Fairfax India Holdings Corporation, a part of Canadian billionaire Prem Watsa’s Fairfax Holdings, is gearing up to increase its equity interest in the city-based Sanmar Chemicals Group to 43% from the existing 30%.
This follows the decision of Fairfax to reinvest a part of the money that it will get from the Sanmar Group towards the settlement of bonds that Mr. Wasta’s Indian subsidiary had subscribed to in early 2016.
“Fairfax India will invest approximately half the consideration into common shares of Sanmar, increasing Fairfax India’s equity interest in Sanmar to approximately 43%. The transaction is subject to customary closing condition and is expected to be completed in the first half of 2019,’’ Fairfax India said in a statement.
Fairfax’s investment into Sanmar happened in 2016. It comprised $300 million (₹19.9 billion) principal amount of bonds maturing on April 22, 2023 and common shares (representing a 30% equity interest).
Under the latest agreement between Fairfax India and Sanmar, the Chennai-based group will settle the bonds by first half of 2019. “The consideration is equal at the date of cancellation to the bonds’ principal amount plus an effective annual interest rate of 13%, which, at March 31, 2019, would be approximately $388 million (approximately ₹28.2 billion),” Fairfax India said.
Investment gain
Following this agreed transaction and positive operational developments at Sanmar, Fairfax India would post in the third quarter of 2018 investment gains to the tune of approximately $252 million (₹18.3 billion), comprising approximately $190 million (₹13.8 billion) from common shares and approximately $62 million (₹ 4.5 billion) from bonds, an increase in book value per share of almost $1.62.
Fairfax now plans to invest almost half of this in Sanmar’s common shares.
