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

Please welcome to the stage, Prem Watsa, Fairfax India's Chairman and Chandran Ratnaswami, Fairfax's India's Chief Executive Officer.

Good morning. Terrific to see a lot of you here, very, very warm welcome. This is our ninth Annual Meeting for Fairfax India, 9th Annual Meeting, and I'm Prem Watsa, Chairman of Fairfax and Chairman of Fairfax India. A warm welcome to all our shareholders. We got our presidents of our companies here, of our investee companies and employees in India, Mauritius and Toronto. It's a pleasure to see all of you here this morning. Like last year, we are also live streaming the AGM. For those who are not able to travel to Toronto. So a warm welcome to all of you at your homes or wherever you are watching this annual meeting. So like in the previous shareholder meetings, we will quickly go through the formal meeting, give a short presentation with slides, and then we're really happy to answer any question that you have. Chandran and I will do it, but I will get our presidents to answer any questions that might come up. We have microphones set up where you can come down. So one there and one there. And we also have an online platform. We're fortunate with Jeff Stacey, moderating all the questions, where is Jeff Stacey – right there. So Jeff is right there, moderating requests received electronically. So let's go to the formal part of the meeting -- so as I said, ladies and gentlemen, Prem Watsa, Chairman of Fairfax India, and I'll act as Chairman of the meeting. I also ask Jennifer Pankratz, the Corporate Secretary of Fairfax India to act as Secretary of the meeting. I shall also appoint Shirley Tom and Louise Walton Berry of Computershare Trust Company of Canada to act as scrutineers and to compute the votes of any polls taken at this meeting and to report thereon to me at Chair. I can report that as a result of reviewing an affidavit of mailing and a preliminary report of this goodness I'm satisfied that notes of me have been duly given, a quorum is present and that the meeting is, therefore, properly called and constituted. As I said, I want to move quickly to the formal business, announced that the minutes of the previous Annual Shareholders' Meeting held on April 20, 2023, are available for inspection upon request to Fairfax India's Corporate Secretary. As well, I now formally place before you the annual report of the company. That's the annual report, which all of you have seen, it's right there. And that's for 2023, which includes the company's statements for fiscal years '23 and '22, and the report of the auditor PricewaterhouseCoopers on the 2023 statements. In addition, I declare that the total number of votes attached to the shares represented at this meeting by proxy, which have been directed to be voted in favor of each matter to be considered at this meeting is in each case, not less than 95% of the 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. We'll ask that the ballot be opened to registered holders and appointed proxy holders. The polls are now open on the platform. And at this point, all registered holders and proxy holders attending virtually will have properly logged in, we'll be able to see the screen, all motions to be presented and brought forth to the meeting. Following this presentation, Jennifer Pankratz will confirm for us when the polls are closed, once electronic belting closures, 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, Jason Kenney, Sumit Maheshwari, Will McFarland, Satish Rai, Chandran Ratnaswami; Gopalakrishnan Soundarajan; Lauren C. Templeton; Benjamin P. Watsa and Prem Watsa.

Thank you. Thank you very much, Amy. Fairfax India's bylaws require that nominations by directors by shareholders be received by the company at least 30 days in advance of the meeting in order to be valid. And no nomination for directors other than those set forth in the Management Information Circular were received prior to the deadline, the nominations are now closed. And the 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 will 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 vote by a show of hands. All in favor – contrary - we will now take a brief pause for 60 seconds to allow registered holders and proxy holders to complete this -- the electronic voting on the motions put before this meeting. And Jen will tell us when that 60 seconds is over.

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

Thank you very much, Jen. I have 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. In addition, I confirm that PricewaterhouseCoopers have been appointed as auditor 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. After that, Chandran and I would like to talk to you about our operations, and then we will proceed with our Q&A. I now invite a motion for termination.

I move that this meeting be terminated.

I second the motion.

Thank you, Amy, and thank you, Jen. I declare the meeting terminated. So that's the formal meeting that we try to get done as soon as possible. Now we have a presentation for you. But before we do that, I wanted to take the opportunity of highlighting the fact that this company began 9 years ago. Prior to that, we had Thomas Cook and Quest, which were our investments in India. But with Mr. Modi coming in for some of your new ones, you'll understand with Mr. Modi coming in, we decided reluctantly at the time that we start another company because the opportunity in India, we thought was huge. -- and the fact is it is huge. It's massive. And Chandran became CEO. So I wanted to recognize that and just tell you that Chandran's been with Fairfax for 30 years and our Indian -- our Indian operations from 1994 was led by Chandran. And I have known Chandran for 62 years. Now you think about how many people do you know for 62 years. Also tells you how old I am. But no, Chandran has done a fantastic job building a terrific company and it's got a terrific base. And all that we thought about India has come to fruition and will come to fruition. So I'm going to go through very quickly. And then Chandran will talk about the specific companies, but -- and then we'll open it up for Q&A. Before we do that, after the presentation, I'll introduce Deepak Parekh, and he's been our director. He's an adviser as a franchisee guy. He's going to give you his perspective on India. So with that, let me just go right here. So this is the book value per share that's grown 9.2% versus the Sensex, the index has grown 7.1%. That's from the 15, January '15. India is at record levels, but that's the rate of return over the last 9 years. And we've outperformed it, as you can see. Fairfax India's book value per share has grown at 14% plus a year 1, 9.2% as I said. But look at the public Indian investments, 38.5% versus 22.4% for 9 years. That's 22.4% compounded. And you can see the index 18% and 7. And that's in spite of a 25% basically drop in the exchange rate. The exchange rate went against us as it tends to do in emerging markets. Moving on solid return on investment. This next slide is interesting because these are listed companies, compounded 22%, private companies only 10%. And -- and the point I want to make to you is we're very conservative on the private companies. For example, the Bangalore International Airport, as Chandran has said in his annual report on its statements is valued at 9.5x free cash flow. That is Bangalore International Airport, by the way I hope Hari's got enough copies of this, but this is an outstanding book that they have on the airport, the best airport in the world. I'm a little optimistic on that. But it is, you haven't seen all of you mostly in North America, but you haven't seen an airport like this happens to be in India, in Bangalore. And it's wonderful with lots of very good pictures. But that whole airport is worth $2.5 billion, 100%. We own 64%. Chandran will talk about it. The whole airport is worth $2.5 billion. Sydney sold some years back Chandran, for about Sydney in Australia for $20 billion, private equity bought it. This airport is going from 25 million; Second terminal adds another $25 million that's in progress. And then a third one will take it to $75 million and then another terminal might be needed to take it through $90 million - huge growth opportunity, wonderful, wonderful asset. It's really the crown jewel of our company. But that's shown there. It's only 10% because the valuation of $2.5 billion, we think, is not excess of very conservative. Partial sales. These are companies that we own, but we haven't sold the whole position. We've sold some of it and 28% compounded from our cost, fully exited positions where we've sold the whole thing, 17%, monetized 18% because we went to India thinking that we would get 15% rates of return, not 9%. And so you can see the monetized investments are very high. This shows you the performance for the shareholder. The book value per share, what it's grown 9.5% when we began, it's like 21 -- almost $22 a share with, again, a conservative valuation for the private investments. The common shareholders equity, you can see and the shares outstanding. Notice that it's gone from 149 million to 135 million because that stock is trading a little below $15, and we just think it's the right thing to buy back the stock. And so you can see the share buybacks here. We've about 2.9 million shares, shares staying at a deep discount. So we bought 2.9 million shares in 2023. And since inception, we bought about 14% for $285 million, 1293. Some of you shareholders are saying, the stock is not going up. We don't control the stock. So what we can do when the stock got down, does it buy it? And that's what we do. We buy it. We've done it at Fairfax with idea. And then someday, some -- I wish I could tell you when I've been in the stock market, 50 years, you can tell when this thing changes and someone suddenly realizes India for effect and the stock goes up very significantly. But in the meantime, we buy back the stock. Financial strength is very strong. Chandran shows you borrowing of $500 million at 5% due 2028. We got $175 million in revolving credit facility with surveys undrawn. We don't want to draw that other than for short periods of time. And the cash and securities are $1.3 billion, as you can see, 3 billion in shareholders' equity -- investment advisory fee. I just wanted to highlight this here for you because some of you have said, why are they taking shares in the last 2 times and now cash. So very simply, we have an incentive fee that's every 3 years. And so this is the third 3-year period, third 3-year period that just finished. The first one and the second one, we didn't have a choice. When we went to our cornerstone investors and raise the money, they said, you have to take shares as long as it's selling, I think, below 2x book value. So we didn't have any choice. We have to take shares. We are happy to take shares because we thought it was a good way for us to take it. But then in the third one, we did have a choice. -- shares or cash. And we thought the best thing we could do for our shareholders is to take cash, not shares because the share is at $15. So we took cash. And you can see the performance fee, what we have. But we are expecting to make much higher returns than 9%. That happened to be -- it's better than the Syntec index, but over time, we expect to do a lot better. As I showed you, the monetize, meaning the ones we've sold have done very well. Investment fees that shows you this AV put together. So if you look at our investment fees for the 9 years, right? It's a percentage of cash and investments on the right, 1.1%. And -- that's what you're paying, 1.1%. And then this is an in mass performance fee. And the performance fee is 0.9%. So the total fees are about 2% for the 9 years. And that's your return, the 9%, is after that after all these fees. And of course, we are the largest shareholder. We have 43%. We're excited about Fairfax India, and we expect to hold it for a long, long time. These are the current investments that we have. You'll see the price-to-earnings ratios there and of 39x, I'm just highlighting the big ones there. Fairchem Organics, 39x. If you take normalized, this is price to earnings or price to free cash flow, the first sections are all price to earnings. 39x but it had earnings down, if you normalize that, it's about 9 to 10x. And [ Pfizer ] it's growing like a weed. So it's 28x, but it'll come down significantly over time. The other ones you can see is listed Bangalore International airport I told you 9.5 -10x. And then you can see the other ones there. Max shop is just getting going. So it's about 15x. We think it's 8x free cash flow and some of the others are a little higher, but over time, they'll be fine. So we like what we have. The one that we've had a tough time with is NCML we've told you that before. But we have a good president, Sanjay Gupta, who's focused on turning it around. Realized gains here, this shows you what our gains are. IIFL Finance, 25%. Nirmal Jain has here done a fantastic job, and we'll talk about that fare, you can see. And the others, you can see -- so all in all, that's how we get the 18.2%. These slides will be in our website. So you don't have to keep it with you. And then we bought this National Stock Exchange, which has done exceptionally well, $27 million cash cost. And Chandran the team just sold it for $189 million. There's still one that closes at the end, I think, closed at the end of April. -- and compound 33%, very, very good. India will be the best economy to invest in for decades. There's a lot of material on this. You've seen it. You'll see more of it. The last December quarter in 2023 was 8.4%. That's a real GDP growth. This country can grow at 10%. No one can tell you exactly what will happen. Here, it shows 7% but could easily grow at 10%. And Mr. Modi is now standing for election in the month of May, about 6 weeks, 1.1 billion people are going to be voting. So it takes a long time. And it's very well done. And by June 2 or third or fourth, some of they get the results. And the only question is how high is this majority. They're going to be 280 seats or they're going to be 400 seats. And quite a few people are betting there be 400, which is like unheard of for the third time, third time is a favorable ranking as way to the roof. Everybody likes him from the top, Northern India to the bottom, Southern India. And the Southern India is using a vote, the BJP has party hasn't won in Southern India, but for the federal election, the central government elections, it tends to do very well. So India will be the third largest economy by 2027. Mr. Deepak Parekh will give us a little quick update on that. Continued reforms. This is from Jefferies, by the way. They're talking about 7%, USD 10 trillion market cap in 2030. And India's current GDP is like $4.2 trillion, which is like the fifth largest because I think 10th or 11th of 12th came in or 14th maybe, and it's now a fifth. And in another few years, that will be the third. So you get the United States or China and then you get India. And India has got the big plus of being a democracy. And democracy for 1.4 billion people and stuff, but it works at there and you always have to be sensitive to what the people want. Vibrant democracy, all of that, you know rising entrepreneurship. People say that Mr. Modi has recommended a book to you all last year, 20 years and the first chapter, the guy says, Mr. Modi has started to dream that anything is possible. Now it's appropriate for him to say that because he's come from a tea seller's son. He was just an ordinary chief service and selling tea in railway stations and now he's running the country. And he's run it for a big state called Gujarat for about 13 years, and now he's running. He had 2 elections that he won in the central government and you're going to win the next one. Entrepreneurship is flying in India. And like it is in the United States, like in Canada. And the idea is if you've got an idea, no one cares where you came from, what your religion is, what your background is, which college you went to, if it's a good idea, the venture cap people are giving you the money. One of my friends to benches, we have to go and say, take our money as opposed to taking this guy's money or the other pillar. -- unheard of in India that there's so much money focused on entrepreneurs. And India has had historically a caste system, all of that is being demolished because I don't make a difference what your caste is, you're a woman, you're a man where you came from Southern India, Northern India. It's business. If you're good and you're smart and you can make money for the venture capitalist, he or she will have it just like is in Canada and really big in the United States. United States, they don't care. If you look at Microsoft, it's an Indian guy running Microsoft good friend of mine, Satyam Nadella, immigrant to the United States about 30 years ago. But he's smart he is good. They put them to run the company in the U.S. and the largest capitalization company in the United States. So entrepreneurship in India is rising. India is now our services export hub and strong stock market. India has had an economy of more than 100 years old. And so there's a strong culture, strong market returns. Now the stock might get are not cheap, but over time, you have to -- when you invest in India, you've got to think this is like decades long. There's a transformation. The economy is $4 trillion for 1.4 billion people, right? China is about $16 billion, $17 billion, $18 billion, and the Americas, I think, about $27 trillion. I'm talking about trillion, tough to imagine trillion, but that's what they are. And so if you go on to Fairfax India, this is the last slide, and it's diversified like Fairfax, all of these companies separately run, and we go -- we are very sensitive to people who run the company, and we like banking them. And irrespective, when they're good, we back them, back them strongly. And we have a fabulous group of people who are honest, hard-working and want to build the company for a long period of time, and we're so happy to back them. With that, I'm going to press the button and there it is for you, Chandran. Let's welcome, Chandran. You have a nice one...

Thank you, Prem, and good morning to all of you. I will give you a brief summary of the 2023 performance of Fairfax India's 6 largest investments. The leaders of most of our investee organizations are here today. And so I will be very brief so you have an opportunity to hear directly from them. Our largest investment is Bangalore International Airport or BIAL. We own 64% of the airport acquired for $903 million, implying a cost of $1.4 billion for 100% of the airport. BIAL is India's third largest airport and the largest in South India and Bangalore is the fastest-growing and third largest city in India. As most of you know, Phase 1 of Terminal 2 was inaugurated and was fully operational in 2023, including the transfer of all international operations. It was acknowledged as one of the most beautiful airports and received the world special prize for an interior for airports at UNESCO's 2023 Prix Versailles. We believe it is one of the best airport terminals in the world, a truly magnificent terminal in a garden. With the completion of the refurbishment of Terminal 1, BIAL's capacity increased to 50 million passengers. Under the exceptional leadership of Hari Marar and his executive team, BIAL had an excellent post-pandemic recovery year. It handled 37.2 million passengers in 2023, surpassing the pre-pandemic high of 33.7 million passengers in 2019. Revenue increased 60% to $305 million and net profit was $44 million, generating an ROE of 14%. BIAL had generated an ROE of 17% over the first 2 control periods. BIAL's valuation is largely driven by its 3 sources of revenue. Aeronautical revenue, non-aeronautical revenue and monetization of 460 acres of land available 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 its regulated asset base. BIAL's growth plans taking its capacity from 50 million to 70 million passengers by 2029 and to over 90 million passengers by 2034, has a significant impact on its valuation. This will be achieved by adding a Phase II expansion to the second terminal and building a new third terminal. The investment required to build these additions is about $2.2 billion and will be funded through internally generated funds and debt. Second, non-aeronautical revenue, which is revenue from all other sources like lounges, food and beverage sales and duty-free shops has resumed its strong trajectory of growth with an objective to increase by 5x over the next decade, driven by the extra space, the attractive surroundings and excellent initiatives launched by BIAL. And on the real estate front, significant progress has been made in the plants from monetize the 460 acres of land that can be developed. The valuation of Fairfax India's interest in BIAL increased to $1.6 billion in 2023, implying an equity value of approximately $2.5 billion for the whole company. Excluding any cash flows from real estate monetization, as Prem said, this is 9.5x normalized free cash flow. In 2019, Fairfax India created accurate infrastructure investment holdings to be its flagship vehicle for airport and other infrastructure investments in India. In 2021, Fairfax India transferred 43.6% of the BIAL to Anchorage and sold 11.5% interest in Anchorage to OMERS $429 million. Fairfax India is in the process of obtaining regulatory approvals to complete the IPO of Anchorage. Approvals unfortunately, are taking much longer than we expected. Moving on to our IIFL Finance. IIFL Finance is a non-deposit-taking -- it's one of the larger nonbanking finance companies or NBFCs in India. It has over 4,600 branches, almost 40,000 employees and serves over 8 million customers. IIFL finances Fairfax India's second largest investment. We own 15% of the company, acquired for $76 million and is currently valued at $412 million. Under the leadership of its CEO, Nirmal Jain, who is also the founder and significant shareholder of all the IIFL group companies and this long-term business partner, R. Venkataraman. IIFL Finance had an excellent year in 2023. And revenue increased 25% to $750 million, and net profit grew 36% to 400 -- sorry, to $242 million, generating an ROE of 70%. Assets under management, which have grown at a compounded rate of 16% over the last 5 years, grew 34% to $9.4 billion. Asset quality is among the best in their peer group with net NPAs of 0.9% and a provision coverage ratio of 151%. Its strong momentum results partly from its asset-light model, whereby 37% of its assets and 34% of its income are derived from co-lending with or assigning assets to other lenders. Loan-to-value is very conservative at 72% for home and gold loans and 52% for business loans with a well-diversified asset portfolio, of which 95% is retail in nature. Our total capital adequacy ratio of 19.6% for the NBFC and 45.8% for the home finance subsidiary and net interest margins at an all-time high of 9.8%. IIFL is well positioned to take advantage of the economic growth expected in 2024 and beyond. In 2023, we sold 27 million shares of IIFL generating a realized gain of $149 million that resulted in an annualized return of 25%. On March 4, 2024, the Reserve Bank of India, the RBI, the Indian central bank and banking regulator ordered IIFL Finance to stop sanctioning, disbursing or assigning, securitizing or selling any new gold notes due to noncompliance with certain banking regulations. The stoppage will be in effect until the RBI completes a special audit and the regulatory deficiencies identified are rectified to RBI satisfaction. IIFL Finance has rectified the deficiencies and responded to the RBI. The RBI has agreed to begin the special audit in April. This audit does not affect the other IIFL segments for finance, which account for approximately 70% of its business. Fairfax is offered to provide IIFL finance up to $200 million of liquidity support by way of debt and equity, if needed. Moving on to CSB, CSB is one of the oldest private sector banks in India. It has 751 branches and 570 ATMs across India. We own 49.7% of the bank and our investment of $169 million made in 2018 is currently valued at $409 million. Under the strong leadership of CEO, Pralay Mondal, CSB has made -- has had its best year ever in 2023. Revenue increased 27% to $236 million, and net profit increased 10% to $69 million. CSB made excellent progress in its key performance measures with loan advances growth of 23% and deposits growth of 21%. Net income grew by 12% with an industry-leading net interest margin of 5.2%. Asset quality is excellent with net NPAs of 0.3% and a provision coverage ratio of 91%. Capital adequacy ratio remains strong at 23%. Compared to other banks, CSB's performance is right at the very top. We are very excited about the long-term prospects for CSB. Moving on to Sanmar Chemicals led by Bala Shanker, it is a private company and one of the largest manufacturers of PVC and Caustic soda in India and Egypt. We own 42.9% of Sanmar acquired for an investment of $199 million that is currently valued at $309 million. Sanmar had a very difficult year in 2023. Revenue declined 26% to about $1 billion. EBITDA declined 55% to $96 million, resulting in a pretax loss of $28 million. All the 3 divisions, the specialty and commodity PVC businesses in India and the Egyptian business all incurred pretax losses. This performance was the result of drops of between 30% and 60% in global PVC prices due to depressed demand from China and the Western world that resulted in the dumping of excess PVC production from China. This was further exacerbated by the lapsing of antidumping duties in India, which had been in effect for the previous 15 years, increasing energy costs and lower caustic soda prices. The Egyptian business, GCI Sanmar also had poor results. This business was impacted by the poor global market for PVC and also by the foreign exchange crisis in Egypt. We are hopeful that business will stabilize in 2024 and resume its upward trajectory next year. IIFL Securities led by R. Venkataraman is a major player in the Indian financial services market with assets under management and custody totaling $22 billion. It offers retail and institutional advisory and broking services, financial products, distribution and investment banking services. It has unparalleled research coverage of over 260 companies. We own 27.5% of IIFL securities acquired for an investment of $51 million that is currently valued at $147 million. It had one of its best years ever, driven by strong performance in the retail broking and investment banking divisions that benefited from buoyant equity and IPO markets. Revenue grew 46% to $234 million, and net profit grew 72% to $68 million, generating an ROE of 25% at a valuation of only 10x earnings and 2.5x book value per share. It trades at a discount to its peers, and we expect it to continue to be an excellent investment for us. Moving on to 7 Islands Shipping, founded and led by Captain Thomas Pinto, it is the second largest private tanker shipping company in India. We own 48.5% of the company acquired for $84 million that is currently valued at $143 million. 7 Islands also had its best year ever in 2023, driven by higher charter rates and opportunistic sales of vessels during the year. Revenue grew 34% to $166 million and net profits grew 310% to $85 million, generating an ROE of 39% at a carrying valuation of below only 4x earnings and cash flow, we expect significant upside on the value of this investment. Fairfax India has investments in several other companies. Fairchem Organics, and oleochemicals company, 5Paisa capital, a discount broker and technology-based financial services company, NCML and agricultural warehousing company, Saurashtra Freight, a container freight station, Maxop engineering Precision Die Casting Unit & Complete Machining Solution and Jaynix Engineering an aluminum electrical parts manufacturer. Most of them are excellent businesses that continue to make good progress. Our annual report has much more detail about each of these companies. With that, I'll turn the mic back to Prem. Thank you...

Thank you Chandran Thank you. So now we have Deepak Parekh. I'll just introduce them very quickly. Deepak Parekh is iconic and India. We created a company called HDFC, which is the first mortgage company and then a bank. And over 4 decades, the growth of the stock price has been in excess of 25% in U.S. dollars. -- this phenomenal return and has been -- and that's the nicest person, highest integrity in India, and we are fortunate to have him as our consultant. He doesn't do that too often, but he's our consultant and will be a consultant forever. We don't do too much. I think it would be fair that a tenant with our target at deeper. And he just knows everybody. And if he doesn't know someone on telephone call you find out. And so with that, perhaps I can put Deepak on the line.

Apologies for not being present at today's Annual General Meeting. As part of the proceedings of today's meeting, I have been requested to share a few perspectives on the Indian economy. -- that India today is on the radar of most global investors is perhaps stating the obvious. The mainstream narrative around India has been its pace of growth. It took India 60 years after an independence to become a $1 trillion economy in 2007. India became a $2 trillion economy in 2014 and a $3 trillion economy in 2019. The pandemic set us back a bit, but the next leap of becoming a $5 trillion economy is estimated to be 2027. Many forecasts now estimate that this growth trust will enable India's stock market capitalization to touch USD 10 trillion by 2030 from the current levels of over $4 trillion today. Yet as shareholders, it is important to understand where the tailwinds are coming from. The tailwinds of demographics improved institutional strength and governance. The rise of entrepreneurship and stable political leadership has capsulated India, leading to increased investor interest in the country. India has now had 3 consecutive years of 7% or higher GDP growth. It is important to reiterate that India's growth and attractiveness is not on account of any other major economy slowing down. India stands on its own strength. Geopolitics is today the dangerous new normal. India is holding its own on the global arena and its own indigenous model of diplomacy is working well for the country. The leadership of India has focused on improving the structural economy and focuses on strengthening its vulnerable areas. As an energy deficit country, India stands is to continue to source crude requirements from the cheapest source possible. When it comes to products and services of the future such as semiconductors or transitioning to clean energy, it has core relationships, invited global players to set up shop in the country and ensure that new investments into the country be beneficial for the long term and should create new job opportunities for its citizens. In equal measure, India has worked on improving the ease of doing business. While India will remain predominantly a domestic and consumption-driven economy, especially positioning itself as a leader of global capability centers, which has buffered itself by increasing investments in the manufacturing as well as the infrastructure sector. India is integrating into global supply chains and the balance sheets of corporates and the bank are significantly stronger to fund sustained revival of the investment cycle. On the external sector, the currency has been stable. Over the past year, the rupee has depreciated by 1.4% against the U.S. dollar, which is significantly lower than other emerging market economics. The foreign exchange reserves at 645 billion, which is sufficient to cover over 11 months of imports. When one looks at the stock market performance, 2 aspects stand out. First is that the gains are widespread and not concentrated in selected few stocks or sectors. Second is the domestic institutional investors, largely insurance companies and mutual funds have been large investors and stability buffer when foreign investors turn net sellers triggered by global volatility. Today, both foreign portfolio investors and domestic institutional investors are bullish on the Indian growth story and our net buyers. The financial sector regulators have been extremely prudent and vigilant watching closely for any potential beta of excessive or volatility in the market. These are factors that give investors greater comfort and confidence. To conclude, let me say, there could be no better testimony of India than seeing the performance of Fairfax investment in the country, which has straddled the new age, financial and industrial sectors. Under the able leadership of Prem Watsa, one of the guiding principles of Fairfax is doing good by doing well. Fairfax presence and performance in India clearly upholds and demonstrates this principle. Thank you.

Thank you very much, Deepak. Deepak did say doing good by doing well. For the first time, we're giving all our shareholders tomorrow but also for you, this is a report on the donations that Fairfax has made, and it's very similar to the donations that are made in India. And I must say I just got it yesterday and it's very well worth reading. You'll like it. The second thing I wanted to mention to you is a terrific book by Amitabh Kant. He was the guy who India last year hosted the G20, and he was the ship, Amitabh Kant and he's written a book called Made in India. -- easy to read 75 years of business history in India. Very, very interesting to read, and you can get a copy of it. And finally, I wanted to say that we've had for some time a trip to India, and we've had it in the Fairfax and now our Chairman asked me to reminded me to mention it here that Thomas Cook, our company, which is not in Fairfax India, but as worldwide the largest travel company all over the world, not only to India. But they will look after it and will be a trip of a lifetime. Kasi Rao will be behind the where you can see there you are cases right there, and Kasi will be available to -- if you are interested, it's in January, and he'll have the dates and stuff and give you any information you want, and you will really enjoy it. Many have done it because of COVID and other things we haven't done it for a few years, but let's open again.

And with that, we'll open it to you for question-and-answer. So feel free, one mic here one mic there. And this mic is what we'll use for our presidents if we need them to answer a question. So with that, please ask us any questions on your mind. Yes. We'll go on this one first and then go here and then keep oscillating.

My name is Asheef Lalani. I'm an investor in Fairfax India and Fairfax Financial. My question is the opportunity that you've played out for India is phenomenal. I think everyone in the room probably agrees that the opportunities are gigantic. It seems like Fairfax India has a constraint in that our valuation is so far below our intrinsic value that raising new capital doesn't seem like it's a possible notion. On that basis, is it possible for Fairfax India to act as a GP for third-party capital? And is there an opportunity for us to earn fees -- additional fees off of that to help offset some of the fees that we pay to Fairfax Financial?

So that's certainly a possibility. So Fairfax India, the stock price is low. So obviously, we're not going to issue shares. We're going to buy stock back. Right now, if an opportunity came, that's the sort of thing that we do. Fairfax itself wants to invest in India, financial. And so between the 2, we'd look at how we can invest and get -- there's a lot of people who want to be our partners. And I didn't mention this, but Mr. Modi is committed to privatization. A lot of the Indian economy because of socialist policies is owned by the government. So I think 60%, 70% of the banks are controlled by the government, they're public, but 60%, 50%, whatever is owned by the government. They're going to sell it. And he makes a point why should we own this bank or insurance company or whatever, we don't know how to run this. It should be run by private enterprise. Let's sell it, get the money and help people who need to be helped. So there's going to be a lot of opportunity once the election is over, and we're going to participate. So we've done that before. We know how to operate under the circumstances. But rest assured we're not going to issue shares to do anything going forward at these prices at that rate. Twice book value, that's a different story, but not at these prices. But thank you for that question.

Michael Jiang from Tancook Investment Management. The first question regarding the airport business. I remember last year, you -- I was told that you have a legal dispute with the Indian government on the logistics business, whether it should be classified as a line regulatory business. Maybe part the business, like for logistics in Mexico, too, they make most of the profits from nonregulated business. So I'm interested to know how you develop such a business specifically for the logistics business in...

Yes. You know it's a regulated business. It's a public private partnership. We get a 16% return, right? Every 3 years, every 3 years? Is it 5 years? Every 5 years, 16% return on the equity capital that we have. But anything you want to add to that, Hari, -- Hari is the guy who built the airport. We might have had some dispute, I guess, in the past, but any...

I think what you're referring to is the appeal that we had in court with regards to how the real estate income is going to be treated. Is that your question let me just clarify this?

I think you're building a larger logistics business, just airport. And you argued it's not part of the regulator business operation. It should be non-regulator can charge...

Why did you do that and then give them a sense for this hub that just happened recently well after you finish...

Of course. So I think what you're referring to is that we had appealed in the court that cargo, ground handling and fuel, 3 parts of our business, which is treated as nonaeronautical business by the economic regulator should be treated -- should not -- it's treated as aeronautical, but it should be treated as not aeronautical as per our concession agreement. At this point of time, and we appealed this is Bangalore Airport, but also Hyderabad Airport also had parallelly appealed. At this point of time, Hyderabad Airport has won their appeal in the court, and the court has held that it has to be treated as nonaeronautical business. But of course, the government has gone back and appealed against that verdict and his containing that it should continue to be treated as aeronautical business. So we don't have a clear answer as to where it stands right now, but it still is in court. But we continue to develop because irrespective whether it is aeronautical or non-aeronautical, this is part of what we expected to develop over the period of our concession. So we continue to develop that, notwithstanding the outcome in the course. I hope that clarifies your question.

My second question here is the question -- the topic I released last year in terms of how you finance the expansion in India, will you buy back shares and you cannot really issue shares given your stock price. And just to give an update on how you finance the expansion last year.

Yes. So it's sort of like what the previous question was at these prices, we're buying back stock. There's not a lot of shares traded, but when they're traded, we buy it back. We've or pretty well all the shares of any size that have traded in the last 1.5 years, I think. And if you have 10,000 shares, 500, we don't buy 100 shares, but 10,000, 5,000, 50,000 shares we will buy it. And that's the best thing we can do for you shareholders. Best thing is to retire the stock. But in terms of your question, it will be interesting for Hari to just expand while you're there about this recent development with Tata.

Sure. So you heard a lot about how exciting the business environment is looking in India. In the aviation industry, too, it's really looking very exciting. So our last year's, the kind of growth and the kind of opportunities that we've had have been very positive and very forward looking. Let me give you a bit of a context on what makes the aviation industry very exciting at this point of time. India is on the verge. So over the last 17 years since Bangalore Airport has opened and has got privatized, we've had a CAGR of 13% in terms of growth in passenger volumes. But one can expect to see in the next few years is exclusive, unprecedented growth rates that we have never seen before. And this comes on the back of the fact that airlines in India have placed orders for 1,200 aircraft over the next 10 to 15 years. This is huge considering the fact that there are only 700 planes operating in India, and the number of aircrafts on order are 1,200. This on just list price alone is a bit of $150 billion because that's what it's going to cost to take to buy these many aircraft. These are firm aircraft orders. And you don't place these kind of bets unless you are sure that this kind of capacity that you deliver will be absorbed in the market. So it's a very exciting time. And on the back of this kind of positivity and sentiment from the airlines, airports are also investing money. And I'll tell you, I'm just giving you a bit of a back story, Prem of what you asked me. Airports are also expected to invest close to $50 billion in the next 10 years. And that involves modernizing and expanding already privatized airports like Bangalore Airport, for instance. Chandran alluded to the fact that we are going to invest $2.2 billion in the next 5 or 6 years. But apart from that, there is also going to be more privatization of existing government on airports and creation of new airports as well. In line with the story that Mr. Parekh said sometime back, the first 65 years India had developed 70 airports. And then in the next 8 years, it developed another 70 airports. So 142 airports operation in India, and this is expected to go to 258 airports in the next 10 years. So about 2032, we'll have 258 airports operating in India, it's a very large number, as you could imagine. And with 2,000 aircraft that have been operation in the Indian skies, the kind of growth rates that we can expect are simply phenomenal. So -- and of course, the demographics of India strongly support all of this. By 2030, the working population of India is expected to be $1.03 billion. That's just the working population. The median age of India, which is 31 is expected to be only reduced going forward. We've got 50% of our population below the age of 25. 65% of our population below the age 35, which all makes it a really exciting environment because the size of the middle class is growing, the size and so is the percentage of the expendable income. And all of this means that all of these youngsters are chasing experiences, which all leads to growth in aviation air traffic. So obviously, this means that we have to create capacity, and that's what Chandran to, we are going to invest another $2.2 billion, creating that capacity for airlines to operate. But it's not good enough if that growth is coming, that we just cater to that growth, but it's important to be able to give that growth a definitive direction so that we can get the best bang for our buck and really achieve our true potential. And in that context, I think the real opportunity was for Bangalore Airport or airports in India to establish hubs. For decades, we have squandered this opportunity and allowed the traffic to be leaked across on both sides of the Indian subcontinent on the west to airports in the Middle East and the East to airports like Singapore, Malaysia and Hong Kong, where we've allowed these massive hubs to come to come up, catering entirely to Indian traffic. So if you just look at the total volume of Southern India traffic that goes to Europe and U.S. 47% of that traffic hubs over Dubai. So if you take -- for every flight that takes off to Dubai, 70% of them are actually going beyond Dubai to either Europe or U.S. And I think it's time to stop that leakage and that can happen only if India creates hubs by -- through fantastic airport airline partnerships. The newest girl in the block was at India, the prettiest is gone by biomile. Everybody wanted to do business with Air India and all airports have been going Air India to see where Air India might establish its second half. The primary hub of Air India without doubt is Delhi it's got to be in Delhi, -- there's no 2 ways about that. But the question was where will that secondary hub be established? And why are India? Because Air India is the only airline that can do it, given the fact that Air India, all the other airlines operate only small body aircraft. Air India is the only airline that has got body aircraft on order, which means that it needs to operate -- it's the only one that can operate direct flights to Europe and United States. And so we've signed a partnership with Air India just 3 days ago. It wasn't the news -- if you followed news that it was a big announcement that we signed a partnership with their India for Air India to establish that hub in Bangalore. This is a game changer as far as Bangalore Airport is concerned because we'll see -- thank you. This is a game changer because this is going to see acceleration of international traffic, which is going to see direct international flights from Bangalore to Europe and to America. And it will also see in India will naturally have to create a bank of flights that bring passengers from other parts of India into Bangalore to connect to their international flight. So there's enough behind traffic. And then I think it's going to be interesting also because that means that there'll be more hubbing traffic out of Bangalore Airport, which also means that there will be more dwell time by these passengers in the airport more dwell time means that you end up shopping more and spending more money in duty free, and this is exactly what we're looking for. So this is the exciting development that Prem alluded to. I hope that sort of clarifies.

Thank you very much, Hari.

Yes. Trevor Scott, Tidefall Capital. Another question on BIAL. If you do any basic form of competitor analysis, it appears extremely undervalued at the valuation that you have on your books. There's a lot of publicly traded companies that you can look at. And you mentioned in the letter this year that 9.5x normalized profits, I was just wondering if you could go a bit more into depth on that. And that excludes the real estate because that's such an attractive valuation for such an incredible asset.

So it's 1.5x, excluding the real estate, you got 460 acres, excluding that, that's a valuable piece of property that we're developing. But just by itself, the free cash flow, this will be like in the next year, 1.5 years, is 9x. But if you go a little further because it's a brand-new terminal as it gets going, you could drop it to 6x in that area. I didn't want to go that far. But it's -- just look at the $2.5 billion for something that's going to have 75 million passages on its way to 75 million. And all the things that Hari just talked about in terms of the development with Air India, Everyday could have chosen any of that it's Tata owned. Air India used to be owned by Tata years ago, it got nationalized. And it's appropriate that it goes back to Tatas and they could be going to make it a fantastic airline competitive with every airline in the world and are the terrific guy who runs it, I mean it runs the whole of Tata, N Chandra. And so it's a big, big plus. So in terms of the -- I don't know, the Heathrow is public, I think, and a few others you can look at. Any comment on that Hari? Have in terms of the fact that other public airports, we don't -- do you know something about that, Amy? Amy is the Chief Financial Officer, done a terrific job. Give her a nice hand...

I will say that our valuation is prudent. And so when we look at it from an accounting standpoint, the valuation will always lag performance slightly. So in the past, we've really only increased the valuation at the airport substantially on 3 occasions. One was when they completed their real estate development plans. And so we took the valuation up at that time in 2019. And the other was when you finished your plans for Terminal 3 and we took it up again. The third time was this year, and we took it up because they completed Terminal 2 Phase 1, which as Prem mentioned, is most beautiful airport in the world. So we pick it up again. We do expect that the valuation will continue to increase. The 9.5x normalized was based on free cash flows, excluding any expansionary CapEx in the year 2026. So we do think that there's a lot of room for growth. It is a long-term infrastructure asset. So we're looking at cash flows going out about 30 years. And as a result, for some of those later cash flows, we have a higher discount rate. So discount rates between 12.4% and 16% and 16% would apply to the real estate investment. And when we say that we exclude the value of the real estate, what we're excluding is the cash flows that will be generated by the real estate, which happened later in the model. I hope that helps.

Yes. Jeff, a question I almost forgot that you were there. Jeff, please go right ahead.

Prem, a question about the National Stock Exchange. May I know what the rationale behind the sale of the National Stock Exchange of India was. It seems to be a long-term compounder.

It is a long-term compounder. It's a terrific company. And first of all, we've done really well. And the valuations were high. A lot of the trading in India as it is in the United States is option trading, like very significant option trading and they get commissioned from options. We looked at all that. And we think it is a terrific compounder. -- and it's going to go public sometime. And -- but we thought perhaps the valuation was where we sold it reflected all of that. And the downside is the option trading. India stock market has done really well. It's selling at a very high price. And so you have to be careful where you invest your money. And so that's how we looked at it. And I have to congratulate Chandran and our team who saw this because it's private. So you're buying a private company. And we bought it and owned it for what a few years, 3 years or something. 5 years... On it for a little longer than 5 years. paid very well. Thank you, Jeff. So we'll go on 1 year, 1 year and 1 day. Sorry, go right ahead.

My name is Rajeev Agrawal. I represent DoorDarshi India fund. Prem, my question is, you referred earlier to India having a lot of public sector banks and the government is looking to privatize some of them. You have been rumored to be interested in IDBI Bank multiple times. My question is that given that IDBI Bank is going to be privatized it's a big bank, will that -- will Fairfax India be interested in that? Or will that be done through Fairfax Financial, if you were to be interested...

So first of all, that's a good question the way you put it. No confirmation that we are interested at IDBI bank it is a rumor, but -- and so we're going to look at all the banks. And we've got a terrific bank in CSB Bank. Pralay and Varghese are there. -- and they're doing a fantastic job. You saw when Chandran's presentation how well it's done, we'd look at all of these things. And our view is simply that if you have in our experience, I'm talking of 38 years at Fairfax, when you see an attractive opportunity, you can always get the money. You have to figure out how to get the money. But we can always get the money like the gentleman was saying, there's many structures that you can put together. But -- so we'll look at all of that. But there is going to be a ton of privatization in India. And they were saying -- he was saying Mr. Modi was people hearing Mr. Modi said, this will be only second to catches privatization in the U.K., like huge privatization, which is exactly what you need, right? And so -- but I can't say exactly what's going to happen. And if we will invest in IDBI bank or not. We don't like to talk about that until we actually do something. So thank you for the question.

So the other question is Bangalore International part clearly about ground you have talked multiple times here. What is preventing us from doing an IPO there? I mean we have been talking about IPO of multiple times...

Yes. So it's the anchorage, right? And India has opened up nicely. -- but it's still got a little bit of accused you got approval here and you get some approval there, and it takes some time. And Chandran, anything you want to add to that?

No, we're working away at it. And every time we get something pops up from some part of government saying you can't do it or you can only do it if you do such and such. So Sumit and his team are working through that diligently and hope that after the election, we'll see something.

My name is Gobinath from GB Investments. I have 2 questions on 2 different businesses, the first one is on IIFL securities. The second one is on 7 Shipping Islands. The first one is, a couple of years ago, you talked about some large real estate IIFL securities owned, which was leased to the other family companies and that kind of information kind of in a way after that. Could you give us an update whether they still own it or -- any kind of...

We'll do better than that because we've got Nirmal Jain, who's here, who has begun a company founder of the company and done a fantastic job. I mean more than 2 decades, maybe 25, 30 years, you've been right to the company. We've been shareholders for a long time, and perhaps he can also talk about just so most recently, the gold loan that you talked about, just a little update on that also big friends of Nirmal. And as he said, we committed $200 million. If he needs it, he's not going to need it. But if we needed it, we were going to -- immediately we came at supportive we've known them for so long. Keep him on a nice warm run...

Thank you, Prem. And I have my colleague Venkat, probably who can take our security's question a little later. But -- so first of all, thanks Prem, Chandran, Gopal and all Fairfax India shareholders, who have always stood by their companies, and I think we have a long investment. And this crisis Prem is really generous to come out in public and say that we offer $200 million. And as you rightly said that we may not need it, but at least the gesture has been very good for the investing community. He's also been kind enough to speak to one of the -- the leading rating agency and reassure them. So our rating has continued to be stable and the event have been marked as developing, not which is neither negative nor positive. Okay. Let me give some background to this entire issue and where we stand and what is the way ahead? So RBI doesn't under audit, and they've been doing it for the last 16 years of our company's existence. And this year, they found a few lapses. And based on that, we're a bit surprised because the order came, which was a complete embargo on our gold loan business. And of course, there were lapses. So I can't say that it's something which is -- we are doing everything which was in full compliance of their master circular. But many of these things that we are doing were also industry practice. So maybe I can give analogy. I mean I don't know many of you would have traveled to India there, the traffic rules are hardly followed. The people obviously. Now -- but if you are in Canada, U.S. everywhere, then you see that even if the other side is empty and there's a 3-mile traffic jam, people still won't break the lane because somewhere -- some point in time, regulators enforce the regulations very strictly. So what happens that in traffic police officer catch hold of somebody and sort of make him an example. And if we have a view, then I don't think that we can really crib about it, but I'll just talk about it that what happened and how we are going to overcome. So one of the -- there are 3 or 4 key issues, which earlier highlighted and I can take a few minutes... One was the cash disbursement about INR 2,00,000. So when people take loan, we are giving them loan up to INR 2,00,000 in cash. So when we say INR 200,000 is about maybe about a $300 -- sorry, 3,000 $2,500. Now we know what happens, we have 4,781 branches across India. Many of our branches are remote areas where people don't have banking. And even the UPI, the digital payment, the internet connectivity doesn't work. So not only us, but all gold loan companies are doing this. Now -- so that was one of the problems that we had as per RBI. The other was when gold loan is not paid when the customer account goes into NPA, which is like is not able to pay the interest in principle, then we auction the gold. Now the auction as per RBI guideline has to happen the same Taluka. Taluka is like a small locality in the same branch, you can say. And we were doing e-auction through hub locations. The RBI is logic for doing it in the same local area is that customer can be physically present there and can see how his jewelry auction. Our logic as in every brand field has such a small quantity of gold that practically, it is really difficult to have bidders for every small branch. But the fact of the matter is that RBI regulation was there and somehow as we have been growing, we ignored it, and so there's a price that you pay. The third was the purity. So again, other than cash, all the observations were related to auction. Our total auctions last year, when the period have awarded, we got 1.3% of our loan disbursement. So there really are a significant part of our business. So whatever compliance we do is not going to affect us in terms of our profitability as such. But -- so the auction security, what we give customers a certificate at the time of loan and there is action. So then there's a variation. And the gold purification is subjective. So the way it happens is that you scrub the gold potential and just see the quality of the -- how yellow it is. And based on that, you say it's a 24-karat 22 carat. And in India, gold or had a lot of stones and other materials, which you have to adjust. So at the time of auction, the purity was lower by 6.5% from the entire option quality. But okay, what we have done now that we are fully compliant. We have made 100% compliance with all the RBIs observations. Not only that, we are going to step further -- we check the master circular very carefully. And every small the letter, we are trying to make sure that we comply fully -- now RBI's a special audit is going to start day after tomorrow. And we are very confident that audit will confirm that we have complied fully and that is when RBI will lift the embargo -- now I'll talk a little bit about the company, what we are. So this is a temporary phase which in my mind will go, it may take a few weeks or a month or a couple of months. But as a company, we cater to all small customers, it's a 1.3 billion people country. And most of these customers are not serviced by banks. So 87% of our customers are economically weaker with their annual income less than $10,000. 69% of our customers are women. And in case of home loans, 98% of one of the borrowers is a woman. Also, 82% of our loans are for property purposes, which are like buying a house or your small business working capital requirement. So these are for -- not for personal loans or consumption of BNPL. So these are all the activities with the government and RBI would like us to do. So we complement the banks in their effort. A number of issues were related to governance or a fraud or money laundering. Our asset quality is the best in the industry at less than 1% nonperforming assets. Our technology, again, probably is one of the best and that has helped us to grow faster. In BFSI space, I think there are 241 incidences, not even one incidence related to our business when we service 8 million customers to almost 40,000 people. So I think the -- as you have seen that the economy is going to grow at 7% and it becomes a $5 trillion economy. The opportunity for credit is immense because when you say 7% real term in nominal value is about 12%. And in this phase of growth of the economy, credit can grow at least more at the bottom of the pyramid at 1.5x the GDP growth. So in nominal terms, we are looking at the industry growing at 18% as for the tremendous future for next decade, at least, that we can see for IIFL Finance. IIFL securities, maybe Venkat can cover it, but question was related to real estate. So I think most of the real estate is still held in a subsidiary company in which we have started selling. Some of it was sold over the last 1 or 2 years, so that cash is there. But still, that's not fully unlocked. Maybe Venkat can talk more about IIFL securities.

Thank you. Thank you... Thank you, Chandran, and Fairfax India for your support. IIFL facilities, which is a 100% subsidiary of IIFL Securities has properties across major metros. We have a big office in Chennai, Delhi, Mumbai. These are the big partners of real estate that we own. Since they are full buildings, it is difficult for us to sell piecemeal by office wise. And we are not desperate sellers. So we are patiently waiting to get a good deal. As we speak, we are negotiating with some buyers. And hopefully, in the next 12 months, we'll be able to monetize, I think, Delhi and Chennai for sure. Thank you so much.

Well, by the way, Venkat and Nirmal built IIFL together, they've been partners for a long time. So thank you, Venkat. Yes, you had another one?

Yes. The second question is about Seven Island shipping. Yes. A couple of years ago, we talked about the advantage of being having an older carriers versus a newer carriers because the pricing is more or less the same, so it's better to have an older carrier. Now that I've noticed over the couple of years, the carrier ads have been like decreasing, which basically means that we're getting into newer and newer carrier. Has the market has changed in any how between the older and newer carrier pricing?

Exactly. Very good question. As a captain, it is a very, very smart buyer, and he works very closely with Sumit Maheshwari at Mumbai. And that's exactly what's happening. He's able to get rid of it some of these old carriers at a good price and by the new carriers a better price. And you can run it for a much longer time. He's got a contract already done. So he's a very -- 39% Chandran was showing 39% last year return on capital. It's doing phenomenally well. And anything you want to add on that, Sumit. Captain is here? Clayton is the captain's son and doing a terrific job. Give him a nice warm welcome...

Thank you very much, Prem and Chandran for having me over. So over the last couple of years, we have gone on the fleet modernization program. So while we acquire younger ships back in the day, our average fleet age was about 24 years. And we've, over the last few years, brought it down to 17 years now. That has also given us access to foreign markets apart from being primarily on the Indian coast. So while we keep buying vessels, we also make it a point to sell the older vessels and bring down the delta on what we acquire.

We have a question about the deal landscape or transaction landscape faced by Fairbridge, -- and the questioner just notes that the last new transaction by Fairfax India was Jaynix in early 2022. So just want to say if they wanted to inquire about what the investment landscape was like.

It's -- it continues to be good. But there's a delay now because of the election, right? So the privatizations are on hold. And so it will -- how many do you look at on a regular basis -- he looks at about 300. And unless it meets our criteria. And the biggest criteria we have is honest goodness entrepreneur founder, like we have here. And so we've got 2 or 3 that we're still working on, but nothing to talk about. The environment continues to be good. But pricy, I think, fair to say…

Good morning, and... Thanks for having us today. I have an easy question for you. When I look at the returns, and I think about the growth in India, -- and I think about the U.S. and even with some of the things that David Sokol did, you have an interesting concept, which is you have a lot of growth in India. If you invest in industrial companies, probably going to get more like a 10% or a 15% return, maybe I'm wrong. Some of the other companies we've had, which are more financial-based have the opportunity to grow quicker because you don't have to build plants and equipment, they don't have. And so how do you guys think about the opportunities that would be different in Canada or the U.S. versus India because you want that high growth and the industrial companies struggle, I think, sometimes because it's hard to build shipped new plants.

So there's 2 things. On the -- you're exactly right on the financial end. If you go back -- and I think I mentioned this previously, but if you look at Lee Kuan coming into Singapore, 1965, and if you knew that he was going to -- what he was going to do, would actually work out and you say, what's the best investment you could make in 1965 for the next 30 years. No question financials banking. There are 4 or 5 big banks that compounded from that time period, 90%, 65%, 20%, you just have to buy it and all that. And because it grew to be a world-class country, right, first world. India is going to have that same opportunity. As someone was saying here that the financial system grows at a multiple of nominal growth. So the nominal growth is 10%, 12%, this will grow at 2, 2.5x, maybe even more. And that's just the industry. And then on top of that, if you're good and our guys are very good, they'll grow faster than that. So financials is very good. We've seen it with Pralay and Paresh. Paresh, by the way, was one of the first people in ICICI or HDFC Bank HDFC Bank, one of the first guys was Pralay. And Paresh has been with the HDFC for a long time, and he was -- he's been with Paresh's one of the first guys at the bank, HDFC Bank, and -- probably was working under him, and they work very well together on the -- he was -- he upped the personal end of the book individuals. And it's all that you said is exactly right. But it's a growing economy. It goes as an economy that goes for $3 million, $4 trillion to $7 billion, $8 billion, $10 trillion. Everything is in demand, everything. -- electric goods, all the stuff that we have with the smaller companies that we bought, they're all going to grow significantly. Now you have to put money in, you're exactly right, but you make a very good return on it, too. And so we've got now in Jaynix, we got an expansion project that they're working on. We can talk to them about it. And it will be sold out because the economy doesn't just go -- financial side is funding it, but there's actual manufacturing Xpoint. I mean look at the -- I was just reading today that the Apples making 14% of its phones in India, that's $14 billion that they're making, and they'll increase it to double and triple that because it's stuff moving from China to India. And India has got the big advantage link language is English. Guys in the north can't talk to the guys in the south other than in English. I'm exaggerating to make the point, but it is true -- so manufacturing will also improve. You have to get the right people, hardworking, and we're not talking 10%, 15% rate of return. We're talking to 20%. We wouldn't invest in something like 10 or 15 in India, that's the type of returns you need to get. And we have got, and we will continue to get more than 20% because you do have the foreign exchange risk, right, which Parekh said was sort of flat, but it can depreciate a little. It might go the other way. But yes, so what we're looking for is honest to goodness, hard-working people who want to build the company, not like private equity, 3, 4, 5 years, sell it. We're not looking for that. We're looking for honest all of these people here, like we just talked, Clayton, they're building this shipping business and shipping business in India, right? They're like the #2, and they're very, very profitable. And this is very smart in an economy that's growing nominal terms, 10%, 12%, maybe even more. But thank you for that question. Anyone from this side? No. We'll go back to -- Jeff, any question that you have on that?

Yes. So question about CSB Bank. Can you give us a better sense of CSB's long-term prospects going forward? What are the main constraints on growth? And what is the potential for growth beyond being a regional bank...

So who better than Pralay to answer that question. He runs it probably give us a little history on the bank in the last few years and then what's going to happen...

Thank you very much. I think it's an opportunity to talk about the bank here. History of the bank is 103 years old bank. And while it's a great history to have. But when I talk to my team, I said that, can you calculate the CAGR of 103 years to the balance sheet which we are in today. So we need to change that, and we need to look forward to sustaining what we have done well, building for the future and scale it further, so that we are in the mid-sector category by 2030. That's the vision which we're working on in the bank. As I was talking to someone in the morning that -- we were chosen by one of the most eminent duties as the best small bank in the country, the Mint award which we got, which is one of the best awards in the country.

Best ball back in the country.

And when I address my team, I said this is not the vision. We have a small vision, which has changed the small to mid-sector by 2030. And that's what we are working on. But obviously, there are steps we have built because building a bank cannot be overnight. We are rebooting the bank. So we are changing almost everything the way the bank is being run today and for the future. So while we have every quarter, we have analyst call and we have to get a listed bank, and we have to continue to drive results and which we are growing 30% to 50% faster than the system in terms of balance sheet as well as reasonable profits. But that's just a one-day quarter-end discussion. But the bigger vision, which is in the bank constantly is what we want to achieve by 2030 and what's beyond that. And the vision is that we want to build a universal bank. We have various licenses in India, but we have the license of a universal bank license, which means that we can do everything what HDFC, ICICI and some of the other larger banks can do in India, and we must do that. So we said that there are 4 building blocks to build the bank. Number one, we must have the right governance, board and the right kind of processes in the bank. So that's something which you worked on. Of course, Sumit works very closely with us and has been working on that front. And I must say that we are one of the best boards in the country, though we are a small bank. The second was how do we build a great leadership team because ultimately, what matters in the service industry is people. And we have concluded our inter senior management plus one level higher, which is the best, which is one of the best in the country, and I kind of on the lighter side said that if there was any kind of a ratio because we all talk about the financial ratios, if there's any ratio where the senior management caution divided with the business, we will be the best in the world, okay? And that's the leverage, the leadership leverage, which we have built for the future because that's very critical when you look at because what management schools don't teach us how to build scale, that comes through experience. And we have built a team, whether it's in wholesale, SME, retail, gold, everywhere and the meta assurance functions, the other support functions. -- everybody has come to us from organizations like HDFC, ICICI, Axis, and these kind of organizations. So it's a very, very good leadership team, which you have built, aspiring to build for the future. The third big element and it is very, very big for us because we are rebooting the bank is on the technology front because future banking will be about technology, already it is. And given where we are -- we -- I mean, simplest way to put it because Time is shorts, we'll have nothing in the bank in terms of technology, what was 3 to 4 years back. So our intel ecosystem, we are going at GL, the entire system with ServiceNow Intel platform, I don't want to get into all the details, but the intel service technology infrastructure will be in line with the best in the industry and probably a little better because some of the larger banks have gone through these phases. When you take the latest also, you do customization because you have a large business to run and you make the new system look like old. We don't have that legacy. So we can sort of create the future bank with the latest on the technology front. The fourth part, of course, is very, very important in India today because India is growing first is compliance and execution and be on the right side of the regulator. And I keep saying to everybody on the team that our regulators calls come like us to stand on the bench in the schools, you have to stand up and respond and be very sure that what we are talking is not just lip service, but do it down the line and ensure that we execute because ultimately, perception is reality. And with regulators, it's just not doing is enough. We have to communicate what we are doing constantly. So I myself said, to my compliant said that anything to do with regulators, I should be the first person I'll respond to the regulator directly. And that gives a lot of confidence and comfort in terms of how to take the bank forward. I think these are the 4 things. execution, of course, is key because ultimately acquisition has got in banking. And India, that way the growth is happening on the GDP side, am talked about 10% to 12% nominal or maybe more my belief is it can be higher than that and give a multiplier to that in terms of credit growth. And if you take all the banks together between public sector and private sector. I think the growth for the banks will -- the opportunity will be there for all the banks going ahead. And question is everything starts with the 0. So we are small today, which is fine. But what separate sources we can aspire to become much larger because when banks like HDFC or some of the other banks started, they all started with 0. I said that don't worry about where we start. But where we want to go is something which we have to and that management is got motivated and they are driving big. So that's broadly where the CSB Bank today is. We are growing -- and most of our financial ratios, as was shown there in terms of NIM, in terms of ROA, ROE, whichever credit cost, as explained some of day is actually negative. So given all this perspective, I think we are on the right track. And our vision is very clearly focused on SBS 2030 as we call it, every employing CSB is tied up with this with this what called SBS 2030 -- sustained scale 2030 is what our vision is, quarters will come on quarterly go, but SBS 2030 will remain. Thank you very much...

You can see why we are excited about CSB Bank. Pralay runs at with Paresh full support from Pralay. No question there. Just making sure we answer this one Yes. Go ahead.

Prem, you've mentioned the tremendous growth of -- sorry, my name is Edward Martin, and I'm a shareholder. You mentioned the tremendous growth of the Indian economy. Have you considered whether Fairfax companies like Blackberry and Tools and some of the other, how could -- how are they positioning itself to take advantage of this Indian economic growth?

You didn't purposely use Blackberry did you Yes, it's -- you wouldn't say anything to that. How would you we -- India is growing significantly, right? What you need is honest people to run a company that to build it. I keep saying that because that's how we -- so when you look at an economy and I saw that in Greece, once you get business-friendly policies, it's unbelievable what happens, Canada was built on business-friendly policies. -- less so today. I hope that will change. But business friendly, look at the history of Canada, it's all business friendly, all sorts of entrepreneurs built the country. The United States is very much like that. And a country like Greece -- it was almost Commoners. The business-friendly guy came in about 5 years ago, majority government in Europe, very few people get a majority government, got a majority government. And then this year, you got another majority. Second, it gets another one and it will be like India, totally changed. Right now, it's a very entrepreneurial, the best country to invest in Europe. But and in India is the same, Mr. Modi, I mean imagine changing $1.2 billion populations mindset from socialism being given handouts. And you couldn't mention-- I was reading stuff about the 1950s and '60s. You couldn't mention business. actually, when we all grew up, now I came to Canada never having bought a stock, not knowing anything about business. And it would be the same. No indication of -- we never own stock. We never knew anyone who own stock. That's how it was, the 51 years ago. So this has been changed. One man is not married, as you know. It's got like -- 18 out of the 24 hours is focused on India. I happen to know and unbelievable instinct for the country in terms of what's good for the country, what's good, very business-oriented. And that's what you're participating in India. And we don't try to make it too technical. We're looking for good people. We want to build a company and we've had good track record. Not that they're going to do something in the future. They had to have done something in the past. And guys like Hari and all of those guys are examples of that. So thank you for that question. And Jeff, any more questions that you have.

Yes, we have a couple of more about Sanmar. The questioner just notes that 2023 was a difficult year for Sanmar. And is asking if that is just a cyclical decline? Or is there something secular going on?

That's a good question. And Vijay is right here, Vijay is their family has been in excess of 50 years in Southern India in the PVC business and in chemicals, done a fantastic job. Mr. Deepak Parekh said, their family has the highest integrity when we first met them. It's been a good -- a very good investment for us. And Vijay runs it now, Vijay your perspective.

Thank you for the question. And as Prem and Chandran have described in the annual report, it was 23 was a very, very tough year. Multiple challenges. PVC pricing, as was described, primarily because of the lower demand in China and excess sales from China outside both in our 2 large markets of Egypt and in India. And the second big reason was significant currency challenges, mainly in Egypt. As you know, Egypt faced multiple challenges with foreign exchange availability, forcing the company, our large subsidiary there to export at much, much lower prices rather than sell in the higher-priced domestic Egyptian market. However, there were staying with 23, there were lots of positives as well, which were not reflected in the numbers. First, we initiated very significant production improvement measures, primarily in Egypt. In spite of all the difficult challenges that we had financially, very happy to report that our Egyptian plant, which did have a few teething troubles after their commissioning of the new project in 2020 or so. We worked with the consultant for over 1.5 years, and we reached 100% operating rate over the last few months, which is a very, very significant achievement. Second, PVC prices themselves have bottomed out globally. I think China, the economy, while we're not betting on a rapid improvement, I think, has also bottomed out demand is slowly picking up. We've also initiated significant trade defense measures both in India and in Egypt against this excessive predatory dumping that we've seen. And most importantly, we are refocusing the company quite a bit on our specialty business. We've commissioned almost $150 million worth of projects in the last few months, both in specialty PVC. And in our newest baby, which is specialty custom manufacturing. The specialty PVC business is a very small business, but it's something where Sanmar is a market leader in India with almost with the capacity expansion north of 60% market share. There's no other second producer, and so there's significant opportunity to expand in the years ahead. And as I said, our youngest child, which is the custom manufacturing business, and I think Prem and Chandran spoke about the China plus 1 manufacturing strategy. We just commissioned a $100 million greenfield plant for putting up a custom manufacturing operation, where we cater to innovator chemical companies in Europe and the U.S. who want to outsource manufacturing, all these years, they had primarily only one place to go to, which is China. Now they've got a second location to look to, which is India. And there are not too many people in India who can service these large customers, keeping their technology proprietary technology intact, giving them the ESG that they see, the governance that they see. I think that's something that Salman has focused over the last 10 years. I would say without a doubt that we are in the top 1% of chemical companies as far as ESG goes. And that stood us in good stead in making these big wins. We did receive our first active ingredient win last year for this fledging business that was a very big win for us. And I think all of this, while 2024 is still, I think, turning upwards, I think all of this should reflect in a much better position company in 2025 and beyond. As we refocus on our 3 businesses, -- just staying with PVC for a second, while it does look commodity and does look cyclical, the Indian PVC market is 4 million tonnes for a population, which is slightly larger than China. And China's population or similar population has a PVC market of 20 million tonnes. That's 5x. And there are nobody in India who is really focusing on taking advantage of this huge growth that we're seeing. Specialty PVC, as I said, which is our second platform, where again, market leaders by a long way, there's nobody else. And the third, which is our smallest segment, which is our specialty chemical business, customer manufacturing business. Again, we see huge headway in the next huge runway in the next many years to come. So I think all around, while we've had a very, very tough year. I think we've really taken a lot of significant steps in the last, I would say, 12, 15 months to position the company much better for the next decade, I would say. Thank you.

Just to highlight what he said. PVC consumption in India, 4 million tonnes in China, same population, 20 million tonnes. You were talking about manufacturing one of you. That's the opportunity. And they've been doing PVC for 50 years. They've got all the facilities, all the underlying infrastructure for PVC, which is a phenomenon. So thank you for that question. Jeff, any other questions from you?

There's still a couple more, Prem one about what are the prospects for a turnaround at NCML. Excuse me.

NCML is one of the companies that we had a tough time with and it's the silos, warehousing. And fortunately, Sanjay Gupta has joined us about 18 months ago now. And we've been talking to them for some time. Chandran and Sumit selected them. I met them before. And changes in the air. And so the turnaround is taking place. warehousing and all is very big business in India, but a lot of it is government. And so he's moving it around to make sure it works. So stay tuned for another year or 2 right at Give them a nice run of apply it there. And Jeff, is there one more question -- is there a question there? Yes. Okay. Go right ahead.

It's Steve Walden. Dave I was really intrigued by your comment about Singapore. It was really clever. I was hoping you could comment on the India stack, how it affects the competitive landscape in finance now going forward and what it might do to margins in existing companies in what it might offer to upstarts.

That's what he's talking about India stack. He's talking about the fact that in India, there's about 1 billion people that have identification either through a thumbprint or through your eyes, which is like phenomenal. No other country, I think, in the world has that. And you're seeing that in speeds in terms of using your telephone for payments, ordinary people, anyone stores are using the guy who had the store uses that. Intriguingly enough, it's called UPI, I think, and one of our guys, Sanjay, is in the President of Digital technology for us. And UPI is prevalent in India. And so that now you can -- an Indian business or individual going -- traveling into France can use that. So it's a phenomenal like a French bank can use it. I know in Greece, our bank, Eurobank, and some of you will be able to meet the guy who runs at Fokion. And Greek, Greek business guy or a Greek traveler coming to -- or sorry, an Indian businessman or an Indian traveler going to Greece can automatically take money from this account. -- like a bank account in India, which is unheard of. So there's lots of opportunity, lots of opportunity in terms of how you slice and dice the insurance business, how do you find the best risk. Still early days, I'd say, Chandran, anyone you want to say anything, Sumit nothing there. You want to add anything? Yes. It's still early days. Huge opportunity, but they're exporting it. UPI is owned by the government, and they're expanding it. And we're trying to use it as much as we can. I'm sure Pralay you're using it, the UPI, all of our companies, Nirmal will be using that. We're trying to see how we could -- a very good point you did make. Thank you for that. Jeff...

Two more question about Jaynix and Maxop, -- and the questioner just says the 2 most recent purchases by Fairfax India where MaxOp and Jaynix, while small, currently, they're growing quite rapidly. Could you talk to the long-term prospects for both of those companies.

It's sort of what we talked about in terms of manufacturing, like huge opportunity, not only in India. So the Jaynix is building a new plant, as we talked about, but also exporting because our Indian costs are much, much less, very low. So you can sell -- once the quality improves, the quality is really good in both of them. And you want to add, Chandran?

Not really, Jeff. Both the companies have all kinds of opportunity that they're following up like every day, every week, every month. And capacity is what is limiting them and they're building capacity as we speak. Growth potential is unlimited. Wouldn't you say Sumit?

Yes. Tremendous growth potential in India and also elsewhere, and they're going from a very small base, very small...

These companies are also focused a little bit on exports because that's where the better margins are, and this diversification away from China is really helping them.

And run by founders who have a big equity interest in that company. We didn't buy 100%. So they have a big equity interest. And so we're very excited about the possibilities. Jeff, any more questions?

So one last question. You alluded to share repurchases earlier as being the best way to deploy capital. The questioner asks, would you consider issuing another or issuing another significant issuer bid to close the gap between share price and NAV.

Yes. So we did that when the stock price was very low, what they're saying is buying 10% of the stock, making a significant issue a bit. as the stock has gone up to $15, we're just buying everything in the marketplace. And that's how we're thinking the best thing we can do for our shareholders as opposed to pay a premium. And -- but this is all changes. We look at it all the time. And we're -- we've done significant issuer bids, SIBs, they call it, and we did it in Fairfax, we've done it in Fairfax India and look at doing it again, but no plans at the moment. This has been a really good session. This is what shareholders meetings are all about, right? So you asked your question and we try to answer it to the best of our knowledge. And we've got you because of your questions, you heard so many of our presidents come out and talk about it. And every one of them was very impressive. No question about it. And so that's what you're participating in the growth of all of these companies that Chandran and team have assembled over 9 years and the opportunity and in the context of India, where the economy is growing. So thank you all for attending. We have some refreshments, and we look forward to continuing this outside. So thank you very much.