Fairfax caps voting rights in IIFL to 25%

Relief for IIFL promoters; open offer to begin Thursday

Fairfax India Holdings Corporation has decided to restrict its voting rights in financial services firm IIFL Holdings to 25 per cent even if it acquires more shares after coming open offer. In July, Fairfax India, controlled by Canadian billionaire Prem Watsa-promoted Fairfax Financial Holdings, had said FIH Mauritius Investments would make an open offer to increase its stake in IIFL by 26 per cent.

Nirmal Jain, executive chairman of IIFL, said, "Fairfax has voluntarily agreed to restrict its voting rights to 25 per cent and the open offer will begin on October 29."

IIFL promoters hold 29.39 per cent stake in the company. However, Fairfax India currently owns 8.97 per cent of IIFL and also has an economic interest in another 5.24 per cent through derivative instruments.

Fairfax India intends to buy the additional stake for Rs 1,621 crore through an open offer at Rs 195 a share. The acquisition will be done through Fairfax's wholly-owned subsidiary, FIH Mauritius Investments, and certain other affiliates.

If Fairfax can acquire 26 per cent in the open offer, its stake will increase to 34.97 per cent, higher than the promoters' holding.

The open offer is understood to have been delayed as both parties were working on a solution to the higher stake issue.

According to sources, Fairfax usually remains the financial investor even after raising its stake to controlling levels.

IIFL said on Saturday that private equity (PE) firm General Atlantic will pick up to 21.6 per cent stake in IIFL Wealth Management, a subsidiary of IIFL Holdings, for Rs 1,122 crore.

On Friday, the IIFL scrip closed at Rs 206.95 on the BSE, six per cent higher than the open offer price. Sources say some PE investors could be interested in tendering their shares in the open offer.