Prem Watsa, who helms the $84 billion Toronto-based investment giant Fairfax, reiterated his commitment to India, hailing the country’s economic prospects. Fairfax’s investment plans for India are on track despite macroeconomic headwinds, he said.
“India has got one big advantage – two-thirds of the economy is consumer-oriented,” Fairfax Financial Holdings chairman Watsa told ET. “Nations like China have taken a long time to get that, through infrastructure development and government spending and all of that… It might drop a little, half a percent here, or a percent there, but it brings a lot of stability to an economy.” Fairfax has invested $7 billion in India, he said. “In next five years, we are looking at doubling that. We got a few projects already that we’re working on,” Watsa said. However, for India to remain an attractive investment destination, continuity will be key, he said.
‘Country on a roll’
During his recent visit to India, Watsa met Prime Minister Narendra Modi in the last week of December. “I think it’s fair to say that in India Modi is trusted – they say 70-80% comfort factor with the population in terms of the surveys that they do,” Watsa said. “Investors feel that with Modi there, we can trust that the economy will continue to do well, and that there will be business friendly policies and no taxes that are inappropriately put in and that kind of stuff.”
The country is better placed than others to counter any disruptions.
“India is on a roll… You might have some problems in the US… a slowdown… you might have problems in China, because they have a lot of debt and they have a huge real estate crisis there that they’re looking to stabilise,” Watsa said. “India doesn’t have those excesses. Stock prices may be high. And India is where China was like 15 years ago or 20 years ago, so a long way to go in terms of economic development.”
Fairfax recently increased its stake in Bangalore International Airport Ltd (BIAL) to 64% by purchasing additional shares from partner Siemens. Watsa pointed to this event as a sign of his commitment to investments in India.
He highlighted that travel had rebounded as was evident from the performance of Thomas Cook India, one of the Canadian investor’s portfolio companies. Thomas Cook India’s stock price has doubled in the past one year.
BIAL’s annual capacity has risen to 50 million passengers with the opening of Terminal 2 and it will be adding more, according to him. The next step will be to build more infrastructure around BIAL and bid for more airports as the company has proven its competence in this domain. He cited the 450-acre airport city, which includes the Taj, fully owned by BIAL.
“We want to be able to manage, build and construct more airports in India because we have shown we can do it right,” Watsa said. “So, with (BIAL CEO) Hari Marar, we are looking at more airports that we can build. We have to make a return. We cannot bid unreasonable prices or unreasonable rates.”
Apart from Thomas Cook and BIAL, other major Fairfax holdings include CSB Bank, Quess Corp and GoDigit insurance.
Watsa, who built his early reputation as a value investor and stock picker, sounded a warning about big global tech stocks. “Apple, Microsoft, Amazon, they are all selling at high PE ratios,” he said. “For any of those companies to grow 10%, they would have to add $20 billion in revenue extra or $50 billion in revenue in the case of Amazon – those are big numbers. If history is any guide, these things have come down. After the dotcom bust between 2000 and 2003, the Nasdaq dropped 75%, Microsoft dropped that much because the PE ratio was too high. I’ve been in the stock market for 50 years. You can’t say when it will happen but nothing goes to the sky and these things change and so I see that happening.”
