Prem Watsa, the Canadian billionaire of Indian origin, has floated Fairfax Financial Holdings, which has $1.5 billion invested in India. This includes Bangalore International Airport ($653 million), Sanmar Chemicals ($300 million), IIFL Holdings($276 million) and National Collateral Management Services ($174 million). Fairfax has also invested over Rs 400 crore in Digit Insurance and is a majority investor in Thomas Cook. In an interview with TOI, he speaks on why he is bullish on India.
How much have you planned to invest in India?
Fairfax has around $40 billion of investments and we have around $5 billion in India, of which $3 billion is ours and the rest is raised from others. In America, regulations do not allow a lot of money to be invested in India. So, we floated Fairfax India as a separate publicly listed company, where we raised a billion and a half. We expect Fairfax India will grow substantially over time.
As a large investor, what do you expect from the next government that comes in?
Hopefully, continuing to be business-friendly and encouraging foreign investment. Also, further improve the ease of doing business and bring down the global ranking below 50. If the economy of India does well, everyone prospers and socio-economic differences begin to disappear. That’s what we have seen in North America — the American dream, where anyone from any religion and economic status can build a business and prosper.
What made you exit ICICI Lombard?
ICICI Lombard is a terrific partnership and it continues to be a wonderful relationship. We always wanted a higher stake in property and casualty business. A couple of years ago, when the government said we could own up to 49%, we wanted to increase our share from 26% and we spoke to ICICI Bank. They said they did not want to go below 55% and they also wanted to go public. This meant we would have reduced to 20% after 25% dilution in an IPO. So, I went back and said, “I understand you want to keep 55% — 20% for us is too low. Why don’t we go down to 10% in ICICI Lombard and then we can start Digit with 45% stake?” In Digit, we have an option to increase our ownership in the future if the government allows increases in FDI.
Do you intend to hold on to the company? And will it continue to use the Lombard brand?
Our company in Canada goes by the name Northbridge. Lombard was one of the Northbridge companies. During the IPO, we had to take a decision and we decided to let them keep Lombard. All of our insurance investments going forward in India will be in Digit.
What made you choose Digit?
India is a phenomenal growth opportunity, insurance is under-penetrated. You have all the digital economy coming in. You have an economy that is growing at 7% and can go up to 10%. For a market of India’s size, 27-28 insurance companies is very low. Canada, which is a smaller market, has 150 companies. Kamesh (Digit founder-chairman Kamesh Goyal) built Bajaj Allianz from scratch. If you look at his track record, it was the best company in terms of underwriting profits. A business ultimately has to make profits. You can’t run a business losing money for the long term — many high-flying digital businesses do not generate underlying free cash flow and must rely on the whims of the market to continually get capital. Kamesh’s track record is a good mix of underwriting profit and aggressively growing a company. His experience is not only in India but worldwide. We want to take the Digit technology platform to Brazil, the US and other parts of the world and we are already working with Kamesh. We want to take this digital direct technology to other places over time.
Why do you want to set up a reinsurance company with Digit?If the non-life business grows, so will reinsurance. A reinsurance company incorporated locally has an advantage over a branch of a multinational as it gets to see all the business. We already have a holding company, which owns the non-life business where we are partners. We can use the same holding company to promote a reinsurance business.You have made varied investments, from airports to warehouses…
I am bullish on India. India’s population, which was previously considered by the world to be a negative, is a big positive. We have Bangalore International Airport (BIAL) — they are expanding 32 to 45 million passengers with a second terminal and a second runway in the works. Eventually, there will be a third terminal with the third runway and there will be 100 million passengers. Today, Atlanta, one of the biggest North American airports, handles 100 million. BIAL has also got 500 acres for development, which will be part of Aerocity. We hold 70% in Thomas Cook, which is taking Indians all over the world. So Madhavan Menon (Thomas Cook CEO) has a worldwide travel business that began from here. Catholic Syrian bank (CSB) — we are going to expand outside Kerala. Over time, it is going to be a very good bank. We have C V R Rajendran. We have Paresh Sukthankar as an adviser for CSB. India needs banking. The bank was hoping to list on the stock exchange by the end of the year, but we are hoping to get an extension. We have to take it public and reduce our stake over a period of time. But for the moment, we are 51%. In India, grains are largely stored in gunny bags because there is no testing facility to store them in silos, so we bought the warehousing company National Collateral Management Services.
You acquired BlackBerry globally. Was that an emotional decision?
If you look at it, John Chen (BlackBerry CEO) has got a billion-dollar software company. Think of the three big trends — first, everything went on the internet, then everything going into the smartphone, and the third is everything getting digitised through the internet of things, billions of connected devices above and beyond smartphones. But they never thought about cyber security for the digitised world for all of these many interconnected devices. He (Chen) has bought a company called Cylance, which is the foremost in cybersecurity. Even after buying that for $1.4 billion, he has got a billion dollars of cash. He is out of the manufacturing, is in only enterprise SAS software and now he has got cybersecurity. We have not made any significant money on it, but in the meantime we are clipping coupons on our bonds. I am betting that with Chen running it, it is going to do well.―Times of India