Fairfax India (FIH.U): A call option on the Indian economy

Note: apologies if this seems a bit erratic but this write up is just a thought splurge. Fairfax is the Canadian version of BRK - similar playbook but more aggressive as their in there early/mid lifecycle. Fairfax owns a subsidiary by the ticker FIH.U The Indian market is incredibly volatile and the rupee is constantly depreciating against the US dollar (3-5% annually) but FIH has an underlying structural moat making it more resilient against this high beta environment. Couple of important facts to keep in mind about the Indian environment. The fastest growing major economy sitting at 6.5-7.5% GDP growth. Median age of the population is <30 which is the youngest among major players meaning a swelling workforce and increasing consumer class. Prem Watsa does not believe in hedging but rather aim for high nominal growth which outpaces inflation against US currency. **The three pillars of the business** 1. BIAL- the monopoly airport asset 2. IIFL financial and CSB bank - financial levers 3. Seven islands, sanmar, 5paisa - diversification **Bangalore airport - FIH owns 74%** \- passengers increased \~ 3 million from 2024 \- international traffic grew by 28.7% - higher spenders at the airport > locals \- 520,000 metric tonnes of cargo \- floor value 2.55 billion - plausible value 3.55 billion ( if valued like Mumbai airport or Sydney airport) **Financial levers** IIFL \- AUM growth IIFL: 35% YoY \- Gross NPA: 2.1 % - growth is not coming at the expense of credit quality \- gold loan buissness- highly valued given gold’s recent pop CSB \- Not all that interesting but net NPA is 0.5% - wow Won’t be going into all the diversification **FIH balance sheet and more** \- debt to asset ratio - 13% \- 500 million in 5% senior notes maturing in Feb 28 \- interest expense (25 million) is serviced by dividend inflow and investment income \- refinancing is a ways away but should be fine all things considered given asset coverage and low credit risk Share buybacks \- in q2 the company repurchased 28 000 shares at \~15 bucks a pop while the book value was at 21 a pop Bangalore airport \- NAV as it stands values the stock at 23 bucks a pop while- but if Bangalore airport were to be valued at its competitors pricing we would be looking at 28 dollars a pop for NAV \- this indicates a margin of safety of 30% base case and 60 % bull case \- if BIAL IPOs we would be looking at a bull case scenario Yes P/E is at 68 but you really cannot analyze this stock with P/E in my opinion - it’s a NAV play Not financial advise Please let me know your thoughts on this stock - please also expose any holes that this theory might have it would be much appreciated!