Annual Meeting April 20, 2017

Transcription

1 Annual Meeting April 20, 2017

2 Forward-Looking Statements This Presentation has been prepared for informational purposes only from information supplied by Fairfax India Holdings Corporation ( Fairfax India or the Company ) and from thirdparty sources indicated herein. Such third-party information has not been independently verified. The Company makes no representation or warranty, expressed or implied, as to the accuracy or completeness of such information. Any graphs, tables or other data demonstrating the historical performance of Fairfax India or its Indian Investments contained in the presentation are intended only to illustrate past performance and are not necessarily indicative of the future performance of Fairfax India or its Indian Investments. This Presentation may contain forward-looking information within the meaning of applicable securities legislation. Forward-looking statements may relate to the company s or an Indian Investment s future outlook and anticipated events or results and may include statements regarding the financial position, business strategy, growth strategy, budgets, operations, financial results, taxes, dividends, plans and objectives of the company. Particularly, statements regarding future results, performance, achievements, prospects or opportunities of the company, an Indian Investment, or the Indian market are forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as plans, expects or does not expect, is expected, budget, scheduled, estimates, forecasts, intends, anticipates or does not anticipate or believes, or variations of such words and phrases or state that certain actions, events or results may, could, would, might, will or will be taken, occur or be achieved. Forward-looking statements are based on the opinions and estimates of the company as of the date of this Presentation, and they are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forwardlooking statements, including but not limited to the following factors: taxation of the company and its subsidiaries; substantial loss of capital; long-term nature of investment; limited number of investments; geographic concentration of investments; potential lack of diversification; financial market fluctuations; pace of completing investments; control or significant influence position risk; minority investments; ranking of company investments and structural subordination; follow-on investments; prepayments of debt investments; risks upon dispositions of investments; bridge financings; reliance on key personnel; effect of fees; performance fee could induce Fairfax to make speculative investments; operating and financial risks of investments; allocation of personnel; potential conflicts of interest; employee misconduct at the portfolio advisor could harm the company; valuation methodologies involve subjective judgments; lawsuits; foreign currency fluctuation; derivative risks; unknown merits and risks of future investments; resources could be wasted in researching investment opportunities that are not ultimately completed; investments may be made in foreign private businesses where information is unreliable or unavailable; illiquidity of investments; competitive market for investment opportunities; use of leverage; investing in leveraged businesses; regulation; investment and repatriation restrictions; aggregation restrictions; restrictions relating to debt securities; pricing guidelines; emerging markets; corporate disclosure, governance and regulatory requirements; legal and regulatory risks; volatility of the Indian securities markets; political, economic, social and other factors; governance issues risk; Indian tax law; changes in law; exposure to permanent establishment; enforcement of rights; smaller company risk; due diligence and conduct of potential investment entities; Asian economic risk; reliance on trading partners risk; natural disaster risks; government debt risk; and economic risk. Additional risks and uncertainties are described in the company s annual information form which is available on SEDAR at and on the company s website at These factors and assumptions are not intended to represent a complete list of the factors and assumptions that could affect the company. These factors and assumptions, however, should be considered carefully. The preparation of financial statements requires management to make estimates and assumptions that impact the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, the reported amounts of revenues and expenses and the calculation of the Net Asset Value of the Company during the reporting periods. Financial information provided throughout this presentation is prepared in accordance with IFRS, unless otherwise noted.

3 What is Fairfax India Holdings Corporation (FIH)? An investment company focused on making outstanding long-term returns through investments in Indian businesses Unique opportunity to co-invest with Fairfax Financial Holdings (FFH) in India Alignment of interest FFH s long-term investment of $450 million in FIH 3

4 India Compelling Investment Destination New, business-friendly government Strong growth profile Attractive demographic trends 4

5 Fairfax Financial Superior Investing Record in India HWIC Asia Fund Class A is the Fairfax Financial group investment vehicle for investments in Asia, predominately India $2,800 $2,400 $2,000 $1,600 Annual Total Return (U.S.$) 5 year 10 year Since Inception - Feb '00 HWIC Asia Fund BSE Class A Index 20.0% 6.0% 12.4% 4.3% 20.7% 7.9% $2,482 $1,200 $800 $400 $0 Monthly performance through March 31, 2017 (U.S.$100 Invested in February 2000) HWIC Asia Fund Class A BSE Index 5

6 Fairfax India Holdings Corporation (FIH) ($ millions, except for per share data) Dec 31, 2015 Book value per share Closing share price Earnings per share Income Net earnings Investments Total assets Common shareholders' equity Shares outstanding Actual Dec 31, 2016 (1) Proforma Dec 31, 2016 $ $ $10.64 $65 $41 $129 $108 $979 $1,025 $1,013 $1,096 $1,304 $1,075 $1, (1) Subsequent to the issuance of 42.6 million subordinate voting shares on January 13, 2017 at $11.75 per share (net proceeds of $494 million) 6

7 Summary of Investments ($ millions) National Collateral Management Services Limited IIFL Holdings Limited Amount Invested $ (1) Adi Finechem Limited (renamed Fairchem Speciality Limited) 19 Privi Organics Limited 55 Sanmar Chemicals Group National Stock Exchange of India Limited Total invested at December 31, 2016 Saurashtra Freight Private Limited Bangalore International Airport Limited Total invested at March 31, 2017 Amount currently available for new investments and ongoing expenses $ $1, $1,471 Total (1) Includes additional $75 million investment in IIFL Holdings in February

8 Fairfax India Intrinsic Value IIFL Holdings Limited 10 Year CAGR Book value per share 26% Earnings per share 22% Fairfax India average cost per share Rs 217 Current market price per share(1) Rs 442 Price/earnings ratio on expected earnings (1) April 13, 2017 closing price 16.9x 8

9 Fairfax India Investments (1) Over $1.2 Billion Investments Completed BIAL $149m $277m Warehousing Collateral management of agri commodities NBFC NBFC Wealth Management Capital Markets & Other 88% FIH ownership Private 27% FIH ownership 9% FFH ownership Public $74m Specialty Chemical Manufacturer 49% FIH ownership Public $300m $30m $386m $27m PVC and Caustic Soda producer Container freight station India s 3rd largest airport Monopoly asset Real estate assets Indian Stock Exchange 30% FIH ownership 7-year debentures Private 51% FIH ownership Private 38% FIH ownership Private 1% FIH ownership Private (1) Fairfax Financial Holdings Limited holds a 30.2% equity interest and 93.6% voting interest in Fairfax India

10 National Collateral Management Services Limited Storage & Preservation Procurement & Supply Chain Collateral Management Loans Testing & Certification Commodity and Weather Intelligence & Consultancy

11 National Collateral Management Services Investment date August 2015 Ownership % 88.1% Initial investment $149 Fair value - Dec 31, 2016 $147 Transaction IRR -1.0% Multiple of net investment (Rs billions - Indian GAAP) Total assets Shareholders' equity 1.0x Mar 31, Revenue Net earnings Return on equity (1) Average ROE over the last 5 years % Twelve months ended Dec 31, Dec 31, % % 5 Year CAGR 26% 34% 21% 7% (1) 11

12 NCML Business Update Revenue grew by 109% to $118 million but net earnings fell 21% to $4 million Successful launch of NCML Finance, an RBI regulated NBFC Successfully bid for 11 large silo contracts from the Food Corporation of India, representing 550,000 metric tons of storage capacity Collateral management business increased assets under management to $2.5 billion, serving 74 lending institutions Significant expansion of the Supply Chain segment 12

13 Broking, Insurance, Mutual Fund Home, Gold and Commercial Vehicle Loans Investment Banking Project Financing and Advisory Wealth Management Asset Management Institutional Equities India Investment Advisory

14 IIFL Investment date Dec 2015 Feb 2017 Total Ownership % 21.7% 5.0% 26.7% Initial investment $202 $75 $277 Fair value - April 13, 2017 $580 Transaction IRR 97.0% Multiple of net investment 2.1x Twelve months ended (Rs billions - Indian GAAP) Total assets Shareholders' equity Mar 31, Dec 31, Dec 31, % % % Revenue Net earnings Return on equity (1) Average ROE over the last 10 years 10 Year CAGR 30% 28% 24% 15% (1) 14

15 IIFL Business Update Wealth Management Emerged as one of the leading wealth managers in India Assets under management, advice and distribution grew 22% to about $16 billion In February 2016, this division launched its own NBFC to offer loans against securities to its high net worth clients it already has a loan book of $430 million General Atlantic invested $173 million for a 22% stake in the wealth management business, valuing this division at $800 million we paid a valuation of $930 million for the whole company 15

16 IIFL Business Update NBFC Loan book grew 15% to approximately $3 billion CDC, the UK government-sponsored fund invested $150 million for a 15% stake in the NBFC, valuing this division at $1 billion the whole company was valued at approximately $1.3 billion Capital markets and other activities The investment banking division had a landmark year completing 16 transactions including 5 IPOs IIFL Markets App is highest rated and most downloaded stock trading app on Android and IOS Over 800,000 downloads on Android 16

17 Oleo Chemicals FAIRCHEM SPECIALITY LIMITED Renewable Specialty Chemicals Aroma Chemicals

18 Fairchem Speciality Limited Investment date Ownership % Initial investment Fair value - April 13, 2017 Transaction IRR Multiple of net investment Fairchem (former Adi) (Rs millions - Indian GAAP) Total assets Shareholders' equity Adi Feb % $19 Privi Aug % $55 Fairchem March % $74 $ % 2.0x Twelve months ended Mar 31, Dec 31, , Dec 31, , % 1, % 1, % Revenue Net earnings Return on equity (1) Average ROE over the last 5 years 5 Year CAGR 26% 13% 12% 28% (1) 18

19 Fairchem (Formerly Adi Finechem) Business Update While revenues grew 17% to $26 million, net earnings remained flat at $2 million Return on equity of 18.2% Revenue and net earnings growth were below expectation significant plant upgrades resulted in production losses With the upgrades completed, Fairchem is poised for strong growth in the next year 19

20 Privi Organics Investment Rationale Founded in 1992 by Mahesh Babani and D.B. Rao, two outstanding entrepreneurs who continue to run the company One of India s leading suppliers of aroma chemicals With a capacity of 22,000 tons per annum, Privi has a dominant position and economies of scale Strong R&D capabilities 20

21 Privi Organics Business Update Low crude oil prices and a slowdown in China resulted in pricing pressure worldwide Despite this, Privi maintained its revenue and had nominal growth in EBITDA and net earnings Net operating cash flow improved to $8 million, following negative cash flow in

22 SANMAR Sanmar Chemicals Group Major PVC and Caustic Soda Manufacturer

23 Sanmar Chemicals Group Investment date Ownership % Initial investment - debentures Initial investment - equity Fair value - Dec 31, 2016 Transaction IRR Multiple of net investment Apr % $250 $1 Sep 2016 $50 Total 30.0% $300 $1 $ % 1.0x Twelve months ended (Rs billions - Indian GAAP) Total assets Shareholders' equity Revenue Net earnings Return on equity Mar 31, Dec 31, (3.3) Dec 31, (11.3) % 35.4 (6.7) 36.6 (7.8) 5 Year CAGR 8% 23

24 Sanmar Investment Rationale Strong and highly ethical ownership and management team with over 45 years experience in PVC and Caustic Soda businesses, with operations in India and Egypt Second largest PVC player in India the top three account for 90% of India s domestic PVC manufacturing Sanmar acquired TCI Egypt in 2007 with the intention of serving the growing market for PVC in North Africa, the Middle East and parts of Europe Capacity expansion planned in India and Egypt to supply the growing PVC demand in India, the Middle East and parts of Europe 24

25 Sanmar Business Update For the first time in a decade, optimism returned to the global PVC market Chemplast, Sanmar s company in India, had excellent performance in 2016 Sales grew 11% to $401 million EBITDA grew 103% to $67 million TCI, Sanmar s company in Egypt, has restructured its balance sheet with the help of our loan and the CapEx project to increase capacity is well under way 25

26 WORLD CLASS CONTAINER FREIGHT STATION at Mundra Port Mundra port (Gujarat) - second largest and fastest growing port in India

27 Saurashtra Freight Private Limited Investment date Ownership % February % Initial investment $30 Fair value n.a. Transaction IRR n.a. Multiple of net investment n.a. (Rs billions - Indian GAAP) Total assets Shareholders' equity Mar 31, Revenue Net earnings Return on equity (1) Average ROE over the last 5 years 0.5 (0.0) n.a. Twelve months ended Dec 31, Dec 31, % % 5 Year CAGR 59% 18% 36% (1) 27

28 Saurashtra Investment Rationale A 12 year old company, with an excellent track record and impressive growth since management was taken over by Raghav Agarwalla Saurashtra is the number one CFS company at Mundra port, the second largest and fastest growing container port in India Attractive valuation at a price/earnings ratio of 13.9x, price/free cash flow ratio of 8.3x 28

29 Saurashtra Business Update Saurashtra had an excellent year in 2016 growing revenue by 23% to $14.4 million and net profit by 105% to $2.9 million Saurashtra is on track to grow revenue and net income by over 25% in the next fiscal year 29

30 Bangalore International Airport - South India s largest airport

31 Bangalore International Airport Limited (BIAL) Investment date March 2017 Ownership % 38.0% Initial investment $386 Fair value n.a. Transaction IRR n.a. Multiple of net investment n.a. (Rs billions - Indian GAAP) Total assets Shareholders' equity Mar 31, Revenue Net earnings Return on equity (1) Average ROE over the last 5 years % Twelve months ended Dec 31, Dec 31, % % 5 Year CAGR 24% 17% 30% 23% (1) 31

32 BIAL Investment Rationale Operational since 2008, BIAL is India s third largest airport and the largest in South India it is expected to grow from 20 million to 60 million passengers by 2030 Bangalore is considered the Silicon Valley of India Concession to operate the airport for 30 years with the option to extend for another 30 years 32

33 BIAL Investment Rationale Regulated return of 16% from 100% of aero revenue and 30% of nonaero revenue Approximately 460 acres of land that can be monetized Potential real estate revenue is not included in our projections Attractive valuation at a price/earnings ratio of 14.4x and price/free cash flow ratio of 8.3x 33

34 BIAL Business Update In 2016 BIAL handled traffic of 22 million passengers Plans are in place to gradually expand the capacity of the airport to 60 million passengers by 2030 Land preparation for a second runway is underway and half completed 34

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