Watsa broadens horizon for Fairfax

Recent investments in Bangalore airport and Sanmar Chemicals are new calls for infrastructure, manufacturing

As shareholders of Fairfax India gather at Roy Thomson Hall in Toronto to attend their first annual general meeting on Thursday, its India-born chairman, Prem Watsa, is ready to impress with a highly productive investment record. The investment holding company has deployed nearly 90 per cent of the $1 billion it raised last year.

Of this, about $500 million was invested in the past 15 days alone, when the India-focused investment firm bought a 30 per cent stake in Sanmar Chemicals and a 33 per cent stake in Bangalore International Airport. Its parent, Fairfax Financial, provided an additional $122 million for these two buyouts as the investment strategy for Fairfax India restricts it from investing more than $250 million in an individual firm.

These two deals made in a fortnight also mark new calls in Watsa's investment strategy for India. Hyderabad-born Watsa, also known as the Canadian Warren Buffett, largely focused on financial services and travel businesses for his investments in India till he met Prime Minister Narendra Modi in November 2014.

Modi was then on a state visit to Canada to attract investments. Watsa responded to his 'India Calling' appeal by raising about $1 billion through listing of Fairfax India on the Toronto Stock Exchange in January 2015. He promised to primarily invest this amount in India in a couple of years to benefit from the pro-business political environment under the new government.

"Fairfax India believes that the sectors of the Indian economy that will benefit most include infrastructure, consumer services, retail and exports," says a person, who works closely with Watsa. "But, it is open to investments in other opportunities such as manufacturing where India has an advantage over other countries," he says talking about the strategy that Fairfax India is playing out.

Sanmar, the largest speciality PVC company in India, is in the process of doubling its capacity in Egypt to 400,000 tonnes per annum. Once the expansion is completed, Sanmar will have a total PVC capacity of over 700,000 tonnes per annum, making it among the largest PVC companies in the world. In addition, Sanmar also manufactures caustic soda, chloromethanes, refrigerant gases, industrial salt and speciality chemical intermediates.

Sanmar is not the first chemical business that Fairfax India has invested in. In November last year, it invested $19 million for a 45 per cent stake in oleo chemicals producer Adi Finchem. Oleo chemicals are derived from plant or animal fat, which can be used for making both edible and non-edible products. These investments are targeted to leverage India's export and manufacturing potential as chemical production is shifting to Asian countries from developed ones on account of raw material availability and environmental concerns.

Fairfax India's other investments include a 21.8 per cent stake that it bought in India Infoline (IIFL) for $202 million in December 2015 through an open offer. Hamblin Watsa Investment Counsel Fund first invested in IIFL in 2010. It also holds board representation in the financial services firm since 2012 and has about nine per cent stake.

"Prem Watsa's strength lies in his ability to take big bold macro-economic calls," says R Venkataraman, managing director, IIFL, reminding how he rightly predicted the global financial crisis in 2008. "He is optimistic about India's economic growth over the next decade, and hence is investing not only in financial services but also in infrastructure and manufacturing," says Venkataraman.

FAIRFAX SPREADS ITS WINGS

FAIRFAX INDIA

• Jan '14: Fairfax India lists on Toronto Stock Exchange
   
• Jul '15: Offers to acquire a 26% of IIFL Holdings
   
• Jul '15: Buys 88% in National Collateral Management Services Rs 992 crore
   
• Nov '15: Invests Rs 126 crore for 45% stake in Adi Finchem
  

 

Dec '15: Acquires 21.8% in IIFL for about Rs 1,344 crore
 

Mar' 16: Buys 33% in Bangalore Airport for Rs 2,125 crore, parent supports
 

Apr '16: Buys 30% in Sanmar Chemicals for Rs 2,000 crore, parent supports