Fairfax India's assets grow at five-year CAGR of 26% to $3.24 billion

Canadian billionaire Prem Watsa-led Fairfax India Holdings has said its return on equity since inception at end-January 2015, showed a compound annual growth rate (CAGR) of 13.8 per cent till 2019.

Its assets were $1.02 billion in 2015 and grew to $3.24 billion in 2019, a CAGR of 26.4 per cent. Investments saw a CAGR of 27 per cent, from $978.6 million (Rs 7.3 billion) in 2015 to $3.17 billion (Rs 235 billion) in 2019, according to the latest annual report.

The return on equity grew from 4 per cent in 2015 to 22 per cent in 2019 even though there was a blip in 2018 to 4.5 per cent. The net earnings grew from $40.9 million in 2015 to $516.34 million in 2019.

The highest compounded annualised return among its investments was from CSB Bank  (earlier known as Catholic Syrian Bank), in which Fairfax took a 51 per cent stake from October 2018. 

It had invested $169.5 million and the value had grown to $229.3 million at end-December 2019. The bank’s initial public offer of shares in November 2019 was subscribed 87 times. Fairfax’s cost was Rs 140 a share and the closing price at end-2019 was Rs 216. CSB has reported a mark-to-market (revaluation at current prices) gain of $60 million from its cost of acquisition.  

It has claimed CSB showed 23 per cent growth in revenue to $107 million and reduction of gross non-performing assets (as a proportion of advances) to 3.2 per cent in 2019, from 7.5 per cent, the previous year.

The bank earlier had a geographically divided structure and will now be managed based on business verticals. With branches primarily in South India, it focuses on small depositors, gold loans and those to small and medium enterprises (SMEs), together about 75 per cent of total advances. CSB plans to open about 100 new branches (it has 416 now) over the next six months to drive the growth of gold, SME and two-wheeler loans.

“The branch network will be more focused on raising deposits and generating leads for the business verticals, rather than being mini banks that try to do everything,” said Fairfax in its annual report.

The book value per share of Fairfax India has a 11.2 per cent CAGR, to $16.89 from $9.5 in 2015.

Since 2015, it completed investments in 10 companies (12 currently, as two of these have combined and one, IIFL, has split into four listed entities), all sourced and reviewed by Fairbridge, the wholly owned subsidiary of Fairfax Financial Holdings in India.

Bangalore International Airport, in which it took a 54 per cent stake, has seen a CAGR of 35.7 per cent. That for its investment in National Stock Exchange was 29.3 per cent.

National Collateral Management Services, the very first investment, completed in August 2015, has seen a 8.6 per cent fall in CAGR. Sanmar Chemicals Group, in which it invested $199 million, has seen a 23.9 per cent annualised return. 

The IIFL companies on an aggregate saw annualised return at 13.8 per cent.