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 onCONSOLIDATED BALANCE SHEETSas 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 onCONSOLIDATED 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 onCONSOLIDATED 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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