Fairfax India Holdings Corporation: Financial Results for the Year Ended December 31, 2023
16 February 2024 - 9:10AM
Fairfax India Holdings Corporation (TSX: FIH.U) announces fiscal
year 2023 net earnings of $371.8 million ($2.72 net earnings per
diluted share), compared to 2022 net earnings of $191.4 million
($1.34 net earnings per diluted share). The company's book value
per share at December 31, 2023 of $21.85 increased compared to
$20.89 at September 30, 2023 ($19.11 at December 31, 2022) through
the realization of gains on the sales of investments and strong
performance of the investment portfolio. The company's book value
per share has grown at a compound annual growth rate of 9.2% (9.6%
prior to the performance fee described below) from the initial
public offering price of $10.00 per share. The company's growth in
2023 was supported by strong Indian equity markets and economic
fundamentals.
Highlights for 2023 (with comparisons to 2022,
except as otherwise noted) included the following:
- Net change in unrealized gains on
investments of $361.7 million (Q4 2023 - $44.6 million) principally
from increases in the fair values of the company's listed
investments of $367.1 million, including CSB Bank ($188.8 million),
IIFL Securities ($82.6 million), IIFL Finance ($78.7 million), and
5paisa ($24.1 million), and private company investments of $174.4
million including BIAL ($125.0 million), Seven Islands ($46.8
million), NSE ($30.1 million) and Jaynix ($16.8 million). These
unrealized gains were partially offset by a decrease in the fair
values of the company's investments in the private companies Sanmar
($33.2 million) and NCML ($16.1 million). The net change in
unrealized gains on investments also included reversals of prior
period gains upon the sales of IIFL Finance ($157.7 million) and
360 ONE ($17.7 million).
- Net realized gains on investments
of $193.2 million (Q4 2023 - $145.8 million) primarily related to
realized gains on sales of IIFL Finance ($177.3 million) and 360
ONE ($16.6 million).
- The company continued to buy back
shares under its normal course issuer bid and during 2023 purchased
for cancellation 2,872,391 subordinate voting shares at a net cost
of $37.2 million ($12.97 per subordinate voting share).
- During 2023 the company acquired an
additional 10.0% equity interest in BIAL from Siemens Project
Ventures GmbH in two transactions for total purchase consideration
of $250.0 million. Following completion of the second closing,
Fairfax India's aggregate share ownership in BIAL has increased to
64.0% (20.4% held by its wholly-owned subsidiary and 43.6% held by
its indirect subsidiary, Anchorage Infrastructure Investments
Holdings Limited) from 54.0% last year.
- BIAL achieved notable recognition
at the 2023 Prix Versailles by UNESCO. The airport's Terminal 2 was
acknowledged as one of the "World's most beautiful airports" and
received the esteemed "World special prize for an interior
2023".
- In accordance with the Investment
Advisory Agreement, which provides for the payment of a performance
fee of 20% of the increase in book value per share in excess of a
hurdle rate of 5% per annum, a performance fee of $110.2 million
was earned by Fairfax Financial Holdings for the period from
January 1, 2021 to December 31, 2023. The performance fee will be
paid in cash in the first six months of 2024.
- Fairfax India is in strong
financial health, with cash and marketable securities at December
31, 2023 of approximately $209 million, prior to the sales of NSE
described below. Additionally, on December 4, 2023 DBRS Limited
(Morningstar DBRS) upgraded the issuer rating and unsecured senior
notes ratings of the company to BBB from BBB (low).
- During the fourth quarter of 2023
and the first quarter of 2024 the company entered into agreements
to sell its equity interest in NSE for gross proceeds of
approximately $189 million (15.7 billion Indian rupees). The
original cost of the company's investment in NSE was $26.8 million.
On January 29, 2024 the company completed one of the sales and
received gross proceeds of $132.3 million (11.0 billion Indian
rupees). The remaining sales are subject to customary closing
conditions and are expected to be completed in the first quarter of
2024.
There were 135.5 million and 138.5 million
weighted average common shares outstanding during the fourth
quarters of 2023 and 2022, respectively. At December 31, 2023 there
were 105,398,509 subordinate voting shares and 30,000,000 multiple
voting shares outstanding.
Unaudited balance sheets, earnings and
comprehensive income (loss) information follow and form part of
this press release.
Fairfax India Holdings Corporation is an
investment holding company whose objective is to achieve long term
capital appreciation, while preserving capital, by investing in
public and private equity securities and debt instruments in India
and Indian businesses or other businesses with customers, suppliers
or business primarily conducted in, or dependent on, India.
For further
information, contact: |
John Varnell,
Vice President, Corporate Affairs |
|
(416) 367-4755 |
|
|
FAIRFAX INDIA HOLDINGS
CORPORATION95 Wellington Street West, Suite 800,
Toronto, Ontario, M5J 2N7 Telephone: 416-367-4755
This press release may contain forward-looking
statements within the meaning of applicable securities legislation.
Forward-looking statements may relate to the company's or an Indian
Investment's future outlook and anticipated events or results and
may include statements regarding the financial position, business
strategy, growth strategy, budgets, operations, financial results,
taxes, dividends, plans and objectives of the company.
Particularly, statements regarding future results, performance,
achievements, prospects or opportunities of the company, an Indian
Investment, or the Indian market are forward-looking statements. In
some cases, forward-looking statements can be identified by the use
of forward-looking terminology such as “plans”, “expects” or “does
not expect”, “is expected”, “budget”, “scheduled”, “estimates”,
“forecasts”, “intends”, “anticipates” or “does not anticipate” or
“believes”, or variations of such words and phrases or state that
certain actions, events or results “may”, “could”, “would”,
“might”, “will” or “will be taken”, “occur” or “be achieved”.
Forward-looking statements are based on our
opinions and estimates as of the date of this press release, and
they are subject to known and unknown risks, uncertainties,
assumptions and other factors that may cause the actual results,
level of activity, performance or achievements to be materially
different from those expressed or implied by such forward-looking
statements, including but not limited to the following factors:
COVID-19 pandemic, the conflicts in Ukraine and Israel, and the
development of other geopolitical events and economic disruptions
worldwide; oil price risk; geographic concentration of investments;
foreign currency fluctuation; volatility of the Indian securities
markets; investments may be made in foreign private businesses
where information is unreliable or unavailable; valuation
methodologies involve subjective judgments; financial market
fluctuations; pace of completing investments; minority investments;
reliance on key personnel and risks associated with the Investment
Advisory Agreement; lawsuits; use of leverage; significant
ownership by Fairfax may adversely affect the market price of the
subordinate voting shares; weather risk; taxation risks; emerging
markets; MLI; economic risk; and trading price of subordinate
voting shares relative to book value per share risk. Additional
risks and uncertainties are described in the company's annual
information form dated March 10, 2023 which is available on SEDAR+
at www.sedarplus.ca and on the company's website at
www.fairfaxindia.ca. These factors and assumptions are not intended
to represent a complete list of the factors and assumptions that
could affect the company. These factors and assumptions, however,
should be considered carefully.
Although the company has attempted to identify
important factors that could cause actual results to differ
materially from those contained in forward-looking statements,
there may be other factors that cause results not to be as
anticipated, estimated or intended. There can be no assurance that
such statements will prove to be accurate, as actual results and
future events could differ materially from those anticipated in
such statements. Accordingly, readers should not place undue
reliance on forward-looking statements. The company does not
undertake to update any forward-looking statements contained
herein, except as required by applicable securities laws.
Information on |
|
CONSOLIDATED BALANCE SHEETS |
as
at December 31, 2023 and December 31, 2022 |
(unaudited - US$ thousands) |
|
December 31, 2023 |
|
December 31, 2022 |
Assets |
|
|
|
Cash and cash equivalents |
|
174,615 |
|
|
147,448 |
Short term investments |
|
— |
|
|
49,692 |
Bonds |
|
63,263 |
|
|
140,693 |
Common stocks |
|
3,581,043 |
|
|
3,020,223 |
Total cash and investments |
|
3,818,921 |
|
|
3,358,056 |
|
|
|
|
|
|
Interest receivable |
|
1,367 |
|
|
5,599 |
Income taxes refundable |
|
220 |
|
|
1,012 |
Other assets |
|
1,027 |
|
|
902 |
Total assets |
|
3,821,535 |
|
|
3,365,569 |
|
|
|
|
Liabilities |
|
|
|
Accounts payable and accrued liabilities |
|
912 |
|
|
1,143 |
Accrued interest expense |
|
8,611 |
|
|
8,611 |
Income taxes payable |
|
— |
|
|
331 |
Payable to related parties |
|
120,858 |
|
|
50,851 |
Deferred income taxes |
|
108,553 |
|
|
50,554 |
Borrowings |
|
497,827 |
|
|
497,306 |
Total liabilities |
|
736,761 |
|
|
608,796 |
|
|
|
|
Equity |
|
|
|
Common shareholders' equity |
|
2,958,718 |
|
|
2,642,036 |
Non-controlling interests |
|
126,056 |
|
|
114,737 |
Total equity |
|
3,084,774 |
|
|
2,756,773 |
|
|
3,821,535 |
|
|
3,365,569 |
|
|
|
|
|
|
Book value per share |
$ |
21.85 |
|
$ |
19.11 |
Information onCONSOLIDATED STATEMENTS OF
EARNINGSfor the fourth quarters and years ended December
31, 2023 and 2022 (unaudited - US$ thousands except per share
amounts) |
|
Fourth quarter |
Year ended December 31, |
|
|
2023 |
|
2022 |
|
|
2023 |
|
|
2022 |
|
Income |
|
|
|
|
Interest |
|
3,511 |
|
3,397 |
|
|
16,833 |
|
|
11,353 |
|
Dividends |
|
12,208 |
|
2,850 |
|
|
28,831 |
|
|
23,985 |
|
Net realized gains on investments |
|
145,758 |
|
68,769 |
|
|
193,203 |
|
|
95,882 |
|
Net change in unrealized gains on investments |
|
44,581 |
|
47,705 |
|
|
361,702 |
|
|
153,656 |
|
Net foreign exchange gains (losses) |
|
322 |
|
(3,161 |
) |
|
(1,713 |
) |
|
(47,350 |
) |
|
|
206,380 |
|
119,560 |
|
|
598,856 |
|
|
237,526 |
|
Expenses |
|
|
|
|
Investment and advisory fees |
|
10,720 |
|
9,444 |
|
|
39,382 |
|
|
38,988 |
|
Performance fee (recovery) |
|
27,849 |
|
8,855 |
|
|
69,385 |
|
|
(36,428 |
) |
General and administration expenses |
|
1,884 |
|
6,317 |
|
|
12,672 |
|
|
13,470 |
|
Interest expense |
|
6,380 |
|
6,380 |
|
|
25,521 |
|
|
25,521 |
|
|
|
46,833 |
|
30,996 |
|
|
146,960 |
|
|
41,551 |
|
Earnings before income
taxes |
|
159,547 |
|
88,564 |
|
|
451,896 |
|
|
195,975 |
|
Provision for (recovery of) income taxes |
|
22,794 |
|
(3,996 |
) |
|
68,050 |
|
|
4,487 |
|
Net earnings |
|
136,753 |
|
92,560 |
|
|
383,846 |
|
|
191,488 |
|
Attributable to: |
|
|
|
|
Shareholders of Fairfax India |
|
134,968 |
|
92,574 |
|
|
371,770 |
|
|
191,439 |
|
Non-controlling interests |
|
1,785 |
|
(14 |
) |
|
12,076 |
|
|
49 |
|
|
|
136,753 |
|
92,560 |
|
|
383,846 |
|
|
191,488 |
|
Net earnings per
share |
$ |
1.00 |
$ |
0.67 |
|
$ |
2.72 |
|
$ |
1.38 |
|
Net earnings per diluted share |
$ |
1.00 |
$ |
0.65 |
|
$ |
2.72 |
|
$ |
1.34 |
|
Shares outstanding (weighted average) |
|
135,464,165 |
|
138,481,733 |
|
|
136,818,139 |
|
|
139,066,682 |
|
Information onCONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME (LOSS)for the fourth quarters and years ended
December 31, 2023 and 2022 (unaudited - US$ thousands) |
|
Fourth quarter |
Year ended December 31, |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
Net earnings |
136,753 |
|
92,560 |
|
383,846 |
|
191,488 |
|
Other comprehensive loss, net of income taxes |
|
|
|
|
Item that may be subsequently reclassified to net
earnings |
|
|
|
|
Unrealized foreign currency translation losses, net of income taxes
of nil (2022 - nil) |
(6,485 |
) |
(48,570 |
) |
(18,614 |
) |
(301,507 |
) |
Other comprehensive loss, net of income taxes |
(6,485 |
) |
(48,570 |
) |
(18,614 |
) |
(301,507 |
) |
Comprehensive income (loss) |
130,268 |
|
43,990 |
|
365,232 |
|
(110,019 |
) |
Attributable to: |
|
|
|
|
Shareholders of Fairfax India |
128,727 |
|
45,947 |
|
353,913 |
|
(97,114 |
) |
Non-controlling interests |
1,541 |
|
(1,957 |
) |
11,319 |
|
(12,905 |
) |
|
130,268 |
|
43,990 |
|
365,232 |
|
(110,019 |
) |
GLOSSARY OF NON-GAAP AND OTHER FINANCIAL
MEASURESManagement analyzes and assesses the financial
position of the consolidated company in various ways. Certain of
the measures included in this press release, which have been used
consistently and disclosed regularly in the company's Annual
Reports and interim financial reporting, do not have a prescribed
meaning under IFRS and may not be comparable to similar measures
presented by other companies. Those measures are described
below.
Book value per share - The
company considers book value per share a key performance measure in
evaluating its objective of long term capital appreciation, while
preserving capital. This measure is also closely monitored as it is
used to calculate the performance fee, if any, to Fairfax Financial
Holdings. This measure is calculated by the company as common
shareholders' equity divided by the number of common shares
outstanding.
Book value per share prior to the
performance fee - This measure adjusts common
shareholders' equity in the book value per share calculation to
remove the performance fee accrued, and is a key performance
measure.
Cash and marketable securities
- This measure is calculated by the company as the sum of cash,
cash equivalents, short term investments, Government of India bonds
and Other Public Indian Investments. The company uses this measure
to monitor short term liquidity risk.
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