Fairfax creates India-focused control-oriented investment co with $500M initial corpus

By Bhawna Gupta

  • 27 Nov 2014

Prem Watsa-led Fairfax Financial Holdings has formed an India-focused investment arm and has committed $300 million to the firm with other cornerstone investors bringing an additional $200 million. The new company is being floated through a public offer which can up its investment corpus, it said on Wednesday.

Fairfax India Holdings Corporation (Fairfax India) has filed its prospectus with authorities to go public in Canada with subordinate voting shares.

In addition to the public offering of subordinate voting shares, and as a condition to the closing of the offering, Fairfax India will issue to Fairfax 30 million multiple voting shares on a private placement basis, for an aggregate purchase price of $300 million. Further, cornerstone investors have committed to subscribe for, on a private placement basis, approximately 20 million of the subordinate voting shares representing around $200 million.

Markel Corporation, West Street Capital Corporation, certain funds and accounts advised by Fidelity comprise the cornerstone investors.

It did not say how much shares will be available for other shareholders in the IPO. But, this comes days after India-born Watsa, better known as Canada's Warren Buffett, announced his plans to create a $1 billion corpus to invest in India.

Fairfax India is an investment holding company whose investment objective is to achieve long-term capital appreciation, while preserving capital, by investing in public and private equity securities and debt instruments in India and Indian businesses or other businesses with customers, suppliers or business primarily conducted in India. Generally, subject to compliance with applicable law, Indian investments will be made with a view to acquiring control or significant influence positions, it said.

The firm will invest in at least six different firms and a majority of the investments by value will be in public-listed securities.

It will rely on Fairbridge, Fairfax’s wholly-owned India-based investment advisor, as a portfolio advisor. Fairbridge consists of a five-person team led by former Candover India chief Harsha Raghavan. Since 2011, Fairbridge has played an active role in the sourcing and advising investments in India, including Fairfax's majority stake acquisition in Thomas Cook besides IKYA and proposed merger with Sterling Resorts.

In India, Fairfax also holds 26 per cent stake in ICICI Lombard General Insurance Co.

"We are excited to launch, for the first time in our nearly 30-year history, a new company sponsored and promoted by Fairfax Financial - a company focused purely on the potential of India and Indian businesses," said Prem Watsa , chairman of Fairfax Financial and Fairfax India.

"We believe India will be transformed by the business-friendly government of Prime Minister Modi - and Fairfax India, with our resources and expertise in India developed over the last 15 years, will be well positioned to make excellent significant long-term investments in businesses with experienced and ethical management teams," added Watsa.

The offering is being led by RBC Capital Markets, BMO Capital Markets, CIBC, Scotiabank and National Bank Financial Inc.

In the past Canada Pension Plan Investment Board (CPPIB), in effect the sovereign wealth fund of Canada, has also committed a huge sum through both direct and joint investments in India.

It bought a stake in Kotak Mahindra Bank for $372 million and committed $161.4 million in L&T Infrastructure Development Projects Ltd.

It has also formed a JV with Shapoorji Pallonji Group to acquire foreign direct investment (FDI)-compliant, stabilised office buildings in the major metropolitan areas in India. CPPIB will own 80 per cent of the venture with an initial equity commitment of $200 million.

In addition, it formed an alliance with Piramal Enterprises Ltd to offer rupee debt financing to residential projects in major urban centres of India. The two partners have committed an initial investment of $250 million each for the same.

(Edited by Joby Puthuparampil Johnson)