NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Friday, July 15, 2011

Fairfax Financial Holdings Ltd, a $30 billion (Rs.1.3 trillion)-plus diversified financial services company that owns stakes in Kraft Foods Inc. and Dell Inc., is entering India to invest in listed and unlisted Indian companies, a senior company official said.

It will buy both minority as well as controlling stakes.

Founded by Indian-born Prem Watsa , 61, popularly known as the Warren Buffett of Canada, Fairfax has appointed Harsha Raghavan, former India head of private equity firm Candover Investments Plc, as head of the unit.

The investments in Indian companies will be made through Fairbridge Capital Pvt. Ltd, an affiliate of Fairfax.

“We have the ability to invest long-term, patient capital into Indian businesses,” said Raghavan who, before moving to Candover, was executive director at the Principal Investment Area (PIA), the flagship $20 billion private equity fund sponsored by Goldman Sachs.

“We are free of any constraints around stage, capital structure, industry, etc. as long as the investment makes long-term business sense,” he said. “We strongly believe in the India growth story and particularly see opportunities in consumer products, consumer services and niche manufacturing sectors.”

Fairfax will also selectively incubate companies or build platform companies from scratch alongside partners-a strategy the firm follows in global markets. For instance, ICICI Lombard General Insurance Co. Ltd, the largest private sector general insurance company in India, is a 74:26 joint venture between ICICI Bank Ltd, India’s largest private lender by assets, and Fairfax.

Some private equity funds see merit in Fairfax’s strategy while others say there are challenges.