Indian Buffett goes shopping
V Prem Watsa, the India-born billionaire and promoter-chairman of Toronto-based Fairfax Financial Holdings, a $30-billion plus insurance and investment company, is often referred to as the “Canadian Buffett,” a reference to the famous billionaire founder of Berkshire Hathaway, Warren Buffett.
This is primarily because Watsa is known for his shrewd deal making abilities. Some call him a consummate ‘turnaround artist’ while a report quoted a portfolio manager at an asset management company saying, “Prem is attracted to companies that are out of favour and unpopular with the market.” No surprise, then, that he recently saw value in struggling Research In Motion (RIM), the Canada-based Blackberry maker, becoming one of the top investors in the company. Apparently, he’s been busy, working behind the scenes to revamp RIM. Earlier this week, Fairbridge Capital, a fully-owned subsidiary of Fairfax Financial Holdings, snapped up Thomas Cook UK’s 77 per cent stake in the India unit for Rs 810 crore.
The 62-year-old Watsa, who graduated in chemical engineering from the Indian Institute of Technology, Madras left soon after in search of greener pastures. His father, who was orphaned young and who rose to become the principal of elite Hyderabad Public School, influenced Prem to try his luck overseas. He went to Ontario, which is where his brother was. A story published in Toronto Life some years ago quotes Prem as saying, “I went to the Ivey not because it was good, though it turned out it was, but because it was near where my brother lived….” He was referring to the Richard Ivey School of Business at University of Western Ontario where he did his MBA.
It was at Confederation Life, a Canadian insurance and financial services company which was forced to liquidate in the 90s, that he had his epiphany. In a recent interview to a journal, Watsa called it “a road to Damascus moment”, when his boss gifted him a book written by a Columbia business school professor and investment manager Ben Graham, a legend for introducing the concept of value investing. Graham had experienced huge losses in the 1929 crash and it deeply influenced his strategic and turnaround market approach. In 2007, Watsa apparently saw the ‘storm’ coming and moved much of his company’s $16-billion portfolio out of the stock market and into treasury bonds and other recession-proof instruments, renewing comparisons of him with Buffett.
Watsa was in India last year to host former US President George W Bush at a Mumbai function with top bankers and industrialists in attendance. Some of these India-based bankers are known to be his good friends. Deepak Parekh, HDFC chairman, is one of his friends, and the two have known each other for 35 years. Speaking to Business Standard, Parekh described Watsa as “a good individual, self-made, smart, successful and well-regarded in the financial system and society.” He has other active India connections. Till June of last year, he was a non-executive director of ICICI Bank. Fairfax Financial Holdings has a 26 per cent stake in ICICI Lombard, while ICICI Bank holds 74 per cent in the company. Prem Watsa is on the board of ICICI Lombard.
It’s not as if this uber-investor hasn’t tasted failure. Documents reveal that Fairfax had to write off a large chunk of its investments in a Canadian media company, Canwest, in 2009, as the firm filed for bankruptcy. Another venture of Watsa’s that didn’t do too well was with publisher Torstar, where it had to write off some of its investment.
But more often than not, Watsa is known for his hits, not his misses. His annual letter to shareholders is often picked up by B-schools for its insight, not unlike his alter ego. In one letter, he reveals that he has been attending Berkshire Hathaway shareholders’ meetings for the last thirty years, from when there were only 200 shareholders present. “I still find I learn something each year from Warren (Buffett) and Charlie (Munger),” says Watsa.
Maybe, they can learn something from him now.
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