Press Release Details

Fairfax India Holdings Corporation: Financial Results for the Year Ended December 31, 2021

02/10/2022

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 derived from financial statements prepared using the recognition and measurement requirements of International Financial Reporting Standards as issued by the International Accounting Standards Board ("IFRS"), except as otherwise noted, and are unaudited. This news release contains certain non-GAAP and other financial measures, including book value per share, book value per share prior to the performance fee and cash and marketable securities, that do not have a prescribed meaning under IFRS and may not be comparable to similar financial measures presented by other issuers. See "Glossary of non-GAAP and other financial measures" at the end of this news release for further details.)

TORONTO, Feb. 10, 2022 (GLOBE NEWSWIRE) -- Fairfax India Holdings Corporation (TSX: FIH.U) announces fiscal year 2021 net earnings of $494.5 million ($3.22 net earnings per diluted share), compared to fiscal year 2020 net loss of $41.5 million ($0.27 net loss per diluted share), reflecting increased net unrealized and realized gains on investments, partially offset by increased performance fees and provision for income taxes. The company's book value per share increased by 20.0% from $16.37 at December 31, 2020 to $19.65 at December 31, 2021, representing a compound annual growth rate of 10.3% (10.7% prior to the performance fee recorded in 2021) from the initial public offering price or $10.00 per share.

Highlights for 2021 (with comparisons to 2020 except as otherwise noted) included the following:

  • Net change in unrealized gains on investments of $438.9 million, principally from an increase in market prices of the company's investments in the public companies IIFL Finance ($190.0 million), Fairchem Organics ($96.3 million), IIFL Wealth ($66.6 million), IIFL Securities ($48.8 million), CSB Bank ($17.1 million), and 5paisa ($10.5 million), and an increase in the fair value of the company's investments in the private companies Sanmar ($88.8 million), NSE ($40.1 million), and Saurashtra ($15.0 million), partially offset by a decrease in the fair value of the company's investment in the private company NCML ($15.3 million). The net change in unrealized gains on investments also included reversals of unrealized gains on Privi Speciality ($105.1 million), Other Public Indian Investments ($30.3 million), and Fairchem Organics ($5.3 million) recorded in prior periods as a result of its sale.
  • Net realized gains on investments of $227.2 million primarily related to realized gains since inception on the sales of Privi Speciality ($132.3 million), Other Public Indian Investments ($58.9 million), and Fairchem Organics ($33.6 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, the company recorded a performance fee of $85.2 million for 2021 and at December 31, 2021 had accrued $84.7 million to the benefit of Fairfax Financial Holdings. The performance fee, if any, will only be finally determined on December 31, 2023 at the end of the three year measurement period.
  • On August 11, 2021 the company completed its substantial issuer bid, pursuant to which the company purchased for cancellation 7,046,979 subordinate voting shares for aggregate consideration of $105.0 million ($14.90 per subordinate voting share). In addition, the company continued to buy back shares under its normal course issuer bid and during 2021 purchased for cancellation 1,734,503 subordinate voting shares at a net cost of $21.9 million ($12.61 per subordinate voting share). Subsequent to December 31, 2021, the company purchased for cancellation 1,397,532 subordinate voting shares for a net cost of $18.0 million ($12.88 per subordinate voting share) under the terms of an automatic share purchase plan.
  • On September 16, 2021 the company completed the sale of approximately 11.5% of its interest in Anchorage for gross proceeds of 9.5 billion Indian rupees ($129.2 million). As part of the transaction, Fairfax India transferred 43.6% of its equity interest in BIAL such that it is held through Anchorage.
  • On November 30, 2021 the company completed the initial closing of its investment in Maxop Engineering Company Private Limited. In connection with initial closing, the company invested cash of $29.5 million (approximately 2.2 billion Indian rupees) for 51.0% equity interest in Maxop. The second transaction is expected to close in the second half of 2022, subject to customary closing conditions.
  • On December 17, 2021 the company completed a $175.0 million unsecured revolving credit facility ("Revolving Credit Facility") with a syndicate of lenders. The Revolving Credit Facility has a three-year term with an option to extend for an additional year and at December 31, 2021 it was undrawn.
  • At December 31, 2021 common shareholders' equity was $2,774.8 million, or book value per share of $19.65, compared to $2,446.9 million, or book value per share of $16.37, at December 31, 2020, an increase of 20.0% (an increase of 23.7% prior to the performance fee recorded in 2021), primarily related to net earnings and the impact of share purchases for cancellation in 2021, partially offset by unrealized foreign currency translation losses as a result of the weakening of the Indian rupee relative to the U.S. dollar.

Fairfax India is in strong financial health, with cash and marketable securities of approximately $299 million.

There were 141.4 million and 149.9 million weighted average common shares outstanding during the fourth quarters of 2021 and 2020 respectively. At December 31, 2021 there were 111,235,352 subordinate voting shares and 30,000,000 multiple voting shares outstanding.

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

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

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

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: the COVID-19 pandemic; oil price risk; geographic concentration of investments; foreign currency fluctuation; volatility of the Indian securities markets; investments may be made in foreign private businesses where information is unreliable or unavailable; valuation methodologies involve subjective judgments; financial market fluctuations; pace of completing investments; minority investments; reliance on key personnel and risks associated with the Investment Advisory Agreement; lawsuits; use of leverage; significant ownership by Fairfax may adversely affect the market price of the subordinate voting shares; weather risk; taxation risks; emerging markets; multilateral instrument; economic risk; and trading price of subordinate voting shares relative to book value per share risk. Additional risks and uncertainties are described in the company's annual information form dated March 5, 2021 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, 2021 and December 31, 2020
(unaudited - US$ thousands)

    December 31, 2021       December 31, 2020  
Assets              
Cash and cash equivalents     30,376         22,057  
Restricted cash             16,315  
Short term investments     6,151          
Bonds     214,468         35,873  
Common stocks     3,325,713         2,991,775  
Total cash and investments     3,576,708         3,066,020  
               
Interest and dividends receivable     5,339         1,911  
Income taxes refundable     1,056         2,803  
Other assets     1,243         2,264  
Total assets     3,584,346         3,072,998  
               
Liabilities              
Accounts payable and accrued liabilities     866         931  
Accrued interest expense     8,611          
Payable to related parties     95,002         14,428  
Deferred income taxes     80,648         63,477  
Borrowings     496,785         547,228  
Total liabilities     681,912         626,064  
               
Equity              
Common shareholders' equity     2,774,792         2,446,934  
Non-controlling interests     127,642          
Total equity     2,902,434         2,446,934  
      3,584,346         3,072,998  
               
               
Book value per share   $ 19.65       $ 16.37  

Information on
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
for the fourth quarters and years ended December 31, 2021 and 2020
(unaudited - US$ thousands except per share amounts)

  Fourth quarter   Year ended December 31,
    2021       2020     2021       2020  
Income              
Interest   2,372       865     5,500       6,013  
Dividends   4,438       1,022     27,468       16,449  
Net realized gains on investments   33,550       666     227,193       5,372  
Net change in unrealized gains (losses) on investments   (186,133 )     102,670     438,935       (26,618 )
Net foreign exchange gains (losses)   (112 )     4,998     (5,557 )     (14,188 )
    (145,885 )     110,221     693,539       (12,972 )
Expenses              
Investment and advisory fees   10,120       9,010     40,775       33,922  
Performance fee (recovery)   (32,976 )     5,143     85,193       (41,991 )
General and administration expenses   994       1,127     5,526       4,233  
Interest expense   6,381       7,272     28,515       29,844  
    (15,481 )     22,552     160,009       26,008  
               
Earnings (loss) before income taxes   (130,404 )     87,669     533,530       (38,980 )
Provision for (recovery of) income taxes   (12,679 )     5,372     39,030       2,496  
Net earnings (loss)   (117,725 )     82,297     494,500       (41,476 )
               
Attributable to:              
Shareholders of Fairfax India   (117,716 )     82,297     494,514       (41,476 )
Non-controlling interests   (9 )         (14 )      
    (117,725 )     82,297     494,500       (41,476 )
               
Net earnings (loss) per share $ (0.83 )   $ 0.55   $ 3.38     $ (0.27 )
Net earnings (loss) per diluted share $ (0.83 )   $ 0.55   $ 3.22     $ (0.27 )
Shares outstanding (weighted average)   141,398,140       149,904,457     146,379,346       151,001,909  
               

Information on
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
for the fourth quarters and years ended December 31, 2021 and 2020
(unaudited - US$ thousands)

  Fourth quarter   Year ended December 31,
  2021     2020   2021     2020  
               
Net earnings (loss) (117,725 )   82,297   494,500     (41,476 )
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 (2020 - nil) (1,125 )   24,185   (46,262 )   (60,606 )
Other comprehensive income (loss), net of income taxes (1,125 )   24,185   (46,262 )   (60,606 )
Comprehensive income (loss) (118,850 )   106,482   448,238     (102,082 )
               
Attributable to:              
Shareholders of Fairfax India (118,656 )   106,482   449,672     (102,082 )
Non-controlling interests (194 )     (1,434 )    
  (118,850 )   106,482   448,238     (102,082 )

GLOSSARY OF NON-GAAP AND OTHER FINANCIAL MEASURES

Management analyzes and assesses the financial position of the consolidated company in various ways. Certain of the measures included in this news release, which have been used consistently and disclosed regularly in the company's Annual Reports and interim financial reporting, do not have a prescribed meaning under IFRS and may not be comparable to similar measures presented by other companies. Those measures are described below.

Book value per share - The company considers book value per share a key performance measure in evaluating its objective of long term capital appreciation, while preserving capital. This measure is also closely monitored as it is used to calculate the performance fee, if any, to Fairfax Financial Holdings. This measure is calculated by the company as common shareholders' equity divided by the number of common shares outstanding.

Book value per share prior to the performance fee - This measure adjusts common shareholders' equity in the book value per share calculation to remove the performance fee accrued, and is a key performance measure.

Cash and marketable securities - This measure is calculated by the company as the sum of cash, cash equivalents, short term investments, Government of India bonds and Other Public Indian Investments. The company uses this measure to monitor short term liquidity risk.


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Source: Fairfax India Holdings Corporation