 20% of total returns. If outside investors get under 80% of the returns, I can see the argument that it should trade under 80% of NAV.

The fees could also end up being larger if the price stays below book value. The fee is paid based on book value increases, but it is paid in shares at VWAP. So if the share price is below book when the fee is paid, they will get more shares (this works backward as well, up to 2x book when Fairfax can take cash instead).

I think the investment performance is likely to justify the fees here, especially considering the current discount, so I'm a buyer right now, but the fees are significant and do justify a discount to NAV imo.
Title: Re: Fairfax India new issue
Post by: Viking on February 15, 2020, 12:39:34 PM
Thanks Viking! Super helpful for someone getting up to speed here. I have always had this one in the "too many fees" pile, but took a deeper look based on this thread.

The increase in reported book seems like an easy obvious catalyst here. I dont think the airport is overvalued now (although I couldn't find the full 2018 annual report, would appreciate a link if anyone has). Biggest risks there seem to be an unfavorable regulatory determination when their 5 year rate set period is up in 2021, and big inflation in India which would debase the value of their capital for regulatory purposes when converted to hard currency. The development land seems like upside as well.

I like the container port asset (infrastructure, probably barrier to entry). The other assets, (chemicals, banking) seem fine. Although between the airport and the banks if inflation breaks out in India a bunch of their assets would be directly denominated in rupees and wouldn't re-base.

I've taken a good sized starter position here.

I found it useful to do a quick read of all 32 pages of posts on this thread. It provides a great look into the life of a stock. What a roller coaster ride! In the beginning there was such euphoria (and interest). And rightly so. Fairfax has a long history of investing well in Indian stocks. People were happy a few years ago to pay well above BV.

What happened? The past 2 years have not been kind.
- INR currency has depreciated about 10% versus the US$ (their reporting currency)
- banking crises in India caused IIFL stock price to drop 50% (all financials got wacked)
- Fairfax India ‘paid up’ to get control position of BIAL; looked like big overpay at the time

Where are we today?
- currency looks to have stabilized at current levels (we will see)
- banking crises in India has forced financials to fix a few things (which is good for shareholders) and the IIFL triplets are once again coming back into favour (stock prices up 45% in the last 6 weeks)
- BIAL continues to execute its business plan with 2nd runway opening in 2019, 2nd terminal on track to open next year (2021) and progress being made on monetizing the land around the airport. Bottom line, value of the airport asset is up significantly and the glide path for future growth is happening.

I agree the fee structure for Fairfax India is not good. The fact the stock is listed in Canada but trades in US$ is problematic. I also do not like how illiquid the shares are.

Do i believe current BV is $16.89? The problem with stocks in general and especially Indian stocks is it is tough to know. So it really comes down to do you trust management. And i do but not blindly. Is there some promotion in the current price of BIAL? Probably. Will the airport be increasing in value in the coming years? Yes. So even if the current value attached to BIAL is a little stretched the business will get there over time.

With shares trading at $12.85 (my average price is about $12.45) BIAL is still being valued below the old valuation. I think there is a large margin of safety at the current stock price. Investor sentiment in Fairfax India is at its low. And with IIFL triplets on fire the margin of safety is only getting larger as we start the new year.

One thing i really do appreciate is all the disclosure that Fairfax India does. It is very easy to understand what they own, when they bought it, what it cost and what they think it is worth at each quarter end.
Title: Re: Fairfax India new issue
Post by: Viking on February 15, 2020, 01:01:11 PM
I am wondering what the market sentiment for FIH is. As of this writing it is selling at 0.76 times year end book value. The assets are earning cash and are profitable. Whenever there is a relevant transaction they get marked to market. So the book value is likely a good approximation.

Why the discount? No faith in management? Fees do not justify the discount. Is the market thinking that Indian assets are overpriced on the books?

I am incredibly patient. Just wondering what the narrative is to justify the large discount to book.

I think it is safe to say sentiment in FIH is at an all time low. Same for FFH (the two are linked at the hip). My guess is a lot of the initial investors in FIH were big FFH supporters (at the time).

Although i would say i think the issues at FFH were internal; they made some bad decisions. Fortunately, i think FFH has learned some important lessons and have been moving in a better direction for about 2 years. But it will take time to right the ship and get BV growth into double digits on a consistent basis.

I think the issues with FIH are more external. INR devaluation hurt. The Indian banking crises was not their doing; however, it crushed the value of IIFL. Until recently, book value for BIAL was near cost.

Bottom line, investors were too optimistic a couple of years ago. And now they are too pessimistic. Company (FIH) has not really changed that much :-)
Title: Re: Fairfax India new issue
Post by: Viking on February 15, 2020, 01:12:58 PM
I think it is just due to lack of inflows funds into EM with EM being out of fashion as whole; and nothing to do with FFH management.
i am very content with the discount. Have been buying since 2017.

i think it is one of those investment, that once inflows to EM picks up some years from now, the same folks that refuse to buy it at current depressed prices would willing to pay 1.5x book. 

And i like the fact that the volatility of IIFL (it being mark to market) creates discount opportunities in the stock, with the private holdings acting as a dampener or a floor, when FIH stock falls.

Agreed. I missed this in my previous point. It looks to me like EM and India in particular was starting to come back into favour the end of Q4 and start of 2020 (before Caronavirus hit). I think this trade may come back into favour in another month or two which would help investments like FIH.
Title: Re: Fairfax India new issue
Post by: Viking on February 15, 2020, 05:16:47 PM
Thanks Viking! Super helpful for someone getting up to speed here. I have always had this one in the "too many fees" pile, but took a deeper look based on this thread.

The increase in reported book seems like an easy obvious catalyst here. I dont think the airport is overvalued now (although I couldn't find the full 2018 annual report, would appreciate a link if anyone has). Biggest risks there seem to be an unfavorable regulatory determination when their 5 year rate set period is up in 2021, and big inflation in India which would debase the value of their capital for regulatory purposes when converted to hard currency. The development land seems like upside as well.

I like the container port asset (infrastructure, probably barrier to entry). The other assets, (chemicals, banking) seem fine. Although between the airport and the banks if inflation breaks out in India a bunch of their assets would be directly denominated in rupees and wouldn't re-base.

I've taken a good sized starter position here.

Attached below is the 2017-18 BIAL AR (PDF).
Title: Re: Fairfax India new issue
Post by: bizaro86 on February 15, 2020, 06:45:18 PM
Thanks Viking! Super helpful for someone getting up to speed here. I have always had this one in the "too many fees" pile, but took a deeper look based on this thread.

The increase in reported book seems like an easy obvious catalyst here. I dont think the airport is overvalued now (although I couldn't find the full 2018 annual report, would appreciate a link if anyone has). Biggest risks there seem to be an unfavorable regulatory determination when their 5 year rate set period is up in 2021, and big inflation in India which would debase the value of their capital for regulatory purposes when converted to hard currency. The development land seems like upside as well.

I like the container port asset (infrastructure, probably barrier to entry). The other assets, (chemicals, banking) seem fine. Although between the airport and the banks if inflation breaks out in India a bunch of their assets would be directly denominated in rupees and wouldn't re-base.

I've taken a good sized starter position here.

I found it useful to do a quick read of all 32 pages of posts on this thread. It provides a great look into the life of a stock. What a roller coaster ride! In the beginning there was such euphoria (and interest). And rightly so. Fairfax has a long history of investing well in Indian stocks. People were happy a few years ago to pay well above BV.

What happened? The past 2 years have not been kind.
- INR currency has depreciated about 10% versus the US$ (their reporting currency)
- banking crises in India caused IIFL stock price to drop 50% (all financials got wacked)
- Fairfax India ‘paid up’ to get control position of BIAL; looked like big overpay at the time

Where are we today?
- currency looks to have stabilized at current levels (we will see)
- banking crises in India has forced financials to fix a few things (which is good for shareholders) and the IIFL triplets are once again coming back into favour (stock prices up 45% in the last 6 weeks)
- BIAL continues to execute its business plan with 2nd runway opening in 2019, 2nd terminal on track to open next year (2021) and progress being made on monetizing the land around the airport. Bottom line, value of the airport asset is up significantly and the glide path for future growth is happening.

I agree the fee structure for Fairfax India is not good. The fact the stock is listed in Canada but trades in US$ is problematic. I also do not like how illiquid the shares are.

Do i believe current BV is $16.89? The problem with stocks in general and especially Indian stocks is it is tough to know. So it really comes down to do you trust management. And i do but not blindly. Is there some promotion in the current price of BIAL? Probably. Will the airport be increasing in value in the coming years? Yes. So even if the current value attached to BIAL is a little stretched the business will get there over time.

With shares trading at $12.85 (my average price is about $12.45) BIAL is still being valued below the old valuation. I think there is a large margin of safety at the current stock price. Investor sentiment in Fairfax India is at its low. And with IIFL triplets on fire the margin of safety is only getting larger as we start the new year.

One thing i really do appreciate is all the disclosure that Fairfax India does. It is very easy to understand what they own, when they bought it, what it cost and what they think it is worth at each quarter end.

Thanks for the pdf! I had read the entire thread, and that was a key part of my decision process. Getting a feel for what the market sentiment among value investors (who are the target share buyers for anything Fairfax related) when this traded for >$18 was important to me. While I think the fees probably justify a discount to NAV, I can also easily see how the market could justify a premium to NAV for relationships/deal flow/private equity style returns.
Title: Re: Fairfax India new issue
Post by: petec on February 15, 2020, 10:14:57 PM
Where did you get the BIAL AR and is there a more recent one? Great find!
Title: Re: Fairfax India new issue
Post by: Viking on February 15, 2020, 11:19:51 PM
Where did you get the BIAL AR and is there a more recent one? Great find!

I found the old BIAL AR doing a search on the internet. I think it was released in Dec. So my guess is the 'new' 2018-2019 report should be out shortly. BIAL has a spot for it on their web site but the link is not active.
Title: Re: Fairfax India new issue
Post by: Viking on February 15, 2020, 11:59:53 PM
The key to Fairfax India is BIAL. It is the 800 pound gorilla in the BV calculation. Are there some other ways we can get a fix on some other measures that might help us understand what might be fair value for that asset?

How about looking at all the historical sales since 1999 (when BIAL was born)? There have not been many transactions as stakes in trophy assets like this do not come up for sale often.

- 2009 GVK purchases 2 stakes for 12% and 17%; implied value for BIAL = $800 million.
- 2011 GVK purchased 14% (total ownership to 43%); implied value for BIAL = $964 million.
- 2016 Fairfax purchased 33% for $336 million; implied value for BIAL = $1,018 million
- 2016 Fairfax purchased 5% for $49 million; implied value for BIAL = $980 million
- 2017 Fairfax purchased 10% for $200 million; implied value for BIAL = $2,000 million (this purchase is the outlier of recent transactions; it gave Fairfax control and they subsequently made management changes)
- March 2018 Fairfax purchased 6% (total stake = 54%) for $67 million; implied value for BIAL = $1,117 million
- Dec 2019 Fairfax sell 5% for $134 million; implied value for BIAL = $2,680 million

Based off what GVK paid back in 2009 and 2011 it looks like FFH may have gotten a steal of a deal on 3 of its purchases (time value of money, plus the actual asset is much more valuable given all the improvements made over 5 years). Perhaps the one higher purchase ($200 million for 10%) was closer to what Fairfax felt was actual fair value for BIAL (still worth doing to get management control of the asset). Interesting :-)

In the attachment below I constructed a timeline for BIAL from 1999 to today with all transactions entered. 
_____________________________
It is interesting to see that L&T IDPL was part of the original consortium when BIAL was birthed back in 2001. I think they were awarded the contract to build the 2nd runway (recently opened) and also the new terminal. 
_____________________________
Another thing to understand would be how BIAL's value compares to the other big airports in India, like Mumbai. when it made its purchases of BIAL back in 2009 and 2011, GVK also was majority owner of the Mumbai airport. Here is a quote from an article (Aug 2011) commenting on its 14% purchase:

"Aviation experts say GVK must have exercised its right reluctantly considering the money involved, but BIAL was too important an asset to let go. "In the long term, BIAL will be a stronger asset for GVK even better than the Mumbai airport. The revenue share of the government in Mumbai airport with GVK is 37% whereas in BIAL it is only 4%," said Kapil Kaul, CEO, India and Middle-East, Centre for Asia Pacific Aviation, an aviation research and advisory firm.

"Also, Mumbai has structural issues and is a locked airport whereas BIAL has a lot of scope of expansion and development," he added.

https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/gvk-power-and-infrastructure-buys-bial-stake-for-rs-614-crore-threat-from-changi-tatas-forces-co-to-pay-premium-for-siemens-14/articleshow/9700380.cms
Title: Re: Fairfax India new issue
Post by: petec on February 16, 2020, 01:59:17 AM
I think the valuation of the sale of a noncontrol stake to a third party validates even the most expensive of the FFH transactions.
Title: Re: Fairfax India new issue
Post by: StubbleJumper on February 16, 2020, 06:48:27 AM
I think the valuation of the sale of a noncontrol stake to a third party validates even the most expensive of the FFH transactions.


That might be true, but it is better to withhold an opinion until we understand who the buyer is and what sort of incentives may have come into play. 

I raised an eyebrow about this transaction because it seems strange that a 5% stake of a long-term asset would be sold.  So, why did Fairfax sell it?  Did they need to drop their stake to 49% to keep the nationalists at bay?  Were they desperate for an infusion of $134m of cash?  Did they find a partner with specific expertise that they wanted to bring aboard?  Was there some other strategic motivation that was not articulated in the presser?

One potential motivation that needs to be kept in the back of our head is that this minor transaction gives Fairfax the latitude to re-value that asset on its books.  Fairfax India will book a gain of $500m based on a transaction of only $134m.  And then what happens?  Well, the Fairfax India's booked assets will suddenly be pumped up, which gives FFH a nice little boost to its annual management fee as well as the likelihood of a 20% performance fee in 2020.  So, how much wealth will be extracted from Fairfax India unit holders from that little transaction?  I'm guessing that the buyer's price for the 5% slice of that airport will be somewhat similar to the amount of money that FFH extracts from unit-holders.


Maybe Prem will expand on this transaction in his annual letter and the annual report to provide more disclosure?  For now, I am wary, but keeping an open mind.


SJ

Title: Re: Fairfax India new issue
Post by: rohitc99 on February 16, 2020, 08:48:33 AM
The key to Fairfax India is BIAL. It is the 800 pound gorilla in the BV calculation. Are there some other ways we can get a fix on some other measures that might help us understand what might be fair value for that asset?

How about looking at all the historical sales since 1999 (when BIAL was born)? There have not been many transactions as stakes in trophy assets like this do not come up for sale often.

- 2009 GVK purchases 2 stakes for 12% and 17%; implied value for BIAL = $800 million.
- 2011 GVK purchased 14% (total ownership to 43%); implied value for BIAL = $964 million.
- 2016 Fairfax purchased 33% for $336 million; implied value for BIAL = $1,018 million
- 2016 Fairfax purchased 5% for $49 million; implied value for BIAL = $980 million
- 2017 Fairfax purchased 10% for $200 million; implied value for BIAL = $2,000 million (this purchase is the outlier of recent transactions; it gave Fairfax control and they subsequently made management changes)
- March 2018 Fairfax purchased 6% (total stake = 54%) for $67 million; implied value for BIAL = $1,117 million
- Dec 2019 Fairfax sell 5% for $134 million; implied value for BIAL = $2,680 million

Based off what GVK paid back in 2009 and 2011 it looks like FFH may have gotten a steal of a deal on 3 of its purchases (time value of money, plus the actual asset is much more valuable given all the improvements made over 5 years). Perhaps the one higher purchase ($200 million for 10%) was closer to what Fairfax felt was actual fair value for BIAL (still worth doing to get management control of the asset). Interesting :-)

In the attachment below I constructed a timeline for BIAL from 1999 to today with all transactions entered. 
_____________________________
It is interesting to see that L&T IDPL was part of the original consortium when BIAL was birthed back in 2001. I think they were awarded the contract to build the 2nd runway (recently opened) and also the new terminal. 
_____________________________
Another thing to understand would be how BIAL's value compares to the other big airports in India, like Mumbai. when it made its purchases of BIAL back in 2009 and 2011, GVK also was majority owner of the Mumbai airport. Here is a quote from an article (Aug 2011) commenting on its 14% purchase:

"Aviation experts say GVK must have exercised its right reluctantly considering the money involved, but BIAL was too important an asset to let go. "In the long term, BIAL will be a stronger asset for GVK even better than the Mumbai airport. The revenue share of the government in Mumbai airport with GVK is 37% whereas in BIAL it is only 4%," said Kapil Kaul, CEO, India and Middle-East, Centre for Asia Pacific Aviation, an aviation research and advisory firm.

"Also, Mumbai has structural issues and is a locked airport whereas BIAL has a lot of scope of expansion and development," he added.

https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/gvk-power-and-infrastructure-buys-bial-stake-for-rs-614-crore-threat-from-changi-tatas-forces-co-to-pay-premium-for-siemens-14/articleshow/9700380.cms

One point to keep in mind is to look at the history of infrastructure development in India. From 2003-2008, there was big boom in this (and real estate). a lot of capital flowed into airports, roads, power plants etc. There was a lot of optimism in these sectors. Since 2008, it has been a complete bust. A lot of these projects got stalled due to regulatory reasons, land not being available, coal linkage issues and so on. A lot of companies including GVK have been under financial distress and the whole banking sector has been hit badly. The NPA from all these infra projects have hit close to 10% of GDP and are still being worked through.

If you go to a bank and suggest an infra project, they wont even talk to you. there is absolutely no capital flowing into these sectors and the only capital is from the likes of fairfax, Blackstone etc. So it is not surprising that Fairfax got a good deal in 2011. GVK was a distressed seller.

If you look at the projections for BAIL, they have taken 3-4% as volume growth in their DCF in the past. I have lived in bangalore in the past ...nothing grows at 3% :) ...the city is growing rapidly and the area around the airport is becoming more valuable by the day even if it doesnt show up on the balance sheet.
Title: Re: Fairfax India new issue
Post by: petec on February 16, 2020, 09:38:56 AM
I think the valuation of the sale of a noncontrol stake to a third party validates even the most expensive of the FFH transactions.


That might be true, but it is better to withhold an opinion until we understand who the buyer is and what sort of incentives may have come into play. 

I raised an eyebrow about this transaction because it seems strange that a 5% stake of a long-term asset would be sold.  So, why did Fairfax sell it?  Did they need to drop their stake to 49% to keep the nationalists at bay?  Were they desperate for an infusion of $134m of cash?  Did they find a partner with specific expertise that they wanted to bring aboard?  Was there some other strategic motivation that was not articulated in the presser?

One potential motivation that needs to be kept in the back of our head is that this minor transaction gives Fairfax the latitude to re-value that asset on its books.  Fairfax India will book a gain of $500m based on a transaction of only $134m.  And then what happens?  Well, the Fairfax India's booked assets will suddenly be pumped up, which gives FFH a nice little boost to its annual management fee as well as the likelihood of a 20% performance fee in 2020.  So, how much wealth will be extracted from Fairfax India unit holders from that little transaction?  I'm guessing that the buyer's price for the 5% slice of that airport will be somewhat similar to the amount of money that FFH extracts from unit-holders.


Maybe Prem will expand on this transaction in his annual letter and the annual report to provide more disclosure?  For now, I am wary, but keeping an open mind.


SJ

Agreed - I’d be happier not having to take the validation at face value.
Title: Re: Fairfax India new issue
Post by: hobbit on February 16, 2020, 10:27:52 AM
I think the valuation of the sale of a noncontrol stake to a third party validates even the most expensive of the FFH transactions.


That might be true, but it is better to withhold an opinion until we understand who the buyer is and what sort of incentives may have come into play. 

I raised an eyebrow about this transaction because it seems strange that a 5% stake of a long-term asset would be sold.  So, why did Fairfax sell it?  Did they need to drop their stake to 49% to keep the nationalists at bay?  Were they desperate for an infusion of $134m of cash?  Did they find a partner with specific expertise that they wanted to bring aboard?  Was there some other strategic motivation that was not articulated in the presser?

One potential motivation that needs to be kept in the back of our head is that this minor transaction gives Fairfax the latitude to re-value that asset on its books.  Fairfax India will book a gain of $500m based on a transaction of only $134m.  And then what happens?  Well, the Fairfax India's booked assets will suddenly be pumped up, which gives FFH a nice little boost to its annual management fee as well as the likelihood of a 20% performance fee in 2020.  So, how much wealth will be extracted from Fairfax India unit holders from that little transaction?  I'm guessing that the buyer's price for the 5% slice of that airport will be somewhat similar to the amount of money that FFH extracts from unit-holders.


Maybe Prem will expand on this transaction in his annual letter and the annual report to provide more disclosure?  For now, I am wary, but keeping an open mind.


SJ

https://www.vccircle.com/north-american-pension-fund-backs-fairfax-s-india-airport-investment-plan

OMERS infrastrucure - strategic investor , this was probably done to get outside validation of big mark up in book value
Title: Re: Fairfax India new issue
Post by: Viking on February 16, 2020, 10:40:19 AM

One point to keep in mind is to look at the history of infrastructure development in India. From 2003-2008, there was big boom in this (and real estate). a lot of capital flowed into airports, roads, power plants etc. There was a lot of optimism in these sectors. Since 2008, it has been a complete bust. A lot of these projects got stalled due to regulatory reasons, land not being available, coal linkage issues and so on. A lot of companies including GVK have been under financial distress and the whole banking sector has been hit badly. The NPA from all these infra projects have hit close to 10% of GDP and are still being worked through.

If you go to a bank and suggest an infra project, they wont even talk to you. there is absolutely no capital flowing into these sectors and the only capital is from the likes of fairfax, Blackstone etc. So it is not surprising that Fairfax got a good deal in 2011. GVK was a distressed seller.

If you look at the projections for BAIL, they have taken 3-4% as volume growth in their DCF in the past. I have lived in bangalore in the past ...nothing grows at 3% :) ...the city is growing rapidly and the area around the airport is becoming more valuable by the day even if it doesnt show up on the balance sheet.

Thanks for commenting. Very helpful to understand the GVK purchases in 2009 and 2011 and the bigger picture.

The growth of the airport the past 10 years has been impressive. Phase 1 (Terminal A1) expansion was completed in 2013 increasing passenger capacity to 25 million. The second runway was just completed in Dec 2019. And the new terminal (phase 1) is scheduled to open March of next year (2021) and when fully completed will add passenger capacity of 25 million. And they already have plans to add a third runway. Bottom line, the development of the airport is in the early innings of another growth phase.

Link to article discussing plans for the new terminal:
- https://www.trbusiness.com/regional-news/asia-pacific/bial-outlines-commercial-vision-ahead-of-t2-opening/170859
Title: Re: Fairfax India new issue
Post by: petec on February 16, 2020, 11:19:33 AM
I think the valuation of the sale of a noncontrol stake to a third party validates even the most expensive of the FFH transactions.


That might be true, but it is better to withhold an opinion until we understand who the buyer is and what sort of incentives may have come into play. 

I raised an eyebrow about this transaction because it seems strange that a 5% stake of a long-term asset would be sold.  So, why did Fairfax sell it?  Did they need to drop their stake to 49% to keep the nationalists at bay?  Were they desperate for an infusion of $134m of cash?  Did they find a partner with specific expertise that they wanted to bring aboard?  Was there some other strategic motivation that was not articulated in the presser?

One potential motivation that needs to be kept in the back of our head is that this minor transaction gives Fairfax the latitude to re-value that asset on its books.  Fairfax India will book a gain of $500m based on a transaction of only $134m.  And then what happens?  Well, the Fairfax India's booked assets will suddenly be pumped up, which gives FFH a nice little boost to its annual management fee as well as the likelihood of a 20% performance fee in 2020.  So, how much wealth will be extracted from Fairfax India unit holders from that little transaction?  I'm guessing that the buyer's price for the 5% slice of that airport will be somewhat similar to the amount of money that FFH extracts from unit-holders.


Maybe Prem will expand on this transaction in his annual letter and the annual report to provide more disclosure?  For now, I am wary, but keeping an open mind.


SJ

https://www.vccircle.com/north-american-pension-fund-backs-fairfax-s-india-airport-investment-plan

OMERS infrastrucure - strategic investor , this was probably done to get outside validation of big mark up in book value

I’m not a subscriber so can’t read the article. How well-sourced is it? Only asking because Fairfax deliberately aren’t disclosing the buyer and I can’t imagine why they wouldn’t if it was OMERS.
Title: Re: Fairfax India new issue
Post by: rohitc99 on February 16, 2020, 11:24:45 AM

One point to keep in mind is to look at the history of infrastructure development in India. From 2003-2008, there was big boom in this (and real estate). a lot of capital flowed into airports, roads, power plants etc. There was a lot of optimism in these sectors. Since 2008, it has been a complete bust. A lot of these projects got stalled due to regulatory reasons, land not being available, coal linkage issues and so on. A lot of companies including GVK have been under financial distress and the whole banking sector has been hit badly. The NPA from all these infra projects have hit close to 10% of GDP and are still being worked through.

If you go to a bank and suggest an infra project, they wont even talk to you. there is absolutely no capital flowing into these sectors and the only capital is from the likes of fairfax, Blackstone etc. So it is not surprising that Fairfax got a good deal in 2011. GVK was a distressed seller.

If you look at the projections for BAIL, they have taken 3-4% as volume growth in their DCF in the past. I have lived in bangalore in the past ...nothing grows at 3% :) ...the city is growing rapidly and the area around the airport is becoming more valuable by the day even if it doesnt show up on the balance sheet.

Thanks for commenting. Very helpful to understand the GVK purchases in 2009 and 2011 and the bigger picture.

The growth of the airport the past 10 years has been impressive. Phase 1 (Terminal A1) expansion was completed in 2013 increasing passenger capacity to 25 million. The second runway was just completed in Dec 2019. And the new terminal (phase 1) is scheduled to open March of next year (2021) and when fully completed will add passenger capacity of 25 million. And they already have plans to add a third runway. Bottom line, the development of the airport is in the early innings of another growth phase.

Link to article discussing plans for the new terminal:
- https://www.trbusiness.com/regional-news/asia-pacific/bial-outlines-commercial-vision-ahead-of-t2-opening/170859

I lived in bangalore from 1995 to 2005 and have travelled through the old airport and now through the new one for the last few years (the difference is stark). There is a lot of pent up demand for air travel and the traffic growth is quite reasonable. A very small fraction of the population is flying for now and this should increase over the years. For a lot of indians, flying is still aspirational. Both domestic and international travel is increasing.
Also the new airports like bangalore, and other cities are world class now and provide a good flying experience - far better than some of the cities in US.
My guess is that this deal allows Fairfax to fund other assets via this platform. The risk aversion very high in the infra space and so hopefully then can get good risk adjusted returns. There is almost no appetite for such assets among the domestic investors
Something similar applies to financial services - my family has accounts with IIFL and the service levels are good and the number of investors/ borrowers is still a fraction of the potential.
Title: Re: Fairfax India new issue
Post by: StubbleJumper on February 16, 2020, 12:01:32 PM
I think the valuation of the sale of a noncontrol stake to a third party validates even the most expensive of the FFH transactions.


That might be true, but it is better to withhold an opinion until we understand who the buyer is and what sort of incentives may have come into play. 

I raised an eyebrow about this transaction because it seems strange that a 5% stake of a long-term asset would be sold.  So, why did Fairfax sell it?  Did they need to drop their stake to 49% to keep the nationalists at bay?  Were they desperate for an infusion of $134m of cash?  Did they find a partner with specific expertise that they wanted to bring aboard?  Was there some other strategic motivation that was not articulated in the presser?

One potential motivation that needs to be kept in the back of our head is that this minor transaction gives Fairfax the latitude to re-value that asset on its books.  Fairfax India will book a gain of $500m based on a transaction of only $134m.  And then what happens?  Well, the Fairfax India's booked assets will suddenly be pumped up, which gives FFH a nice little boost to its annual management fee as well as the likelihood of a 20% performance fee in 2020.  So, how much wealth will be extracted from Fairfax India unit holders from that little transaction?  I'm guessing that the buyer's price for the 5% slice of that airport will be somewhat similar to the amount of money that FFH extracts from unit-holders.


Maybe Prem will expand on this transaction in his annual letter and the annual report to provide more disclosure?  For now, I am wary, but keeping an open mind.


SJ

https://www.vccircle.com/north-american-pension-fund-backs-fairfax-s-india-airport-investment-plan

OMERS infrastrucure - strategic investor , this was probably done to get outside validation of big mark up in book value


Okay, that makes me yet a little more uncomfortable.  I had been holding out hope that it was a completely new player to the FFH world.  FFH sold a chunk of the airport at roughly the same time as they sold a chunk of Riverstone runoff.  I just hope to hell that there was no quid pro quo on those two deals and that the BIAL transaction was done at true fair market value rather than an inflated value designed to get a favourable mark on the value of the assets.  There really should be no question about this, but unfortunately on more than one occasion, Prem has been too cute by half.


SJ
Title: Re: Fairfax India new issue
Post by: petec on February 16, 2020, 12:20:15 PM
I think the valuation of the sale of a noncontrol stake to a third party validates even the most expensive of the FFH transactions.


That might be true, but it is better to withhold an opinion until we understand who the buyer is and what sort of incentives may have come into play. 

I raised an eyebrow about this transaction because it seems strange that a 5% stake of a long-term asset would be sold.  So, why did Fairfax sell it?  Did they need to drop their stake to 49% to keep the nationalists at bay?  Were they desperate for an infusion of $134m of cash?  Did they find a partner with specific expertise that they wanted to bring aboard?  Was there some other strategic motivation that was not articulated in the presser?

One potential motivation that needs to be kept in the back of our head is that this minor transaction gives Fairfax the latitude to re-value that asset on its books.  Fairfax India will book a gain of $500m based on a transaction of only $134m.  And then what happens?  Well, the Fairfax India's booked assets will suddenly be pumped up, which gives FFH a nice little boost to its annual management fee as well as the likelihood of a 20% performance fee in 2020.  So, how much wealth will be extracted from Fairfax India unit holders from that little transaction?  I'm guessing that the buyer's price for the 5% slice of that airport will be somewhat similar to the amount of money that FFH extracts from unit-holders.


Maybe Prem will expand on this transaction in his annual letter and the annual report to provide more disclosure?  For now, I am wary, but keeping an open mind.


SJ

https://www.vccircle.com/north-american-pension-fund-backs-fairfax-s-india-airport-investment-plan

OMERS infrastrucure - strategic investor , this was probably done to get outside validation of big mark up in book value


Okay, that makes me yet a little more uncomfortable.  I had been holding out hope that it was a completely new player to the FFH world.  FFH sold a chunk of the airport at roughly the same time as they sold a chunk of Riverstone runoff.  I just hope to hell that there was no quid pro quo on those two deals and that the BIAL transaction was done at true fair market value rather than an inflated value designed to get a favourable mark on the value of the assets.  There really should be no question about this, but unfortunately on more than one occasion, Prem has been too cute by half.


SJ

The quid pro quo being a sweet deal on Riverstone? Can’t see why that benefits FFH.
Title: Re: Fairfax India new issue
Post by: StubbleJumper on February 16, 2020, 01:00:00 PM
I think the valuation of the sale of a noncontrol stake to a third party validates even the most expensive of the FFH transactions.


That might be true, but it is better to withhold an opinion until we understand who the buyer is and what sort of incentives may have come into play. 

I raised an eyebrow about this transaction because it seems strange that a 5% stake of a long-term asset would be sold.  So, why did Fairfax sell it?  Did they need to drop their stake to 49% to keep the nationalists at bay?  Were they desperate for an infusion of $134m of cash?  Did they find a partner with specific expertise that they wanted to bring aboard?  Was there some other strategic motivation that was not articulated in the presser?

One potential motivation that needs to be kept in the back of our head is that this minor transaction gives Fairfax the latitude to re-value that asset on its books.  Fairfax India will book a gain of $500m based on a transaction of only $134m.  And then what happens?  Well, the Fairfax India's booked assets will suddenly be pumped up, which gives FFH a nice little boost to its annual management fee as well as the likelihood of a 20% performance fee in 2020.  So, how much wealth will be extracted from Fairfax India unit holders from that little transaction?  I'm guessing that the buyer's price for the 5% slice of that airport will be somewhat similar to the amount of money that FFH extracts from unit-holders.


Maybe Prem will expand on this transaction in his annual letter and the annual report to provide more disclosure?  For now, I am wary, but keeping an open mind.


SJ

https://www.vccircle.com/north-american-pension-fund-backs-fairfax-s-india-airport-investment-plan

OMERS infrastrucure - strategic investor , this was probably done to get outside validation of big mark up in book value


Okay, that makes me yet a little more uncomfortable.  I had been holding out hope that it was a completely new player to the FFH world.  FFH sold a chunk of the airport at roughly the same time as they sold a chunk of Riverstone runoff.  I just hope to hell that there was no quid pro quo on those two deals and that the BIAL transaction was done at true fair market value rather than an inflated value designed to get a favourable mark on the value of the assets.  There really should be no question about this, but unfortunately on more than one occasion, Prem has been too cute by half.


SJ

The quid pro quo being a sweet deal on Riverstone? Can’t see why that benefits FFH.


Okay, so this is all hypothetical and nothing more. We have no knowledge that would support the existence of any quid pro quo between the two transactions.  We have no actual knowledge of any wrong-doing or any other nefarious behaviour.  But, the math is pretty basic and that's what creates the risk:  The primary impact is that for every dollar that the value of that 5% BIAL deal is overestimated, the mark for Fairfax India goes up by $10.  The secondary impact is that the annual management fee (1.5%) to FFH goes up by $0.15 based on the $10 mark and, possibly the performance bonus (20% of everything over the hurdle) could go up by $2 based on the $10 mark.  So if you have the same buyer for two deals being conducted more or less simultaneously, and if you could convince the buyer to over-value one asset and under-value the other, you could create value for yourself.  There's an argument that the buyer would only care about the combined value of the two cheques that he must write and wouldn't much care about the specific amounts on each cheque, so maybe it wouldn't be so hard to twist his arm.  A portion of the $1 overvaluation would be attributable to minority Fairfax India holders, but that would be swamped by the secondary impact.

So yes, I am a little uncomfortable with the idea of there being two transactions made to the same buyer at roughly the same time.  If it true that the buyers are the same for both transactions, I wonder why there hasn't been better disclosure.  And once again, to my knowledge, there is no evidence that anything like this has actually occurred.


SJ
Title: Re: Fairfax India new issue
Post by: petec on February 16, 2020, 01:17:56 PM
Totally agree this is possible. Don’t think it likely.
Title: Re: Fairfax India new issue
Post by: hobbit on February 16, 2020, 01:38:37 PM
I think the valuation of the sale of a noncontrol stake to a third party validates even the most expensive of the FFH transactions.


That might be true, but it is better to withhold an opinion until we understand who the buyer is and what sort of incentives may have come into play. 

I raised an eyebrow about this transaction because it seems strange that a 5% stake of a long-term asset would be sold.  So, why did Fairfax sell it?  Did they need to drop their stake to 49% to keep the nationalists at bay?  Were they desperate for an infusion of $134m of cash?  Did they find a partner with specific expertise that they wanted to bring aboard?  Was there some other strategic motivation that was not articulated in the presser?

One potential motivation that needs to be kept in the back of our head is that this minor transaction gives Fairfax the latitude to re-value that asset on its books.  Fairfax India will book a gain of $500m based on a transaction of only $134m.  And then what happens?  Well, the Fairfax India's booked assets will suddenly be pumped up, which gives FFH a nice little boost to its annual management fee as well as the likelihood of a 20% performance fee in 2020.  So, how much wealth will be extracted from Fairfax India unit holders from that little transaction?  I'm guessing that the buyer's price for the 5% slice of that airport will be somewhat similar to the amount of money that FFH extracts from unit-holders.


Maybe Prem will expand on this transaction in his annual letter and the annual report to provide more disclosure?  For now, I am wary, but keeping an open mind.


SJ

https://www.vccircle.com/north-american-pension-fund-backs-fairfax-s-india-airport-investment-plan

OMERS infrastrucure - strategic investor , this was probably done to get outside validation of big mark up in book value

I’m not a subscriber so can’t read the article. How well-sourced is it? Only asking because Fairfax deliberately aren’t disclosing the buyer and I can’t imagine why they wouldn’t if it was OMERS.

VCcircle has been pretty reliable in my experience so I would say there is decent chance of OMERS being the investor. OMERS has made other bets in infrastructure space in India and also is a part of consortium that acquired London airport. It also bid for brussels airport.
Title: Re: Fairfax India new issue
Post by: hobbit on February 16, 2020, 01:43:53 PM
I think the valuation of the sale of a noncontrol stake to a third party validates even the most expensive of the FFH transactions.


That might be true, but it is better to withhold an opinion until we understand who the buyer is and what sort of incentives may have come into play. 

I raised an eyebrow about this transaction because it seems strange that a 5% stake of a long-term asset would be sold.  So, why did Fairfax sell it?  Did they need to drop their stake to 49% to keep the nationalists at bay?  Were they desperate for an infusion of $134m of cash?  Did they find a partner with specific expertise that they wanted to bring aboard?  Was there some other strategic motivation that was not articulated in the presser?

One potential motivation that needs to be kept in the back of our head is that this minor transaction gives Fairfax the latitude to re-value that asset on its books.  Fairfax India will book a gain of $500m based on a transaction of only $134m.  And then what happens?  Well, the Fairfax India's booked assets will suddenly be pumped up, which gives FFH a nice little boost to its annual management fee as well as the likelihood of a 20% performance fee in 2020.  So, how much wealth will be extracted from Fairfax India unit holders from that little transaction?  I'm guessing that the buyer's price for the 5% slice of that airport will be somewhat similar to the amount of money that FFH extracts from unit-holders.


Maybe Prem will expand on this transaction in his annual letter and the annual report to provide more disclosure?  For now, I am wary, but keeping an open mind.


SJ

https://www.vccircle.com/north-american-pension-fund-backs-fairfax-s-india-airport-investment-plan

OMERS infrastrucure - strategic investor , this was probably done to get outside validation of big mark up in book value


Okay, that makes me yet a little more uncomfortable.  I had been holding out hope that it was a completely new player to the FFH world.  FFH sold a chunk of the airport at roughly the same time as they sold a chunk of Riverstone runoff.  I just hope to hell that there was no quid pro quo on those two deals and that the BIAL transaction was done at true fair market value rather than an inflated value designed to get a favourable mark on the value of the assets.  There really should be no question about this, but unfortunately on more than one occasion, Prem has been too cute by half.


SJ

The quid pro quo being a sweet deal on Riverstone? Can’t see why that benefits FFH.


Okay, so this is all hypothetical and nothing more. We have no knowledge that would support the existence of any quid pro quo between the two transactions.  We have no actual knowledge of any wrong-doing or any other nefarious behaviour.  But, the math is pretty basic and that's what creates the risk:  The primary impact is that for every dollar that the value of that 5% BIAL deal is overestimated, the mark for Fairfax India goes up by $10.  The secondary impact is that the annual management fee (1.5%) to FFH goes up by $0.15 based on the $10 mark and, possibly the performance bonus (20% of everything over the hurdle) could go up by $2 based on the $10 mark.  So if you have the same buyer for two deals being conducted more or less simultaneously, and if you could convince the buyer to over-value one asset and under-value the other, you could create value for yourself.  There's an argument that the buyer would only care about the combined value of the two cheques that he must write and wouldn't much care about the specific amounts on each cheque, so maybe it wouldn't be so hard to twist his arm.  A portion of the $1 overvaluation would be attributable to minority Fairfax India holders, but that would be swamped by the secondary impact.

So yes, I am a little uncomfortable with the idea of there being two transactions made to the same buyer at roughly the same time.  If it true that the buyers are the same for both transactions, I wonder why there hasn't been better disclosure.  And once again, to my knowledge, there is no evidence that anything like this has actually occurred.


SJ

Possible but I highly doubt an investment group like FFH will burn their reputation in such a manner. I believe, given the state of the investments, Fairfax India would have truly EARNED their fees in the long run.
Title: Re: Fairfax India new issue
Post by: petec on February 16, 2020, 02:43:09 PM
Possible but I highly doubt an investment group like FFH will burn their reputation in such a manner. I believe, given the state of the investments, Fairfax India would have truly EARNED their fees in the long run.

More persuasively - given SJ clearly doesn’t trust FFH to start with - it would require OMERS to risk their reputation, which is possible but unlikely.
Title: Re: Fairfax India new issue
Post by: StubbleJumper on February 16, 2020, 02:51:54 PM
Totally agree this is possible. Don’t think it likely.


I don't think it's likely either.  But pardon my French, why does FFH always seem to fuck-up the handling, communication and disclosure of these sorts of things? 

First off, is there, or is there not, a conflict of interest between Fairfax India unit holders and the FFH Holdco shareholders on that BIAL deal?  If that BIAL deal was overvalued, I would make out like a bandit because I currently only hold FFH and not Fairfax India, but the Fairfax India holder would be screwed.  Given that situation, how should FFH have dealt with it?  Well, first and foremost, having a temporal separation (say 6 or 12 months) between those deals would have been a good start.  Alternately, disclose the hell out of BOTH transactions to attempt to have some level of transparency, AND release an independent valuation opinion for both assets.  Instead, what we got were a couple of news releases that didn't tell us much -- one of them didn't even reveal the counterparty!  If you have a set of circumstances that could give the appearance of the possibility of a conflict of interest, you either need to take a pass, or you need to bend over backwards to be transparent.

It's the same story over and over again.  Hard to believe that they are not getting better about these things.


SJ
Title: Re: Fairfax India new issue
Post by: ICUMD on February 16, 2020, 05:20:30 PM
Selling off a portion of BIAL is really the only way to 'mark to market' the private companies of FIH.  Alternatively, they can IPO as they did with CSB.  I think it's up to the investor to decide if the valuation is reasonable and their business partners are synergistic. I think BIAL will prove to be a solid investment over the next 10 yrs. Particularly as they develop not only the airport, but sources of non aero revenue through developing the surrounding property.  They are developing an aero city.  The fees they get paid are for hopefully sound superior management, and investors will hopefully reap rewards as BV increases and market value follows.  Certainly, I don't think it's possible to invest the the type of companies in FIH's portfolio without Prems resourcefulness, and hence the fees.  If you don't think the composite companies are special, I wouldn't invest.
Title: Re: Fairfax India new issue
Post by: Viking on February 16, 2020, 07:17:37 PM
I think the valuation of the sale of a noncontrol stake to a third party validates even the most expensive of the FFH transactions.


That might be true, but it is better to withhold an opinion until we understand who the buyer is and what sort of incentives may have come into play. 

I raised an eyebrow about this transaction because it seems strange that a 5% stake of a long-term asset would be sold.  So, why did Fairfax sell it?  Did they need to drop their stake to 49% to keep the nationalists at bay?  Were they desperate for an infusion of $134m of cash?  Did they find a partner with specific expertise that they wanted to bring aboard?  Was there some other strategic motivation that was not articulated in the presser?

One potential motivation that needs to be kept in the back of our head is that this minor transaction gives Fairfax the latitude to re-value that asset on its books.  Fairfax India will book a gain of $500m based on a transaction of only $134m.  And then what happens?  Well, the Fairfax India's booked assets will suddenly be pumped up, which gives FFH a nice little boost to its annual management fee as well as the likelihood of a 20% performance fee in 2020.  So, how much wealth will be extracted from Fairfax India unit holders from that little transaction?  I'm guessing that the buyer's price for the 5% slice of that airport will be somewhat similar to the amount of money that FFH extracts from unit-holders.


Maybe Prem will expand on this transaction in his annual letter and the annual report to provide more disclosure?  For now, I am wary, but keeping an open mind.


SJ

https://www.vccircle.com/north-american-pension-fund-backs-fairfax-s-india-airport-investment-plan

OMERS infrastrucure - strategic investor , this was probably done to get outside validation of big mark up in book value


Okay, that makes me yet a little more uncomfortable.  I had been holding out hope that it was a completely new player to the FFH world.  FFH sold a chunk of the airport at roughly the same time as they sold a chunk of Riverstone runoff.  I just hope to hell that there was no quid pro quo on those two deals and that the BIAL transaction was done at true fair market value rather than an inflated value designed to get a favourable mark on the value of the assets.  There really should be no question about this, but unfortunately on more than one occasion, Prem has been too cute by half.


SJ

The quid pro quo being a sweet deal on Riverstone? Can’t see why that benefits FFH.


Okay, so this is all hypothetical and nothing more. We have no knowledge that would support the existence of any quid pro quo between the two transactions.  We have no actual knowledge of any wrong-doing or any other nefarious behaviour.  But, the math is pretty basic and that's what creates the risk:  The primary impact is that for every dollar that the value of that 5% BIAL deal is overestimated, the mark for Fairfax India goes up by $10.  The secondary impact is that the annual management fee (1.5%) to FFH goes up by $0.15 based on the $10 mark and, possibly the performance bonus (20% of everything over the hurdle) could go up by $2 based on the $10 mark.  So if you have the same buyer for two deals being conducted more or less simultaneously, and if you could convince the buyer to over-value one asset and under-value the other, you could create value for yourself.  There's an argument that the buyer would only care about the combined value of the two cheques that he must write and wouldn't much care about the specific amounts on each cheque, so maybe it wouldn't be so hard to twist his arm.  A portion of the $1 overvaluation would be attributable to minority Fairfax India holders, but that would be swamped by the secondary impact.

So yes, I am a little uncomfortable with the idea of there being two transactions made to the same buyer at roughly the same time.  If it true that the buyers are the same for both transactions, I wonder why there hasn't been better disclosure.  And once again, to my knowledge, there is no evidence that anything like this has actually occurred.


SJ

Stubble, i think you are going down the rabbit hole on this one. Fairfax has a long, mutually beneficial history of partnering with OMERS on many large deals. It also looks to be doing more deals with Mitsui Sumitomo. Both of these two organizations look to be quality, well run organizations. Neither organization is going to do anything that is not in its own interests (including maximizing returns for their owners).

1.) Yes, Fairfax is in the process of completing a deal to sell 40% of Riverstone UK to OMERS for $600 million. My guess is if someone on this investment board proposed this exact deal (before it was announced) they would have been laughed at; few would have said that the Riverstone UK runoff business was worth $1.5 billion.

The cash will likely be used by Fairfax to grow the business at the insurance subs that need $; we are in a hard market that may only last a year or two. Some of the cash may also be used to buy out minority partners (sounds like the timing is contractual). The deal will result in an increase in BV for Fairfax of $10/share. It sounds like the new Riverstone UK will have better access to capital needed to be able to grow their business more aggressively moving forward (likely due to OMERS involvement). This looks to me to be a very good deal for Fairfax and also a very good deal for OMERS. Nothing nefarious.

2.) Yes, Fairfax India is also in the process of creating a new subsidiary (Anchorage) to invest in the airport sector in India. This makes alot of sense as infrastructure investments are big money and it is good to have partners with deep pockets. Their investments in BIAL was $650 million, which is a massive number and not repeatable for Fairfax on their own. If they see other airport opportunities they will need to spend big money and will likely need partners to come up with the high price tag. And it sounds like there might be some big opportunities in India (see rohitc99’s comments).

They have sold an 11.5% stake in Anchorage to someone for $134 million. This transaction will decrease Fairfax India’s ownership of BIAL from 54% to 49%. These is lots we do not know and when Fairfax India releases its annual report (March 6? Same as Fairfax?) i am sure we will know more.

Is the new purchaser OMERS? I hope so as that would be a huge positive as they are a known entity and the perfect partner on this sort of transaction: a quality company with a long term focus (just like Fairfax) and they have deep pockets (access to capital). And it looks like OMERS is looking to grow their investments in Asia and they want to grow their exposure to infrastructure projects (in a low interest rate world with stock markets shrinking in size more money is moving to private markets).

With OMERS as the partner i see nice growth opportunities with Anchorage, especially if they are able to bring another partner or two over time. This will be a big win for Fairfax India shareholders as they will slowly be able to monetize BIAL at a very good price and also grow in a new direction.

Part of all the lack of communication currently may have to do with getting all the ducks lined up. Selling a chunk of BIAL may not be simple... current owners might have first right of refusal. Setting up Anchorage may require local government approval. I have no idea; but this is India so my guess is they have some hoops to jump through. The fact a buyer was not named in the press release (or would not be confirmed by Prem on the conference call) does not suggest anything untoward to me. We will know more when they can tell us.

Regarding the price, perhaps the high price paid for 11.5% of Anchorage reflects the value the purchaser sees in not only the BIAL asset (which is all everyone is focussed on right now) but also the value of partnering with Fairfax in India and the value that will be created in the coming decade. Fairfax has a long successful history in India: ICICI Lombard, IIFL, Thomas Cook, Quess and more recently Digit and BIAL (just off the top of my head). Fairfax is very plugged in to India (understand the region and have the contacts) and it would be very rational for someone like OMERS to want to partner with them there (especially if they are not already well established in the region). It is also very encouraging to see the speed with which Fairfax is moving to develop BIAL; This shows a deep understanding of how to do business in India and also having the contacts to fill important positions with quality people. This will be a major drawing card for Anchorage as it expands.

The sale of 11.5% of Anchorage might be an example of Fairfax actually earning its high fee from Fairfax India. If BIAL is worth anything close to $2.6 billion then Fairfax India shareholders are going to make out like bandits (and it looks like it just might be :-)
Title: Re: Fairfax India new issue
Post by: StubbleJumper on February 16, 2020, 08:22:32 PM
Going down the rabbit hole?  No.  I would like my business partners to have integrity.  I want my business partners to earn money and I want to earn money, but I want it to be earned honestly, fairly and transparently.  Integrity is not a matter of degree.  On yet one more occasion, I find myself writing that FFH needs to improve its governance practices.  Hard to believe.


SJ
Title: Re: Fairfax India new issue
Post by: bizaro86 on February 16, 2020, 10:30:30 PM
I think the valuation of the sale of a noncontrol stake to a third party validates even the most expensive of the FFH transactions.


That might be true, but it is better to withhold an opinion until we understand who the buyer is and what sort of incentives may have come into play. 

I raised an eyebrow about this transaction because it seems strange that a 5% stake of a long-term asset would be sold.  So, why did Fairfax sell it?  Did they need to drop their stake to 49% to keep the nationalists at bay?  Were they desperate for an infusion of $134m of cash?  Did they find a partner with specific expertise that they wanted to bring aboard?  Was there some other strategic motivation that was not articulated in the presser?

One potential motivation that needs to be kept in the back of our head is that this minor transaction gives Fairfax the latitude to re-value that asset on its books.  Fairfax India will book a gain of $500m based on a transaction of only $134m.  And then what happens?  Well, the Fairfax India's booked assets will suddenly be pumped up, which gives FFH a nice little boost to its annual management fee as well as the likelihood of a 20% performance fee in 2020.  So, how much wealth will be extracted from Fairfax India unit holders from that little transaction?  I'm guessing that the buyer's price for the 5% slice of that airport will be somewhat similar to the amount of money that FFH extracts from unit-holders.


Maybe Prem will expand on this transaction in his annual letter and the annual report to provide more disclosure?  For now, I am wary, but keeping an open mind.


SJ

https://www.vccircle.com/north-american-pension-fund-backs-fairfax-s-india-airport-investment-plan

OMERS infrastrucure - strategic investor , this was probably done to get outside validation of big mark up in book value

That is interesting. I doubt OMERS paid more than their calculation of fair value to do Prem a favor. On the other hand, the release noted that they expect to do any future airport investments though the new firm, so OMERS is getting tag along rights for ~11% on any future airport buys, which is probably worth something.

I also think it's interesting that FIH didn't buy the Mumbai airport stake from GVK (which they sold this past fall). It would have been a big deal, but they could have swung it I think. I suppose at these prices they must be more of a seller than a buyer. I like the airport a lot more than the banking/chemicals businesses.
Title: Re: Fairfax India new issue
Post by: petec on February 17, 2020, 12:14:04 AM
Going down the rabbit hole?  No.  I would like my business partners to have integrity.  I want my business partners to earn money and I want to earn money, but I want it to be earned honestly, fairly and transparently.  Integrity is not a matter of degree.  On yet one more occasion, I find myself writing that FFH needs to improve its governance practices.  Hard to believe.


SJ

SJ I broadly agree with your take on this discussion, and although I don’t think I care about it as much as you do yours always good at raising things I haven’t thought of/through.

That said I wouldn’t conflate disclosure with integrity. Fairfax disclosure is often weaker than I’d like. That in and of itself doesn’t call their integrity into question.
Title: Re: Fairfax India new issue
Post by: petec on February 17, 2020, 12:39:27 AM
I think the valuation of the sale of a noncontrol stake to a third party validates even the most expensive of the FFH transactions.


That might be true, but it is better to withhold an opinion until we understand who the buyer is and what sort of incentives may have come into play. 

I raised an eyebrow about this transaction because it seems strange that a 5% stake of a long-term asset would be sold.  So, why did Fairfax sell it?  Did they need to drop their stake to 49% to keep the nationalists at bay?  Were they desperate for an infusion of $134m of cash?  Did they find a partner with specific expertise that they wanted to bring aboard?  Was there some other strategic motivation that was not articulated in the presser?

One potential motivation that needs to be kept in the back of our head is that this minor transaction gives Fairfax the latitude to re-value that asset on its books.  Fairfax India will book a gain of $500m based on a transaction of only $134m.  And then what happens?  Well, the Fairfax India's booked assets will suddenly be pumped up, which gives FFH a nice little boost to its annual management fee as well as the likelihood of a 20% performance fee in 2020.  So, how much wealth will be extracted from Fairfax India unit holders from that little transaction?  I'm guessing that the buyer's price for the 5% slice of that airport will be somewhat similar to the amount of money that FFH extracts from unit-holders.


Maybe Prem will expand on this transaction in his annual letter and the annual report to provide more disclosure?  For now, I am wary, but keeping an open mind.


SJ

https://www.vccircle.com/north-american-pension-fund-backs-fairfax-s-india-airport-investment-plan

OMERS infrastrucure - strategic investor , this was probably done to get outside validation of big mark up in book value


Okay, that makes me yet a little more uncomfortable.  I had been holding out hope that it was a completely new player to the FFH world.  FFH sold a chunk of the airport at roughly the same time as they sold a chunk of Riverstone runoff.  I just hope to hell that there was no quid pro quo on those two deals and that the BIAL transaction was done at true fair market value rather than an inflated value designed to get a favourable mark on the value of the assets.  There really should be no question about this, but unfortunately on more than one occasion, Prem has been too cute by half.


SJ

The quid pro quo being a sweet deal on Riverstone? Can’t see why that benefits FFH.


Okay, so this is all hypothetical and nothing more. We have no knowledge that would support the existence of any quid pro quo between the two transactions.  We have no actual knowledge of any wrong-doing or any other nefarious behaviour.  But, the math is pretty basic and that's what creates the risk:  The primary impact is that for every dollar that the value of that 5% BIAL deal is overestimated, the mark for Fairfax India goes up by $10.  The secondary impact is that the annual management fee (1.5%) to FFH goes up by $0.15 based on the $10 mark and, possibly the performance bonus (20% of everything over the hurdle) could go up by $2 based on the $10 mark.  So if you have the same buyer for two deals being conducted more or less simultaneously, and if you could convince the buyer to over-value one asset and under-value the other, you could create value for yourself.  There's an argument that the buyer would only care about the combined value of the two cheques that he must write and wouldn't much care about the specific amounts on each cheque, so maybe it wouldn't be so hard to twist his arm.  A portion of the $1 overvaluation would be attributable to minority Fairfax India holders, but that would be swamped by the secondary impact.

So yes, I am a little uncomfortable with the idea of there being two transactions made to the same buyer at roughly the same time.  If it true that the buyers are the same for both transactions, I wonder why there hasn't been better disclosure.  And once again, to my knowledge, there is no evidence that anything like this has actually occurred.


SJ

Stubble, i think you are going down the rabbit hole on this one. Fairfax has a long, mutually beneficial history of partnering with OMERS on many large deals. It also looks to be doing more deals with Mitsui Sumitomo. Both of these two organizations look to be quality, well run organizations. Neither organization is going to do anything that is not in its own interests (including maximizing returns for their owners).

1.) Yes, Fairfax is in the process of completing a deal to sell 40% of Riverstone UK to OMERS for $600 million. My guess is if someone on this investment board proposed this exact deal (before it was announced) they would have been laughed at; few would have said that the Riverstone UK runoff business was worth $1.5 billion.

The cash will likely be used by Fairfax to grow the business at the insurance subs that need $; we are in a hard market that may only last a year or two. Some of the cash may also be used to buy out minority partners (sounds like the timing is contractual). The deal will result in an increase in BV for Fairfax of $10/share. It sounds like the new Riverstone UK will have better access to capital needed to be able to grow their business more aggressively moving forward (likely due to OMERS involvement). This looks to me to be a very good deal for Fairfax and also a very good deal for OMERS. Nothing nefarious.

2.) Yes, Fairfax India is also in the process of creating a new subsidiary (Anchorage) to invest in the airport sector in India. This makes alot of sense as infrastructure investments are big money and it is good to have partners with deep pockets. Their investments in BIAL was $650 million, which is a massive number and not repeatable for Fairfax on their own. If they see other airport opportunities they will need to spend big money and will likely need partners to come up with the high price tag. And it sounds like there might be some big opportunities in India (see rohitc99’s comments).

They have sold an 11.5% stake in Anchorage to someone for $134 million. This transaction will decrease Fairfax India’s ownership of BIAL from 54% to 49%. These is lots we do not know and when Fairfax India releases its annual report (March 6? Same as Fairfax?) i am sure we will know more.

Is the new purchaser OMERS? I hope so as that would be a huge positive as they are a known entity and the perfect partner on this sort of transaction: a quality company with a long term focus (just like Fairfax) and they have deep pockets (access to capital). And it looks like OMERS is looking to grow their investments in Asia and they want to grow their exposure to infrastructure projects (in a low interest rate world with stock markets shrinking in size more money is moving to private markets).

With OMERS as the partner i see nice growth opportunities with Anchorage, especially if they are able to bring another partner or two over time. This will be a big win for Fairfax India shareholders as they will slowly be able to monetize BIAL at a very good price and also grow in a new direction.

Part of all the lack of communication currently may have to do with getting all the ducks lined up. Selling a chunk of BIAL may not be simple... current owners might have first right of refusal. Setting up Anchorage may require local government approval. I have no idea; but this is India so my guess is they have some hoops to jump through. The fact a buyer was not named in the press release (or would not be confirmed by Prem on the conference call) does not suggest anything untoward to me. We will know more when they can tell us.

Regarding the price, perhaps the high price paid for 11.5% of Anchorage reflects the value the purchaser sees in not only the BIAL asset (which is all everyone is focussed on right now) but also the value of partnering with Fairfax in India and the value that will be created in the coming decade. Fairfax has a long successful history in India: ICICI Lombard, IIFL, Thomas Cook, Quess and more recently Digit and BIAL (just off the top of my head). Fairfax is very plugged in to India (understand the region and have the contacts) and it would be very rational for someone like OMERS to want to partner with them there (especially if they are not already well established in the region). It is also very encouraging to see the speed with which Fairfax is moving to develop BIAL; This shows a deep understanding of how to do business in India and also having the contacts to fill important positions with quality people. This will be a major drawing card for Anchorage as it expands.

The sale of 11.5% of Anchorage might be an example of Fairfax actually earning its high fee from Fairfax India. If BIAL is worth anything close to $2.6 billion then Fairfax India shareholders are going to make out like bandits (and it looks like it just might be :-)

I think you're right, except about getting ducks in a row. If that's the reason then either a) they should have delayed the release or b) they should have explained the situation.

One other thing both deals have in common is they surface value in FFH. FFH have been saying for years that the sheraes are undervalued. There are two ways to fix that: persuade the market to apply a higher P/BV or do deals that surface true BV. We have seen a spate of deals recently that do the latter and I think it is a deliberate strategy.

As an aside, I think often wonder why FFH and BAM don't partner up more often and India is a good example. FFH have great expertise in India and in financial services and BAM in infrastructure and businesses related to it. If the companies attacked the country together, they could broaden their opportunity set, reduce competition, and raise a ton of OPM to earn fees on.
Title: Re: Fairfax India new issue
Post by: ABM on February 17, 2020, 08:37:23 AM
Going down the rabbit hole?  No.  I would like my business partners to have integrity.  I want my business partners to earn money and I want to earn money, but I want it to be earned honestly, fairly and transparently.  Integrity is not a matter of degree.  On yet one more occasion, I find myself writing that FFH needs to improve its governance practices.  Hard to believe.


SJ

I largely agree with your sentiment although I find some relief in the fact we're still one year away from end of the 2nd perf fee measurement period. However, it doesn't look good especially after the losses reported in IIFL and NCML assets.  Next 3-yr perf fee measurement period ends 12/31/20 so while the carry has not crystallized it still reported as a liability on the BS showing $50M value as of 12/31/19.  When you put the $50M in the context of being used to incentivize the management of FFXDF sitting within FFH holdco as the GP then it is easier to see how quickly this becomes very material. 

Now to Prem's credit, Fairfax is the only company I have seen report share dilution impact in such a transparent and clear way in the financial statements.  They literally include a table in stmts (pg 93 of 2018 report) showing the per share value waterfall assuming no perf fee compared to actual post-performance fee dilution.  I love this! 
Title: Re: Fairfax India new issue
Post by: tradevestor on February 17, 2020, 04:05:08 PM
Epictetus, India and Patience
https://www.woodlockhousefamilycapital.com/post/epictetus-india-and-patience
Title: Re: Fairfax India new issue
Post by: valueinvesting101 on February 27, 2020, 02:41:15 PM
Some commentary about future growth at the Bangalore airport.

https://www.passengerterminaltoday.com/news/expo/pte-interview-reimagining-indias-fastest-growing-gateway.html

I think Mr. Watsa also referred to taking passenger capacity to 90 million in few years. 10-15 years predictions can be too rosy but given growth in the aviation sector in India it is possible if GDP continues to grow in high single digits.
Title: Re: Fairfax India new issue
Post by: wondering on March 02, 2020, 06:22:43 AM
https://podcasts.google.com/?feed=aHR0cHM6Ly9pbnRlbGxpZ2VudGludmVzdGluZy5wb2RiZWFuLmNvbS9mZWVkLnhtbA&episode=aW50ZWxsaWdlbnRpbnZlc3RpbmcucG9kYmVhbi5jb20vY2M1ZDY3NzYtZGQ4OC01YWRjLWE2MWEtM2ExOTViNGU1NmJk&hl=en-CA&ved=2ahUKEwjJjoKd_vvnAhVYlHIEHYLfCjUQieUEegQIBxAE&ep=6

I am not sure if anyone posted this yet.  There is an interesting discussion of Fairfax India and Thomas Cook India on the Intelligent Investing Podcast.  Just recent.
Title: Re: Fairfax India new issue
Post by: Xerxes on March 06, 2020, 11:12:10 AM
At $10.95, trade with a huge discount to BV.
But I am guessing things will get worse before they get better.
Title: Re: Fairfax India new issue
Post by: Viking on March 06, 2020, 11:26:27 AM
I agree. Hard to pull the trigger on airlines right now. An airport (BIAL)? Need more information.
Title: Re: Fairfax India new issue
Post by: hobbit on March 06, 2020, 03:54:58 PM
So BIAL IPO at 3bn . I wonder if coronavirus will have an impact on the timing or valuation. If it goes through as planned at 3Bn , that would be a significant win for the shareholders.
Title: Re: Fairfax India new issue
Post by: petec on March 06, 2020, 04:04:25 PM
So BIAL IPO at 3bn . I wonder if coronavirus will have an impact on the timing or valuation. If it goes through as planned at 3Bn , that would be a significant win for the shareholders.

Link?
Title: Re: Fairfax India new issue
Post by: hobbit on March 06, 2020, 04:22:04 PM
So BIAL IPO at 3bn . I wonder if coronavirus will have an impact on the timing or valuation. If it goes through as planned at 3Bn , that would be a significant win for the shareholders.

Link?

annual letter just published
"
Fairfax India intends to complete an IPO of AIIHL, targeted to value 100% of BIAL at $3.0 billion (a targeted valuation of $1.3 billion for 100% of AIIHL). A ‘‘ratchet’’ mechanism has been agreed with the investor whereby if the IPO is completed at a valuation of AIIHL below $1.3 billion, the investor will receive incremental shares of AIIHL to compensate for the difference between that actual valuation and $1.3 billion.
"
https://s1.q4cdn.com/293822657/files/doc_financials/annual_reports/2019/Website-Fairfax-India-2019-Shareholders-Letter.pdf

do not know what to make of the ratchet clause though, I have seen it in some VC deals before.
Title: Re: Fairfax India new issue
Post by: petec on March 06, 2020, 04:24:48 PM
So BIAL IPO at 3bn . I wonder if coronavirus will have an impact on the timing or valuation. If it goes through as planned at 3Bn , that would be a significant win for the shareholders.

Link?

annual letter just published
"
Fairfax India intends to complete an IPO of AIIHL, targeted to value 100% of BIAL at $3.0 billion (a targeted valuation of $1.3 billion for 100% of AIIHL). A ‘‘ratchet’’ mechanism has been agreed with the investor whereby if the IPO is completed at a valuation of AIIHL below $1.3 billion, the investor will receive incremental shares of AIIHL to compensate for the difference between that actual valuation and $1.3 billion.
"
https://s1.q4cdn.com/293822657/files/doc_financials/annual_reports/2019/Website-Fairfax-India-2019-Shareholders-Letter.pdf

do not know what to make of the ratchet clause though, I have seen it in some VC deals before.

Thanks!
Title: Re: Fairfax India new issue
Post by: bizaro86 on March 06, 2020, 06:29:00 PM
That takes a lot of probitive value away from the mark on the airport. They basically guaranteed the buyer a 10%+ capital gain on the investment. On those terms, it seems likely they could have sold a small minority stake at basically any price. I wouldn't care, except they're using that mark for the performance fee.
Title: Re: Fairfax India new issue
Post by: Jurgis on March 07, 2020, 06:51:54 AM
That takes a lot of probitive value away from the mark on the airport. They basically guaranteed the buyer a 10%+ capital gain on the investment. On those terms, it seems likely they could have sold a small minority stake at basically any price. I wouldn't care, except they're using that mark for the performance fee.

Yes.  :(
Title: Re: Fairfax India new issue
Post by: bizaro86 on March 07, 2020, 08:35:33 AM
The more I think about it, the less ethical it seems. Shareholders are the ones paying for this guarantee, while management (via performance fee) are the ones benefiting from it.
Title: Re: Fairfax India new issue
Post by: TwoCitiesCapital on March 07, 2020, 12:20:22 PM
The more I think about it, the less ethical it seems. Shareholders are the ones paying for this guarantee, while management (via performance fee) are the ones benefiting from it.

Generally agree with this. Isn't egregious, but is distatseful
Title: Re: Fairfax India new issue
Post by: StubbleJumper on March 07, 2020, 01:56:36 PM
The more I think about it, the less ethical it seems. Shareholders are the ones paying for this guarantee, while management (via performance fee) are the ones benefiting from it.


You are correct, but I would add a bit of precision.  It's not management that benefits, its FFH that benefits via the performance fee.  That's might be trite, but I make that point because it is important to recognize where Prem's financial interest resides.  It resides in the performance of FFH shares, not FFH India.

I am certain that people are tired of me dredging up the ancient past, but this is nothing new.  When FFH bought out ORH, we did not really have a fully independent management cadre or board of directors to ensure that ORH shareholders received full value in that buyback.  Prem had access to a larger collection of ORH financial data than did minority shareholders, so we did not know at the time that he was effectively buying ORH at book value (although as Chairman of ORH, it is almost certain that Prem would have been aware of that).  Okay, it mostly worked out.  Most of us made good money on ORH, but I remain unconvinced that we received a fair price for our shares.  The lesson here is that if there is a divergence between Prem's personal financial interest and your personal financial interest, you would be well advised to consider measures to ensure that your interests are well aligned with his.

Do I need to dredge up Abitibi Bowater?  It's basically the same conclusion.  Understand where Prem's financial interests reside!


SJ
Title: Re: Fairfax India new issue
Post by: petec on March 07, 2020, 04:03:08 PM
The more I think about it, the less ethical it seems. Shareholders are the ones paying for this guarantee, while management (via performance fee) are the ones benefiting from it.


You are correct, but I would add a bit of precision.  It's not management that benefits, its FFH that benefits via the performance fee.  That's might be trite, but I make that point because it is important to recognize where Prem's financial interest resides.  It resides in the performance of FFH shares, not FFH India.

I am certain that people are tired of me dredging up the ancient past, but this is nothing new.  When FFH bought out ORH, we did not really have a fully independent management cadre or board of directors to ensure that ORH shareholders received full value in that buyback.  Prem had access to a larger collection of ORH financial data than did minority shareholders, so we did not know at the time that he was effectively buying ORH at book value (although as Chairman of ORH, it is almost certain that Prem would have been aware of that).  Okay, it mostly worked out.  Most of us made good money on ORH, but I remain unconvinced that we received a fair price for our shares.  The lesson here is that if there is a divergence between Prem's personal financial interest and your personal financial interest, you would be well advised to consider measures to ensure that your interests are well aligned with his.

Do I need to dredge up Abitibi Bowater?  It's basically the same conclusion.  Understand where Prem's financial interests reside!


SJ

Sensible advice for most investments tbh!
Title: Re: Fairfax India new issue
Post by: bizaro86 on March 07, 2020, 04:59:18 PM
I would say any time I'm paying a 20% incentive fee, knowing that it will be calculated fairly is important to me.
Title: Re: Fairfax India new issue
Post by: StubbleJumper on March 07, 2020, 05:14:23 PM
I would say any time I'm paying a 20% incentive fee, knowing that it will be calculated fairly is important to me.


You are expecting Fairfax to suddenly play fair?  Don't hold your breath.

I'm not a big fan of the short-and-distort crowd that made the short attack on FFH in '03 and '04, but they were actually right about one thing.  When FFH holdco was cashflow challenged, Prem engineered an ingenious move whereby FFH bought a slug of ORH shares from an institutional holder by issuing convertible notes to that holder that convertible back into the ORH shares. Effectively, Prem "borrowed" the ORH shares from the institutional holder to enable FFH's holding to pop above 80%.  At that point ORH was consolidated into FFH's financial statements for income tax purposes.  This allowed FFH to use hundreds of millions of dollars of tax loss carry-forwards from TIG and C&F that would otherwise fall off the table.  ORH made the tax payments to FFH, and then FFH offset them against the loss-carryforwards, which gave the holdco an enormous shot of cash.

Was it legal?  The IRS said it was legal.  Was it ethical to pretend that you owned 80% of ORH when the reality was that the shares were borrowed?  Well, I'll leave that one for you to decide.

The moral of all of these stories is that Prem is very clever and very self-interested.


SJ
Title: Re: Fairfax India new issue
Post by: Viking on March 07, 2020, 05:26:25 PM
I would say any time I'm paying a 20% incentive fee, knowing that it will be calculated fairly is important to me.


You are expecting Fairfax to suddenly play fair?  Don't hold your breath.

I'm not a big fan of the short-and-distort crowd that made the short attack on FFH in '03 and '04, but they were actually right about one thing.  When FFH holdco was cashflow challenged, Prem engineered an ingenious move whereby FFH bought a slug of ORH shares from an institutional holder by issuing convertible notes to that holder that convertible back into the ORH shares. Effectively, Prem "borrowed" the ORH shares from the institutional holder to enable FFH's holding to pop above 80%.  At that point ORH was consolidated into FFH's financial statements for income tax purposes.  This allowed FFH to use hundreds of millions of dollars of tax loss carry-forwards from TIG and C&F that would otherwise fall off the table.  ORH made the tax payments to FFH, and then FFH offset them against the loss-carryforwards, which gave the holdco an enormous shot of cash.

Was it legal?  The IRS said it was legal.  Was it ethical to pretend that you owned 80% of ORH when the reality was that the shares were borrowed?  Well, I'll leave that one for you to decide.

The moral of all of these stories is that Prem is very clever and very self-interested.


SJ

Stubble, thanks for the trip down memory lane... great summary of many things i had long forgotten (although i do still remember the day the ORH deal was announced... it was my biggest one day gain ever :-)
Title: Re: Fairfax India new issue
Post by: Cigarbutt on March 08, 2020, 06:54:24 AM
I would say any time I'm paying a 20% incentive fee, knowing that it will be calculated fairly is important to me.
You are expecting Fairfax to suddenly play fair?  Don't hold your breath.

I'm not a big fan of the short-and-distort crowd that made the short attack on FFH in '03 and '04, but they were actually right about one thing.  When FFH holdco was cashflow challenged, Prem engineered an ingenious move whereby FFH bought a slug of ORH shares from an institutional holder by issuing convertible notes to that holder that convertible back into the ORH shares. Effectively, Prem "borrowed" the ORH shares from the institutional holder to enable FFH's holding to pop above 80%.  At that point ORH was consolidated into FFH's financial statements for income tax purposes.  This allowed FFH to use hundreds of millions of dollars of tax loss carry-forwards from TIG and C&F that would otherwise fall off the table.  ORH made the tax payments to FFH, and then FFH offset them against the loss-carryforwards, which gave the holdco an enormous shot of cash.

Was it legal?  The IRS said it was legal.  Was it ethical to pretend that you owned 80% of ORH when the reality was that the shares were borrowed?  Well, I'll leave that one for you to decide.

The moral of all of these stories is that Prem is very clever and very self-interested.
SJ
Stubble, thanks for the trip down memory lane... great summary of many things i had long forgotten (although i do still remember the day the ORH deal was announced... it was my biggest one day gain ever :-)
I just want to add that, even if this was a grey area, the tax consolidation move was both clever and appropriate. The context included a potential material write-down of tax assets, further credit downgrades and other subsequent reflexive and potentially firm-threatening spiral. One can question the way they obtained the IRS acquiescence but, for this specific 'deal', I came to the conclusion that this was the best and most appropriate course of action.
To tax consolidate without the economic interest is controversial but the intent of the transaction was a prelude to full consolidation. For those interested, the IRS continued to show discomfort with this type of transaction or perhaps that specific transaction:
https://www.irs.gov/pub/irs-utl/am2012007.pdf

---) Back to the Fairfax India issue
Title: Re: Fairfax India new issue
Post by: StubbleJumper on March 08, 2020, 07:59:47 AM
I would say any time I'm paying a 20% incentive fee, knowing that it will be calculated fairly is important to me.
You are expecting Fairfax to suddenly play fair?  Don't hold your breath.

I'm not a big fan of the short-and-distort crowd that made the short attack on FFH in '03 and '04, but they were actually right about one thing.  When FFH holdco was cashflow challenged, Prem engineered an ingenious move whereby FFH bought a slug of ORH shares from an institutional holder by issuing convertible notes to that holder that convertible back into the ORH shares. Effectively, Prem "borrowed" the ORH shares from the institutional holder to enable FFH's holding to pop above 80%.  At that point ORH was consolidated into FFH's financial statements for income tax purposes.  This allowed FFH to use hundreds of millions of dollars of tax loss carry-forwards from TIG and C&F that would otherwise fall off the table.  ORH made the tax payments to FFH, and then FFH offset them against the loss-carryforwards, which gave the holdco an enormous shot of cash.

Was it legal?  The IRS said it was legal.  Was it ethical to pretend that you owned 80% of ORH when the reality was that the shares were borrowed?  Well, I'll leave that one for you to decide.

The moral of all of these stories is that Prem is very clever and very self-interested.
SJ
Stubble, thanks for the trip down memory lane... great summary of many things i had long forgotten (although i do still remember the day the ORH deal was announced... it was my biggest one day gain ever :-)
I just want to add that, even if this was a grey area, the tax consolidation move was both clever and appropriate. The context included a potential material write-down of tax assets, further credit downgrades and other subsequent reflexive and potentially firm-threatening spiral. One can question the way they obtained the IRS acquiescence but, for this specific 'deal', I came to the conclusion that this was the best and most appropriate course of action.
To tax consolidate without the economic interest is controversial but the intent of the transaction was a prelude to full consolidation. For those interested, the IRS continued to show discomfort with this type of transaction or perhaps that specific transaction:
https://www.irs.gov/pub/irs-utl/am2012007.pdf

---) Back to the Fairfax India issue


No, don't get me wrong here.  The tax consolidation of ORH was definitely legal -- the IRS made that clear.  Just as the $1B finite reinsurance contract from Swiss Re which was used to facilitate the TIG/C&F acquisitions was legal.  They were both ingenious, but some people held the view that it was playing a little fast and loose from an ethical perspective.  People are free to hold the view that they prefer.  My only observation is that Prem has a long history of making very clever moves for the financial benefit of FFH, and sometimes that can be perceived as a financial dis-benefit for the people who took the other side of the arrangement (the short-sellers of the past, ORH shareholders, Abitibi shareholders, and possibly Fairfax India unit holders).  It's not new.


SJ
Title: Re: Fairfax India new issue
Post by: Xerxes on March 09, 2020, 08:09:25 AM
Wasn’t able to catch it when it opened 22% down.
But caught it I think as 10% down. 
Title: Re: Fairfax India new issue
Post by: Tompety03 on March 24, 2020, 03:35:13 PM
I am not intimately familiar with the cap structure at the Bangalore airport, but a 6-12 month slowdown in air travel should not impact the value of the airport this significantly. With 1/2 of the BV in the airport this seems like a bargain.

India seems to be taking a very proactive approach to the CV - my friend in Pune has been under social distancing measures for a week or so and has a very young population. Obviously there are other challenges discussed in the thread on India/CV.

Would be curious to hear other thoughts in case I am not missing anything.

Chris 
Title: Re: Fairfax India new issue
Post by: obtuse_investor on March 28, 2020, 03:38:26 PM
Of all the things I own right now, FIH certainly looks the cheapest right now.

If the book value growth is about 6-8% per annum for next 10 years, with current discount to book you can lock in a very healthy rate of return even after fees. Book should grow at a higher rate than that.
Title: Re: Fairfax India new issue
Post by: matts on March 28, 2020, 11:46:38 PM
Of all the things I own right now, FIH certainly looks the cheapest right now.

If the book value growth is about 6-8% per annum for next 10 years, with current discount to book you can lock in a very healthy rate of return even after fees. Book should grow at a higher rate than that.

What's your estimate for the current book value though?
Title: Re: Fairfax India new issue
Post by: bizaro86 on March 29, 2020, 08:24:33 AM
Of all the things I own right now, FIH certainly looks the cheapest right now.

If the book value growth is about 6-8% per annum for next 10 years, with current discount to book you can lock in a very healthy rate of return even after fees. Book should grow at a higher rate than that.

What's your estimate for the current book value though?

Yeah, I still own this (worst mistake this year) but given the shenanigans with the airport mark, makes it pretty tough to trust their mark on the other private positions. And if you can't trust the external manager in a reasonable way, then why wouldn't this trade for a 40% discount permanently? There are lots of permanent capital vehicles that do and have lower fees.

Frustrating, as I think the assets are great. But trust is hard to get back, imo.

Title: Re: Fairfax India new issue
Post by: obtuse_investor on March 29, 2020, 05:09:25 PM
Of all the things I own right now, FIH certainly looks the cheapest right now.

If the book value growth is about 6-8% per annum for next 10 years, with current discount to book you can lock in a very healthy rate of return even after fees. Book should grow at a higher rate than that.

What's your estimate for the current book value though?

I don't have any fancy models. Two of their biggest assets are the airport and IIFL (finance & banking). Both these are going to get hit severely due to COVID, but we also know that the impact would not be forever. People will fly again and use their financial institutions again.

Do a DCF of a sample company... even if first two years there is zero earnings, the value drops much less than 30%.

If I simply assume that their Q4 book value has dropped ~30% similar to overall Indian stock market, then it will be around 11.8/shr. As of this writing FIH is selling at P/B of 0.57. If the underlying businesses return nominal 10% p.a. then at current price buyer is earning ~18% p.a.
Title: Re: Fairfax India new issue
Post by: Scunny Bunny on April 14, 2020, 10:46:52 PM
Bit of reverse engineering here with no adjustments for future management fees and costs. Main interest to me is BIAL.  So take the market capitalisation, deduct value of publicly listed stocks, deduct value of unlisteds using 30% discount, adjust for debt/liquids. At 31 December, at share price of $12.82, doing this calculation gave you an implied value of FIH share of BIAL at $962million, or a 33% discount to stated book - harsh but fair IMHO.  At 14 April, at $7.08, taking the market value of listeds (down 32% in US$ terms), reducing unlisted exposures by 30% and still use a 30% discount - which values them at half BV - and adjusting for debt/liquids gives me an implied value of $520m for the stake in BIAL or a 64% discount to last stated BV, and a 46% reduction from the reverse engineered $962m at 31 December. Something like Sydney Airport has a share price off 36% from its high price ever in February - it's still open but one of its major airlines (Virgin) needs a Government bailout of will fail.  Obvious fear that the "parent" is wobbling given its draw down of revolver (I would have done the same!) Starting to be worth putting on the watchlist perhaps.     
Title: Re: Fairfax India new issue
Post by: petec on April 14, 2020, 11:53:52 PM
Bit of reverse engineering here with no adjustments for future management fees and costs. Main interest to me is BIAL.  So take the market capitalisation, deduct value of publicly listed stocks, deduct value of unlisteds using 30% discount, adjust for debt/liquids. At 31 December, at share price of $12.82, doing this calculation gave you an implied value of FIH share of BIAL at $962million, or a 33% discount to stated book - harsh but fair IMHO.  At 14 April, at $7.08, taking the market value of listeds (down 32% in US$ terms), reducing unlisted exposures by 30% and still use a 30% discount - which values them at half BV - and adjusting for debt/liquids gives me an implied value of $520m for the stake in BIAL or a 64% discount to last stated BV, and a 46% reduction from the reverse engineered $962m at 31 December. Something like Sydney Airport has a share price off 36% from its high price ever in February - it's still open but one of its major airlines (Virgin) needs a Government bailout of will fail.  Obvious fear that the "parent" is wobbling given its draw down of revolver (I would have done the same!) Starting to be worth putting on the watchlist perhaps.   

I don’t think this sold off because anyone’s scared the parent drew the revolver. It sold off because it’s an small illiquid closed end fund invested in illiquid/private foreign companies in the biggest recession ever.

I bought my holding back for half the price - superb value.
Title: Re: Fairfax India new issue
Post by: Scunny Bunny on April 15, 2020, 12:48:08 AM
Certainly agree the reason for the sell off plus India COVID fears I suspect. We agree it's excellent long term value. I do worry about the parent sometimes - I'm usually OK at dissecting complex structures but in the past these guys do so many post balance date things to put you off the scent. 
Title: Re: Fairfax India new issue
Post by: petec on April 15, 2020, 12:53:21 AM
Certainly agree the reason for the sell off plus India COVID fears I suspect. We agree it's excellent long term value. I do worry about the parent sometimes - I'm usually OK at dissecting complex structures but in the past these guys do so many post balance date things to put you off the scent.

How do you mean?
Title: Re: Fairfax India new issue
Post by: Xerxes on April 15, 2020, 07:50:39 AM
Bit of reverse engineering here with no adjustments for future management fees and costs. Main interest to me is BIAL.  So take the market capitalisation, deduct value of publicly listed stocks, deduct value of unlisteds using 30% discount, adjust for debt/liquids. At 31 December, at share price of $12.82, doing this calculation gave you an implied value of FIH share of BIAL at $962million, or a 33% discount to stated book - harsh but fair IMHO.  At 14 April, at $7.08, taking the market value of listeds (down 32% in US$ terms), reducing unlisted exposures by 30% and still use a 30% discount - which values them at half BV - and adjusting for debt/liquids gives me an implied value of $520m for the stake in BIAL or a 64% discount to last stated BV, and a 46% reduction from the reverse engineered $962m at 31 December. Something like Sydney Airport has a share price off 36% from its high price ever in February - it's still open but one of its major airlines (Virgin) needs a Government bailout of will fail.  Obvious fear that the "parent" is wobbling given its draw down of revolver (I would have done the same!) Starting to be worth putting on the watchlist perhaps.   

I don’t think this sold off because anyone’s scared the parent drew the revolver. It sold off because it’s an small illiquid closed end fund invested in illiquid/private foreign companies in the biggest recession ever.

I bought my holding back for half the price - superb value.

The illiquidity air pocket are also aggravated by the very high US dollar.
Title: Re: Fairfax India new issue
Post by: Xerxes on April 18, 2020, 05:16:49 AM
unless I heard wrong what was said on AGM, OMERS is the minority buyer of the airport.
Title: Re: Fairfax India new issue
Post by: petec on April 18, 2020, 05:25:57 AM
unless I heard wrong what was said on AGM, OMERS is the minority buyer of the airport.

You heard right. But I think someone had identified that up-thread.
Title: Re: Fairfax India new issue
Post by: ICUMD on April 18, 2020, 11:22:32 AM
Correct me if I'm wrong, but since they get a regulated 16% return on aero operations, they will never suffer loss on core operations.
Title: Re: Fairfax India new issue
Post by: petec on April 22, 2020, 03:55:15 AM
I have not scoured the AR yet. Does anyone know if the "ratchet" in the OMERS deal includes a deadline for an IPO? because
a) if not then the ratchet is somewhat irrelevant.
b) if so, and it is any time soon, then FIH are going to give away a lot of BIAL shares. Coronavirus and full IPO valuations are not compatible.
Title: Re: Fairfax India new issue
Post by: hobbit on April 22, 2020, 11:52:57 AM
I have not scoured the AR yet. Does anyone know if the "ratchet" in the OMERS deal includes a deadline for an IPO? because
a) if not then the ratchet is somewhat irrelevant.
b) if so, and it is any time soon, then FIH are going to give away a lot of BIAL shares. Coronavirus and full IPO valuations are not compatible.

on the call they said next 3 years