News Update: Fairfax India

Value creation continues for now.

This is a quick update on Fairfax India. Please see our previous report here.

Do take note that the pricing of the counter have moved up substantially from our average entry price of USD 7.35.

We are long term bullish on India and the only feasible way for us to invest there is through Fairfax India. To see our 20203Q portfolio, please click here.

We intend to hold this position for the long term (5 - 10 years) if everything play out according to plan.

This position forms part of our Unrecognised Growth portfolio.

A few updates on FairFax.

  • On August 12, 2020 Fairchem spun off its wholly-owned subsidiary Fairchem Organics in a non-cash transaction that resulted in Fairfax India receiving one common share of Fairchem Organics for every three Fairchem common shares held.

  • Listing of Fairchem Organics is anticipated to be completed in the fourth quarter of 2020

  • Did a share repurchase and cancellation which we think should not have happened.

  • The secured term loan of USD 550m is the only significant risk in such an investment holding structure

  • USD 18m in cash on a annual 60m expense is way too tight for comfort. The thought of selling their Indian investment to supplement liquidity requirement should not have even been contemplated

  • Margin of safety is our best due diligence for now. There is multiple period in Fairfax India history that they are trading above book and we are getting growth assets below book.

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As usual, do hit the comment button below if you have questions for us.

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