Press Release Details

Fairfax India Holdings Corporation: Financial Results for the Year Ended December 31, 2020

02/11/2021

NOT FOR DISTRIBUTION TO U.S. NEWS WIRE SERVICES OR DISSEMINATION IN THE UNITED STATES

( Note : All dollar amounts in this news release are expressed in U.S. dollars except as otherwise noted. The financial results are prepared using the recognition and measurement requirements of International Financial Reporting Standards, except as otherwise noted, and are unaudited.)

TORONTO, Feb. 11, 2021 (GLOBE NEWSWIRE) -- Fairfax India Holdings Corporation (TSX: FIH.U) announces fiscal year 2020 net loss of $41.5 million ($0.27 net loss per diluted share), compared to fiscal year 2019 net earnings of $516.3 million ($3.30 net earnings per diluted share), reflecting decreased net unrealized and realized gains on investments, partially offset by a performance fee recovery, decreased provision for income taxes and decreased interest expense. The company's book value per share decreased by 3.1% from $16.89 at December 31, 2019 to $16.37 at December 31, 2020, representing a compound annual growth rate of 8.7% (8.7% prior to the performance fee described below) from the initial public offering price of $10.00 per share.

Highlights for 2020 (with comparisons to 2019 except as otherwise noted) included the following:

  • Net change in unrealized losses on investments of $26.6 million, principally from a decrease in the fair value of the company's investments in the private companies Sanmar ($63.8 million) and NCML ($31.3 million) and a decrease in market prices of the company's investments in the public companies IIFL Finance ($30.3 million), IIFL Wealth ($20.1 million), and CSB Bank ($9.5 million), partially offset by an increase in market prices of the company's investments in the public companies Privi Speciality (formerly Fairchem Speciality) ($48.7 million), Fairchem Organics ($18.8 million), 5paisa ($9.9 million), and IIFL Securities ($7.8 million), and an increase in the fair value of the company's investments in the private companies Seven Islands ($16.6 million) and NSE ($16.5 million).
  • In accordance with the Investment Advisory Agreement, which provides for the payment of a performance fee of 20% of the increase in book value per share in excess of a hurdle rate of 5% per annum, a performance fee of $5.2 million was earned by Fairfax Financial Holdings for the period from January 1, 2018 to December 31, 2020. The performance fee will be paid during the first quarter of 2021 by the issuance of subordinate voting shares valued at $9.55 per share (the weighted average share trading price over the last 10 trading days of 2020).
  • At December 31, 2020 common shareholders' equity was $2,446.9 million, or book value per share of $16.37, compared to $2,577.9 million, or book value per share of $16.89, at December 31, 2019, a decrease of 3.1% (a decrease of 2.9% prior to accounting for the performance fee recorded in 2020), primarily related to a net loss during the year ended of 2020 and unrealized foreign currency translation losses as a result of the weakening of the Indian rupee relative to the U.S. dollar.

Fairfax India remains in strong financial health, with undeployed cash and marketable securities of approximately $191 million.

The company is continuing to buy back shares under its normal course issuer bid and during 2020 purchased for cancellation 3,160,910 subordinate voting shares at a net cost of $28.9 million ($9.14 per subordinate voting share).

There were 149.9 million and 152.6 million weighted average common shares outstanding during the fourth quarters of 2020 and 2019 respectively. At December 31, 2020 there were 119,470,571 subordinate voting shares and 30,000,000 multiple voting shares outstanding.

Unaudited consolidated balance sheets, earnings (loss) and comprehensive income (loss) information follow and form part of this news release.

In presenting the company's results in this news release, management has included book value per basic share. Book value per basic share is calculated by the company as common shareholders' equity divided by the number of common shares outstanding.

Fairfax India Holdings Corporation is an investment holding company whose objective is to achieve long term capital appreciation, while preserving capital, by investing in public and private equity securities and debt instruments in India and Indian businesses or other businesses with customers, suppliers or business primarily conducted in, or dependent on, India.

For further information, contact:                
John Varnell, Vice President, Corporate Affairs
(416) 367-4755

This press release may contain forward-looking statements within the meaning of applicable securities legislation. Forward-looking statements may relate to the company's or an Indian Investment's future outlook and anticipated events or results and may include statements regarding the financial position, business strategy, growth strategy, budgets, operations, financial results, taxes, dividends, plans and objectives of the company. Particularly, statements regarding future results, performance, achievements, prospects or opportunities of the company, an Indian Investment, or the Indian market are forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate” or “believes”, or variations of such words and phrases or state that certain actions, events or results “may”, “could”, “would”, “might”, “will” or “will be taken”, “occur” or “be achieved”. 

Forward-looking statements are based on our opinions and estimates as of the date of this press release, and they are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking statements, including but not limited to the following factors: taxation of the company, its shareholders and subsidiaries; risk of substantial loss of capital; geographic concentration of investments; risks associated with the global pandemic caused by COVID-19, and the related global reduction in commerce and substantial downturns in stock markets worldwide; financial market fluctuations; control or significant influence position risk; minority investments; risks upon dispositions of investments; bridge financings; reliance on key personnel and risks associated with the Investment Advisory Agreement; effect of fees; operating and financial risks of investments; valuation methodologies involve subjective judgments; lawsuits; foreign currency fluctuation; unknown merits and risks of future investments; illiquidity of investments; competitive market for investment opportunities; use of leverage; significant ownership by Fairfax may adversely affect the market price of the subordinate voting shares; trading price of subordinate voting shares relative to book value per share; emerging markets; volatility of the Indian securities markets; political, economic, social and other factors; natural disaster risks; sovereign debt risk; economic risk; weather risk, oil price risk and adverse consequences to the company’s business, investments and personnel resulting from or related to the COVID-19 pandemic. Additional risks and uncertainties are described in the company’s annual information form dated March 6, 2020 which is available on SEDAR at www.sedar.com and on the company’s website at www.fairfaxindia.ca . These factors and assumptions are not intended to represent a complete list of the factors and assumptions that could affect the company. These factors and assumptions, however, should be considered carefully.

Although the company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The company does not undertake to update any forward-looking statements contained herein, except as required by applicable securities laws.

Information on
CONSOLIDATED BALANCE SHEETS
as at December 31, 2020 and December 31, 2019
(unaudited - US$ thousands)

    December 31, 2020       December 31, 2019  
Assets              
Cash and cash equivalents   22,057          48,713     
Restricted cash   16,315          16,915     
Bonds   35,873          138,425     
Common stocks   2,991,775          3,032,907     
Total cash and investments   3,066,020          3,236,960     
               
Interest and dividends receivable   1,911          3,453     
Income taxes refundable   2,803          2,866     
Other assets   2,264          1,658     
Total assets   3,072,998          3,244,937     
               
Liabilities              
Accounts payable and accrued liabilities   931          1,174     
Payable to related parties   14,428          50,519     
Deferred income taxes   63,477          64,477     
Income taxes payable   —          3,688     
Borrowings   547,228          547,228     
Total liabilities   626,064          667,086     
               
Equity              
Common shareholders' equity   2,446,934          2,577,851     
    3,072,998          3,244,937     
               
               
Book value per basic share   $ 16.37          $ 16.89     

Information on
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
for the three and twelve months ended December 31, 2020 and 2019
(unaudited - US$ thousands except per share amounts)

  Fourth quarter   Year ended December 31,
  2020   2019   2020   2019
Income              
Interest 865      706        6,013        4,859     
Dividends 1,022      2,453        16,449        10,141     
Net realized gains on investments 666      139,216        5,372        181,123     
Net change in unrealized gains (losses) on investments 102,670      495,582        (26,618 )     530,372     
Net foreign exchange gains (losses) 4,998      (4,089 )     (14,188 )     (13,806 )  
  110,221      633,868        (12,972 )     712,689     
Expenses              
Investment and advisory fees 9,010      2,593        33,922        27,473     
Performance fee (recovery) 5,143      48,514        (41,991 )     48,514     
General and administration expenses 1,127      1,603        4,233        5,300     
Interest expense 7,272      9,489        29,844        38,781     
  22,552      62,199        26,008        120,068     
               
Earnings (loss) before income taxes 87,669      571,669        (38,980 )     592,621     
Provision for income taxes 5,372      36,445        2,496        76,283     
Net earnings (loss) 82,297      535,224        (41,476 )     516,338     
               
Net earnings (loss) per share $ 0.55      $ 3.51        $ (0.27 )     $ 3.38     
Net earnings (loss) per diluted share $ 0.55      $ 3.42        $ (0.27 )     $ 3.30     
Shares outstanding (weighted average) 149,904,457      152,631,481        151,001,909        152,654,875     
               

Information on
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
for the three and twelve months ended December 31, 2020 and 2019
(unaudited - US$ thousands)

  Fourth quarter   Year ended December 31,
  2020   2019   2020   2019
               
Net earnings (loss) 82,297      535,224        (41,476 )     516,338     
Other comprehensive income (loss), net of income taxes              
Item that may be subsequently reclassified to net earnings (loss)              
Unrealized foreign currency translation gains (losses), net of income taxes of nil (2019 - nil) 24,185      (22,138 )     (60,606 )     (53,445 )  
Other comprehensive income (loss), net of income taxes 24,185      (22,138 )     (60,606 )     (53,445 )  
Comprehensive income (loss) 106,482      513,086        (102,082 )     462,893