Prem Watsa's Fairfax India says it has $230 million in hand for new investments

On January 13, 2017 Fairfax India issued 42.6 million shares at $11.75 per share in public offering

Fairfax India said it has $230 million for new investments, and ongoing expenses in India. The money was part of its recently concluded public offering and private placement to the tune of $500 million.

India-born Canadian billionaire Prem Watsa's Fairfax investment in Indian operations has reached around $5 billion, including $2.9 billion from its own account.
 

Fairfax India came into being on January 30, 2015, when it issued 106.7 million shares raising gross proceeds of $1.1 billion by completing a public offering, a placement to cornerstone investors and an issue to Fairfax Financial. In September 2016, it completed a $225 million 2-year secured term loan from a syndicate of Canadian banks, led by Scotiabank.

On January 13, 2017 Fairfax India issued 42.6 million shares at $11.75 per share in a public offering and a private placement to OMERS and Fairfax Financial, raising gross proceeds of $500 million.

When the announced investments are completed and the term loan is repaid, Fairfax India will be left with about $230 million for new investments, and ongoing expenses, according to Fairfax India annual report.

Fairfax investments in India

Fairfax India has just completed its second year in business and has announced eight investments in India to the tune of $1.2 billion.

They include National Collateral Management (88 per cent stake for $149 million), Privi Organics (51 per cent for $55 million), NSE (1 per cent for $27 million), Bangalore International Airport (38 per cent for $379 million), Sanmar Chemicals Group (30 per cent for $300 million), Saurashtra Freight (51 per cent for $30 million), IIFL Holdings (27 per cent for $277 million) and Adi Finechem (45 per cent for $19 million).

Fairfax is also planning to buy 51 per cent stake in Kerala-based Catholic Syrian Bank by investing up to Rs 1,000 crore.

While the net asset value of Fairfax India increased to $10.25 per share, the underlying intrinsic value is significantly higher. For example, Fairfax first purchased IIFL Holdings for Fairfax India at Rs 195 per share in 2015, adding more at Rs 319 a share and the stock is selling at about 364 rupees per share. In spite of a 15.4 per cent return on equity and a 26 per cent annual growth in book value per share over the past ten years, IIFL is selling at a price earnings ratio of only 14 times expected earnings.

Fairfax's investment of $250 million in Thomas Cook now has a market value of $691 million.

Watsa is quite bullish about Thomas Cook operations in India, which saw 210 per cent jump in the book value in the last four years and made good number of acquisitions, including Chennai-based Sterling Holidays.

"We are very excited about Thomas Cook and its prospects in India," said Watsa.

In May 2013, through Thomas Cook, Fairfax acquired 77 per cent of Quess (then called Ikya) for $47 million, thereby valuing the entire company at $60 million. In July 2016, Quess raised $60 million by selling 10 per cent in an IPO, valuing the company at $600 million. It was one of the most successful IPOs in India in the last 10 years and the issue was over a hundred times oversubscribed. The stock is currently trading at a market value of $1.2 billion.

In November 2016, Quess entered into agreements to acquire the facility management and catering businesses of Manipal Integrated Services. The Manipal group, run by Ranjan Pai, is a major player in the healthcare and education business in India. This significant and accretive acquisition will enable Quess to strengthen its market leading position in integrated facility management services in India while at the same time helping it gain entry into this business in the healthcare and education sectors, said Watsa.