Narendra Modi’s Bharatiya Janata Party, seen as pro-business, won a majority of 282 seats out of 543.AMIT DAVE/Reuters
Prem Watsa is bullish on India in the wake of a landslide electoral victory for Narendra Modi – so much so that the head of Fairfax Financial Holdings Ltd. plans to launch a publicly listed India fund.
On Friday, Mr. Modi and his right-leaning Bharatiya Janata Party won a resounding victory in India's five-week national elections on a campaign platform that promised economic growth and development after years of corruption scandals and slowing growth under the rival Indian National Congress party.
Not only was Congress routed in the worst defeat in its history – with fewer than 45 seats in the 543 seat lower house – but the BJP won a majority on its own, with 282 seats. This development puts to an end India's unstable era of coalition governments and ushers in the sort of stable, pro-business government that investors – both Indian and foreign – had hoped for, and which led to market gains in recent months.
Mr. Watsa, a well known value investor who has been active in India for about 15 years, said in an interview that the new Fairfax India fund would be infused with $300-million of the company's own money but that, for the first time, the company would also manage outside money – aiming for about $1-billion in assets under management. The fund, which is likely to launch in the next year, will invest in a broad cross section of Indian industries: public and private Indian companies, joint ventures with established Indian firms and India's woefully inadequate infrastructure sector.
"We see huge opportunity there," Mr. Watsa said, comparing India's current trajectory to the emergence of modern Singapore under Lee Kuan Yew. "Narendra Modi will have a transformational impact on India."
Fairfax already has people on the ground in India through its existing investments in ICICI Lombard, an insurer. Mr. Watsa's firm also has a 75-per-cent investment in Thomas Cook India, which recently acquired IKYA Human Capital Solutions – which employes more than 65,000 people – and Sterling Resorts, which made roughly $26-million in 2014. Fairfax has not yet decided which stock exchange the firm will list on.
Polls had widely predicted a BJP win for Mr. Modi, who becomes prime minister after a 12-year stint as the chief minister of the prosperous western state of Gujarat, with a population of more than 60 million. Still, few predicted that the party's competition would be so thoroughly demolished. As chief minister – a position roughly equal to a provincial premier – Mr. Modi streamlined government approvals and was widely praised by business leaders.
Although critics point to horrendous Hindu-Muslim violence on his watch in 2002, he has essentially been cleared of blame by the country's Supreme Court. Experts suggest the sheer scale of Mr. Modi's electoral victory made it clear that India had become fed up with corruption under the previous Congress government – after major scandals in the telecommunications and coal industries – as well as the policy paralysis that came as bureaucrats became afraid to approve projects for fear of getting arrested.
"This country has been ground to a halt with all sorts of corruption," Mr. Watsa said. "Slowly but steadily, you're going to see change. All you need is someone who has the guts to make the change. India's never had this."