Good morning.
Terrific to see a lot of you here. Very, very warm welcome. This is our ninth annual meeting for Fairfax India. Ninth annual meeting, and I'm Prem Watsa, Chairman of Fairfax and Chairman of Fairfax India. A warm welcome to all our shareholders. We've got our presidents of our companies here, of our investee companies, and employees in India, Mauritius, and Toronto. It's a pleasure to see all of those all of you here this morning. Like last year, we're also live streaming the AGM for those who were not able to travel to Toronto. Warm welcome to all of you at your homes or wherever you are watching this annual meeting. Like in previous shareholder meetings, we will quickly go through the formal meeting, give a short presentation with slides, and then we're really happy to answer any question that you have.
Chandran and I will do it, but I will get our presidents to answer any questions that might come up. We have microphones set up where you can come down, so one there and one there. We also have an online platform. We're fortunate with Jeff Stacey moderating all the questions. Where is Jeff Stacey? Right there? So Jeff is right there, moderating the questions received electronically. So let's go to the formal part of the meeting. So as I said, ladies and gentlemen, Prem Watsa, Chairman of Fairfax India, and I'll act as Chairman of the meeting. I also ask Jennifer Pankratz, the Corporate Secretary of Fairfax India, to act as Secretary of the meeting.
I shall also appoint Shirley Tom and Louise Waltenbury of Computershare Trust Company of Canada to act as scrutineers and to compute the votes of any polls taken at this meeting and to report their report thereon to me as Chairman. I can report that as a result of reviewing an affidavit of mailing and a preliminary report of the scrutineers, I'm satisfied that notice of the meeting has been duly given, a quorum is present, and that this meeting is therefore duly properly called and constituted. As I said, I want to move quickly through the formal business, announce that the minutes of the previous annual shareholders' meeting held on April 20th, 2023, are available for inspection upon request to Fairfax India's Corporate Secretary. As well, I now formally place before you the annual report of the company. That's the annual report which, all of you have seen.
It's right there. That's for 2023, which includes the company statements for fiscal years 2023 and 2022 and the report of the auditor PricewaterhouseCoopers on the 2020-2023 statements. In addition, I declare that the total number of votes attached to the shares represented at this meeting by proxy, which have been directed to be voted in favor of each matter to be considered at this meeting, is in each case not less than 95% of the votes that may be cast on such matters. Voting today will be conducted by electronic ballot for those attending virtually and by a show of hands for those attending in person. We'll ask that the ballot be opened to registered holders and appointed and appointed poll proxy holders.
The polls are now open on the platform, and at this point, all registered holders and proxy holders attending virtually will have properly logged in, will be able to see the screen, all motions to be presented and brought forth to the meeting. Following this presentation, Jennifer Pankratz will confirm for us when the polls are closed. Once the electronic balloting closes, your votes will be submitted. With your consent, I will now move directly to the election of directors. I now invite nominations for directors.
I am Amy Sherk, and I nominate as directors of the corporation for the ensuing year Christopher Hodgson, Sharmila Karve, Jason Kenney, Sumit Maheshwari, Bill McFarland, Satish Rai, Chandran Ratnaswami, Gopalakrishnan Soundarajan, Lauren Templeton, Ben Watsa, and Prem Watsa.
Thank you. Thank you very much, Amy. Fairfax India's bylaws require that nominations by directors by shareholders be received by the company at least 30 days in advance of the meeting in order to be valid. No nomination for directors other than those set forth in the Management Information Circular will receive prior to the deadline. The nominations are now closed. As the number of directors nominated is exactly the number to be elected, I confirm that those 11 nominees are proposed for election as directors of the company. Given the hybrid meeting and the fact that we will also conduct a virtual vote, we will have a vote on this together with the next resolution. I will now invite a resolution regarding the appointment of an auditor.
I move that PricewaterhouseCoopers LLP be appointed as auditor of the corporation to hold office until the next annual meeting.
Thank you, Jen.
I second the motion.
Thank you, Amy. For those attending in person, I would ask that you please vote by a show of hands. All in favor? Contrary? We will now take a brief pause for 60 seconds to allow registered holders and proxy holders to complete their electronic voting on the motions brought forth before this meeting. And, Jen will tell us when that 60 seconds is over. Take some water.
Mr. Chairman, the voting is now complete, and the polls are closed.
Thank you very much, Jen. I have been advised by the scrutineers that the proxies deposited for the meeting have now been voted. I can confirm that the nominated directors have been appointed as directors of the company to hold office until the next annual meeting. In addition, I confirm that PricewaterhouseCoopers has been appointed as auditor of the company to hold office until the next annual meeting. We will file a report on SEDAR setting out the voting results following the meeting. I propose now to terminate this meeting. After that, Chandran and I would like to talk to you about our operations, and then we will proceed with our Q&A. I now invite a motion for termination.
I move that this meeting be terminated.
Thank you.
I second the motion.
Thank you, Amy, and thank you, Jen. I declare the meeting terminated. So that's the formal meeting that we try to get done as soon as possible. Now, we have a presentation for you, but before we do that, I wanted to take the opportunity of highlighting the fact that this company began nine years ago. Prior to that, we had Thomas Cook and Quess, which were our investments in India. But with Mr. Modi coming in, for some of you new ones, you'll understand, with Mr. Modi coming in, we decided, reluctantly reluctantly at the time, that we'd start another company because the opportunity in India, we thought, was huge. And the fact is, it is huge. It's massive. And Chandran became CEO.
So I wanted to recognize that and just tell you that Chandran's been with Fairfax for 30 years, and our Indian operation from 1994 was led by Chandran. And I've known Chandran for 62 years. Now, you think about how many people do you know for 62 years, also telling you how old I am. But no, Chandran has done a fantastic job building a terrific company, and it's got a terrific base. And all that we thought about India has come to fruition and will come to fruition. So, I'm going to go through very quickly, and then Chandran will talk about the specific companies, and then we'll open it up for Q&A. Before we do that, after the presentation, I'll introduce Deepak Parekh. And he's been our director. He's an advisor. He's a fantastic guy.
He's going to give you his perspective on India. So with that, let me just go right here. So this is the book value per share that's grown 9.2% versus the Sensex. The index has grown 7.1%. That's from January 2015. India is at record levels. But that's the rate of return over the last nine years. And we've outperformed it, as you can see. Fairfax India's book value per share has grown at 14%+ in year one, 9.2, as I said. But look at the public Indian investments, 38.5% versus 22.4% for nine years. That's 22.4% compounded. And you can see the index, 18% and 7%. And that's in spite of a 25% basically drop in the exchange rate. The exchange rate went against us, as it tends to do in emerging markets.
to go on solid return on investments, this next slide is interesting because these are listed companies, compounded 22%, private companies, only 10%. And the point I want to make to you is we're very conservative on the private companies. For example, the Bangalore International Airport, as Chandran has said in his annual report and his statements, is valued at 9.5x free cash flow. That just Bangalore International Airport, by the way I hope Hari got enough copies of this, but this is an outstanding book that they have on the airport, the best airport in the world. I'm a little optimistic on that. But it is. You haven't seen all of you mostly are in North America, but you haven't seen an airport like this. It happens to be in India, in Bangalore. And it's a wonderful with lots of very good pictures.
But that whole airport is worth $2.5 billion, 100%. We own 64%. As Chandran will talk about it, the whole airport is worth $2.5 billion. Sydney sold some years back, Chandran, for about Sydney in Australia for $20 billion. Private equity bought it. This comp this airport is going from 25 million, second terminal adds another 25 million. It's in progress. And then a third one will never take it to 75 million. And then another terminal might be needed to take it through 90 million. Huge growth opportunity, wonderful, wonderful asset. It's really the crown jewel of our company. But that's shown there. It's only 10% because the valuation of $2.5 billion we think is not excessive, very conservative. Partial sales, these are companies that we own, but we haven't sold the whole position. We've sold some of it and a 28% compounded from our cost.
Fully exited position where we've sold the whole thing, 17%, monetized, 18% because we went to India thinking that we would get 15% rates of return, not 9%. And so you can see the monetized investments are very high. This just shows you the performance for the shareholder. You know, the book value per share, what it's grown, 9.5 when we began, it's like $21 almost $22 a share with, again, a conservative valuation for the private investments. Common shareholders' equity, you can see, and the shares outstanding. Notice that it's gone from 149 million to 135 because that stock is trading a little below $15, and we just think it's the right thing to buy back the stock. And so you can see the share buybacks here. We bought 2.9 million shares, shares trading at deep discount. So we bought 2.9 million shares in 2023.
Since inception, we bought about 14% for $285 million in 1993. Some of you shareholders are saying, "You know, the stock's not going up. We don't control the stock. So what we can do when the stock is down is to buy it." And that's what we do. We buy it. We've done it at Fairfax. We've done it here. And then some days, some I wish I could tell you when. I've been in the stock market 50 years. You can't tell when this thing changes. And someone suddenly realizes India, Fairfax India, and the stock, you know, goes up very significantly. But in the meantime, we buy back the stock. Financial strength is very strong. Chandran, that shows you borrowing of $500 million at 5% due 2028. We got $175 million in revolving credit facility with Scotiabank undrawn.
We don't want to draw that other than for short periods of time. The cash and securities are $1.3 billion, as you can see, $3 billion in shareholders' equity. Investment advisory fee, I just wanted to highlight this here for you because for some of you have said, "You know, why are they taking shares in the last two times and now cash?" So very simply, we have an incentive fee that's every three years. This is the third three-year period, nine years, third period, third three-year period that just finished. The first one and the second one, we didn't have a choice. When we went to our cornerstone investors and raised the money, they said, "You have to take shares as long as it's selling, I think, below two times book value." So we didn't have any choice. We have to take shares.
We were happy to take shares because we thought it was a good way for us to take it. But then in the third one, we did have a choice, shares or cash. And we thought the best thing we could do for our shareholders is take cash, not shares because the share's at $15. So we took cash. And you can see the performance fee, the what we have. But we are expecting to make much higher returns than 9%. That happened to be the—it's better than the Sensex index, but over time, we expect to do a lot better. As I showed you, the monetized, meaning the ones we've sold have done very well. Investment fees, this shows you, this, Amy put together.
So if you look at our investment fees for the nine years, right, it's a percentage of cash in investments on the right, 1.1%. That's what you're paying, 1.1%. And then there's an incentive performance fee. And the performance fee is 0.9%. So the total fees are about 2% for the nine years. And that's your return, the 9%, is after that, after all these fees. And of course, we are the largest shareholder. We have 43%. We're excited about Fairfax India. And we expect to hold it for a long, long time. These are the current investments that we have. You'll see the price-to-earnings ratios there, and the 39x I'm just highlighting the big ones there, Fairchem Organics, 39x. If you take normalized, this is price-to-earnings or price-to-free cash flow. The first section's all price-to-earnings, 39x, but it had earnings down.
If you normalize it, it's about 9-10 times. 5paisa is a very, you know, it's growing like a weed. So, it's 28x , but, it'll come down significantly over time. The other ones you can see is listed Bangalore International Airport. I told you, 9.5x-10x . And then you can see the other ones there. You know, Maxop is just getting going. So it's about 15 times. We think it's 8 times free cash flow. And some of the others are a little higher, but over time, they'll be fine. So we like what we have. The one that we've had a tough time with is NCML. And we've told you that before. But we have a good president, Sanjay Gupta, who's focused on turning it around. Realized gains here, this shows you what our gains are, IIFL Finance, you know, 25%.
Nirmal Jain is here, done a fantastic job, and we'll talk about that. Fairchem, you can see, and the others, you can see, you know, so all in all, that's how we get the 18.2%. These slides will be in our website, so you don't have to keep it with you. And then we bought this National Stock Exchange, which has done exceptionally well, $27 million cash cost. And Chandran and the team just sold it for $189 million. There's still one that closes at the end, I think, closes at the end of April and compound 33%, very, very good. India will be the best economy to invest in for decades. There's a lot of material on this. You've seen it. You'll see more of it. The last December quarter in 2023 was 8.4%. That's the real GDP growth. This country can grow at 10%.
No one can tell you exactly what'll happen. Here, it shows 7% but could easily grow at 10%. Mr. Modi is now standing for election, in the month of May, about six weeks. 1.1 billion people are going to be voting. So it takes a long time. It's very well done. By June 2nd or 3rd or 4th, somewhere there, they get the results. The only question is, how high is his majority? Is it going to be 280 seats or is it going to be 400 seats? Quite a few people are betting that it'll be 400, which is like unheard of for the third time, his favorable ranking is way through the roof. Everybody likes him from the top, northern India to the bottom, southern India.
The southern India, it's usually never voted for the BJP, his party hasn't won in southern India. But for the federal elections, the central government elections, he tends to do very well. So India will be the third largest economy by 2027. Mr. Deepak Parekh will give us a little quick update on that. Continued reforms, this is from Jefferies , by the way. They're talking about 7% because, you know, a $10 trillion market cap in 2030. And India's current GDP is like $4.2 trillion, which is like the fifth largest because I think 10th, 11th, or 12th when he came in, or 14th maybe, and it's now fifth. And in another few years, it'll be the third. So you get the United States, you get China, and then you get India. And India's got the big plus of being a democracy.
You know, democracy for 1.4 billion people is tough, but it works there. You always have to be sensitive to what the people want: vibrant democracy, all of that. You know, rising entrepreneurship. People say that Mr. Modi has recommended a book to you all last year, 20 Years. And the first chapter, the guy says, "Mr. Modi has taught us to dream that anything is possible." Now, it's appropriate for him to say that because he's come from a tea seller's son. He was just an ordinary tea seller's son, you know, selling tea in railway stations. And now he's running the country. He's run a big state called Gujarat for about 13 years. Now he's running. He's had two elections that he's won in the central government, and he's going to win the next one.
Entrepreneurship is flying in India, like it is in the United States, like in Canada. And the idea is if you've got an idea, no one cares where you came from, what your religion is, what your background is, which college you went to. If it's a good idea, the venture capital people are giving you the money. One of my friends, the venture capital guy, said, "You know, we have to go and say, take our money," as opposed to taking this guy's money or the other fellow. Unheard of in India that there's so much money focused on entrepreneurs. And India's had historically a caste system. All of that is being demolished because it doesn't make a difference what your caste is. You're a woman. You're a man. Where you came from, Southern India, Northern India, it's business.
If you're good and you're smart and you can make money for the venture capitalists, he or she will have it just like it's in Canada and really big in the United States. United States, they don't care. You know, if you look at Microsoft, there's an Indian guy running Microsoft, good friend of mine, Satya Nadella, immigrant to the United States about 30 years ago. But he's smart. He's good. They put him in to run the company in the US and the largest capitalization company in the United States. So entrepreneurship in India is rising. India is now a services export hub and strong stock market. India's had an economy that's more than 100 years old. So there's a strong culture, strong market returns. Now, the stock market is not cheap.
But over time, you have to when you invest in India, you got to think this is like decades long. It's a transformation. The economy is $4 trillion for 1.4 billion people, right? China is about $16 billion-$18 billion. And America, I think, about $27 trillion. I'm talking billion, $27 trillion. Tough to imagine trillion, but that's what they are. And so if you go on to Fairfax India, this is the last slide. And this is, it's diversified like Fairfax, all of these companies separately run. And we, we are very sensitive to people who run the company. And we like backing them. And irrespective when they're good, we back them, back them strongly. And we have a fabulous group of people who are honest, hardworking, and want to build the company for a long period of time.
And we're so happy to, to back them. With that, I'm going to press this button, and there it is for you, Chandran. Let's welcome Chandran. Give him a nice one. Welcome.
Thank you, Prem. Good morning to all of you. I will give you a brief summary of the 2023 performance of Fairfax India's six largest investments. The leaders of most of our investee organizations are here today. And so I will be very brief so you have an opportunity to hear directly from them. Our largest investment is Bangalore International Airport, or BIAL. We own 64% of the airport, acquired for $903 million, implying a cost of $1.4 billion for 100% of the airport. BIAL is India's third largest airport and the largest in South India. Bangalore is the fastest growing and third largest city in India.
As most of you know, phase one of Terminal 2 was inaugurated and was fully operational in 2023, including the transfer of all international operations. It was acknowledged as one of the most beautiful airports and received the World Special Prize for an Interior for Airports at UNESCO's 2023 Prix Versailles. We believe it is one of the best airport terminals in the world, a truly magnificent terminal in a garden. With the completion of the refurbishment of Terminal 1, BIAL's capacity increased to 50 million passengers. Under the exceptional leadership of Hari Marar and his executive team, BIAL had an excellent post-pandemic recovery year. It handled 37.2 million passengers in 2023, surpassing the pre-pandemic high of 33.7 million passengers in 2019. Revenue increased 60% to $305 million, and net profit was $44 million, generating an ROE of 14%.
BIAL had generated an ROE of 17% over the first two control periods. BIAL's valuation is largely driven by its three sources of revenue: aeronautical revenue, non-aeronautical revenue, and monetization of 460 acres of land available for real estate development. Aero revenue is determined by regulated aero tariffs that BIAL can charge and are set by the regulator for five-year control periods and are computed to provide BIAL around a 16% return on equity deployed in its regulated asset base. BIAL's growth plans, taking its capacity from 50 million to 70 million passengers by 2029 and to over 90 million passengers by 2034, has a significant impact on its valuation. This will be achieved by adding a phase two expansion to the second terminal and building a new third terminal.
The investment required to build these additions is about $2.2 billion and will be funded through internally generated funds and debt. Second, non-aeronautical revenue, which is revenue from all other sources like lounges, food and beverage sales, and duty-free shops, has resumed its strong trajectory of growth with an objective to increase by 5 times over the next decade, driven by the extra space, the attractive surroundings, and excellent initiatives launched by BIAL. On the real estate front, significant progress has been made in the plans to monetize the 460 acres of land that can be developed. The valuation of Fairfax India's interest in BIAL increased to $1.6 billion in 2023, implying an equity value of approximately $2.5 billion for the whole company. Excluding any cash flows from real estate monetization, as Prem said, this is 9.5 times normalized free cash flow.
In 2019, Fairfax India created Anchorage Infrastructure Investment Holdings to be its flagship vehicle for airport and other infrastructure investments in India. In 2021, Fairfax India transferred 43.6% of BIAL to Anchorage and sold 11.5% interest in Anchorage to OMERS, $429 million. Fairfax India is in the process of obtaining regulatory approvals to complete the IPO of Anchorage. Approvals, unfortunately, are taking much longer than we expected. Moving on to IIFL Finance. IIFL Finance is a non-deposit taking. It's one of the larger non-banking finance companies, or NBFCs, in India. It has over 4,600 branches, almost 40,000 employees, and serves over 8 million customers. IIFL Finance is Fairfax India's second largest investment. We own 15% of the company, acquired for $76 million, and is currently valued at $412 million.
Under the leadership of its CEO, Nirmal Jain, who is also the founder and significant shareholder of all the IIFL Group companies and is a long-term business partner, R. Venkataraman, IIFL Finance had an excellent year in 2023. Revenue increased 25% to $750 million, and net profit grew 36% to $400 sorry, to $242 million, generating an ROE of 70%. Assets under management, which have grown at a compounded rate of 16% over the last five years, grew 34% to $9.4 billion. Asset quality is among the best in their peer group, with net NPAs of 0.9% and a provision coverage ratio of 151%. Its strong momentum results partly from its asset light model, whereby 37% of its assets and 34% of its income are derived from co-lending with or assigning assets to other lenders.
Loan-to-value is very conservative at 72% for home and gold loans and 52% for business loans, with a well-diversified asset portfolio of which 95% is retail in nature, a total capital adequacy ratio of 19.6% for the NBFC and 45.8% for the home finance subsidiary, and net interest margins at an all-time high of 9.8%. IIFL is well-positioned to take advantage of the economic growth expected in 2024 and beyond. In 2023, we sold 27 million shares of IIFL, generating a realized gain of $149 million that resulted in an annualized return of 25%. On March 4, 2024, the Reserve Bank of India, the RBI, the Indian Central Bank, and banking regulator ordered IIFL Finance to stop sanctioning, disbursing, or assigning, securitizing, or selling any new gold loans due to non-compliance with certain banking regulations.
The stoppage will be in effect until the RBI completes a special audit and the regulatory deficiencies identified are rectified to RBI satisfaction. IIFL Finance has rectified the deficiencies and responded to the RBI. The RBI has agreed to begin the special audit in April. This order does not affect the other segments of IIFL Finance, which account for approximately 70% of its business. Fairfax has offered to provide IIFL Finance up to $200 million of liquidity support by way of debt and equity if needed. Moving on to CSB. CSB is one of the oldest private sector banks in India. It has 751 branches and 570 ATMs across India. We own 49.7% of the bank, and our investment of $169 million made in 2018 is currently valued at $409 million. Under the strong leadership of CEO Pralay Mondal, CSB has had its best year ever in 2023.
Revenue increased 27% to $236 million, and net profit increased 10% to $69 million. CSB made excellent progress in its key performance measures, with loan advances growth of 23% and deposits growth of 21%. Net interest income grew by 12%, with an industry-leading net interest margin of 5.2%. Asset quality is excellent, with net NPAs of 0.3% and a provision coverage ratio of 91%. Capital adequacy ratio remains strong at 23%. Compared to other banks, CSB's performance is right at the very top. We are very excited about the long-term prospects for CSB. Moving on to Sanmar Chemicals, led by Vijay Sankar, it is a private company and one of the largest manufacturers of PVC and caustic soda in India and Egypt. We own 42.9% of Sanmar, acquired for an investment of $199 million that is currently valued at $309 million. Sanmar had a very difficult year in 2023.
Revenue declined 26% to about $1 billion. EBITDA declined 55% to $96 million, resulting in a pre-tax loss of $28 million. All the three divisions, the specialty and commodity PVC businesses in India and the Egyptian business, all incurred pre-tax losses. This performance was the result of drops of between 30%-60% in global PVC prices due to depressed demand from China and the Western world that resulted in the dumping of excess PVC production from China. This was further exacerbated by the lapsing of anti-dumping duties in India, which had been in effect for the previous 15 years, increasing energy costs and lower caustic soda prices. The Egyptian business, TCI Sanmar, also had poor results. This business was impacted by the poor global market for PVC and also by the foreign exchange crisis in Egypt.
We are hopeful that business will stabilize in 2024 and resume its upward trajectory next year. IIFL Securities, led by R. Venkataraman, is a major player in the Indian financial services market, with assets under management and custody totaling $22 billion. It offers retail and institutional advisory and broking services, financial products distribution, and investment banking services. It has unparalleled research coverage of over 260 companies. We own 27.5% of IIFL Securities, acquired for an investment of $51 million that is currently valued at $147 million. It had one of its best years ever, driven by strong performance in the retail brokering and investment banking divisions that benefited from buoyant equity and IPO markets. Revenue grew 46% to $234 million, and net profit grew 72% to $68 million, generating an ROE of 25%.
At a valuation of only 10x earnings and 2.5x book value per share, it trades at a discount to its peers, and we expect it to continue to be an excellent investment for us. Moving on to Seven Islands Shipping. Founded and led by Captain Thomas Pinto, it is the second largest private tanker shipping company in India. We own 48.5% of the company, acquired for $84 million that is currently valued at $143 million. Seven Islands also had its best year ever in 2023, driven by higher charter rates and opportunistic sales of vessels during the year. Revenue grew 34% to $166 million, and net profits grew 310% to $85 million, generating an ROE of 39%. At a carrying valuation of below only 4 times earnings and cash flow, we expect significant upside on the value of this investment.
Fairfax India has investments in several other companies: Fairchem Organics, an oil and chemicals company. 5paisa Capital, a discount broker and technology-based financial services company. NCML, an agricultural warehousing company. Saurashtra Freight, a container freight station. Maxop Engineering, an aluminum die-casting and machining company. And Jaynix Engineering, an aluminum electrical parts manufacturer. Most of them are excellent businesses that continue to make good progress. Our annual report has much more detail about each of these companies. With that, I'll turn the mic back to Prem. Thank you.
Thank you, Chandran. Thank you. Now we have Deepak Parekh. I'll just introduce him very quickly. Deepak Parekh is iconic in India. He created a company called HDFC, which is the first mortgage company, and then a bank. Over four decades, the growth of the stock price has been in excess of 25% in US dollars. That's phenomenal return and has been and that's the nicest person, highest integrity in India, and we're fortunate to have him as our consultant. He doesn't do that too often, but he's our consultant and will be our consultant forever. We don't do too much. I think it'd be fair to say Chandran without talking to Deepak. He just knows everybody. If he doesn't know someone, one telephone call, he'll find out. With that, perhaps I can put Deepak on the line.
Apologies for not being present at today's annual general meeting. As part of the proceedings of today's meeting, I have been requested to share a few perspectives on the Indian economy. That India today is on the radar of most global investors is perhaps stating the obvious. The mainstream narrative around India has been its pace of growth. It took India 60 years after independence to become a $1 trillion economy in 2007. India became a $2 trillion economy in 2014 and a $3 trillion economy in 2019. The pandemic set us back a bit, but the next leap of becoming a $5 trillion economy is estimated to be in 2027. Many forecasts now estimate that this growth thrust will enable India's stock market capitalization to touch $10 trillion by 2030 from the current levels of over $4 trillion today.
Yet as shareholders, it is important to understand where the tailwinds are coming from. The tailwinds of demographics, improved institutional strength and governance, the rise of entrepreneurship, and stable political leadership has capitalized on India, leading to increased investor interest in the country. India has now had three consecutive years of 7% or higher GDP growth. It is important to reiterate that India's growth and attractiveness is not on account of any other major economy slowing down. India stands on its own strength. Geopolitics is today the dangerous new normal. India is holding its own on the global arena, and its own indigenous model of diplomacy is working well for the country. The leadership of India has focused on improving the structural economy and focuses on strengthening its vulnerable areas. As an energy deficit country, India's stance is to continue to source crude requirements from the cheapest source possible.
When it comes to products and services of the future, such as semiconductors or transitioning to clean energy, it has forged relationships, invited global players to set up shop in the country, and ensured that new investments into the country be beneficial for the long term and should create new job opportunities for its citizens. In equal measure, India has worked on improving the ease of doing business. While India will remain predominantly a domestic and consumption-driven economy, especially positioning itself as a leader of global capability centers, it has buffered itself by increasing investments in the manufacturing as well as the infrastructure sectors. India is integrating into global supply chains, and the balance sheets of corporates and the banks are significantly stronger to fund sustained revival of the investment cycle. On the external sector, the currency has been stable.
Over the past year, the rupee has depreciated by 1.4% against the US dollar, which is significantly lower than other emerging market economies. The foreign exchange reserves at $645 billion, which is sufficient to cover over 11 months of imports. When one looks at the stock market performance, two aspects stand out. First is that the gains are widespread and not concentrated in selected few stocks or sectors. Second is that domestic institutional investors, largely insurance companies and mutual funds, have been large investors, and stability buffers when foreign investors turn net sellers triggered by global volatility. Today, both foreign portfolio investors and domestic institutional investors are bullish on the Indian growth story and are net buyers. The financial sector regulators have been extremely prudent and vigilant, watching closely for any potential buildup of excesses or volatility in the markets. These are factors that give investors greater comfort and confidence.
To conclude, let me say there could be no better testimony of India than seeing the performance of Fairfax investment in the country, which has straddled new-age financial and industrial sectors. Under the able leadership of Prem Watsa, one of the guiding principles of Fairfax is doing good by doing well. Fairfax's presence and performance in India clearly upholds and demonstrates this principle. Thank you.
Give a nice applause. Thank you very much, Deepak. Deepak did say doing good by doing well. For the first time, we're giving all our shareholders tomorrow, but also for you. This is a report on the donations that Fairfax has made, and it's very similar to the donations that are made in India. And I must say, I just got it yesterday, and it's very well worth reading. You'll like it. The second thing I wanted to mention to you is there's a terrific book by Amitabh Kant. He was the guy who India last year hosted the G20, and he was the Sherpa, Amitabh Kant. And he's written a book called Made in India, easy to read, 75 years of business history in India. Very, very interesting to read, and you can get a copy of it.
And finally, I wanted to say that we've had for some time a trip to India, and we've had it in Fairfax. And Chandran asked me to reminded me to mention it here, that Thomas Cook, our company, which is not in Fairfax India, but is worldwide the largest travel company all over the world, not only to India. But they will look after it. It'll be a trip of a lifetime. Kasi Rao will be behind there. Where are you, Kasi? There you are. Kasi is right there. And Kasi will be available too, if you're interested. It's in January, and he'll have the dates and stuff and give you any information you want. And you will really enjoy it. Many have done it because of COVID and things. We haven't done it for a few years, but it's open again.
With that, we'll open it to you for question and answer. So feel free. One mic there, one mic there. And this mic is what we'll use for our presidents if we need them to answer a question. With that, please ask us any question on your mind. Yeah. We'll go on this one first and then go here and then keep oscillating.
Hi Prem. My name is Ashit Lulani. I'm an investor in Fairfax India and Fairfax Financial. My question is, the opportunity that you've laid out for India is phenomenal. I think everyone in the room probably agrees that the opportunities are gigantic. It seems like Fairfax India has a constraint in that our valuation is so far below our intrinsic value that raising new capital doesn't seem like it's a plausible notion. On that basis, is it possible for Fairfax India to act as a GP for third-party capital? And is there an opportunity for us to earn fees, additional fees off of that, to help offset some of the fees that we pay to Fairfax Financial?
So that's certainly a possibility. So Fairfax India, the stock price is low, so obviously, we're not going to issue shares. We're going to buy stock back. Right now, if an opportunity came, that's the sort of thing that we do. Fairfax Financial wants to invest in India. And so between the two, we'd look at how we can invest and get there. There's a lot of people who'd want to be our partners. And I didn't mention this, but Mr. Modi is committed to privatization. A lot of the Indian economy, because of socialist policies, is owned by the government. So I think 60%-70% of the banks are controlled by the government. They're public, but 60%, 50%, whatever, is owned by the government. They're going to sell it. And he makes the point, "Why should we own this bank or insurance company or whatever?
We don't know how to run this. It should be run by private enterprise. Let's sell it, get the money, and help people who need to be helped." So there's going to be a lot of opportunity once this election is over. And we're going to participate. So we've done that before. We know how to operate under the circumstances. But rest assured, we're not going to issue shares to do anything going forward at these prices I've met, right? Twice book value, that's a different story, but not at these prices. But thank you for that question.
Hi. [Michael Chan] from Tanc ook Investment Management. So first question regarding the airport business. I remember last year, I was told that you have a legal dispute with the Indian government on the logistics business, whether it should be classified as a non-regulated business. Airport business, I follow some airport business in Mexico too. They make most profits from non-regulated business. So I would be interested to know how you develop such a business, specifically for a logistics business in that airport.
Yeah. You know it's a regulated business. It's a public-private partnership. We get a 16% return, right, every three years. Every three years, is it? Five years. Every five years, 16% return on the equity capital that we have. But anything you want to add to that, Hari? Hari is the guy who built the airport. We might have had some dispute, I guess, in the past, but any.
I think what you're referring to is the appeal that we had in court with regards to how the real estate income is going to be treated. Is that your question? Let me just clarify this. I think you're building a larger logistics business with the airport, and you argue it's not part of the regulated business operation. It should be non-regulated so they can't charge you twice anymore.
Maybe I can explain 2 minutes on that. Why did you do that and then give them a sense for this hub that just happened recently after you finished?
Of course. Of course. So I think what you're referring to is that we had appealed in the court that cargo, ground handling, and fuel, three parts of our business, which is treated as non-aeronautical business by the economic regulator, should be treated should not it's treated as aeronautical, but it should be treated as non-aeronautical as per our concession agreement. At this point of time, and we appealed this as Bangalore Airport, but also Hyderabad Airport also had parallelly appealed. At this point of time, Hyderabad Airport has won their appeal in the court, and the court has held that it has to be treated as non-aeronautical business. But of course, the government has gone back and appealed against that verdict and is contending that it should continue to be treated as aeronautical business.
So we don't have a clear answer as to where it stands right now, but it still is in court. But we continue to develop because irrespective of whether it is aeronautical or non-aeronautical, this is part of what we're expected to develop over the period of our concession. So we continue to develop that, notwithstanding the outcome in the courts. I hope that clarifies your question.
Yeah. Thank you.
Thank you.
Thank you for your help. My second question is the question, the topic I raised last year, in terms of how you finance the expansion in India. Do you buy back shares? You cannot really issue shares given your stock price. Just to give an update on how you financed your expansion last year.
Yeah. So it's sort of like what the previous question was. At these prices, we're buying back stock. There's not a lot of shares traded, but when they're traded, we buy it back. We've got pretty well all the shares of any size that have traded in the last year and a half, I think. If you have 10,000 shares, 5,000, we don't buy 100 shares, but 10,000 shares, 5,000 shares, 50,000 shares, we'll buy it. And that's the best thing we can do for you shareholders. Best thing is to retire. The stock is cheap. But in terms of your question, it'll be interesting for Hari to just expand while you're there about this recent development with Tata.
Sure. So you've heard a lot about how exciting the business environment is looking in India. In the aviation industry too, it's really looking very exciting. So our last years, the kind of growth and the kind of opportunities that we've had have been very positive and very forward-looking. Let me give you a bit of a context on what makes the aviation industry very exciting at this point of time. India is on the verge. So over the last 17 years, since Bangalore Airport has opened and has got privatized, we've had a CAGR of 13% in terms of growth in passenger volumes. But what one can expect to see in the next few years is explosive, unprecedented growth rates that we've never seen before.
And this comes on the back of the fact that airlines in India have placed orders for 1,200 aircrafts over the next 10-15 years. This is huge considering the fact that there are only 700 planes operating in India, and the number of aircrafts on order are 1,200. This on just list price alone is a bet of $150 billion because that's what it's going to cost to buy these many aircrafts. These are firm aircraft orders. And you don't place these kind of bets unless you're sure that this kind of capacity that you deliver will be absorbed in the market. So it's a very exciting time. And on the back of this kind of positivity and sentiment from the airlines, airports are also investing money. And I'll tell you, I'm just giving a bit of a backstory, Prem, to what you asked me.
Airports are also expected to invest close to $50 billion in the next 10 years. That involves modernizing and expanding already privatized airports like Bangalore Airport, for instance. Chandran alluded to the fact that we are going to invest $2.2 billion in the next 5 or 6 years. Apart from that, there's also going to be more privatization of existing government-run airports and creation of new airports as well. In line with the story that Mr. Parekh said some time back, in the first 65 years, India had developed 70 airports. Then in the next 8 years, it developed another 70 airports. 142 airports operational in India, and this is expected to go to 258 airports in the next 10 years. About 2032, we'll have 258 airports operating in India, which is a very large number, as you can imagine.
With 2,000 aircraft that will be in operation in the Indian skies, the kind of growth rates that we can expect are simply phenomenal. Of course, the demographics of India strongly support all of this. By 2030, the working population of India is expected to be 1.03 billion. That's just the working population. The median age of India, which is 31, is expected to only reduce going forward. We've got 50% of our population below the age of 25, 65% of our population below the age of 35, which all makes it a really exciting environment because the size of the middle class is growing, and so is the percentage of their expendable income. All of this means that all of these youngsters are chasing experiences, which all leads to growth in aviation air traffic.
So obviously, this means that we have to create capacity, and that's what Chandran alluded to. We are going to invest another $2.2 billion creating that capacity for airlines to operate. But it's not good enough if that growth is coming that we just cater to that growth. But it's important to be able to give that growth a definitive direction so that we can get the best bang for our buck and really achieve our true potential. And in that context, I think the real opportunity was for Bangalore Airport or airports in India to establish hubs.
For decades, we have squandered this opportunity and allowed the traffic to be leaked across on both sides of the Indian subcontinent, on the west to airports in the Middle East, on the east to airports like Singapore, Malaysia, and Hong Kong, where we've allowed these massive hubs to come catering entirely to Indian traffic. So if you just look at the total volume of southern India traffic that goes to Europe and U.S., 47% of that traffic hubs over Dubai. So if you take for every flight that takes off to Dubai, 70% of them are actually going beyond Dubai to either Europe or U.S. And I think it's time to stop that leakage. And that can happen only if India creates hubs through fantastic airport-airline partnerships. The newest girl in the block was Air India, the prettiest girl by a mile.
Everybody wanted to do business with Air India, and all airports have been wooing Air India to see where Air India might establish its second hub. The primary hub of Air India, without doubt, is Delhi, and it's got to be in Delhi. There's no two ways about that. But the question was, where will that secondary hub be established? And why Air India? Because Air India is the only airline that can do it, given the fact that in India, all the other airlines operate only narrow-body aircraft. Air India is the only airline that has got wide-body aircraft in order, which means that it needs to operate to where it's the only one that can operate direct flights to Europe and United States. And so we've signed a partnership with Air India just three days ago. It was in the news.
If you've followed news, that was a big announcement that we've signed a partnership with Air India for Air India to establish that hub in Bangalore. This is a game-changer as far as Bangalore Airport is concerned because we'll see thank you. This is a game-changer because this is going to see acceleration of international traffic. This is going to see direct international flights from Bangalore to Europe and to America. And it'll also see Air India will naturally have to create a bank of flights that bring passengers from other parts of India into Bangalore to connect to their international flight. So there's enough behind traffic. And that, I think, is going to be interesting also because that means that there'll be more hubbing traffic out of Bangalore Airport, which also means that there will be more dwell time by these passengers in the airport.
More dwell time means that you end up shopping more and spending more money and duty-free. This is exactly what we're looking for. This is the exciting development that Prem alluded to. I hope that sort of clarifies.
Thank you very much, Hari. Give my nice round of applause. Yes.
Hi, Prem. Trevor Scott, Tidefall Capital. Another question on BIAL. If you do any basic form of competitor analysis, it appears extremely undervalued at the valuation that you have it on your books. There's a lot of publicly traded companies that you can look at. And you mentioned in the letter this year that 9.5 times normalized profits. I was just wondering if you could go a bit more into depth than that. And that excludes the real estate value because that's such an attractive valuation for such an incredible asset.
So it's 9.5x excluding the real estate. You have 460 acres. Excluding that, that's a valuable piece of property that we're developing. But just by itself, the free cash flow this'll be like in the next year, year and a half is 9.5x. But if you go a little further because this is a brand new terminal, as it gets going, you could drop it to 6x in that area. I didn't want to go that far. But just look at it. $2.5 billion for something that's going to have 75 million passengers on its way to 75 million. And all the things that Hari just talked about in terms of the development with Air India. Air India could have chosen any of its Tata-owned. Air India used to be owned by Tata years ago. It got nationalized.
It's appropriate that it goes back to Tatas because they're going to make it a fantastic airline, competitive with every airline in the world. And there's a terrific guy who runs it, I mean, runs the whole of Tata, his name is Chandra. And so it's a big, big plus. So in terms of competition, there's. I don't know. The Heathrow is public, I think, and there are a few others you can look at. Any comment on that, Hari? In terms of the fact that other public airports, you know something about that, Amy?
Sure. I can.
Sure. Amy's our Chief Financial Officer. Done a terrific job. Give her a nice hand.
So I will say that our valuation is prudent. So when we look at it from an accounting standpoint, the valuation will always lag performance slightly. So in the past, we've really only increased the valuation of the airport substantially on three occasions. One was when they completed their real estate development plans. And so we took the valuation up at that time in 2019. And the other was when you finished your plans for Terminal 3 and you took it up again. The third time was this year. And we took it up because they completed Terminal 2 Phase 1, which, as Prem mentioned, is the most beautiful airport in the world. So we took it up again. We do expect that the valuation will continue to increase.
The 9.5x normalized was based on free cash flows excluding any expansionary CapEx in the year 2026. So we do think that there's a lot of room for growth. It is a long-term infrastructure asset. So we're looking at cash flows going out about 30 years. And as a result, for some of those later cash flows, we have a higher discount rate. So our discount rate's between 12.4%-16%. And 16% would apply to the real estate investment. When we say that we exclude the value of the real estate, what we're excluding is the cash flows that will be generated by the real estate, which happen later in the model. I hope that helps.
Yes. Thanks very much.
Great. Very good. Thank you very much.
Should we go to Jeff now?
Yeah. Jeff, a question. Almost forgot that you were there. Jeff, please go right ahead.
Prem, a question about the National Stock Exchange. May I know what the rationale behind the sale of the National Stock Exchange of India was? It seems to be a long-term compounder.
It is a long-term compounder. It's a terrific company. First of all, we've done really well. The valuations were high. A lot of the trading in India, as it is in the United States, is option trading, very significant option trading, and they get commissions from options. We looked at all that. We think it is a terrific compounder. It's going to go public sometime. But we thought perhaps the valuation was where we sold it reflected all of that. The downside is these option trading India's stock market has done really well. It's selling at a very high price. So you have to be careful where you invest your monies. That's how we looked at it. I have to congratulate Chandran and our team who saw this because it's private. You're buying a private company.
We bought it and owned it for what, a few years, three years or something?
Five years.
Five years?
Yeah.
We owned it for a little longer than 3.5 years. Compounded very well. Thank you, Jeff. So we'll go on one year, one year, and one there. Sorry. Go right ahead.
Great. My name is Rajeev Agrawal. I represent DoorDarshi India Fund.
Thank you, Rajeev.
Prem, my question is, you referred earlier to India having a lot of public sector banks, and the government is looking to privatize some of them. You have been rumored to be interested in IDBI Bank multiple times. My question is that given that IDBI Bank is going to be privatized, and it's a big bank, will Fairfax India be interested in that, or will that be done through Fairfax Financial if you were to be interested?
So first of all, that's a good question, the way you put it. No confirmation that we are interested in IDBI Bank. It's rumored. So we're going to look at all the banks. We've got a terrific bank in CSB Bank, probably Paresh are there. They're doing a fantastic job. You saw when Chandran's presentation how well it's done. We'd look at all of these things. Our view is simply that if you have, in our experience, I'm talking now 38 years at Fairfax, when you see an attractive opportunity, you can always get the money. You have to figure out how to get the money. But we can always get the money. Like that gentleman was saying, there's many structures that you can put together. So we'll look at all of that.
But there is going to be a ton of privatization in India. And they were saying he was saying it. Mr. Modi was—people hearing Mr. Modi said this will be only second to Thatcher's privatization in the U.K.—huge privatization, which is exactly what you need, right? But I can't say exactly what's going to happen if you're interested in IDBI Bank or not. We don't like to talk about that till we actually do something. So thank you for the question.
Last one. One or more.
Sure.
I can delay.
No.
So the other question is, Bangalore International Airport clearly a crown jewel, as you have talked multiple times here. What is preventing us from doing an IPO there? I mean, we have been talking about IPO multiple times here.
Yeah. So it's the Anchorage, right? And India has opened up nicely, but it's still got a little bureaucracy. And you got approval here, and you got some approval there. And it just takes some time. And do you have anything you want to add to that?
No. We're working away at it. Every time we get something pops up from some part of government saying you can't do it or you can only do it if you do such and such. So Sumit and his team are working through that diligently and hope that after the election, we'll see some movement.
Okay. Great. Thank you.
So then yeah. Thank you. Your question.
Thank you so much, Prem and Chandran, having us again. My name is Gopinath from Washington, D.C., GB Investments. I have two questions on two different businesses, first is IIFL Securities. The second one is on Seven Islands Shipping. The first one is a couple of years ago, you talked about some large real estate IIFL Securities owned, which was leased to the other family companies. And that kind of information kind of went away after that. Could you give us an update whether they still own it or any kind of?
We'll do better than that because we've got Nirmal Jain, who's here, who began the company, founder of the company and done a fantastic job. I mean, more than two decades, maybe 25, 30 years, he's been running the company. We've been shareholders for a long time. And perhaps he can also talk about just most recently, the gold loan that you talked about, just a little update on that also. We're big fans of Nirmal. And as he said, we committed $200 million. If he needs it, he's not going to need it. But if he needed it, we were going to immediately, we came and support him because we've known him for so long. Nirmal, give Nirmal a nice, warm round of applause.
Thank you, Prem. I have my colleague, Venkat, probably who can take IIFL Securities' question a little later. First of all, thanks, Prem, Chandran, Gopal, and all Fairfax India shareholders who have always stood by their companies. I think we have been long investment. This crisis, Prem has been very generous to come out in public and say that we offer $200 million. As he rightly said, that we may not need it, but at least that gesture has been very good for the investing community. He's also been kind enough to speak to one of the leading rating agencies and reassured them. Our rating has continued to be AA stable. The event has been marked as developing, which is neither negative nor positive. Okay.
Let me give some background to this entire issue and where we stand and what is the way ahead. RBI does an annual audit, and they've been doing it for the last 16 years of our company's existence. This year, they found a few lapses. Based on that, we were a bit surprised because the order came, which was a complete embargo on our gold loan business. Of course, there were lapses. I can't say that it's something which is we were doing everything which was in full compliance of their master circular. Many of these things that we are doing were also industry practice. Maybe I can give an analogy. I mean, I don't know. Many of you would have traveled to India. There, the traffic rules are hardly followed. The people obviously now.
But if you are in Canada, U.S., or everywhere, then you see that even if the other side is empty and there's a 3-mile traffic jam, people still won't break the lane because somewhere, some point in time, regulators enforced the regulations very strictly. So what happens is that in traffic police, you have to catch hold of somebody and sort of make him an example. And if it happens to be you, then I don't think that we can really crib about it. But I'll just talk about it, that what happened and how we are going to overcome. So one of the there are 3 or 4 key issues which RBI has highlighted. And I can take a few minutes and.
Sure. Sure. Go right ahead.
One was that the cash disbursement, about INR 20,000. So when people take loan, we are giving them loan up to INR 200,000 in cash. So when we say INR 200,000 is maybe about, what, $300? Sorry, $3,000 or rather, $2,500. Now, you know what happens? We have 4,781 branches across India. Many of our branches are in remote areas where people don't have banking. And even the UPI, the digital payment, the last-mile connectivity doesn't work. So it's not only us, but all gold loan companies were doing this. So that was one of the problems that we had as per RBI. The other was when gold loan is not paid, when the customer account goes into NPA, which is he's not able to pay the interest and principal, then we auction the gold. Now, this auction, as per RBI guideline, has to happen in the same taluka.
Taluka is like a small locality in the same branch, you can say. And we were doing e-auction through hub locations. Now, RBI's logic for doing it in the same local area is that customer can be physically present there and can see how his jewelry is auctioned. Our logic was that every branch, we'll have such a small quantity of gold that practically, it is really difficult to have bidders for every small branch. But fact of the matter is that RBI regulation was there. And somehow, as we have been growing, we ignored it. And so that's the price that you pay. The third was the purity value. So again, other than cash, all the observations were related to auction. Now, our total auctions last year, when the period of the audit, were 1.3% of our loan disbursement. So they really aren't a significant part of our business.
So whatever compliance we do is not going to affect us in terms of our profitability as such. So the auction purity, what we give customer a certificate at the time of loan, and when it's auctioned, so then there's a variation. And the gold purity certification is subjective. So the way it happens is that you scrub the gold, put acid, and just see the quality or how yellow it is. And based on that, you say it's a 24-carat, 22-carat. And in India, gold also has a lot of stones and other material, which you have to adjust. So at the time of auction, the purity was lower by 6.5% for the entire auction quantity. But okay. What we have done now, that we are fully compliant, we have made 100% compliance with all the RBI's observations. Not only that, we are going to step further.
We have checked the master circular very carefully. Every small letter, we have tried to make sure that we comply fully. Now, RBI's special audit is going to start the day after tomorrow. And we are very confident that audit will confirm that we have complied fully. And that is when RBI will lift the embargo. Now, I'll talk a little bit about the company, what we are. This is a temporary phase, which in my mind will go. It may take a few weeks or a month or a couple of months. But as a company, we cater to small customers. It's a 1.3 billion people country. And most of these customers are not serviced by banks. So 87% of our customers are economically weaker with their annual income less than $10,000. 69% of our customers are women.
In case of home loans, 98% of one of the borrowers is a woman. Also, 82% of our loans are for productive purposes, which are like buying a house or you have a small business, working capital requirement. So these are not for personal loans or consumption or BNPL. So we complement the banks in their effort. None of the issues were related to governance or fraud or money laundering. Our asset quality is the best in the industry at less than 1% non-performing assets. Our technology, again, probably is one of the best. And that has helped us to grow faster. In BFSI space, I think there were 241 incidents, not even one incident related to our business when we serviced 8 million customers through almost 40,000 people.
So I think that, as you have seen, the economy is going to grow at 7%, and it becomes a $5 trillion economy. The opportunity for credit is immense because when you say 7% real term, in nominal value, is about 12%. And in this phase of growth of the economy, credit can grow at least or more so at the bottom of the pyramid at 1.5 times the GDP growth. So in nominal terms, we are looking at the industry growing at 18%. So there's a tremendous future for next decade, at least, that we can see for IIFL Finance. IIFL Securities, maybe Venkat can cover it. But the question was related to real estate. Would you like to talk about it?
That's good. That's good.
I think most of the real estate is still held in a subsidiary company which we started selling. Some of it was sold over the last one or two years. That cash is there. But still, that's not fully unlocked. Maybe Venkat can talk more about IIFL Securities. Thank you.
Thank you. Thank you, Venkat.
Thank you, Venkat. Thank you, Chandran and Fairfax India for your support. IIFL Facilities, which is 100% subsidiary of IIFL Securities, has properties across major metros. We have big offices in Chennai, Delhi, Bombay. These are the big parcels of real estate that we own. Since they are full buildings, it is difficult for us to sell piecemeal by office-wise. We are not desperate sellers. We are patiently waiting to get a good deal. As we speak, we are negotiating with some buyers. Hopefully, in the next 12 months, we'll be able to monetize, I think, Delhi and Chennai for sure. Thank you so much.
Thank you very much. Thank you. Venkat, by the way, Venkat and Nirmal built IIFL together. They've been partners for a long time. So thank you, Venkat. Yes. You had another one?
Thank you. Yes. The second question is about Seven Islands Shipping.
Oh, Seven Islands Shipping. Yeah.
A couple of years ago, we talked about the advantage of having older carriers versus newer carriers because the pricing is more or less the same. So it's better to have an older carrier. Now that I've noticed over the couple of years, the carrier ages have been decreasing, which basically means we're getting into a newer and newer carrier. Has the market changed in any way between the older and newer carrier pricing?
Exactly. Very good question. The captain is a very, very smart, shrewd buyer. And he works very closely with Sumit at Mumbai. And that's exactly what's happening. He's able to get rid of some of his old carriers at a good price and buy the new carriers at a better price. And he can run it for a much longer time. He's got a contract already done. So he's a very 39%. Chandran was showing 39% last year return on capital. He's doing phenomenally well. And anything you want to add on that, Sumit? But.
Clayton is over here. Captain is here.
Captain is here?
Clayton.
Clayton is here? Hey, Clayton, you wanted to say something. Where's Clayton? Clayton, come on in here. Clayton is the captain's son and doing a terrific job. Give him a nice warm round of applause.
Yeah. So thank you, Prem and Chandran, for having me over. So over the last couple of years, we have gone on a fleet modernization program. So while we acquire younger ships, back in the day, our average fleet age was about 24 years. And we've, over the last few years, brought it down to 17 years now. That has also given us access to foreign markets apart from being primarily on the Indian coast. So while we keep buying vessels, we also make it a point to sell the older vessels and bring down the delta on what we acquire. Thank you.
Thank you very much, Clayton. Jeff?
We have a question about the deal landscape or transaction landscape faced by Fairbridge. The questioner just notes that the last new transaction by Fairfax India was Jaynix in early 2022. They just wanted to inquire about what the investment landscape was like.
Yeah. It continues to be good. But there's a delay now because of the election, right? So the privatizations are on hold. And so it'll how many do you look at on a regular basis?
300 or.
He looks at about 300 unless it meets our criteria. The biggest criteria we have is honest, goodness, entrepreneur, founder like we have here. So we've got two or three that we're still working on but nothing to talk about. The environment continues to be good but pricey, I think, fair to say. Nothing here. Here. Come right here.
Good morning, Shannon and Prem. Thanks for having us today. I have an easy question for you. When I look at the returns and I think about the growth in India and I think about the U.S. and even with some of the things that David Sokol did, you have an interesting concept, which is you have a lot of growth in India. If you invest in industrial companies, probably going to get more like a 10% or a 15% return. Maybe I'm wrong. Some of the other companies we've had, which are more financial-based, have the opportunity to grow quicker because you don't have to build plants and equipment. And so how do you guys think about the opportunities that would be different in Canada or the U.S. versus India? Because you want that high growth.
The industrial companies struggle, I think, sometimes because it's hard to build new ships, new plants.
So there's 2 things. You're exactly right on the financial end. If you go back and I think I mentioned this previously. But if you look at Lee Kuan Yew coming into Singapore in 1965 and if you knew what he was going to do would actually work out and you say, "What's the best investment you could make in 1965 for the next 30 years?" No question financials, banking. There were 4 or 5 big banks there compounded from that time period, 1965, 20%. You just have to buy it and hold it because it grew to be a world-class country, right, first world. India is going to have that same opportunity. As someone was saying here, that the financial system grows at a multiple of nominal growth. So the nominal growth is 10%-12%. This will grow at 2-2.5 times, maybe even more.
That's just the industry. Then on top of that, if you're good and our guys are very good, they'll grow faster than that. So financials is very good. We've seen it with Pralay and Paresh. Paresh, by the way, was one of the first people in ICICI or HDFC Bank. HDFC Bank, one of the first guys was Pralay. And Paresh has been with the HDFC for a long time. And he was he's been with Paresh was one of the first guys at the bank, HDFC Bank. And Pralay was working under him. And they worked very well together on the he helped with the personal end of the book, individuals. And it's all that you said is exactly right. But it's a growing economy. It's an economy that goes from $3-$4 trillion to $7-$8-$10 trillion.
Everything is in demand, everything, like electric goods, all the stuff that we have with the smaller companies that we bought. They're all going to grow significantly. Now, you have to put money in. You're exactly right. But you make a very good return on it too. And so we've got now in Jaynix, right, we've got an expansion project that they're working on. You can talk to them about it. And it'll be sold out because the whole economy doesn't just grow financial side is funding it. But there's actual manufacturing, exports. I mean, look at the I was just reading today that the Apple's making 14% of its phones in India. That's $14 billion that they're making. And they'll increase it to double and triple that because it's stuff moving from China to India. And India's got the big advantage. Linked language is English.
Guys in the north can't talk to the guys in the south other than in English. I'm exaggerating to make the point. But it is true. So manufacturing will also improve. You have to get the right people smart, hardworking. And we're not talking 10%, 15% rate of return. We're talking through 20%. We wouldn't invest in something like 10 or 15. In India, that's the type of returns you need to get. And we have got and we will continue to get more than 20% because you do have the foreign exchange risk, right, which Mr. Parekh said was sort of flat. But it can depreciate a little. It might go the other way. But yeah. So what we're looking for is honest, goodness, hardworking people who want to build a company, not like private equity, 3, 4, 5 years, sell it. We're not looking for that.
We're looking for honest all of these people here, like you just talked, Clayton Pinto. They're building this shipping business in India, right? They're the number two. And they're very, very profitable. And just very, very smart in an economy that's growing, nominal terms, 10%-12%, maybe even more. But thank you for that question. Anyone from this side know? We'll go back to Jeff, any question that you have on that?
Yes. So question about CSB Bank. Can you give us a better sense of CSB's long-term prospects going forward? What are the main constraints on growth? And what is the potential for growth beyond being a regional bank?
So who better than Pralay to answer that question? He runs it. Pralay, give us a little history on the bank in the last few years. And then watch what happens.
Thank you, Prem and Chandran. I think it's an opportunity to talk about the bank here. History of the bank is 103 years old bank. While it's a great history to have, but when I talked to my team, I said that, "Can you calculate the CAGR of 103 years to the balance sheet which we are in today?" We need to change that. We need to look forward to sustaining what we have done well, building for the future, and scale it further so that we are in the mid-sector category by 2030. That's the vision which we're working on in the bank.
As I was talking to someone in the morning, that we were chosen by one of the most eminent judges as the best small bank in the country, the Mint Award which we got, which is one of the best awards in the country.
Best small bank in the country.
And when I addressed my team, I said, "This is not the vision. We have a small vision, which is change the small to mid-sector by 2030." And that's what we are working on. But obviously, there are steps to be built because building a bank cannot be overnight. We are rebooting the bank. So we are changing almost everything the way the bank is being run today and for the future. So while we have every quarter, we have analyst call. And we have to we're a listed bank. And we have to continue to drive results in which we are growing 30%-50% faster than the system in terms of balance sheet as well as reasonable profits. But that's just the one-day quarter-end discussion. But the bigger vision which is in the bank constantly is what we want to achieve by 2030 and what's beyond that.
The vision is that we want to build a universal bank. We have various licenses in India. We have the license of a universal bank license, which means that we can do everything what HDFC, ICICI, Axis, and some of the other larger banks can do in India. We must do that. We said that there are 4 building blocks to build the bank. Number 1, we must have the right governance board and the right kind of processes within the bank. That's something which we worked on. Of course, Sumit works very closely with us and has been working on that front. I must say that we are one of the best boards in the country, though we are a small bank. The second was, how do we build a great leadership team? Because ultimately, what matters in a service industry is people.
And we have concluded our entire senior management plus one level higher, which is one of the best in the country. And I kind of, on a lighter side, said that if there was any kind of a ratio because we all talk about the financial ratios. If there's any ratio where the senior management quotient divided by the business, we would be the best in the world, okay? And that's the leverage, the leadership leverage which we have built for the future because that's very critical where we look at. Because what management schools don't teach is how to build scale. That comes through experience. And we have built a team, whether it's in wholesale, SME, retail, gold, everywhere. And the internal assurance functions, the other support functions. Everybody has come to us from organizations like HDFC, ICICI, Axis, and this kind of organizations.
So it's a very, very good leadership team which we have built, aspiring to build for the future. The third big element, and it's very, very big for us because we are rebooting the bank, is on the technology front because future banking will be about technology. Already, it is. And given where we are I mean, simplest way to put it because time is short is we'll have nothing in the bank in terms of technology what was there 3-4 years back. So our entire ecosystem, we are going with Oracle, OFSAA, OGL, the entire surround system with ServiceNow, entire platform. I don't want to get into all the details. But the entire service technology infrastructure will be in line with the best in the industry and probably a little better because some of the larger banks have gone through these phases.
When you take the latest also, you do customization because you have a large business to run. You make the new system look like old. We don't have that legacy. So we can sort of create the future bank with the latest on the technology front. The fourth part, of course, is very, very important in India today because India is growing. First is compliance and execution and being on the right side of the regulator. I keep saying to everyone in the team that regulator's calls come like we used to stand on the bench in the schools. You have to stand up and respond and be very sure that what we are talking is not just lip service but do it down the line and ensure that we execute because ultimately, perception is reality. With regulators, it's just not doing is enough.
We have to communicate what we are doing constantly. So I myself said to my compliance said that anything to do with regulator, I should be the first person I'll respond to the regulator directly. And that gives a lot of confidence and comfort in terms of how do we take the bank forward. I think these are the four things. Execution, of course, is key because ultimately, execution is God in banking. And India, where the growth is happening on the GDP side, Prem talked about 10%-12% nominal or maybe more. My belief is it can be higher than that and give a multiplier to that in terms of credit growth. And if you take all the banks together between public sector and private sector, I think the growth for the banks will the opportunity will be there for all the banks going ahead.
The question is, everything starts with a zero. We are small today, which is fine. But what separates us is we can aspire to become much larger because when banks like HDFC or some of the other banks started, they all started with a zero. I said that, "Don't worry about where we start. But where we want to go is something which you have to." That management is very motivated. And they are dreaming big. That's broadly where the CSB Bank today is. We are growing. And most of our financial ratios, as was shown there in terms of NIM, in terms of ROA, ROE, whichever way, credit cost, I was explaining some of the is actually negative. Given all this perspective, I think we are on the right track. Our vision is very clearly focused on CSB 2030, as we call it.
Every employee in CSB is tied up with this quotient with this word called SBS 2030. Sustain, build, scale 2030 is what our vision is. Quarters will come and quarter will go. But SBS 2030 will remain. Thank you very much.
You can see why we are excited about CSB Bank. Pralay runs it with Paresh, full support from Paresh. No question there. I'm just making sure we answer this one. Yeah. Go right ahead.
Hi, Prem. Sorry. My name is Edward Martin. I'm a shareholder. You mentioned the tremendous growth of the Indian economy. Have you considered whether Fairfax companies like BlackBerry and [Toyota Lucent], some of the other, how are they positioning themselves to take advantage of this Indian economy growth?
You didn't purposely use BlackBerry, did you? Yeah. You wouldn't say anything to that. How would you? India is growing significantly, right? What you need is honest people to run a company that to build it. I keep saying that because that's how we so when you look at an economy and I saw that in Greece, once you get business-friendly policies, it's unbelievable what happens. Canada was built on business-friendly policies, less so today. Hope that'll change. But look at the history of Canada. It's all business-friendly. All sorts of entrepreneurs built the country. The United States is very much like that. And a country like Greece, it was almost communist. The business-friendly guy came in about 5 years ago. Majority government in Europe, very few people get a majority government, got a majority government. And then this year, he got another majority, second. He gets another one.
It'll be like India, totally changed. Right now, it's a very entrepreneurial, best country to invest in Europe. And in India, it's the same. Mr. Modi, I mean, imagine changing 1.4 billion population's mindset from socialism being given handouts. And you couldn't mention business. I was reading stuff about the 1950s and 1960s. You couldn't mention business. Actually, when we all grew up no, I came to Canada, never having bought a stock, not knowing anything about business. And Chandran would be the same. No indication of we never owned stock. We never knew anyone who owned stock. That's how it was 51 years ago. This has been changed. One man is not married, as you know. He's got like 18 out of the 24 hours. He's focused on India. Happened to know him.
Unbelievable instinct for the country in terms of what's good for the country, what's good, very business-oriented. That's what you're participating in in India. We don't try to make it too technical. We're looking for good people who want to build a company and who have had a good track record, not that they're going to do something in the future. They had to have done something in the past. Guys like Nirmal and Venkat and Hari and all of those guys are examples of that. So thank you for that question. Jeff, any more questions that you have?
Yeah. We have a couple more, Prem. The first one was about Sanmar. The questioner just notes that 2023 was a difficult year for Sanmar and is asking if that is just a cyclical decline or is there something secular going on.
That's a good question. Vijay is right here. Vijay, their family has been in excess of 50 years in southern India in the PVC business and in chemicals, done a fantastic job. Mr. Deepak Parekh said their family has the highest integrity when we first met him. It's been a very good investment for us. Vijay runs it now. Vijay, your perspective.
Thank you for the question. As Prem and Chandran have described in the annual report, 2023 was a very, very tough year, multiple challenges, PVC pricing, as was described, primarily because of the lower demand in China and the excess sales from China outside both in our two large markets of Egypt and in India. The second big reason was significant currency challenges, mainly in Egypt. As you know, Egypt faced multiple challenges with foreign exchange availability, forcing the company, our large subsidiary there, to export at much, much lower prices rather than sell in the higher-priced domestic Egyptian market. However, staying with 2023, there were lots of positives as well, which were not reflected in the numbers. First, we initiated very significant production improvement measures, primarily in Egypt.
In spite of all the difficult challenges that we had financially, very happy to report that our Egyptian plant, which did have a few teething troubles after their commissioning of the new project in 2020 or so, we worked with a consultant for over a year and a half. We reached 100% operating rate over the last few months, which is a very, very significant achievement. Second, PVC prices themselves have bottomed out globally. I think China, the economy, while we're not betting on a rapid improvement, I think has also bottomed out. The demand is slowly picking up. We've also initiated significant trade defense measures both in India and in Egypt against this excessive predatory dumping that we're seeing. And most importantly, we are refocusing the company quite a bit on our specialty business.
We've commissioned almost $150 million worth of projects in the last few months, both in specialty PVC and in our newest baby, which is specialty custom manufacturing. The specialty PVC business is a very small business. But it's something where Sanmar is a market leader in India with the capacity expansion north of 60% market share. There's no other second producer. And so there's significant opportunity to expand in the years ahead. And as I said, our youngest child, which is the custom manufacturing business and I think Prem and Chandran spoke about the China Plus One manufacturing strategy, we just commissioned a $100 million greenfield plant for putting up a custom manufacturing operation where we cater to innovator chemical companies in Europe and the US who want to outsource manufacturing. All these years, they had primarily only one place to go to, which is China.
Now, they've got a second location to look to, which is India. And there are not too many people in India who can service these large customers, keeping their proprietary technology intact, giving them the ESG that they see, the governance that they see. I think that's something that Sanmar is focused on over the last 10 years, I would say, without doubt, that we are in the top 1% of chemical companies as far as ESG goes. And that stood us in good stead in making these big wins. We did receive our first active ingredient win last year for this fledgling business. That was a very big win for us.
I think all of this, while 2024 is still, I think, turning upwards. I think all of this should reflect in a much better position company in 2025 and beyond as we refocus on our three businesses, PVC. Just staying with PVC for a second, while it does look commodity and does look cyclical, the Indian PVC market is 4 million tons for a population which is slightly larger than China's. And China's similar population has a PVC market of 20 million tons. That's 5 times. And there is nobody in India who is really focusing on taking advantage of this huge growth that we're seeing, specialty PVC, as I said, which is our second platform. We're, again, market leaders by a long way. There's nobody else.
The third, which is our smallest segment, which is our specialty chemical business, custom manufacturing business, again, we see huge headway in the next huge runway in the next many years to come. So I think all around, while we've had a very, very tough year, I think we've really taken a lot of significant steps in the last, I would say, 12, 15 months to position the company much better for the next decade, I would say. Thank you.
Thank you very much, Vijay.
Just to highlight what he said, PVC consumption in India, 4 million tons. In China, same population, 20 million tons. You were talking about manufacturing, one of you. That's the opportunity. And they've been doing PVC for 50 years. They got all the facilities, all the underlying infrastructure for PVC, which is phenomenal. So thank you for that question. Jeff, any other questions from you?
There's still a couple more, Prem.
Go ahead.
One about NCML. What are the prospects for a turnaround at NCML? Excuse me.
NCML is one of the companies that we had a tough time with. It's silos, warehousing. Fortunately, Sanjay Gupta has joined us about 18 months ago now. We've been talking to him for some time. Chandran and Sumit selected him. I met him before. Change is in the air. So a turnaround is taking place. Warehousing and all is very big business in India. But a lot of it is government. He's moving it around to make sure it works. Stay tuned for another year or two, right, Sanjay? Give him a nice round of applause. He's right there. Jeff, is there one more question that you have? Is there a question there? Yeah. Okay. Go right ahead.
Hi. It's Stu Waldman.
Steve.
I was really intrigued by your comment about Singapore. It was really clever. I was hoping you could comment on the India Stack, how it affects the competitive landscape in finance now going forward, and what it might do to margins in existing companies and what it might offer to upstarts. Thanks.
That's when he's talking about India Stack, he's talking about the fact that in India, there's about 1 billion people that have identification either through a thumbprint or through your eyes, which is phenomenal. No other country, I think, in the world has that. And you're seeing that in spades in terms of using your telephone for payments, ordinary people, not anyone stores are using. The guy who has a store uses that. Intriguingly enough, it's called UPI, I think. And one of our guys, Sanjay, is in the digital he's president of digital technology for us. And UPI is prevalent in India. And so that now, an Indian business or individual traveling into France can use that. So it's phenomenal. The French bank can use it.
I know in Greece, our bank, Eurobank, and some of you will be able to meet the guy who runs it, Fokion, and a Greek business guy or a Greek traveler coming to or, sorry, an Indian businessman or an Indian traveler going to Greece can automatically take money from his account, like a bank account in India, which is unheard of. So there's lots of opportunity, lots of opportunity in terms of how you slice and dice and be in the insurance business, how do you find the best risk. Still early days, I'd say. Chandran, anyone you want to say anything, Sumit? Nothing there? You want to add anything? Yeah. It's still early days, huge opportunity. But they're exporting it. UPI is owned by the government. And they're expanding it. And we're trying to use it as much as we can.
I'm sure, Pralay, you're using it, UPI, all of our companies, Nirmal and all will be using that. We're trying to see how we could. Very good point you did make. Thank you for that, Jeff.
Two more, Prem. Question about Jaynix and Maxop. The questioner just says the two most recent purchases by Fairfax India were Maxop and Jaynix. While small currently, they're growing quite rapidly. Could you talk to the long-term prospects for both of those companies?
It's sort of what we talked about in terms of manufacturing, huge opportunity, not only in India so Jaynix is building a new plant, as we talked about, but also exporting because our Indian costs are much, much less, very low. So you can sell once the quality improves, the quality is really good in both of them. And you want to add, Chandran?
Not really, Jeff. Both the companies have all kinds of opportunity that they're following up every day, every week, every month. Capacity is what is limiting them. They're building capacity as we speak. Growth potential is unlimited. Wouldn't you say, Sumit? Yeah.
Tremendous growth potential in India and also elsewhere. They're going from a very small base, very small base.
These companies are also focused a little bit on exports because that's where the better margins are. And this diversification away from China is really helping them.
And run by founders who have a big equity interest in their company. We didn't buy 100%. So they have a big equity interest. And so we're very excited about the possibilities. Jeff, any more questions?
One last question. You alluded to share repurchases earlier as being the best way to deploy capital. The questioner asks, would you consider issuing another Significant Issuer Bid to close the gap between share price and NAV?
Yeah. So we did that when the stock price was very low. What they're saying is buying 10% of the stock, making a significant issuer bid. As the stock has gone up to $15, we're just buying everything in the marketplace. And that's how we're thinking the best thing we can do for our shareholders as opposed to pay a premium. But this is all changes. We look at it all the time. And we've done significant issuer bids, SIBs, they call it. And we've done it in Fairfax. We've done it in Fairfax India. We're looking at doing it again. But no plans at the moment. This has been a really good session. This is what shareholders' meetings are all about, right? So you ask your question. And we try to answer it to the best of our knowledge.
And we've got to, because of your questions, you heard so many of our presidents come out and talk about it. And every one of them was very impressive, no question about it. And so that's what you're participating in, the growth of all of these companies that Chandran and team have assembled over nine years and the opportunity in a context of India where the economy is growing. So thank you all for attending. We have some refreshments. And we look forward to continuing this outside. So thank you very much.