Fairfax Financial Holdings Ltd. booked a US$1.4-billion gain after a subsidiary in India, Go Digit General Insurance Ltd., launched a US$200-million share sale at a valuation well above Fairfax’s investment in the four-year-old company.
On Monday, Digit Insurance announced it was raising money by selling stock to a group of institutional investors that includes Faering Capital, Sequoia Capital India and IIFL Alternate Asset Managers. The latest financing values Digit Insurance at US$3.5-billion.
Toronto-based Fairfax owns 49 per cent of Digit Insurance’s parent company in India and has invested US$154-million in the business since it was founded in 2017. Fairfax currently values its stake in Digit Insurance at US$532-million.
When the US$200-million offering closes in the third quarter of 2021, Fairfax expects to record an unrealized gain of US$1.4-billion or US$47 per share on its holding, the Canadian company said in a press release on Monday.
Fairfax’s book value per share was $US497.23 when the company last reported its financial results, for the quarter ended March 31, 2021. The Toronto Stock Exchange-listed company’s market capitalization is $14-billion.
Fairfax is an insurance company and asset manager with extensive holdings in North America, Europe and India. Investors and analysts closely track the company’s book value per share, as the stock price tends to track the value of the company’s holdings.
On Monday, Fairfax said the book value of its stake in Digit Insurance could increase by an additional US$400-million if the government of India follows through on previously announced plans to increase foreign ownership limits on domestic insurance companies from 49 per cent to 74 per cent. Fairfax’s 49 per cent stake in Digit Insurance currently consists of both common stock and convertible preferred shares, and swapping the preferred shares for common stock would increase the Canadian company’s ownership.
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Andrew Willis