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'India Calling' moment for Prem Watsa as his funds get aggressive

Watsa's Fairfax Financial Holdings has announced three acquisitions in India in a month

Abhineet Kumar  |  Mumbai 

Prem Watsa, known as the ‘Canadian Buffett’, thanks to his contrarian approach to investment, has got aggressive on India like never before.

The Hyderabad-born 65-year-old promoter of Fairfax Financial Holdings, which has a market cap of $10.5-billion, has announced three acquisitions in India in a month.

Out of these, two — the offer to buy an additional 26 per cent stake in India Infoline for Rs 1,621 crore and the buyout of a 74 per cent stake in National Collateral Management Services — have come from the newly-created $1-billion fund under Fairfax India.

Watsa created this fund through an initial public offering on the Toronto Stock Exchange, after his meeting with Prime Minister Narendra Modi in November last year.

Another acquisition announcement came this month when Thomas Cook India acquired Kuoni Group’s travel operations in India and Hong Kong for Rs 535 crore. Thomas Cook India has been used by Watsa as his investment vehicle for myriad acquisitions in the country since May 2012 when he bought a 77 per cent stake in the multinational travel company’s India business through his fund Fairbridge Capital.

“Watsa has seen the world and various enterprises, right now he is bullish on India,” says Nirmal Jain, founder and chairman, India Infoline (IIFL) Group. Fairfax’s open offer valuation pegs IIFL as a billion-dollar firm in terms of market cap, one of the largest among peers.

Watsa first invested in the financial services firm in 2011 when he acquired a nine per cent stake through Hamblin Watsa Investment Counsel Fund (HWIC Fund). Despite the open offer, there is no management change at IIFL. Also, IIFL promoters are not offering any shares in the open offer. “He raises money through share capital and not as a fund structure. Therefore, he is not under any pressure to redeem or return the money after a few years,” says Jain.

Watsa’s interest in Indian financial services is not new. He acquired a 26 per cent stake in general insurance company ICICI Lombard in 2001 through HWIC Fund. He also served as a director on the board of ICICI Bank from 2004 to 2011.

Watsa has been investing in India for 15 years
  • 2001: Acquires 26% in ICICI Lombard
  • 2011: Buys 9% in stock brokerage firm IIFL
  • May ‘12: Acquires 77% in Thomas Cook (India) for Rs 817.4 crore
  • Feb ‘13: Thomas Cook (India) buys 74% in Ikya Human Capital for Rs 256 crore
  • Mar ‘13: Fairbridge buys 8.26% Nations Trust Bank (Sril Lanka)
  • Feb ‘14: Thomas Cook (India) merges with Sterling Holidays
  • Jun ‘14: Ikya acquires Hofincons
  • Sep ‘14: Ikya buys Canadian firm Brainhunter
  • Feb ‘15: Ikya renamed Quess; acquires Aramark
  • Jun ‘15: Quess buys 49% stake in Transfield Services (Qatar)
  • Jul ‘15: Thomas Cook India acquires Luxe Asia
  • Aug ‘15: Thomas Cook India buys Kuoni’s operations in India & Hong Kong
  • Jan ‘14: Fairfax India lists on Toronto Stock Exchange
  • Jul ‘15: Offers to acquire a 26% of IIFL Holdings
  • Jul ‘15: Buys 74% in National Collateral Management Services Rs 800 crore

V Vaidyanathan, chairman of Mumbai-based financial institution Capital First Group, remembers Watsa as a warm and collected person who would not get easily carried away by good or bad. The former ICICI group veteran saw him from close quarters when Watsa was on the board of ICICI Bank.

“In 2007-08, when RBI (Reserve Bank of India) had just started raising rates but the Indian economy was yet sprinting, he sent me a book A Demon of Our Own Design by Richard Bookstaber, which I read end-to-end twice over,” says Vaidyanathan. “He does not go with the flow and has a cautious outlook when things are great and an opportunistic outlook when things are down.”

Watsa, an alumnus of Indian Institute of Technology-Madras, left for Canada soon after graduating in 1971. He joined the University of Western Ontario to get a management degree. He began his career at Confederation Life Insurance Company in Toronto, and in 1984 co-founded Hamblin Watsa Investment Counsel, now part of Fairfax. The next year, he took control of Markel Financial Holdings and in 1987, renamed it Fairfax — short for ‘fair and friendly acquisitions’.

Watsa came to global limelight when Fairfax made a $4.7 billion bid for troubled smartphone maker BlackBerry. Then, Fairfax was already the largest shareholder in BlackBerry with a 10 per cent stake. The troubled company abandoned the bid later, as it turned to a $1-billion fund-raising plan in a battle to stay afloat.

“Our investment philosophy is based on the value approach as laid out by Ben Graham and practised by his famous disciple, Warren Buffett. This means, we buy stocks of financially sound at prices below their underlying long-term value. We expect to make money over time, not in the next month or two,” he said in his first annual report in 1985.

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First Published: Thu, August 13 2015. 00:40 IST