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Fairfax offers to buy 26% in IIFL for $255M; maiden move through India-focused fund

14 July, 2015

Canadian investment giant Fairfax has sought to hike its stake in Carlyle-backed financial services company IIFL Holdings Ltd (formerly India Infoline). Fairfax as a group already owns just under 9 per cent in IIFL and its newly created India-focused investment unit has now made a voluntary open offer to buy 26 per cent more for Rs 1,621 crore ($255.4 million), according to a stock market disclosure.

Fairfax India Holdings Corporation (Fairfax India), which raised $1.06 billion early this year through an IPO in Toronto Stock Exchange with anchor investment from Fairfax, has offered to buy up to 8,31,28,852 equity shares from existing shareholders of IIFL Holdings through its arm FIH Mauritius Investments at Rs 195 per share.

Parent firm Fairfax Financial already owns close to 9 per cent in addition to an economic interest of another 5.24 per cent stake through derivative instruments.

It also has a board seat in IIFL.

IIFL Holdings, a public-listed holding company for broking, investment banking among other financial services, is led by its executive chairman Nirmal Jain. Promoters held 29.77 per cent of the firm as of March 31, 2015.

It is not yet clear if Jain intends to bring Fairfax on board as a strategic partner without diluting his stake or this is an unsolicited bid by the Canadian investor.

Full acceptance in the tender offer could make Fairfax India the single largest shareholder of IIFL.

PE firm Carlyle is an existing institutional investor in IIFL and currently holds 9.27 per cent. Ashish Dhawan, founder of PE firm ChrysCapital, who is currently involved in philanthropic activities, is also a private investor in IIFL.

For Fairfax, this is second big move in India in recent times and the first under its newly created India-focused investment unit.

Fairfax as a group had acquired majority stake in Thomas Cook India three years ago and has been using it as a platform to buy other business services firms. Fairfax also holds 26 per cent stake in ICICI Lombard General Insurance Co.

In February this year, Fairfax India had raised $1.061 billion to invest in India.

ICICI Securities is managing the open offer by Fairfax.

IIFL scrip shot up to hit the upper circuit of the day in early morning trades but the share price later moderated and was trading at Rs 207 each, up 10.11 per cent on BSE in a flat Mumbai market on Tuesday at 2.44 PM.

Several stock brokerages had attracted PE funding during the last bull-run which ended in January 2008. Valuation of brokerages have crumbled since then.

Some like Carlyle went on to bet on the sector later (acquiring stake in India Infoline and Edelweiss) when the valuation was down.

The revival in the markets with the new government in place has led to analysts predicting the beginning of a new long-term bull-run. This has once again made brokerages attractive. The rise in the stock markets over the last one year has put a shine on the fortunes of brokerages as investors flocked back to trade in shares.

There is already a buzz in the industry with Warburg Pincus leading the race to acquire over 40 per cent stake held by emerging markets-focused investment firm The Rohatyn Group in Mumbai-based retail stock brokerage firm Sharekhan Ltd, as first reported by VCCircle.

In another development, SMC Global is in the queue to go public in a national bourse. It is already listed on Delhi Stock Exchange.


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Fairfax offers to buy 26% in IIFL for $255M; maiden move through India-focused fund

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