Fairfax Looking unlisted companies to invest in

MUMBAI—Fairfax Financial Holdings Ltd., a $30 billion-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.

The investments in Indian companies, which will include both minority as well as controlling stakes, 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 Harsha Raghavan, who was appointed head of the unit by Fairfax’s India-born founder, Prem Watsa.

“We are free of any constraints around stage, capital structure, industry, etc. as long as the investment makes long-term business sense,” said Mr. Raghavan, the former head of private-equity firm Candover Investments PLC. “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.

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

“New entrants in India are trying to take [a] diversified approach to investing,” said Raja Parthasarathy, partner at IDFC Private Equity Co. Ltd. “A lot of them feel that the valuations have run up in India, so they have a ground-up approach, so that all the value is accrued by them, even though it takes time.”

Mr. Parthasarathy said incubation or platform deals happen in fragmented sectors, which offer robust growth potential in the long term. The financial services sector is one such area.

“They seem to have a lot more flexibility in investing, but when it comes to deals where specialization is needed or operational value has to be added, they will face competition from private equity firms that have entered the market earlier,” said Avinash Gupta, financial advisory head at consulting and audit firm DeloitteTouche Tohmatsu India Pvt. Ltd.

“Fairfax got its name due to its philosophy of doing fair and friendly acquisitions. We decided to use the name Fairbridge to reflect this philosophy as well as the need for long-term capital,” said Mr. Raghavan, who had helped Goldman Sachs PIA purchase low-cost cast metal parts maker Sigma Electric Manufacturing Corp. for $172 million.

Apart from the insurance and reinsurance businesses, Fairfax has interests in other North American companies. The Canadian company has invested in pulp and paper maker AbitibiBowater Inc., American bank Wells Fargo and Co. and coal miner International Coal Group Inc., among others.


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