Prem Watsa's Fairfax India to buy stake in Sanmar Chem for $300 mn
09 Apr 2016
Fairfax India Holdings said on Friday it has agreed to acquire a minority stake in privately held Indian petrochemical company Sanmar Chemicals with a roughly $300 million investment.
The Sanmar investment is the latest in a string of bets Fairfax India and its sister concern Fairfax Financial Holdings Ltd have made in the country within the last year. The two entities are chaired by Canadian billionaire Prem Watsa.
Indian-born Watsa, whose main investment vehicle is Fairfax Financial Holdings, set up Fairfax India in 2014 to hone in on investments in the country, where he expects strong long-term growth driven by Prime Minister Narendra Modi's economic reform agenda.
"The economy in Canada is about $2 trillion with only 35 million people, while India by comparison with over 1.2 billion people has an economy the same size. It's an unbelievable opportunity," said Watsa in an interview.
The investment in Sanmar that will give Fairfax a 30-per cent equity stake is being made via a combination of equity and fixed income instruments.
Sanmar, a family-owned firm chaired by N Sankar, is one of India's largest producers of polyvinyl chloride (PVC). The firm, which has manufacturing facilities in India and Egypt, is also a manufacturer of other specialty chemicals.
Sanmar is also in the process of expanding its PVC capacity in Egypt from 200,000 tons a year to 400,000 tons a year. Once completed, Sanmar will have a total PVC capacity exceeding 700,000 tons a year, making it one of the largest PVC makers globally.
This investment, Watsa's latest bet in India, comes barely weeks after Fairfax agreed to buy a 33 per cent equity stake in Bangalore International Airport from GVK Power and Infrastructure Ltd for $321 million.
"We just bought a 33 per cent stake in the Bangalore airport, and we hope to add more over time, as that airport is going to expand," said Watsa. "The Indian economy is going to expand, it just stands to reason that as the economy expands there'll need to be more infrastructure investments."
In February, Fairfax bought a 45 per cent stake in ADI Finechem, a small Ahmedabad-based specialty chemical company, for $19 million. Last August, it acquired a majority stake in India's largest nongovernment grain-handling company, National Collateral Management Services Ltd, for $126 million.