Fairfax India Holdings Corporation (FIHU) Earnings Call Transcript & Summary

Ladies and gentlemen, good afternoon. Welcome to our eighth Annual Meeting for Fairfax India. Prem Watsa, Chairman of Fairfax, real warm welcome to all our shareholders, presidents of our investee companies, employees in India, Mauritius, Toronto. It's a pleasure to see all of you here in attendance today. This year, we are also live streaming the AGM for those who are not able to travel to Toronto. As at the prior shareholders meeting, today we will quickly go through the formal meeting, give a short presentation with slides and then have a Q&A. The slides will be -- myself and Chandran will do it together, and then we'll have a Q&A. A lot of our presidents are here who run our companies in India, great opportunity for you all to ask any questions, and we'll bring them up to the mic. Now we have microphones like Fairfax set up there, so that any question that comes to your mind, once a year we do this, so we're very happy to answer any and every question you have. And on the online platform, Jeff Stacey will be moderating the questions received electronically. So with that as background, we'll go to the formal part of the meeting. So ladies and gentlemen, welcome again to Fairfax India's Annual Shareholders' Meeting. Prem Watsa, Chairman of Fairfax, I shall ask Jennifer Pankratz, the Corporate Secretary of Fairfax India to act as Secretary of the meeting. She'll also appoint Shirley Tom and Louise Waltenbury of Computershare Trust Company of Canada to act as scrutineers and to complete the votes of any polls taken at the meeting, and then report it to me as Chairman. I can tell you that as a result of the affidavits that I got reviewing the mailing and preliminary report of the scrutineers, satisfied that notice of this meeting has been duly given, that a quorum is present and that this meeting is properly constituted. I propose to move quickly through this formal business. I announce that the minutes of the previous meeting held on April 21, a year ago, are available for inspection, as well I can formally place before you our annual report with Chandran's CEO report here, as well as the auditor statements from PwC for 2022 and 2021. In addition, I declare that the total number of votes attached to shares represented at this meeting by proxy, which have been directed to be voted in favor of each matter is, in each case, not less than 95% of all votes that may be cast in such matters. Voting today will be conducted by electronic ballot for those attending virtually and by a show of hands for those attending in person. I'll ask that the balloting be open to registered holders and appointed proxy holders. The polls are now open on the platform. At this point, all registered holders and proxy holders attending virtually who have properly logged in will be able to see the screen and all motions to be brought forth at this meeting. Following the presentation of the motions, Jennifer Pankratz will confirm for us when the polls have closed and once the electronic balloting closes, your votes will be submitted. With your consent, I will now move directly to the election of directors. I now invite nominations for directors.

I am Amy Sherk, and I nominate as directors of the corporation for the ensuing year Christopher Hodgson, Sharmila Karve, Sumit Maheshwari, Bill McFarland, Deepak Parekh, Satish Rai, Chandran Ratnaswami, Gopalakrishnan Soundarajan, Lauren Templeton, Benjamin Watsa and Prem Watsa.

Thank you very much, Amy. Fairfax India's bylaws require the nomination of directors by shareholders be received by the company at least 30 days in advance of the meeting in order to be valid. As no nomination for directors other than those set forth in the management circular were received prior to the deadline, the nominations are now closed. Number of directors nominated is exactly the number to be elected, I confirm that those 11 nominees are proposed for election as directors of the company. Given the hybrid meeting and the fact that we will also conduct a virtual vote, we will have a vote on this together with the next resolution. I now invite a resolution regarding the appointment of an auditor.

I move that PricewaterhouseCoopers LLP be appointed as auditor of the corporation, to hold office until the next annual meeting.

Thank you, Jen.

I second the motion.

Thank you, Amy. For those attending in person, I would ask that you please show a vote by a show of hands. All in favor? Thank you. Any contrary? We will now take a brief pause for 60 seconds to allow registered holders and proxy holders to complete their electronic voting on the motion brought forth, and Jen Pankratz will tell us when that is over. [Voting]

Mr. Chairman, the voting is now complete, and the polls are closed.

Thank you, Jen. I've been advised by the scrutineers that the proxies deposited for the meeting have now been voted. I can confirm that the nominated directors have been appointed as directors of the company to hold office until the next annual meeting next year. In addition, I confirm that the PricewaterhouseCoopers have been appointed as auditors of the company to hold office until the next annual meeting. We will file a report on SEDAR setting out the voting results following the meeting. I propose now to terminate this meeting and then Chandran and I would like to talk to you about our operations. I invite a motion for termination.

I move that this meeting be terminated.

I second the motion.

Thank you, Amy and Jen, and I declare the meeting terminated. So that's the formal part of our meeting, and that is over. And we'll just go right into the presentation. I'll do some of the slides and then pass it on to Chandran for the details. I wanted to take a minute to recognize Chandran, he is the CEO, built this company in last 8 years with a whole bunch of people that you'll see here who are running our companies, and Sumit who's in Fairbridge, in Mumbai, and I wanted to recognize Chandran. Let's give him a nice round of applause. Okay, so we'll go right into the presentation. And so you can see this is Fairfax India's book value. We focus on book value, net asset value, and it's compounded at 8.5% compared to the U.S. dollars -- U.S. dollars for the Sensex, which is 5.8%. So from inception, we've outperformed it. Though the 8.5% is not a huge number, it's better than what you could have got by buying the Sensex. This is the 1 year and the 8 years since the IPO. And in the 1-year book value per share just come down a little and the Sensex has come down about 5.9%. But you'll notice that the Indian rupee is depreciated for the year 2022 by 10%, very significant. And over the 8 years, 25%, so very significant deterioration in the Indian rupee, and all of us here, because that's [indiscernible] in U.S. dollars, we suffer that depreciation. You might ask, given that depreciation, how do you expect to do well over time. We think -- and I'd love to hear a question on that front -- we think the investments that we have will have a return in excess of that depreciation, significantly in excess of the depreciation. This, we're just showing you what happened in Asian equity markets, and pretty significant declines in Sri Lanka, Vietnam, China, Hong Kong, and you can understand why people feel that in the years to come money will shift from North America to some of these markets which are not expensive. Performance for shareholders. We show you we started with about $9.50 after all the commissions. We started at $9.50 a share for book value and then now it's about $19 and change, and investments per share is a little more because we've had $500 million of a bond issue that we did. So common shareholders' equity is $2.6 billion, and cash and investments is about $3.4 billion. Shares outstanding, you'll see, and we make the point here -- see that in 2019, 153 million shares. And over the years, we've dropped it, particularly in 2022 to 138 million, a significant drop, and we can't control. Some of you will ask the question: why is the stock selling at a low price? Can't control it, but if we see the advantage, we can buy the shares. And so, we've bought significant amounts of the shares, and we'll continue to do that, not at the expense of the financial position of the company, always after making sure the financial position of the company is fine. So we bought 3 million shares in 2022 for $36 million at $12 a share. Over the last 5 years, we bought 17.5 million shares at $13 a share. And Fairfax also -- after Fairfax India bought the shares and couldn't buy any more shares, there were more shares available, so we bought -- Fairfax bought 5.4 million shares in '22 at $12 a share. We just think it's a very good price. We're showing it by our actions. We're not just saying it, we're buying back stock. Financial strength is always very important in the company, and here we show you cash and public securities. Total borrowings, the -- $500 million, $0.5 billion, and common shareholders' equity. And the borrowings to common -- we looked at borrowings to common shareholders' equity, not a lot, 18%,19% and cash, and public securities to borrowings covered very nicely by cash and public securities, which we can sell if we like. Borrowings of $500 million, 5% unsecured senior notes due 2028, payer interest, payer principal and no covenants to speak of. That's what we like. $175 million unsecured revolver. That's just for -- if there's a problem, you don't go looking for a bank line, you're not going to get it. So we always get it, pay the standby fee, and we've got $175 million there, unlikely to be used. Fees developed with -- some questions on [ our ] investment fees. What's your fee, why is it what it is? Well, we just highlighted again, there's an investment advisory fee because Fairfax provides all the investment advice. And so that's 1.5% on deployed capital and 0.5% on undeployed; capital is pretty well all deployed now, so it's 1.5%. And the performance fee is calculated on a cumulative basis every 3 years, 20% of any increase in the book value per share above a 5% increase, less any performance fees already paid. And performance fees are applicable, as I said, at the end of 3 years. And I think the next one comes at the end of this year, so end of 2023 we will look at the results for the last 3 years and figure out a performance fee. Sufficient to say when I showed you the results, better than the Bombay Stock Exchange, but we're thinking that to be in India, we got to get 15%, 20%, and over time, that's what we're looking to do. Haven't done it yet though. That just shows you the book value. We talked about that. See the fees. Now you can see $215 million cash fees you paid to Fairfax, basically, total fees, and per year, that works out to about $27 million. So Fairfax has all of the trading, the investing, all of that, it's $27 million each year. And that works out to about 1% of the average cash and investments. And the shares you can see, we got $120 million to the performance fee, $120 million, it works out to about $15 million each year. And the sum of those 2 numbers each year is $42 million. But the cash component is only 1%, the remaining -- everything else is performance directed. We are the largest shareholder, we got 42.3%. Because we have 10 votes, we got a multiple voting share, a voting interest of 95%. These are all the investments that we have. Chandran is going to go through them, and this shows you very quickly the Bangalore International Airport, you can see the rates of return from Bangalore, IIFL, Sanmar, all of them, and the one that hasn't worked out for us yet is NCML, and we are spending a lot of time on it. But all the others have done -- some really good and some to come. And -- but they're all there. You can see that. Total Indian investments, $1.65 billion and a fair value of about $3 billion. The big one being, of course, Bangalore International Airport, which is valued at $1.2 billion compared to the $653 million that we invested in it. Cash and government bonds, you can see, and that's the total. And develops -- and developments in India. We've talked about it. I mentioned it in our Fairfax annual report. Chandran talks about it in the Fairfax India report. The big thing is a fantastic leader in India. And he said -- so just think big, he says, and execute at scale. Look at the scale of what he's done. Medical insurance for the poor is 500 million, not 10 million, 5 million, 20 million -- 500 million people in India, 18,000 villages electrified in India, now everyone has electricity. 120 million toilets, 100 million gas cylinders. The scale is unbelievable. 400 million bank accounts, primarily to rural India. And by the end of next year, and he has an election next year, 100% of Indians will have drinkable tap water. And then he also has said last year, he says a large-scale privatization program, one of the largest scales in the world, privatization is taking place. And because he's saying the government is not a business and wealth creator, business is. And just phenomenal. And so I wanted to introduce you to this book, called Modi@20. It's a fabulous book. You all should get it if you're interested in India, and it's talking to 21 people, 21 -- some ordinary people, some business people, some bank executives, why -- what makes -- why is this guy successful? Mr. Modi come from very humble beginnings. He's a tea seller's son, and he's never gone to university, and he's been phenomenal in terms of what he has done for India. And it's quite extraordinary and you're watching it live. It's happening as we speak. And that book is worth -- interesting and worth reading, and I bring it to your attention. Chandran sort of highlighted here that in 2010, India was the ninth largest economy. Now it's the fifth. And in the next 5 years or so, could well be the third. The United States, China and India. In terms of population, India is very close to, if not already become, the most populous country in the world, about 1.4 billion plus, with China's population is going down. And people are recognizing it, the business-friendly nature of the Indian economy, and so foreign direct investment is coming in. You've heard of Apple now building, I think, 10% of their phones in India and opening a store in Mumbai. And today they're opening a store in Delhi. And so India is well on its way to being a $7 trillion economy and then a $10 trillion economy. And those are big numbers. And when you invest in that, there's a ton of opportunity that is available. This just shows you per capita GDP, when it hits $2,000 per person in China, it really took off. And this is saying that's what's happened. This was in 2005 for China. For India, it's right now $2,400 currently, is where China was in 2005. Tremendous momentum to move up. Infrastructure transformation underway. Transport -- roads are being built all over the place. Airports are being -- new airports, 74 to 148, road networks from 380 -- double, 380,000 kilometers to 729,000 kilometers. Air India, big deal, they privatized it at -- the 1950s, 60s, they nationalized it, and the guys who owned it then were the Tata family, and they privatized it and they bought it again, and it will be a -- you can rest assured that it will be a terrific airline soon. Broadband connections have risen, I mean, unbelievable. You can see that, from 61 million to 816 million, now the world's largest connected nation, vibrant start-up system. And I'm always -- I'm really encouraged by this because what it means is, India used to have a caste system. Caste system don't make a difference. You've got a good idea and you can raise money, people will support you, and you have access to all sorts of money, wherever -- whatever your education, wherever you've come from. And it's fantastic to see. 63% rise in digital payments, massive adoption of technology platforms. Fair -- all the bases are -- for the country have been laid out nicely on its way. These are all the investments that we have and Chandran is going to very quickly -- big investments he's going to talk to you about and then we'll open it up for Q&A. Chandran?

Thank you, Prem, and good afternoon to all of you. I'll give you a brief summary of the 2022 performance of Fairfax India's 5 largest investments. The leaders of all our investee companies are here today, and so I will be very brief, so you have an opportunity to hear directly from them. Our largest investment is the Bangalore International Airport Limited or for short, we'll call it BIAL. We own 54% of the airport acquired for $653 million, implying a cost of $1.2 billion for 100% of the airport. BIAL is India's third largest airport and the largest in South India, and Bangalore is the third-largest and fastest growing city in India. As most of you know, Phase 1 of Terminal 2 was inaugurated in November 2022, and we believe it is one of the best airports in the world, a truly magnificent "terminal in a garden." BIAL's capacity will increase to 50 million passengers and the refurbishment of Terminal 1 is completed in 2024. Let me play a short video of the terminal. [Presentation]

Under the exceptional leadership of Managing Director and CEO Hari Marar and his executive team, BIAL had a tremendous post-pandemic recovery year. Even though part of the year was affected by the pandemic, they handled 27.5 million passengers in fiscal 2023, just 5 million below its pre-pandemic high. Revenue doubled over the previous year to $192 million and was about 5% higher than the pre-pandemic levels. Despite the difficult years in 2020 and 2021, BIAL has generated an ROE of 17% for the first 2 control periods ending 2021. BIAL's valuation is driven by its 3 sources of revenue: aeronautical revenue, non-aeronautical revenue and monetization of 460 acres of land for real estate development. Aero revenue is determined by regulated aero tariffs that BIAL can charge and are set by the regulator for 5-year control periods and are computed to provide BIAL around a 16% return on equity deployed in the regulated asset base. We see that BIAL's growth investment plans, taking its capacity from 50 million to a planned capacity of 70 million by 2029 and to over 90 million passengers by 2033, has a significant impact on its valuation. This will be achieved by adding a Phase 2 expansion to the second terminal and building a new third terminal. The investment required to build the additions is about $1.8 billion and will be funded through internally generated funds and debt. Non-aeronautical revenue has resumed its strong trajectory of growth to increase by 5x over the next decade, driven by the extra space, the attractive surroundings and excellent initiatives launched by BIAL. Also significant progress has been made in the plans to monetize the 460 acres of land that can be developed. The valuation of Fairfax India's interest in BIAL dropped to $1.2 billion in 2022, mainly due to the depreciation of the Indian rupee, implying an equity valuation of approximately $2.3 billion for the whole company. Anchorage is Fairfax India's flagship vehicle for holding infrastructure assets in India. In 2021, we transferred 43.6% of BIAL to it, and sold 11.5% of Anchorage to OMERS for $129 million, which valued BIAL at $2.6 billion at the exchange rates prevalent at that time, which was like INR 70 and now it's INR 82. We intend to complete an IPO of Anchorage when we obtain regulatory approvals. Once Anchorage is listed, the proportion of the publicly listed investments in Fairfax India will increase from 39% to 89 -- 80%. Moving on to IIFL Finance. IIFL Finance, which is non-deposit taking, is one of the larger nonbank financial companies or NBFCs in India. The funding environment for NBFCs has improved considerably in India. IIFL took advantage of the changing sentiment and obtained a capital injection of $275 million into its subsidiary, IIFL Home Finance, from ADIA, the Middle East sovereign fund. IIFL Finance's rating was recently upgraded by Moody's, which cited IIFL's strong growth momentum from its asset-light model that improved its profitability, capital and funding, among the reasons for the upgrade. 37% of IIFL Finance assets and 34% of its income are derived from co-lending with or assigning assets to other lenders. Under the able leadership of its CEO, Nirmal Jain, who is also the founder and significant shareholder of all the IIFL Group companies, IIFL Finance had an excellent year in 2022. Revenue increased 29% to $631 million, and net profit grew 32% to $187 million, generating an ROE of 15%. Assets under management, which have grown at a compounded rate of 16% over the last 5 years, grew 24% to $7 billion. Asset quality is among the best in the peer group with net NPAs of 1.1% and a provision coverage ratio of 164%. Loan-to-value is very conservative at 70% for home and gold loans and 49% for business loans, with a well-diversified asset portfolio, of which 95% is retail in nature. Total capital adequacy of 22%. Net interest margins at an all-time high of 8.3% and cost-to-income ratio of 42%. IIFL finance is well positioned to take advantage of the economic growth expected in 2023 and beyond. Moving to Sanmar Chemicals, led by Vijay Sankar. It is a private company and one of the largest manufacturers of PVC and caustic soda in India and Egypt. Sanmar had an excellent year in 2022. Revenues grew 11% to $1.4 billion. And while EBITDA dropped by 14% to $224 million, pretax profit grew 5% to $91 million. All the 3 divisions, the specialty and commodity PVC businesses in India and the Egyptian businesses, were all profitable. The performance was the result of high capacity utilization driven by strong demand, prices and margins of PVC in the first quarter of the year, partly offset by steep price declines and muted global demand during the rest of the year. The Egyptian business, TCI Sanmar, after their best ever performance in 2021, did even better in 2022. Revenues increased 22% to $647 million, EBITDA increased 41% to $147 million, and net profit increased 146% to $45 million. Altogether, the future is very promising for Sanmar. CSB Bank. Under the strong leadership of CEO Pralay Mondal, who took over from Mr. Rajendran, CSB had its best year ever in 2022. Revenue increased 12% to $196 million, and net profit increased 41% to $66 million. CSB made excellent progress in its performance measures in 2022 with loan advances growth of 26%, deposits growth of 19%, and net interest income grew by 15% with an industry-leading net interest margin of 5%. Asset quality is excellent with net NPAs of 0.4% and a provision coverage ratio of 92%. Capital adequacy ratio improved from 21% to 26%. Compared to all banks or peer group banks, CSB's performance is right at the very top. We are very excited about the long-term prospects for CSB. National Stock Exchange, though it started as a small investment of $27 million for a 1% interest in NSE, it has become Fairfax India's fifth-largest dollar value investment with a valuation of $160 million in December 2022. NSE is the dominant stock exchange in India, with a market share of 93% in cash equity trading and 100% in equity derivatives trading. It operates over 2,000 centers with over 200,000 terminals. It had another excellent year in 2022. Revenue grew 49% to $1.6 billion, and net income grew 72% to $875 million, generating an ROE of 37%. It's awaiting regulatory approvals to get listed on the Indian stock exchanges, but it is difficult to predict when that might happen. In the meanwhile, we value it based on private transactions by foreign investors. The manufacturing sector in India. With global supply chains diversifying from overdependence on China, India has emerged as a source for a wide array of manufactured goods and parts. In the last 2 years, Fairfax India completed 2 acquisitions in the manufacturing sector. First, Fairfax acquired 67% of Maxop Engineering from its founder, Shailesh Arora, for $51 million. Maxop is a precision aluminum diecasting and machining solutions provider for components used by the automotive and industrial sectors with customers around the world. Then Fairfax India acquired 70% of Jaynix Engineering for $33 million. Jaynix is a manufacturer of aluminum electrical neutral bars, lugs and connectors and assemblies and is a Tier 1 supplier to major electrical equipment manufacturers in North America and Europe. Jaynix was founded and is operated by 2 brothers and engineering graduates, Nikhil Diwakar and Ninad Diwakar. Given the global movement to diversify supply sources, Fairfax India believes that Maxop and Jaynix have significant growth opportunities with existing and new customers, and that with Fairfax India's support each of them can be built into a world-class leader in the engineered goods manufacturing industry. Fairfax India has investments in several other companies: Fairchem organics and oleochemicals company, IIFL Securities, the Financial Securities Services Company; NCML, an agricultural warehousing company; Seven Islands Shipping, a tanker shipping company; Saurashtra Freight, a container freight station, and 5paisa Capital, a technology-based financial services company. All of them are excellent businesses that continue to make progress. Our annual report has a lot more information about each of them. And with that, we'll get into the question and answers. And I'll hand the mic back to Prem. Thank you.

Thank you. So now we are ready for your questions, and we have a lot of our presidents here, they'd be happy to answer. So we'll start with #3.

[indiscernible] from Toronto. As you highlighted, we've compounded the book value at 8.5%, but the shares have only compounded at 3.5% since inception. I think the performance fee, the way it's set up, was designed to incentivize to close the discount every 3 years as the performance fee is paid in shares. With the size of the discount right now, we're at risk of issuing 1/3 more shares than we otherwise would if the stock was trading at book value. Would you consider taking the performance fee in cash and doing a tender for the shares so that we are not diluted and we can allow shareholders who wish to exit a chance to do so.

So that's a very good question. First of all, we have bought shares. The incentive shares, 2 payments were priced at about $15 a share. The shares that we retired, that on average, about $13 a share. So we've retired the shares, we bought the shares at a higher price. When we set up this incentive structure, when we went public, we went to 1 or 2 of our biggest shareholders and said, "What do you think is fair?" And that's how the -- their performance fee was -- they wanted us to not take cash from the company. They wanted us to take shares. And we said, fine. Up to 2x book value, we said we were forced to take shares, not -- we didn't have a choice, couldn't say cash or shares. And so one of the problems in being listed in the stock market, is stock prices go up sometime, when they go up -- go down. And when they go down, you're not happy, we are not happy. What we can do though is to buy back the stock. So that's what we've done. We've -- I forget now, like a bundle of shares back in the last 4, 5 years. And we'll continue to do that as time goes by. But I think our performance fee and all of that, if you look at it and compare it to other entities, it's not unreasonable. But our return book value, 8.5% -- you say the stock is selling below book value, so you said 2.5% whatever -- that's -- unfortunately in a market, that's what happens. So what we do, as I said at the Fairfax meeting, is that buy back the stock, just keep buying it back. Eventually it will go up. You don't know what will take it up, but you just continue to buy it back and perform. And we've got a lot of assets there in Fairfax India that we haven't really -- the Anchorage one hasn't happened yet. That's -- you got an airport that has the potential of 90 million passengers, and it's being valued at about, I think, about $2.83 billion and -- not even. And the -- an Australian airport -- was it Sydney, Chandran? -- Sydney Airport went for like $20 billion or something, right? $20 billion. And ours is in a growing country, tons of people that are going to be traveling, airports are being created. So -- but there's nothing you can do, that's the valuation today. And so we're very excited about the long term, but we understand your frustration [ ours ] with the stock price.

I just think there's an opportunity to -- instead of paying out the shares, paying out the performance fee in shares, that we pay out in cash and you can buy back stock in the market. And it solves 2 problems. It reduces our -- we don't have to dilute as much effectively, because we're not issuing an extra 1 million shares or whatever it ends up being by the end of the year.

So that's an idea. We'll certainly take that into consideration. Thank you for that question. #4.

Trevor Scott, TidefallCapital. Given your success with BIAL, I was curious what you thought the probability of another government deregulation deal, if there's something along those lines in the future?

In the airport sector?

Any sector, maybe banking, it doesn't...

Yes. I mean the Indian government, as I said, is privatization on a large scale. And it could happen. But it's -- we would of course look at it. But it's worth for you to get a sense for Hari Marar and how we -- because that's the big thing that we've done, right? In 4 years, 2 with COVID, Hari built the -- with his team built the T2, the second terminal. When we get Hari to give us a quick summary, Hari, as to how you all did it and how it all worked out. It's quite -- quite an -- if you ever go to India, any of you, you have to go to Bangalore and you have to see this airport. It is spectacular. I'd like to think it's best in the world. And many people -- we are biased, of course. So if you go to someone, who hasn't -- is not biased, they say the same thing. I think, Jamie, you might have said the same thing. After you, Hari.

Thank you, Prem. Thank you, Chandran, for having me here. It's terrific being back here after 4 years this time. And Prem certainly is biased. I think it's a very nicely designed airport, but we have a long way to -- way to go before we become the best airport in the world, and we have some work to do. But we're certainly on our way and I'm pretty sure we'll be able to get there. I'll give you a short overview of what's happened in Bangalore in the last 1 year, and then probably talk to you about the disinvestment in other airports and such public assets, state-owned enterprises and what the possibilities there might be. So to start with, I think the headlines for the last year, as far as Bangalore Airport was concerned, were 2 things. Traffic and Terminal 2, the 2 big things that happened. Traffic recovery was just phenomenal in the last 1 year. The first 3 months of the last year were actually a washout. When I say last year, I talk about financially at April 1 to March 31. April, May, June, were actually a washout, because we had the second wave of COVID, it wasn't really doing well. But in the 9 months that have -- that we've seen sort of the recovery that you've seen, in 9 months, we have done more than what we did in a full pre-COVID year, that is 2019. So fantastic growth, which clearly goes to show domestic travel, there's huge latent demand. And the reason why the demand is not growing faster than it is right now, it's because there isn't enough capacity. And in India, one of the sort of features of air travel has been that you provide capacity and demand will follow. And I think there is still plenty of room for such capacity to be introduced into the Indian market, so that demand will pick up and really cater -- so that India can really achieve its true potential in terms of the trip rate per capita as far as air travel is concerned. On the international traffic side, till October 2020, we really had no international travel. International travel was restricted because of various restrictions that companies -- as countries were imposing. And as soon as these restrictions were removed, I think traffic again went zooming up. Again, restricted by the number of aircrafts that are in play, lots of fleets were sort of retired. But as we see right now, international traffic has come back to pre-COVID levels. If you just look at what happened between Jan and December, it's back at pre-COVID levels. Based on this, we are excited because there is also Air India, which has got privatized now under the Tata leadership, it has just placed an order for 470 planes. The largest commercial order for aircrafts ever in the history of aviation. So 470 planes coming in. If you add that up along with the other aircrafts that are coming in for the other airlines, in the next few years, we've got 700,000 aircrafts coming in, which means, again, capacity that I always told you was a constraining factor is not a constraining factor anymore. The demand will play itself out. So that's excellent opportunity for growth there, and we are working very hard with Air India to try and establish themselves as a hub at Bangalore Airport. Cargo has also been a good story, but the growth last year was slightly dampened because the shipping lanes opened up. Supply chains around the world sort of stabilized and the cost of shipping by YRC came down considerably, as a result of which air travel or air cargo sort of growth was dampened a little bit. But still, I think we have achieved record numbers, and that is really good. The other headline, Terminal 2, as it was mentioned by Chandran, opened in -- sorry, inaugurated in November. Then we did a little bit of trials. We opened in January. 3 airlines have transitioned. The question that I heard most often from most of you was which -- what's going to be the split between the terminals. Terminal 2, all the international flights will ultimately move to Terminal 2, sometime by August, September. On the domestic side, only 5 airlines are expected to move there, which is Star Air, AirAsia, Air Vistara, Air India and GoAir, out of which 3 have already moved. The remaining 2 will move in the next 1 month, which will complete the domestic transfer. But remember that bulk of domestic travel will continue in Terminal 1. Terminal 1 will be refurbished after this and will cater to 40 million passengers. And that will hope -- Indigo will continue to operate there, which is 55% of all travel out of Bangalore Airport. Apart from this, I think we've made a couple of other strategic moves. We bring all the traffic to Bangalore Airport, but the money is made by all the partners who come and do business at the airport. So we decided that we need to have a stake in that as well. And some of the upsides that come with servicing all the passengers that come there, all the planes that come there, we need to get some of that too. So this time, starting this year, we've got into joint ventures to manage the cargo business at the airport with -- so we've formed 2 joint ventures with the #1 and #2 player in the world in the space of air cargo, which is WFS headquartered in Paris and Menzies headquartered in London. So we've got 2 JVs there, where we're 26% stakeholders. We will manage the cargo at the airport going forward. On duty-free, we've got a joint venture with the #1 duty-free player in the world, Dufry. It's a 50%-50% joint venture. We'll be running duty-free at Bangalore Airport going forward. We also expect to set up, or we've just set up, a fully owned hospitality company, just 1 level below BIAL, which will take care of things like lounge hospitality services, [ maintenance ] services, the airport hotel, parking and things like that, which is again a significant revenue source which again will help us to grow further. So that's a couple of strategic moves we are there, and I'll end with a little update on what's happening on the Airport City. As far as the Airport City is concerned, obviously COVID had a dampening impact on the development of the Airport City. But I think we're seeing sort of some of the demand coming back. And most recently, we just awarded a contract with the largest real estate developer in the city to build a 2 million square feet business park at the airport. We've got the 3D printing facility already up and running. There is a CloudKitchen that SATS has established that's coming along, will be inaugurated this year. We've got 1 hotel that's already operational, which we're expanding by 216 rooms, which will be operational by August this year. We're building another hotel, 775-room hotel, we're launching the RFP for the retail dining entertainment village. The concert arena construction will start in the next couple of months, and so on and so forth. So a lot of interesting stuff happening there, too. And before I close, I must open that invitation up that Prem said, please come and visit Bangalore Airport. We'd love to show you around, and I think you'll enjoy the visit too. Coming back to your question on privatization. The airport was supposed -- the government was supposed to privatize 13 airports during this financial year. And they had also drawn up all the controls for that privatization to take place. But surprisingly, it's a move that caught us by surprise. Last week or 2 weeks ago, the government announced that they have canceled the privatization of those 13 airports. We would have been bidders for those airports. We would have -- we were looking forward to it quite eagerly. The other interesting opportunity was railway stations, but we've explored that. I think the sort of structure that the government has put in place is not something that is exciting us. They want EPC contractors to build it and not operations management contract, which is not something that we're interested in. So for the moment, nothing immediately coming up on the [ anvil ], but we're keeping our eyes very closely to track any of these developments.

Thank you very much, Hari. Nice. It's a public/private partnership, as Shannon was saying, 2 5-year periods have gone: first 5-year period, average return on equity 17%, second 5-year period with another 17%, and the third one is in progress now. And so it's a great opportunity, especially with the nonregulated businesses that Hari was talking about. We'll come to #1 -- let's just go to the net for a second, Jeff.

A follow-on question about Anchorage. When do you expect to take Anchorage public? And how does the ratchet mechanism work?

Yes. So we are expecting to -- you have to go -- like the SEC or the Ontario Securities Commission here, we have to get that permission. And so that's in progress. And in the case of airports, it's a bit more complicated. And so we have to get regulatory approval, and that's taken some time. And -- but the ratchet mechanism is, basically, it's a...

What we will do, Prem, is. Sumit works with approvals every day of the week.

So Sumit is working on... Yes.

So Sumit, can you just talk about a little bit about what you're doing with the Department of Economic Affairs and also explain the ratchet mechanism in view of the rupee change.

So Sumit is President of Fairbridge. He runs all our -- all of our investment ideas come through Fairbridge, Sumit is the President and CEO, and then it comes to Chandran. Sumit?

Thank you, Prem, Chandran. Thank you very much. So Anchorage, as it's set up in India, is a foreign-owned holding company. And under the regulations, we require government of India's approval to do anything in Anchorage. So we got 1 round of approvals to move 43% from Fairfax into Anchorage of Bangalore Airport, and we could sell 11% of Anchorage to OMERS. That was the stage 1 of the deal. Stage 2 of the deal is an IPO. Government is aware about it. The process that's going on right now is Ministry of -- Finance Ministry. That is a particular Department of Economic Affairs. They are kind of working on this particular file for us. They need to approve this particular IPO request, then, because it is a sensitive sector for India airports, the approval will go to a committee, which is called CCEA, Cabinet Committee of Economic Affairs, and that is headed by Prime Minister himself. So this entire approval will go to all the way to Prime Minister and all his cabinet ministers. Once everybody approves, that's when it will come back to finance ministry and we'll get a formal approval. Now we are in the process. India is a little complicated country from a bureaucracy perspective. We have the benefit of Nadir Patel to kind of help us through going through this particular bureaucracy. But we are on it. We talk to them on a weekly basis. Things are in progress. It may take a little time. But so far, we haven't heard anything which is negative, and we've been told this approval should be forthcoming any time. So now we are keeping our fingers crossed, and I would request all of you shareholders, please start praying for us. It should come faster.

Sumit, how about the ratchet mechanism?

Now on the ratchet mechanism, we had an interesting construct with OMERS, wherein we started with 88.5% for Fairfax India and 11.5% for OMERS in Anchorage. We agreed that within a 4-year period, which is ending in 2025, within a 4-year period we'll take Anchorage public at an agreed minimum valuation. In rupee terms, the valuation is about INR 90 billion. At INR 90 billion or better valuation for Anchorage, it basically translates into -- now I'm talking 2021 -- INR 90 billion at that time meant for Bangalore Airport, a valuation of $3 billion. at that particular value, OMERS will have 11.5%, Fairfax will have 88.5%. Now that was the default deal. If we are not able to take Anchorage public at $90 billion, it goes public at a below level, up to $70 billion, which translates into an equivalent of $2.6 billion in 2011, the resulting shareholding, the ratchet mechanism would have worked at 15.5% for OMERS and 84.5% for Fairfax India. Now between 2011 and now, rupee has moved from INR 70 a dollar to INR 82 a dollar. And because of that, the $3 billion valuation for 11%, 11.5%, has come down to, if my memory serves me right, $2.6 billion, and $2.6 billion, at which OMERS will get 15.5%, that number has come down to about $2.2 billion. So realistically, the dollar number is only for reference purposes. All our interaction with OMERS and the formal agreement is in rupees. So realistically, INR 90 billion for 43% of Bangalore Airport is the base for us. But if we are not able to achieve that and IPO happens at a lower number, the floor for -- or the cap for OMERS is $70 billion -- INR 70 billion for 43% of Bangalore Airport, that's when OMERS will get 15.5%. But let's say, for example, if the IPO happens at INR 60 billion, OMERS will get still 15.5% and not more. So that's the ratchet mechanism for us.

Thank you very much, Sumit. Thank you. Yes, #1.

My name is [ Paul Durden ] from Burlington. Unless I misunderstood your overhead, the rupee has fallen against the U.S. dollar quite a bit in the last couple of years. Do you have a reason for that? And I also have another question. I am an Infosys shareholder in Bangalore. And I was quite happy with the fact that they did not fall sharply with the rest of the tech correction, which made me happy. However, much more recently than that, Infosys has said there is a slowdown in the demand for the cloud. Do you own Infosys? And do you have any comment on their comment?

Well, on the second question, Infosys is a very good company. We don't own it, but it's an excellent company. We know quite about it, knew all the founders from the main founder to Nandan Nilekani and on -- he's still the Chairman, I think, Nandan, right? And -- but we don't own the shares. So no comment to make on that. What was the -- sorry, your first question again?

The first question is the rupee has fallen against the U.S. dollar. Unless I misunderstood the overhead -- over the last couple of years. What's the reason for that?

And I mean, if you can figure that out, you'll have to take this seat. Foreign exchange, it goes up and down and that's like the stock market. And the U.S. dollar is very, very strong. Every currency in the world has fallen against the U.S. dollar, right? And so all of them have fallen. Now interest rates have gone up in the United States. If it starts coming down, may perhaps the rupee will strengthen some. But the Indian economy is so strong that you would think over time that the rupee will strengthen. But Chandran, any comment on that?

Just what I'd like to add is that the Indian rupee bucked the trend. When other emerging market currencies were going down, we were still holding. And then about 2 years ago, 18 months ago, that kind of broke. And Indian currency, among other things, also responds to oil price, maybe sometimes with a lag, sometimes not. It's hard to predict exactly when it will change. But what it has done with the latest fall is that it's kind of caught up with other emerging market currencies.

That's true. And like I said, the U.S. dollar is strong against all currencies. But thank you for your question. That's the best answer we've got. And it might, as Chandran says, reverse itself over, when it becomes strong, when the economy goes to $7 trillion and higher, the currency will become very strong, we think. But a follow-up question. Did you have one?

No, that's fine.

#2.

Thanks, Prem. My question is, can you please share some more details of Fairfax India's interest in the upcoming privatization of IDBI Bank. If you would have interest, can you share whether CSB Bank could be one of the vehicles for investing into IDBI bank?

Yes. One thing we don't do is talk about potential investments. We talk about investment that we've already made, but not potential investments. So I'm sorry, we can't say anything about that IDBI Bank. But what we can say is just that this is we're in India, and we're looking at opportunity and long-term opportunity. So we continue to look at possibilities. #3.

[ Doug Vicic ], Vancouver, Portfolio Manager and holder of the stock. Could you please talk about opportunities in India going forward post pandemic? You talked about electrification, computers, sanitation. Is it more of the same? How is it different now? What are you looking at? And then second thing, over the next 5, 10 years for Fairfax India, do you see ways you want the pool to be diversified? We want to limit concentration in certain areas, we want to take this down, we want to move here? Whatever you can comment about the long-term diversification approach that applies to that pool, please.

Thank you. Chandran, do you want to take a crack, we're very opportunistic. The Bangalore International Airport, the owners were looking to sell and perhaps had to sell. And so we had the opportunity to buy it. We got a very good price on it. And the first thing we did was put Hari Marar, who was like 45 years old and -- as CEO, and you can see a fabulous decision. He was #2 then and done really, really well. What would you say to that, Chandran?

Yes. This is a bit of a cliche, I guess, but we are sector-agnostic. I'm sure you heard this before. And we really practice it. And so we -- as Prem said, we are looking for people that have built the company, have integrity and don't have all kinds of problems hidden. We want to see a track record of performance, 5, 10 years, and we want to see opportunity for growth. And we want owners and managers who will stay, not sell and leave. So that's how we kind of choose our investments. Now as it turns out, we are concentrated in infrastructure through the airport, we are concentrated in financial services through IIFL and CSV. And that, in any emerging market, is a great place to be. And so we are -- we didn't start out looking to do it, but that's how it's turned out. The only thing that we are looking at a little bit more nowadays is, because of this movement to diversify out of China and because the government has given all kinds of incentives for the manufacturing industry, we are looking there a little bit more than we normally might have. So those are our basic kind of sectors. And I don't see any deliberate change.

What you're saying, Chandran, is we've never been sector-oriented. We are looking at people, like you say, who have had a track record. First, honesty and integrity and everything they do, no bribing, none of that stuff. And then, after a good track record, and that want to build something, as opposed to sort of, if I use a private equity format, build something and then sell it. We don't want to do that. We want to build something and something that lasts. And so just Chandran, I think, summarized it very well. Follow-on.

I think -- and I think I heard that it's the same opportunistic and a little bit more in manufacturing now, you're taking advantage of the move out of China. So that would be the -- the material change I heard out of what you said.

Yes. No, I think that's right. We've got 2 companies that Chandran talked about in the manufacturing. They're small, but over time, we expect them to become much, much bigger. Thank you. #4.

My name is James Pan, and we own about a couple of hundred thousand shares for a family office called CP&E Partners. And I want to thank you for letting -- allow us to invest with you. It looks like the future of India is very bright. And I think your compensation system is fair. I have no complaints about that. Like you, we have a frustration with the discount to NAV, and we know that there's a limited amount of control you can do. But can we review how much of the directors' compensation and the CEO's compensation come from narrowing the discount? Specifically maybe putting that incentive into their compensation system, so they can come up with some creative ways to somehow narrow it over time. So we understand that you're going to get paid with NAV, you're going to get paid with increased NAV with shares. That's perfectly fine, but somehow tweak the compensation a little bit for the people who do have some influence on how corporate actions are executed, to somehow narrow that.

Yes. No, that's very well said. Chandran and Sumit and the people at the holding company are -- have Fairfax India shares and I don't know on the proxy circular what we disclosed. Maybe Jen, the disclosure and the proxy circular for Fairfax India?

We do disclose all of our directors' compensation in the proxy circular as well as all senior management, including Chandran and myself and Gopal and Sumit.

Is there anything about the discount to NAV?

There is nothing about the discount to NAV currently.

Can we consider that in the future?

We can consider it. We are all also Fairfax employees, so oftentimes, our compensation is linked to Fairfax. And of course, as our largest shareholder, Fairfax has a lot of incentive to want to see our share price go up as well.

Well, I would say that there's very little downside to tweaking the compensation system. And if the market knows about it, maybe they'll give it proper [ weight ]...

We'll certainly take that under advisement. That's a good idea, interesting idea. But because you are looking at the discount to NAV and you're saying what could we do? And we think about that also, being a large shareholder. But what we have done is buy back the stock. And whatever opportunity we see, we're not going to issue shares at these prices, rest assured about that. We're not going to issue shares at these prices, but we will buy back the stock. And there will be ways of -- if we have a big acquisition there will be ways of financing it. That doesn't entail [indiscernible].

And I'm just spitballing here, I'm sure there's some downside to this proposal. But maybe just send a signal to the market in your next shareholders' letter saying, instead of increasing in NAV -- let's say it's 15% next year, which is approximately $3 -- we'll take that $3 and pay a special dividend. So we'll keep the NAV at $19 and give $3 to the guys who are paying $13 now. Do that a couple of years, maybe the discount closes too. I'm just putting it out there. I'm not sure if that's a solution.

Thank you very much for your suggestion. We'll review that. We go to Jeff here now, Jeff.

A question about the PVC industry and Sanmar's role in it. Please comment on the demand/supply environment in the global PVC industry and Sanmar's role within the PVC industry.

So we've got Vijay here. And so Vijay, why don't you come right over. He is the CEO and basically, the founding family. His Dad founded the company and Vijay has done a fantastic job building it. And so Vijay, your answer to the question.

Thanks, Prem. Thanks, Chandran. And it's been 4 years, as Hari said, since I was here and it's been a tremendous 4 years for our company. Our sales has more than doubled in this period, since I was last here. And the PVC industry has also shown a strong resilience in that period. We're now heading into a, I would say, a short-term difficult time frame for the PVC industry due to a couple of factors, mainly revolving around China and the fact that the Chinese economy, which is the world's largest PVC producer and consumer, has had challenges post their zero-COVID policy loosening up and their opening up. We still haven't seen the demand pull that you normally should have seen. I think it's still a little slow coming, but we're still very, very optimistic. Just to take rewind back and go back to the PVC industry and the question around PVC. I think Prem had a slide on the PVC on India and where we are. To give you a sense, we are the world's largest population, as he just explained. We've just overtaken China, I think, last week at 1.4 billion. China at 1.4 billion consumes 20 million tonnes of PVC and produces approximately the same amount. India, to give you a sense for the same population and 10 years younger in demographics, we consume 3.5 million tonnes of PVC and produce 1.5 million tonnes of PVC. So in our view, the opportunity is just enormous. PVC, I mean, like planes or airports or cement or steel, I think the opportunity for PVC to grow is just mind-boggling. Unfortunately, the capacity side has been fairly restricted for a number of reasons, primarily centered around China and the way they produce PVC. Just for the benefit of this audience, China produces PVC from the coal route or the carbide route and they use a mercury catalyst as well and it consumes a lot of water, and in today's ESG-focused world, I don't think that's a sustainable model long term. So we see an approach over the next 10, 15 years where PVC, which is the cheapest plastic and most sustainable plastic, because half of PVC comes from the non-oil route, 55% comes from sort of renewable resource, which is chlorine. And it's also the cheapest and most durable and most adaptable polymer. So we see a tremendous possibility for PVC over the next 10 years. As I said, the current environment is a little tough, but we are thinking long term, and we think this is a great environment to be manufacturing PVC. We are -- we spoke about, I think, Fairfax being 1 of the top 12 insurance companies, I think we are sort of around there, top 12 PVC companies globally, but the only one with a presence in 2 of the fastest growth and deficit markets globally: South Asia and the Middle East, North Africa regions. These are the only 2 large markets globally in PVC which are deficient in PVC and all the PVC comes from China and other parts at very expensive freights. So we think we're very well positioned in PVC globally to do, I think, to take advantage over the next 10 years. There are some challenges in the short run: how do we source feedstock competitively, how do we put our plants competitively, but we have a lot of strengths in those areas. Sanmar has a history of working with partners over the last 55 years of its existence, and I think we have -- we're working hard to find solutions to expand PVC. If I could just take a minute, Prem, just to give you a sense, Sanmar is -- we've got 3 businesses. I think Chandran explained, we're in commodity PVC in India and in Egypt. We're also in specialty PVC in India, where we are the market leaders with 50% market share. And we're also an increasingly large player in the custom manufacturing segment. we're the third or fourth company in India to take advantage of what was described earlier as a China Plus One strategy. Prem, you forgot us apart from those other 2 companies, we are also going to be taking advantage of the China Plus One manufacturing strategy. There's a lot of interest in manufacturing in India. We serve the agrochemical innovator segment. We're putting up -- we're investing this year -- after a long time, we're investing capacity. We are putting up close to $150 million in our specialty PVC and our custom manufacturing business, which should come to fruition over the next year or so. So while this year may be a little tepid, once this capacity comes on stream, our focus will be far more on the specialty side of things, where margins are far more attractive. Till we crack the code on getting low feedstock, high return on capital way to expand PVC. I think that's -- it's a little bit about Sanmar. We're extremely optimistic about the long term. But before I leave, I just want to thank Prem for one thing in -- during the last 4 years, difficult years of COVID, as many businesses suffered, he really pushed us hard in spite of his various time challenges to do an IPO for one of our subsidiaries. And I remember him calling, I don't remember whether it was Chandran or Sumit or everybody, and he pushed us to do the IPO. And the deleveraging that happened around the IPO, we deleveraged from almost $1.6 billion of debt to $600 million of debt, and that has really put the company in a very good financial position to take advantage of the tremendous expansion opportunities in India over the next few years.

Their family is one of the highest integrity families in India. It really is a pleasure to do business with them. And Chandran and I have got to know the whole family. And we have no question that it's only -- we've already done well, but there's no question that over time we'll do exceedingly well for Fairfax India. Jeff, I'll move on to #.

Michael Jiang from Tancook Investment Management. My first question regarding the sources of funding for future expansion in India. Given your buyback in shares and lots of opportunity in India. I'm just wondering that if we have significant opportunities, how you finance those of the acquisitions? Another thought is that the Fairfax India does not have an insurance operation. You surely cannot take advantage of the insurance [ float ] like what you have done with the Fairfax Financial. So would it be a good idea for Fairfax India to have a significant insurance operation in India, so you can leverage the Fairfax Financial business model in India?

Yes. So we already have that, right, with Digit.

Does Digit belong to Fairfax India?

Sorry, not Fairfax India, Fairfax Financial. Yes, Fairfax India cannot get into insurance. That's the one area that we've said in the prospectus that belongs to Fairfax Financial because it's our business. So when we set it up, we said Fairfax India won't get into the insurance business, but we are already at Fairfax India -- Fairfax Financial is already in the insurance business. But your good question is -- first question is, how are you going to expand -- where are you going to get the money from to buy these opportunities? And Chandran, why don't you just highlight what we have or [ perhaps ] Sumit... Okay. Chandran [indiscernible]...

We have about $330 million, $350 million of liquidity right now. So that will give us the resources to find -- to make investments as we need them. Beyond that, there are 2 sources. One is, there might be investments that we exit because we think they've reached their full potential. And then the other thing is if we find an investment that is much larger than what we have, as Fairfax has done in the past, we'll bring in partners to do that.

I think that's well summarized. So you want to add to that, Sumit, in terms of possibilities that Chandran is saying you've got $350 million and potentially some more. If you can give some sense for what that is.

Yes. So I'll answer this question slightly differently. Now India as a market is not very deep. So there are not too many transactions in a year that happen which are above $200 million as a transaction value. Now in that particular range, as it is, there's a lot of competition. There's just too much of money chasing very little number of deals. We are seeing opportunities in the mid-market range between $50 million and $200 million, if you will. And in -- for -- to take advantage of that particular segment, I think we have got sufficient resources. I just want to give one example, Fairchem. We first invested in 2015, between 2015 and 2020, we accumulated 67% of Fairchem for $35 million. In 2020 November, we sold 12% of Fairchem for $45 million. And right now, we have 52% of Fairchem at the market price of $120 million. It's corrected a little bit. At its peak, it was 150 -- over $150 million. So I just want to give you as an example that this mid segment within -- mid-market segment within India is growing. There are opportunities we are seeing. We need to find the right ones that we get at the right price. And for that, we have available resources, and as Chandran said, if you find more number of opportunities, we'll bring in more partners. There are enough and more people within India who would want to partner with us in the businesses that we do on the ground. So that's my...

Thank you, Sumit. That's well said. So what we'll do is -- one thing we won't do, whatever the opportunity, is issue shares of Fairfax India at low prices. But like he says and Sumit says, we get partners. And in Fairfax could -- it's Fairfax Financial could be a partner, too. And so we look at the possibilities like that, but we won't issue shares of Fairfax India. At these prices, it's just very dilutive. So we wouldn't do that.

Can I ask another question?

Go right ahead.

As a new shareholder, I find that the relationship between the Fairfax Financial and the Fairfax India is very complicated. Your majority shareholder of the company, you control the voting rights. Sometimes you charge a management fee, you charge your performance fee. At the same time, you have a separation or insurance and noninsurance business in India. As a minority shareholder, how should I interpret all the relationships?

Nothing new. Right from day 1, 8 years ago, if you read the prospectus, we laid it all out. And it was vetted with some of the big institutional shareholders who backed us at the time, and they saw it all, and they said, "Yes, we like it," bang, and that's how we did it. We went to them and said, does the -- the biggest investor at the time was $100 million when we raised money and he put $100 million, and we went to him putting $100 million, we're going to be big investors ourselves. What do you think? So insurance, of course, we are in the insurance business, does it makes sense to compete with Fairfax Financial? No. So we've said that we laid it all out. So there's no -- it's not complicated. The business is not complicated. The investments are not complicated. When stock prices are down, it seems like it's complicated, but it's not that complicated.

No, I'm okay. I'm a new shareholder.

Thank you very much. Thank you Jeff, any question from you.

So a question about the discount, but coming at it from a slightly different angle. With cash and government bonds on the balance sheet of close to $300 million and with the IPOs of Anchorage and the National Stock Exchange pending, why have the pace of share buybacks slowed, and would you consider a substantial issuer bid?

Yes. We did -- we've done a substantial issuer bid. And it hasn't slowed. We're just working with our resources and continue to buy as it comes up. In one case, I think last year, Fairfax India bought as much as it could, and then, as I said in the presentation, Fairfax Financial bought the shares, only after Fairfax India, but as much as they could, and then we stepped in. But do you want to add to that, Chandran?

Jeff, we've bought almost -- Amy, correct me if I'm wrong -- 20 million shares over the life of the Fairfax India. And SIB, I mean, we can't talk about it. I mean if it's appropriate, we'll do one. But what we must -- they must know is that we have increased the amount of NCIBs from 5% to 10% this time. So we can buy quite a bit more in the current NCIB.

So I think we're -- we understand that, and we'll continue to look at doing more within always the financial soundness. And -- but we like the stock price and we bought a lot of shares. We go to #1.

Hello, my name is Jeffrey Steven. I'm a stockholder. My question is, does -- is there a timeline for Fairfax India to pay a dividend?

That's a very good question. We've been asked that before. And there is no timeline for that because this is -- we're trying to build capital appreciation really, as opposed to dividend. And it could change depending on what we buy in the future and you get some stable cash flows that justifies a dividend. But at the moment, it's more capital appreciation and building net asset value. Chandran, do you want to add to that?

No, that's...

He says the same. So that's how we began. We began by thinking that -- if we go -- went to India, we had the opportunity of going 15% to 20% growth. We haven't done it, someone said the stock prices have gone up only 2.5%. But the book value has grown up at about 8.5%. We think the book value as shown is perhaps not representative of what the intrinsic value is. And the stock price, of course, goes up and down, depending on the day, you get a pretty lousy return. If it's at $20, it's a different return, right? And so -- but we think India has got the opportunity. Our investments have been, with one exception in CML, all the others have done well. We're not concerned about any of them and the rates of return have been good. We haven't sold all of them. We haven't sold many of them. But we like what we see and the possibilities are pretty significant.

One more question. I'm not an expert on stock exchanges, but would it be beneficial for Fairfax India to trade on the stock exchange in India alongside?

Any question -- anything on that, Chandran? Do you think that will take the stock price up?

I'm no expert, I just want to throw that question out.

I don't know, Sumit, you got anything to add to that. I mean I don't know if that will have any impact, but...

Indian stock markets and security laws are fairly complicated. So -- this is a good idea. We'll explore this. And in case if there's a logic to do this, I think we will consider.

I'd just add to that and say that it's kind of trying to game the system because it's not trading that good. This was an opportunity for people outside India to invest in India. And then to go and stick it in the Indian market, it doesn't make sense to me. Jeff?

A question on -- or a 2-part question actually on CSB Bank. What is the planned growth for CSB Bank in the next 10 years? And what is being done right now to achieve that growth?

So CSB Bank has had -- when you're talking about very good performance. Mr. Rajendran, I don't know if he is here, but he did a terrific job, passed it on to Pralay. Pralay has done a fabulous job taking it over from Mr. Rajendran. And Pralay happens to be right here. So why don't we get him to give us a little update on CSB Bank. Pralay?

Thank you, Prem. Thank you, Chandran. I'll just tell you what -- we had a conference a few days back in India with the CSB management team. And I said that we are at the right place at the right time in the right industry and in the right bank. I'll tell you why. Right place because, as we saw in the presentation, India is looking at -- in 76 years, we have a $3.5 trillion, next 7 years, another $3.5 trillion and maybe by -- 10 trillion by 2035. So the whole opportunity which is there. And look at the consumption side of the story with 50% to 60% consumption to GDP. And overall, I think the way the whole country is growing in terms of credit growth, the opportunities is absolutely phenomenal. The savings -- on the savings side, because there's the consumption side, the consumer growth is happening. So all of that is happening. And even in this year budget when you looked at things, the CapEx cycle is coming back. The government has committed CapEx growth, which will get crowded in within private investment. So from all perspective, the Indian banking system has never been so good as it is today. And when you look at back at the GFC crisis way back, from there -- in the public sector banks, the private sector banks, the way they have come out. And right now we are at the [ evolution ] of the credit cycle. I think the industry is absolutely poised to support the growth on the GDP side which I just talked about. So with that background, I said we are in the right place at the right time. And there is never a right time. I keep telling my team that we are small as a bank, but it's never to late to start, especially -- in 76 years, if you have $3.5 trillion and in another 7 years, we have $3.5 trillion. If you make a beginning now, we can be a large bank at some stage. Of course, we have to cross the mid-sector bank journey as well along the way. So we within the bank we have set a vision and then I'll do talk about the execution side. We have set a vision of SBS 2030, which also matches with the $7 trillion economy in 2030 in a way. And SBS is nothing but sustain, build, scale. So we said that FY '23 to '25 we'll work on the sustain and build, will completely reform the bank in terms of technology, processes, building blocks. I'll talk about it a little bit. And then '27 onwards, the building will be done and the scale will happen. So this is the way we want to build the bank. What we're doing in terms of building blocks. The first, of course, is -- I mean, a lot of people said, "Can we really become a mid-sector bank. I said, why mid-sector, we should be in the top end of the mid-sector by 2030. And 2030, when we set the vision for the next decade, we should look at a large bank. So that's the vision that the management we are creating in the bank and it's built on 5 pillars. One is, of course, with a promoter investor like Fairfax, you cannot get a better kind of a support. Second, of course, is governance, the Board -- some of them are sitting here -- and we get absolutely amazing support, at the same time they make us work very hard, which is good for us at this stage because building blocks is something which has to be very, very strong. We're creating the machine and creating the machine is more difficult than running a machine. I mean, I have done it in HDFC, Axis. Running a machine is easier. Building a machine is much tougher. That's what I tell my team. Third is building a very strong management team, which we have done, I think 70%, 80% done, another 20%, 30% still to go. We are working on it, in the next 6 months, we'll complete that. And fourth, of course, is bring the technology. It's fourth, but it's probably the highest in terms of execution priority for us right now. So what we are doing is -- easier way to say that is whatever is in the technology today in the bank, nothing will be almost visible 2 years from now -- I think that's the easier way to say than saying that what all we are doing -- including the core system, the entire banking, because the future of banking is about technology. We are adding 15% branches every year, around 100 branches. And as the size grows by 2030, we'll have around 1,500 branches. And India is a market which will always have -- I mean, when you look at the largest private sector bank, HDFC is adding 600 branches this year. So given that perspective, branches are not going away anywhere, but the form factor and what we do in those branches are changing, and that will be in the back of the technology. So we are completely changing the technology stack. More than a year's profit we are putting into the technology next year. And lastly, I think what is most important is the culture, because without the right culture -- culture, governance, and the support and the technology and the leadership. These are the 5 pillars on which we are building the bank. And the culture is very, very clear. Highest ethics integrated in the organization, respect for people, customer centricity, and most importantly, working as a team. And what we have said to people is that the priority #1, no hierarchy in the organization. I'm the gatekeeper, I'm the CEO, and everybody has to work like that. Secondly -- because that's -- in the building phase, that's very important. The second part is the right kind of a risk management culture in the organization, because we are dealing in public money. When you're dealing public money, we have to understand risk and we have to manage this very well. Because in cycles, certain things look very good, but in cycles, the real story comes out. And we have seen in various organizations what happens. The third part of the culture which you're talking about is how do you work as a team, because I have seen in large organizations -- I worked in some of the largest private sector banks in the past -- I have seen that as the bank grows with time, a lot of people waste a lot of time in meetings and the conflicts and a lot of other stuff. So what you're saying is we should build a culture in a way that everybody works together, lesser meetings, more decision-making, one-on-one, working with each other and then building it. Fourth is how do we ensure -- now last part which I want to talk about is the execution part what we're doing quickly, we are saying we have a universal banking license. If you have a universal banking license, we better use that license, because a lot of other banks who are SFBs, small finance banks, are trying for universal banking license. We have it. We must leverage that. So what you're saying is banking is about putting all of it together, because whether it is savings account, whether it's current account, whether it's transaction banking, everything is a float at the end of the day. We have to have a full relationship with the customer. To do that, we need all the products. We need all the services, we need distribution, we need sales, we need customers. And when you go to a customer, you go with a single product, you will get a customer who needs only a single product. So when we need to have that kind of -- and gradually, we're going to change the pyramid of the customer structure. So if you are starting with a smaller pyramid, we'll gradually move towards a bigger pyramid. And by 2030, we'll have everything including wealth management fees, everything which is the highest level. And then we get the scale and then the whole takeoff will happen. So '27 onwards, we'll see a big scale happening. The question on growth, we said we are growing -- I mean, the numbers are out for the fourth quarter, from a top line perspective. We grew against a 5% deposit growth last year, we have grown by 21%. This is in public domain. And in assets, we have grown by 30% against 9% last year. The market also grew by 15% and 10%, respectively. So to that extent, we have beat the market by double, and when we started the year, we went ahead and said that we will do 50% faster than the market. We did 100%, but that's the way we are driving management, saying that get the commitment in and then execute and work backwards. So that's broadly what is happening in CSB, a very, very exciting story. And I must thank the management and the support of the board, but more importantly, I must say that most of the people who have joined the bank, including me, we have a vision of creating a legacy. The people have joined has not really joined because they are [ doing ] another job. They want to retire from here. And the long term, which you were talking about, Prem, all through the morning and in the main body AGM, I think the entire management team is looking at what we create in the next decade and create a legacy behind, and that's exactly what we're working on. Thank you very much.

Thank you, Pralay. You can see that's the kind of person we like looking at building the bank with all the services that it has. He was at HDFC the very lovely bank and has worked there for a long time. And Paresh, who is like a terrific adviser consultant, was like the #3 or #4 employee at the HDFC Bank. And Paresh, are you there? Where are you -- yes, Paresh is right there, and it's Pralay and Paresh. Give them a nice round of applause. And we were the only -- Fairfax was the only company, domestic, I think, or international, who have the RBI, Reserve Bank of India, like Bank of Canada, allowed us to have 51% of the bank. So we own 51% of the bank. In time, we have to divest it and come down, but we own 51% of the bank. And like Pralay just said, we are building a tremendous bank over the long term and it's listed, of course, in the market. We've got #3.

I'm John Hong, private investor, long-term shareholder of Fairfax Financial and Fairfax India. I'd like to offer some contrary opinion to -- we've heard a lot about discount to NAV and the concerns. I have contrary opinion that I'd like to express. So I think the one proposal was to incentivize management to try and narrow the discount. First of all, I think incentivizing management to engage in financial engineering as opposed to focusing on building value in underlying business, I think is a bad idea. The second reason why I think it's a bad idea is if you look at the history of closed-end funds, most close-end funds trade at big discounts to NAV, and many strategies that have been tried by close-end fund management companies to narrow discounts never work. You may do something to narrow the discount for a while, but eventually, the discounts will come back. And I think it's -- the reasons for the discount is because people, in general, don't like closed-end funds that charge fees. I think if the closed-end funds operated as operating companies without the fee structure, you would remove a lot of the discounts immediately. But that's a different story to talk about. The other reason I'm against the idea of focusing too much on the discount to book value is I think the very idea of Fairfax, I mean, the philosophy of Fairfax, has always been to be patient value investors. [ anybody ] it's been a long-term shareholder of Fairfax will understand that you need patience. Sometimes the market is just against you, and that's how it works. But eventually, if the company -- if management is good at building up underlying value, the stock price will catch up. I mean Buffett says this all the time.

So well said. You are great shareholder. So well said, thank you.

Can I get an extra dividend next year?

I'll give you some food outside.

So I have a few other questions. That point, I didn't plan on talking about but I had a few other questions.

No, go right ahead.

So I think one of the first things you learn as a value investor is don't do [ envy ]. But having said that, I can't help -- the previous speaker mentioned the performance of Digit Insurance. So I can't help looking at Digit Insurance's performance and asking why can't we get some of that performance. I understand the reason for splitting the insurance business to Fairfax, and I think that was clear from the start. So I have no problem with that. So I -- what I'm curious about is -- why is the insurance business -- you did the same thing with ICICI Lombard as well. Why is it possible for you to achieve such phenomenal growth with the insurance companies but not, say, with CSB or IIFL. IIFL, the growth has been quite phenomenal, but I think still nothing like...

The CSB Bank, the economy might grow at, say, 10%. I used to be on the ICICI Bank Board and the guy who ran it was a guy by the name of K.V. Kamath. And he used to say, if the economy grows at 10%, the banking services -- and the insurance -- but banking would grow at 2x, maybe 2.5x. That's the industry. And then if you're really smart like Pralay and Paresh, you might be able to grow even more than that. So it grows at 2x, 2.5x the growth of the economy in nominal terms. So India's nominal -- India's real growth might be 8%, 9%, and then you add to it inflation and then you add the multiplier effect, and it's a hell of a way of compounding, which they're going to do on the banking side. You're going to see that. That's why it works as well.

Can I ask another question? So the question is on India in general. One of the paradoxes, to me at least, is like India, the economy seems to be doing very well, growing very fast. But it can't seem to solve the twin deficits problem, the budget deficit and the trade deficit. Like, is there a point where this -- the situation will improve for...

That will change. The trade deficit will definitely change because they're just getting manufacturing and Make in India, all of that and then export it -- and the budget deficit is building infrastructure, building roads and all of that. That's why -- so he was saying that privatized -- Mr. Modi were saying that he is going to privatize these companies, a lot of companies that the government owns, and then use that money for infrastructure development as opposed to using other government resources. So India is in the throes of exactly that change, they're going through that change, but you have 1.4 billion people, and these are -- it's a democracy, he has to go to the voters. So I showed you what he did for the poor people, $500 million medical and drinking water, and so he has done all that. So you think there's any chance he won't get elected next year? No chance. I mean the #1 -- what he's done for India is unbelievable, sort of like Lee Kuan Yew, in a smaller sense, did in Singapore, just got elected one after the other. And Mr. Modi is in a similar position, but he has to get into that -- you have to give him the ability, give him some time. India was a socialist economy for 67 years. Socialism, bureaucracy, all of that. That has been changed. But he's only been doing it for like 7.5 years, maybe something 8 years. And there's a ton of stuff to do and it's now moving. And so I think all that you say will come to place and that might well be a good thing for the exchange rate, which we were talking about before. But thank you for your question. Jeff, any more from your standpoint?

One last one here. Moody's just upgraded IIFL. Can you please comment on the NBFC and lending environment in India?

So we have -- Nirmal has been the founder of this company and done an outstanding job. They've been a great partner of ours for a long time, and let's welcome Nirmal to the podium.

Thanks, Prem, and thanks, everybody. So Moody's has upgraded our rating, and I think there's a very good vote of confidence, particularly in this environment where there's concern globally about banks in the financial sector. So -- and also about the outlook for NBFC sector. So I'll just take a couple of minutes. So last 6, 7 years, in India, NBFC sector has witnessed all kind of turmoil and the sort of trial by fire possible. So starting with demonetization, then GST, then IL&FS crisis, then DHFL, Redbus, and then there are a few more and then there was COVID. So I think in all these crises always men are separated from boys, the stronger -- companies that survive become stronger. And I think the NBFC sector now looks a lot more consolidated and orderly. And as Pralay highlighted, that India -- and also what Prem mentioned, that when the economy grows at whatever rate in nominal terms, 10%, 12%, the demand for credit can grow at a multiple of it. Part of that is serviced by banks and there's a significant part, which is not easily accessible to banks, is serviced by NBFCs like us. So I think there's a tremendous potential for this business to grow. And in the last 5 years, we have seen the difficult times and done the hard work. And I think now things look good for next 5 years. Anything else?

Any other -- No, that's terrific. How many branches do you have?

How many branches?

Yes, NBFC.

So we have almost 3,900 branches and 35,000, 36,000 people, in fact, at least in terms of number of people, probably we are bigger than Fairfax also. Maybe twice. So we generate a lot of employment, do a lot of social work and we have 8 million customers. All our loans are small ticket loans, so we specialize in retail loans. So gold loan is about INR 60,000, INR 70,000, which is sort of maybe less than $1,000. Our home loan ticket sizes, INR 13 lakh, INR 14 lakh, less than maybe around USD 15,000, USD 16,000. Business loans that we do is about $5,000, $6,000 and microfinance is $500 to $800. So we really have -- what is our core is 95% of our book, retail small ticket loan, and that we do through our own people and our own branches, and that is why we are able to partner with banks also for co-lending and selling them our retail assets. So this is something where, typically, large banks will find it difficult because the cost of sourcing the loan and servicing is something which requires really high level of efficiency and local connect and a small local branches near the customer. And I think as the economy grows, this segment of the business will be lifted very, very significantly. Just to give you a little perspective about how the credit market in India will grow, I -- maybe these numbers may be a little off. But the top 12% households of India in terms of income today consumes 70% of credit. So what is happening is that obviously credit eligibility is based on your income. But there is another 30% of households below that which is consuming just about 15% of credit. Their real income in 10 years' time will be what it is of the top 12%. So even if all the lenders have the same criteria for lending in terms of the income eligibility, Then [ you can ] imagine that it can be 3 to 5 fold increase in the credit eligibility itself. And with technology, which you know I think what is happening in India is revolutionary, you know that the payment can happen for almost no cost. And even developed countries like U.S., the PayPals and others who make a lot of money. And CreditNow, even for a small customer for $500, the entire bank statement or turnover data can be digitally accessed through what they call account aggregator, can be digitally analyzed, which reduces operating cost to almost zero. And that is what will revolutionize the small business and the small credit over the next 5 to 10 years.

Thank you, Nirmal. the scope of the operation, you can get a sense. Thank you very much. So we'll make that the last question. Thank you very much. Is there one person -- one more? Okay. So that will be the last one. Go right ahead.

Hi, Chandran, good to see you again, and hello again, Prem, and our sincere gratitude to all the CEOs and directors for traveling all the way from India to answer our questions. We really appreciate as shareholders. So I have 2 questions. First question is regarding BIAL. So BIAL is set up as a build, lease and then transfer operation. You compared it to Sydney Airport, which I believe is owned in perpetuity by whichever private group owns it. So I was wondering, as and if when you IPO, does that model have an effect on the valuation that we might get for Bangalore airport?

We don't have ownership forever, but the ownership is long. Like how much is it, 45?

45 years left.

So it's a long time period. You and I -- I will be long gone, you'll still be there, but 45 years is a long time. But your next question.

Yes. The second question is regarding IIFL and CSB. So a lot of growth in both of those companies has come from the gold loan segment. And since CSB is looking for scale, I was wondering if you have ever thought about merging these 2 entities. And are there any synergies that can be realized over there?

So we don't believe in merging companies. There's a lot of hassles -- in Fairfax, we got 23 different companies, some of them doing relatively the same, but we don't merge them. and it's worked for us. And so here, also, we would -- there's too many conflicts, too many potential conflicts. So highly unlikely we would look at that.

And Sundar, as you know, NBFCs have different rules and they have the opportunity to exploit those. And the banks have different rules that they have opportunity to exploit those to put them together and you get a big mishmash. I know HDFC and HDFC Bank are doing it, but I think at our stage, we are better off the way we are.

Keep it focused. And so thank you very much. Last question from #1.

I'm Jignasha Gohil from Toronto. I have 2 broad questions. So I spent some time in Mumbai and Bangalore recently and everyone looks like they have some success doing anything. So my question is, in an environment where everyone is thriving, how do you filter out the mediocre players?

How do you have -- just repeat that last question, how do you...

How do you filter out the mediocre companies when everyone is doing so well?

Yes. So we have high standards. First of all, as Chandran was saying, integrity: we want to deal with people who are good people, treat their people well, but have honesty and integrity. So if you could do really well, but if you don't have honesty and integrity, we don't want to do business with you. That applies to everything in Fairfax. But secondly, as results that we understand, comfortable with -- everything is not doing well in India. It's growing significantly. You might have a subset that you run into, which seems like everyone is doing well. But when an economy grows like at 7%, 8%, 9%, that's what happens, you're exactly right. Business grows at 20%, 30%, 40%. All of these companies are growing at significant -- I mean, look at the airport going from 25 million, 50 million, the second airport is going from 25 million to 50 million. And then the third terminal when they do it, it will be 90 million. Like you don't get that growth in many parts of the world. You saw it in China, by the way. You're seeing it now in India. China perhaps has already seen it. It'd be tough to replicate that. Whereas in India, as that chart that Chandran showed, we're past the $2,000 per capita. Lots of cities in India have $10,000 per capita. And so the possibilities are quite significant. You had another question?

Yes. If India was a stock, would you put it in the value bucket or the growth bucket?

We'll have fantastic growth but we'll buy it at a value price. But thank you very much to all of you. We have a wonderful company in Fairfax India and over the next 5 years we think we will do very well for you. Thanks for coming here. Thanks for taking part in our...