McElvaine Value Fund on Fairfax India Holdings Corporation
Thesis
Fairfax India is an Indian investment holding company controlled by Fairfax Financial, with its dominant asset being a 74% interest in Bangalore International Airport held partly through Anchorage. Reported book value per share declined during the period because of currency weakness and lower marks on listed financial holdings, but McElvaine believes underlying asset value remains strong. The company sold its Sanmar investment in April and agreed to increase its ownership of IIFL Capital above 51%, continuing to reshape its portfolio. A potential Anchorage listing remains an important possible value-realization event, although a filing has still not occurred. Fairfax India has also been rumored as a potential participant in the acquisition of IDBI Bank. McElvaine therefore sees a portfolio with strong underlying assets but mixed near-term developments.
“Underlying asset value is strong.”
Key risks
- Indian rupee weakness can reduce reported book value for shareholders.
- The expected Anchorage listing has still not been filed, creating uncertainty around timing of value realization.
- Additional acquisitions such as a potential IDBI Bank transaction could introduce execution and capital-allocation risk.