Fairfax India plans to list subsidiary for airport, other infra investments

Fairfax India is planning to list its subsidiary Anchorage Infrastructure Investments Holdings (AIIHL), which has been created in June 2019.

AIIHL is Fairfax’s flagship investment vehicle for airports and other infrastructure investments in India. The plan is to eventually transfer all of Fairfax’s shares in Bangalore International Airport (BIAL) to AIIHL.

In December 2019, Fairfax India signed definitive agreements with an investor, whereby it will transfer 43.6 per cent of BIAL out of the 54 per cent that it owns to AIIHL. The investor will pay about $135 million to acquire from Fairfax India 11.5 per cent stake on a fully diluted basis in AIIHL. This will result in the investor indirectly owning approximately 5 per cent in BIAL. The transaction values BIAL at $2.7 billion.

Fairfax seeks Canadian regulator's nod to infuse up to $1.5 bn in India

Fairfax India Holdings Corporation has made regulatory filings with the Canadian securities regulator, as it seeks to offer up to $1.5 billion as debt, equity or other securities over a 25-month period.

The company has filed a final short form base shelf prospectus with the Canadian securities regulatory authorities in connection with its $1.5 billion universal shelf renewal.

"The shelf prospectus renewal allows Fairfax India to offer from time to time over a 25-month period up to $1.5 billion of debt, equity or other securities," the company said. "Should Fairfax India offer any securities, it will make a prospectus supplement available that will include the specific terms of the securities being offered."

Fairfax invests in businesses that are expected to benefit from India’s pro-business political environment, its growing middle class and its demographic trends that are likely to underpin strong growth for several years. Sectors of the Indian economy that it believes will benefit most from such trends include infrastructure, financial institutions, consumer services, retail and exports, though it is not limiting its investments into these sectors.

The company said that its net earnings for the year 2019 grew five-fold to $516.3 million, from $96.4 million for the year 2018, reflecting increased net undrealised and realised gains on investments. This was partially offset by increased tax expense and performance fees. Its book value per share has seen an 11.2 per cent compounded annual growth rate during the period.

The increase primarily related to the fiscal year 2019 net earnings, partially offset by unrealised foreign currency translation losses as a result of the weakening of the Indian rupee relative to the US Dollar.

The Company also announced a net change in unrealised gains on investments of $530.4 million in February, mainly from an increase in the fair value of its investments in Bangalore International Airport ($751.5 million) and Sanmar Chemicals Group ($23.1 million), and an increase in the market prices of its investments in the Catholic Syrian Bank Limited ($60.9 million) and Fairchem Specialty Limited ($33.4 million).

This was partially offset by a decrease in the market prices of the investments in IIFL Finance Limited ($196.0 million) and IIFL Securities Limited ($40.9 million) and a decrease in the fair value of the investment in National Collateral Management Services Limited ($41.6 million).

Fairfax India completes equity infusion in Sanmar Group, takes stake to 43%

Fairfax India Holdings Corporation has completed an equity infusion into Chennai-based Sanmar Chemicals Group, taking its equity interest in the group to about 43 per cent.

Under the terms of the deal, Sanmar bought bonds worth $300 million (around Rs 1,990 crore) held by Fairfax India, along with accrued interest at an effective annual interest rate of 13 per cent, for a net cash consideration of approximately $425 million (Rs 3,020 crore).

Fairfax India re-invested approximately $200 million (Rs 1,420 crore) of the cash consideration received from the bond sale to buy Sanmar common shares.

Following this investment, Fairfax India’s equity interest in Sanmar has risen to about 43 per cent.

Fairfax India will retain approximately $225 million (Rs 1,600 crore) of the cash consideration for future Indian investments.

Between the third quarter of 2018, when the transaction was announced and September 30, 2019, Fairfax India recorded investment gains from Sanmar common shares and bonds of approximately $210 million and $100 million, respectively.

In 2017, Fairfax for the first time invested Rs 400 crore in Samar. Over the years it has been investing to back Sanmar group's $220 million capex for projects in Tamil Nadu.

Fairfax’s investment was in Sanmar’s chemicals business, which accounts for about 70 per cent of the latter’s operations, and is housed within three companies – Chemplast Sanmar (Chemplast), Sanmar Speciality Chemicals, and Egypt-based TCI Sanmar (TCI).

Chemplast is Sanmar’s flagship company and a major player in the chemical business for over 50 years.

Sanmar’s capex plan includes increasing suspension PVC capacity in Cuddalore to 600 kilo tonnes per annum (ktpa) by 2023, and to 900 ktpa by 2025 at an investment of $186 million. The current capacity is 300 ktpa.

The estimated incremental annual earnings before interest, tax, depreciation and amortisation (EBITDA) after the expansion would be $162 million.

Fairfax chairman Prem Watsa earlier said Sanmar’s consolidated financial results in 2018 were below expectations since TCI did not deliver due to a spike in raw material and energy costs, while Chemplast's financial results were good.

For the year ended December 31, 2018, Sanmar’s net loss was $91 million against a loss of $85 million in 2017. Revenue grew 10 per cent to $682 million. EBITDA for 2018 was up 10 per cent to $100 million. The Sanmar group has a sales figure of around $1 billion and assets worth $1.5 billion.

Watsa said profitability is expected to improve significantly with capacity addition in Egypt.

With the ability to refinance its existing debt and to realise increased demand for its products, Sanmar plans to add several new capital expansion projects in Chemplast.

This will result in additional capacity for various products of around 420,000 tonnes per annum, with commissioning projected to be before 2024.

Fairfax-backed CSB Bank IPO subscribed 87 times so far on final day

Fairfax-backed CSB Bank’s Rs 410-crore initial public offering (IPO) was subscribed 87 times on Tuesday, underpinned by a rally in the secondary market and encouraging performance of new listings.

The share sale saw good demand from all categories of investors. The institutional investor portion was subscribed 62 times; high net worth individuals (HNIs) category saw 164 times demand and the retail segment saw 43 times demand the shares on offer. Analysts said investors were attracted to CSB Bank’s strong network and brand presence in South India. “Significant capital base, established SME business model, gold loan portfolio and prudent risk management controls,” were some of the strengths of CSB Bank highlighted in a report by Reliance Securities.

Given the huge oversubscription, the IPO is likely to be priced at the upper end of its price band of Rs 193-195 per share. At Rs 195 per share, CSB Bank will have post-IPO market cap of Rs 3,382 crore.

Analysts said the huge demand for shares was despite aggressive pricing.

At the IPO price, CSB Bank was asking for valuations of 2.4 times its book value. Valuations look to be stretched with established players like RBL, Federal Bank, and Development Credit Bank which despite higher return on assets trade at price-to-book multiples of below 2 times, wrote Reliance Securities in a note.

CSB Bank raised Rs 24 crore in fresh capital through the IPO. The remaining was an offer for sale by existing shareholders such as ICICI Lombard General Insurance, HDFC Life Insurance and ICICI Prudential Life Insurance.

As on September 30, CSB, formerly the Catholic Syrian Bank, had 1.3 million customers, 412 branches and 290 ATMs.

Fairfax offloads 4.9% stake in ICICI Lombard for Rs 2,627 crore

Prem Watsa’s Fairfax on Thursday sold 4.91 per cent stake in ICICI Lombard General Insurance Company, exiting the firm it co-founded with ICICI Bank in 2001.
FAL Corporation, a subsidiary of Canada-based Fairfax, sold 22 million shares at Rs 1,178 apiece via block deals, the data provided by stock exchanges showed. The company has mopped up Rs 2,627 crore through the stake sale. The stake was bought by a clutch of buyers whose names couldn’t be ascertained.
This comes after the insurance regulator relaxed the five-year lock-in rule for Fairfax’s stake in ICICI Lombard, which was scheduled to end in March 2021. Watsa has also invested in digital general insurance player Digit General Insurance. Shares of ICICI Lombard fell nearly 5 per cent in the secondary market to end at Rs 1,207 because of poor performance of the company in September.
The total premium collection for ICICI Lombard in September fell 23 per cent. Also, in the first half of 2019-20, the company’s premium collection contracted 11 per cent, compared to the same period last year.
On September 27, Fairfax had sold nearly 5 per cent stake in ICICI Lombard for Rs 2,562 crore. Back then, L&T Mutual Fund (MF), SBI MF, ICICI Prudential MF, and Aditya Birla Sun Life MF were among the buyers.
ICICI Lombard was set up in 2001, a 64:36 joint venture (JV) between ICICI Bank and Fairfax. The latter has reduced its stake in the JV over the years. When ICICI Lombard came out with an initial public offering in September 2017, Fairfax had sold its 12 per cent stake, while ICICI Bank had sold nearly 7 per cent.
Shares of ICICI Lombard have more than doubled since its listing. Currently, ICICI Bank holds 55.86 per cent in the general insurer.
Currently, Fairfax has investment in other Indian companies, including Thomas Cook India, Quess Corp, India Infoline, and Catholic Syrian Bank. The firm has proposed to invest billions of dollars more in India over the next five years.

Fairfax Financial Holdings sells 5% in ICICI Lombard for Rs 2,562 crore

FAL Corporation, a wholly-owned subsidiary of Canadian investor Prem Watsa’s Fairfax Financial Holdings, has sold 4.99 per cent equity stake in ICICI Lombard general insurance for Rs 2,562 crore in a block deal.

This comes after the insurance regulator, earlier this month, relaxed the five-year lock-in rule for Fairfax's stake in ICICI Lombard, which was scheduled to end in March 2021.

Fairfax now owns 4.91 per cent of the general insurer. Watsa has also invested in digital general insurance player Digit General Insurance. In Thursday’s share sale, the buyers included a host of mutual fund (MF) houses, insurance companies, and foreign investors.

These included L&T MF, SBI MF, ICICI Prudential MF, Aditya Birla Sunlife MF, Reliance MF, TATA AIG Life Insurance, Reliance Nippon Life Insurance Company, and Goldman Sachs Investments (Mauritus).

Earlier in September, Red Bloom Investment — part of Warburg Pincus group — had sold 12.3 million equity shares, or 2.7 per cent stake, in ICICI Lombard for Rs 1,378 crore, through open market transactions.

ICICI Lombard, set up in 2001, was a 64:36 joint venture (JV) between ICICI Bank and Fairfax. The latter has reduced its stake in the JV over the years.