Title: Fairfax India: discount on discount? Show: Compounding Quality (Substack, paid post — compoundingquality.net) Guest: Pieter Slegers (signed "Pieter"; byline "Compounding Quality") Date: 2026-08-27 URL: https://www.compoundingquality.net/p/fairfax-india-discount-on-discount Length: written post — no timestamps Note: Paid-subscriber post captured via Stephen's logged-in session. Body text verbatim; UI chrome removed. Charts and shareholder-letter exhibits noted inline as [Image — ...]; the two exhibits that carry figures not stated in the prose — the Anchorage/BIAL ownership slide and Fairfax India's "Recent Global Airport Transactions" peer table — are transcribed below as [Table image — ...] blocks. The commentator "Brown" cited near the end is quoted from a post dated 17 June 2026; the post does not reproduce the text of that quote, only a screenshot, and it is not transcribed here.
Hi Partner
As you might know, we recently added Fairfax Financial ($FFH) to Our Portfolio.
One of the biggest reasons we bought it?
It's an easy way to invest in one of the world's most attractive growth markets: India.
Fairfax's investment portfolio is worth roughly $75 billion, with $4.3 billion already invested in India.
In other words, about 5.7% of its portfolio is exposed to the country.
We believe this percentage will increase significantly going forward.
As India becomes more important to Fairfax, it's worth taking a closer look at one of its key investments there: Fairfax India.
[Image — Fairfax's Investment Portfolio in India]
1. What is Fairfax India?
Fairfax India is a holding company.
As you might have guessed, it invests in India.
It manages an investment portfolio worth $4 billion. Around 84% of the portfolio is invested in infrastructure and financial services.
The crown jewel of their portfolio? Bangalore International Airport Limited (BIAL).
It accounts for 55% of Fairfax India's investment portfolio.
Bangalore is often called the "Silicon Valley of India."
Many of India's most promising startups are based there. Nearly every major U.S. tech company also has an engineering or R&D hub in the city.
A fun fact? Around one in four iPhones is now manufactured in Bangalore.
These trends benefit the city's airport.
Over the past year, passenger traffic increased 8% to 43.8 million passengers.
Management expects that growth to continue. Annual passengers should reach 80 million by 2029.
[Image — Prem Watsa walking next to Modi in the "Terminal in a Garden" at BIAL]
Some notes on India
Unless you have been living under a rock, India's bright future is no secret.
India is now the country with the world's largest population. The population equals roughly 1.5 billion people.
Nearly 1 in 5 people is Indian!
On top of that, India's population is still young, with a median age of just 29.2 years.
In other words, the country has a massive, young workforce that is well positioned to drive economic growth.
We are certainly no macro experts, but there is a saying you hear time and again:
"India is today where China was two decades ago."
[Image — Source: Worldometer]
In his 2025 shareholder letter, Prem Watsa also shares some interesting statistics on India's progress:
[Image — Source: Fairfax 2025 Shareholder Letter]
Again, we are no macro-investors.
But you don't have to be a macro-investor to see India's potential.
Fairfax India (and Fairfax itself) is a good way to gain exposure to this tailwind.
The link with Fairfax (what we own)
As you can see below, Fairfax owns 43% of Fairfax India:
[Image — 2025 Fairfax Shareholder Letter]
More interesting than its stake in Fairfax India, are the fees Fairfax receives from Fairfax India.
Over the past 11 years, Fairfax received $572 million in fees from Fairfax India.
It's split up into two types of fees:
Investment and Advisory Fee: Each year, Fairfax receives a management fee of 1.5% of Fairfax India's portfolio value. For the portion held in cash, the fee is lower at 0.5%.
Performance Fee: Fairfax also receives 20% of any increase in Book Value Per Share (BVPS) above a 15% hurdle over a three-year period. This is equivalent to a ~4.8% annualized growth hurdle.
If you add both fees up, Fairfax historically received about 1.8% annually of Fairfax's India's investment portfolio (including cash).
The reasoning behind these fees?
Hamblin Watsa Investment Counsel Ltd. plays an important role in the investment research behind Fairfax India's investments.
This company is a wholly owned subsidiary of Fairfax (the company we own). It also makes the investment decisions for Fairfax.
Prem Watsa believes it does not make sense to duplicate expenses by creating a separate investment advisory firm within Fairfax India.
Therefore, Hamblin Watsa Investment Counsel Ltd. also manages Fairfax India's investments.
In return for these services, Fairfax receives fees from Fairfax India.
2. Management
The key man at Fairfax India? Benjamin Watsa.
He is the son of Prem Watsa.
Benjamin Watsa serves as Chairman and writes the annual shareholder letters.
You don't need to dig deep into the financials to see he has his father's talent for capital allocation.
In true Henry Singleton style (and much like Fairfax does), Fairfax India has issued shares at high valuations to fund investments.
At lower valuations, they buy back their own shares.
Just look at the two charts below.
At the peak share price in 2018, management saw the opportunity to issue new shares.
Afterwards, when the share price dropped, management started repurchasing shares for cancellation.
It all sounds obvious, but we are aware of very few companies that actually do this.
Fairfax also does the same.
TerraVest is another company that comes to mind that is following a similar strategy.
[Image — shares outstanding, Source: Own Research Based on the Annual Reports]
[Image — share price, Source: Fiscal.ai]
If something would ever happen to Prem Watsa, Benjamin Watsa will be his successor.
It's good seeing he has the same capital allocation skills as his father.
3. Financials
For a holding like Fairfax India, I think the two most important financial metrics are:
How much has intrinsic value grown in the past?
Did the company grow prudently?
1. How much has intrinsic value grown in the past?
The best metric to track intrinsic value growth at Fairfax India? Book-Value-per-Share (BVPS).
BVPS grew from $9.35 in 2015 to $22.94 in 2025.
That's a CAGR of 10.3%.
It's important to know that Book-Value-per-Share (BVPS) understates true value creation.
In other words, intrinsic value has grown at a much higher rate than 10.3%.
You'll read more about this in a minute.
2. Did the company grow prudently?
You don't want a holding that uses excessive leverage to fund its investments.
Instead, you want prudent financing.
With a debt/equity ratio below 20%, Fairfax India is conservatively financed.
4. Valuation
Accounting creates hidden value
Before we dive into valuation, let's start with a quick accounting lesson.
More specifically, let's take a look at how equity investments are valued.
Public investments are valued mark-to-market. This means their value on Fairfax India's balance sheet changes with the stock price. If a stock rises 20%, its carrying value increases by 20%. If it falls 20%, its carrying value decreases by 20%. In other words, these investments are always recorded at their current market value.
Private investments are not valued using a stock price because they are not publicly traded. Instead, Fairfax India estimates their fair value based on management's estimates.
These two accounting rules create real "hidden value".
Why? Let's take a look at Fairfax India's return on its equity investments.
Important: we are now looking at unrealized investment returns. These are investments in which management hasn't sold its stake.
The unrealized returns on listed companies (which are valued mark-to-market) are 19% annually.
These returns are very attractive. It speaks volumes about management's capital allocation skills.
Now compare this to private investments, which have 'only' generated annual returns of 8%.
Same management team…
And yet they generate a 19% return on public investments and only a 8% on private investments?
Do you really believe that the same management team is more than half as bad at investing in private companies than they are in public companies?
Let me answer it for you: they aren't.
They also share a number called "return on monetized investments".
"Return on monetized investments" refers to investments from which Fairfax India has actually realized cash by selling part or all of its stake.
These are realized returns.
The return on all their monetized investments equals 19%.
See that these numbers don't add up?
67% of Fairfax India's investments are not subject to mark-to-market valuations. These are private investments. Their carrying value reflects management's estimate.
Unrealized returns on private investments are 8%.
Realized returns are 19%.
The explanation is that management is very conservative in how it values private investments.
They intentionally undervalue their private investments, which is why unrealized returns on private investments are only 8%.
But when they sell, or when the unrealized return becomes realized, the asset's true intrinsic value shows, not management's conservative estimate.
Hence, realized returns are much higher (19%).
Put simply, the accounting returns lag economic returns. And that creates "hidden value".
A specific example
We just covered a lot of numbers!
If you are a bit lost, this specific example will clear things up for you.
One good example of how they undervalue their private investments is Bangalore International Airport Limited, the crown jewel of the portfolio.
Today, BIAL is valued in the books at roughly $2.9 billion (2,187 / 74%).
[Image — 2025 Fairfax India Shareholder Letter]
The real question obviously is: Is this cheap?
In 2019, Fairfax India's management valued BIAL at roughly $2.6 billion (1,429 / 54%).
[Image — 2019 Fairfax India Shareholder Letter]
In other words, management's estimate for the intrinsic value grew at roughly 1.8% annually since 2019 from $2.6 billion to $2.9 billion.
Revenue growth during that same period? 21% per year!
That's a good example of how they undervalue private investments.
Another way to look at it is a comparison with peers:
[Table image — "Recent Global Airport Transactions" (Enterprise Value $bn / EV per EBITDA / Est. Annual Passengers, millions), from the Fairfax India shareholder-letter deck: Sydney (Australia) 24.8 / 25x / 44 Brussels (Belgium) 10.7 / 29x / 24 Copenhagen (Denmark) 10.0 / 26x / 30 Budapest (Hungary) 4.6 / 15x / 15 Edinburgh (Scotland) 4.5 / 17x / 14 Aberdeen, Glasgow and Southampton (UK) 2.2 / 20x / 11 Queensland (Australia) 2.1 / 24x / 8 Haikou Meilan (China) 1.1 / 13x / 27 Average — 21x]
Despite lower growth potential, all peers are trading at significantly higher valuation levels.
Trust me, I live in Belgium.
The valuation of Brussels Airport? 29x EV/EBITDA.
The valuation of BIAL in Fairfax India's books? 10x EBITDA and 13.8x Free Cash Flow.
BIAL deserves to trade at a higher valuation level than Brussels Airport.
You don't believe me?
Just look at these visuals comparing the outdated Brussels Airport to BIAL.
Not to mention BIAL's 21% (!) revenue CAGR over the past 6 years.
The outdated Brussels Airport:
[Image — Brussels Airport terminal]
And the "Terminal in a Garden" at BIAL:
[Image — BIAL Terminal 2, "Terminal in a Garden"]
The closest public peer for BIAL is GMR Airports. They own and operate several Indian Airports.
Interestingly, the company trades at an EV/Sales multiple of 10.1x. That's higher than BIAL's EV/EBITDA multiple.
Just read that again!
[Image — Source: Fiscal.ai]
That's the catalyst.
BIAL could IPO over the next few years. This could unlock a lot of shareholder value.
Because if BIAL becomes public, the company will be valued mark-to-market in Fairfax India's books.
As a result, Fairfax India's book value will rise a lot.
In the latest annual report, management hinted again that they are looking at an IPO:
"Fairfax India intends to complete an IPO of Anchorage, and we are still in the process of obtaining regulatory approvals. If Anchorage were currently listed, the proportion of Fairfax India's investments subject to public mark-to-market valuations would increase from 31% to 85% of the overall portfolio." - 2025 Shareholder Letter
(Anchorage is a 100% owned subsidiary of Fairfax India that is making the infrastructure investments like BIAL)
[Table image — "Anchorage transaction and prospective IPO" slide (Fairfax India shareholder-letter deck): Ownership chart: Fairfax India owns 88.5% of Anchorage and 30.4% of BIAL directly; OMERS owns 11.5% of Anchorage; Anchorage owns 43.6% of BIAL. "FIH intends to complete IPO" of Anchorage. Bullets: "Fairfax India created Anchorage Infrastructure Investment Holdings ('Anchorage') in 2019 to be its flagship vehicle for airport and other infrastructure investments in India." "In 2021 Fairfax India transferred a 43.6% interest in BIAL to Anchorage and sold an 11.5% interest in Anchorage to OMERS for $129 million, implying an equity value of $2.6 billion for 100% of BIAL." "Fairfax India is in the process of obtaining regulatory approvals to complete an IPO of Anchorage."]
The speculation is that if BIAL goes public, the valuation would be at least $4 billion, not the current carrying value of $2.9 billion.
Let's be conservative and use that $4 billion.
If this happens, Fairfax India's book value rises from ~$2.8 billion to nearly ~$3.6 billion.
This means that the current price-to-book (P/B) is closer to ~0.7x, not ~0.9x.
"A discount on a discount"
Fairfax India's management describes the current valuation as "a discount on a discount."
What they mean is that the company's investments, like BIAL, are already carried on the books at values below their estimated intrinsic value.
On top of that, the market is valuing Fairfax India at less than its book value. The current P/B multiple is only ~0.9x.
Book value per share stands at $22.94, a figure that already understates the company's intrinsic value. Yet the shares trade at around $18.
That's the "discount on a discount."
"While the BVPS of Fairfax India is $22.94, we believe that the long-term underlying intrinsic value is much higher. As Fairfax India's shares continue to trade at a discount to book value, we have taken the opportunity to buy back, since inception, 23.2 million shares for $303.9 million or an average price of $13.09 per share, including the 0.6 million shares we bought in 2025 for $10.4 million at an average price of $16.81 per share. In total, we have bought back approximately 14.8% of total shares issued since inception." - 2025 Shareholder Letter
To wrap up the valuation discussion, here is what Brown (=an expert on Fairfax and Fairfax India) has to say about Fairfax India's ($FIH.U) valuation:
[Image — Source: Brown (post dates from 17 June 2026)]
For Fairfax shareholders, hidden value in Fairfax India inherently means hidden value in Fairfax as well.
Fairfax also does the same as Fairfax India: deliberately undervaluing private investments.
A recent example? Poseidon.
Poseidon is a private company in which Fairfax owned a ~45% stake. On its balance sheet, that stake was carried at just $15.5 per share.
[Image — Fairfax 2025 Shareholder Letter]
In late May, Fairfax sold a ~23% stake for $28.30 per share, more than 85% above its carrying value.
The sale generated $1.91 billion in proceeds and a pretax gain of $837 million.
In other words, it was a substantial position carried at a 85% discount to intrinsic value.
Once again, accounting returns lag economic returns at Fairfax and Fairfax India.
It's probably one of the main reasons why Fairfax is so cheap. The company currently trades at a book value of ~1.3x.
On first sight, that looks expensive. But dig a bit deeper, like we just did with Poseidon, and you get the idea that book value underestimates intrinsic value.
5. Conclusion
Fairfax India offers a very attractive investment opportunity.
It operates in a rapidly growing end market
It's run by very capable and shareholder-friendly capital allocators (just look at how they manage Total Shares Outstanding)
It's invested in a gem (BIAL Airport)
It's significantly undervalued
Finally, there is a big catalyst likely to take place in the following years (the IPO of BIAL).
We are very happy to own them via Fairfax. And even better, we will receive big fees from Fairfax India.
Over the past 11 years, Fairfax received $572 million in fees from Fairfax India.
If Fairfax India didn't have to pay fees to Fairfax, we would probably buy them for the Tiny Titans Portfolio.
Interested in Tiny Titans and not a Partner yet?
It's currently not possible to join Tiny Titans (it's very exclusive). You can put yourself on the waiting list here: Waiting list Tiny Titans
To conclude, here's a great summary of Fairfax India:
[Image — summary of Fairfax India]
Everything In Life Compounds Pieter
Book Order your copy of The Art of Quality Investing here
Used sources Interactive Brokers: Portfolio data and executing all transactions Fiscal.ai: Financial data
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