Why is 'Canadian Warren Buffett' Prem Watsa, so bullish on India?

In 2020, Indian-born Canadian billionaire Prem Watsa was honoured with India’s fourth highest civilian award – the Padma Shri, recognising his distinguished service in the field of trade and industry.

The 71-year-old is the founder, chairman and CEO of Toronto-based Fairfax Financial Holdings. 

Fairfax’s investments in India are worth $7 billion, he said in a recent interview. 

Now, the investor is doubling down on India, with plans to invest $7 billion more in the next 5 years. 

Watsa is reportedly keen on taking a majority stake in IDBI Bank, which the government intends to privatise soon. 

Fairfax India has reportedly concluded initial talks with representatives of the Finance Ministry to acquire the government’s 45.48% stake in IDBI. It may acquire a part of LIC’s holding too. LIC currently holds a 49.24% stake in the bank.

If Watsa succeeds, it would be the second instance of Fairfax taking control of an Indian bank. In 2019, Fairfax India completed its purchase of a 51% stake in CSB Bank, formerly known as Catholic Syrian Bank. 

Prem Watsa made history in 2019 when his company took 51% stake in CSB Bank – It was the first time the RBI allowed a foreign investor to hold a majority stake in an Indian lender

The 102-year old bank changed its name and went public in November 2019. Post IPO, Fairfax’s holding stands at 49.7%.

Prem Watsa, the third of four children, was born in Hyderabad in 1950. He earned a bachelor’s degree in chemical engineering from IIT Madras in 1971. But, he was more interested in pursuing a career in business than engineering. So, the following year, he moved to Ontario with reportedly just $8 and settled in with his brother. He found a job selling appliances door to door, which funded his MBA programme.

After almost a decade-long career in the asset management industry, he set out on his own in 1984 and Fairfax was born in 1985. He built a reputation as an astute value investor whose approach is sometimes compared with Warren Buffett’s. 

He is known as the ‘Warren Buffett of Canada’ of his contrarian approach to investment. He made billions for the company by correctly calling the 2008 US mortgage crisis. He formed an India-focussed investment holding company following his meeting with Prime Minister Narendra Modi in November 2014.

He was, however, not new to investing in India. He first acquired a 26% stake in ICICI Lombard General Insurance in 2001. This went up to 35% in 2015 and by 2019, Fairfax exited the insurer completely. 

He made his second investment after almost a decade in 2011 when he bought a 9% stake in brokerage firm IIFL in 2011. A year later in 2012, he acquired Thomas Cook India.

Fairfax has investments in close to 20 companies in India across sectors like banking, chemicals, logistics, finance, travel and engineering.

Its investments in India gathered pace from 2015. Fairfax built majority holdings in Bangalore International Airport, Fairchem Organics, National Commodities Management Services and Saurashtra Freight.  

It holds a 30% stake in Quess Corp, one of India’s largest private sector employers. Other major investments include a 1% stake in the National Stock Exchange of India, 43% in Sanmar Chemicals Group, 26.1% in brokerage firm 5Paisa and 48.5% in Seven Islands Shipping

Sanmar Group subsidiary Chemplast Sanmar went public last year.

Earlier this year, Fairfax acquired electrical equipment manufacturer Jaynix Engineering.

Digit Insurance in Fairfax’s only startup investment in India. It owns 49% of its parent company Go Digit Infoworks. 

The startup is reportedly considering raising about $500 million in an IPO at a valuation of $4.5 bn to $5 bn. 

India’s vibrant democracy makes it an attractive investment destination, believes Prem Watsa, which had attracted global companies like Samsung, Facebook and Amazon to make a significant presence in the country  

Watsa recently said that PM Modi has made India business-friendly. He hailed the government’s privatisation push, saying it will attract more foreign companies, investment and talent to India. 

The expectation that the share of state-owned enterprises in the overall market cap will decline in India also bodes well for the country, he said. Listed public sector enterprises make up 10% of the combined market cap of the top 50 companies in India, compared to 45% in China.

Finally, according to him, manageable public debt levels, comfortable foreign reserves and the possibility of a large section of the population moving into the middle class with development make India the number one investment spot.