Well-positioned to invest big in India: Fairfax Financial Holdings CEO

It has been a difficult year for Fairfax on its investments across geographies, said Prem Watsa

Prem Watsa, chief executive officer (CEO) of Canada-based Fairfax Financial Holdings, believes India is on a sustainable economic growth trajectory, driven by favourable business policies.

“We are well-positioned to invest large sums of money in India,” the famed investor has said in a letter to the shareholders of Fairfax Financial Holdings.

Watsa has also expressed confidence that the Narendra Modi-government will get re-elected in the upcoming Lok Sabha polls.

“The country that we continue to be very excited about is India. The sleeping giant has been waking up with the pro-business policies of Prime Minister Modi. If he wins in the upcoming election, which we think he will, India also will have a long runway of strong economic growth,” he said.

Watsa’s bullish stance comes even as Fairfax India’s listed investments have seen sharp erosion in mark-to-market gains. The fall in shares of IIFL Holdings and Fairchem Specialty have eroded Fairfax’s mark-to-market gains on these investments by $329 million (Rs 2,290 crore at current exchange rates).

Shares of IIFL Holdings and Fairchem Specialty have lost 24 per cent and 26 per cent, respectively, in 2018. Watsa and Chandran Ratnaswami, CEO of Fairfax India, attributed the fall in IIFL’s shares to the nervous sentiments created by the Infrastructure Leasing & Financial Services default.

“Early in September 2018, the market learned that a large heavily indebted quasi-government infrastructure and lending institution had defaulted on some short-term debts. A few days later another non-bank financial company (NBFC) came under distress when a major mutual fund sold some of its debt at a big discount, causing panic sell-off of shares in all NBFCs... IIFL did not escape this sell-off,” Watsa said in the shareholders’ letter.

It has been a difficult year for Fairfax on its investments across geographies.

“...the unrealised $1.2-billion gain at the end of 2017 in the stock prices of our associates and consolidated equities had all but disappeared at the end of 2018. We expect the mark-to-market declines to reverse ultimately,” he further added in the letter.

Meanwhile, Watsa-led Fairfax India has continued to make investments in India in 2018. In October 2018, Fairfax India invested $88.5 million in the Catholic Syrian Bank. On May 16, 2018, Fairfax India increased its equity interest in Bangalore International Airport (BIAL) to 54 per cent by acquiring 6 per cent for consideration of $67 million.

At the end of 2018, Fairfax India had investments in nine companies. Its investment portfolio includes IIFL Holdings, Fairchem Specialty, BIAL, Sanmar Chemicals Group, National Collateral Management Services, Catholic Syrian Bank, Saurashtra Freight, and the National Stock Exchange.