Well, good morning, everyone. Good to see you all. Welcome to Fairfax India's annual shareholders' meeting. We're going to go through the formal part now, and then we'll move on to Gopal and my part of the presentation. Let's see. Okay. I am Ben Watsa, Chairman of Fairfax India, and I will act as Chairman of this meeting. I shall ask Jennifer Pankratz, the General Counsel and Corporate Secretary of Fairfax India, to act as Secretary to the Meeting. I shall also appoint Shirley Tom, 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 thereon to me as chairman.
I can report that as a result of reviewing an affidavit of mailing and preliminary report of the scrutineers, I am satisfied that notice of this meeting has been duly given and that a quorum is present and that this meeting is therefore properly called and constituted. I propose to move quickly through the formal business. I announce that the minutes of the previous annual shareholders meeting, held on April 9th, 2025, are available for inspection upon request to Fairfax India's corporate secretary. As well, I now formally place before the meeting the annual report of the corporation for the year ended December 31st, 2025, which includes the corporation's financial statements for its year ended December 31, 2025 and 2024. The report of the auditor, PricewaterhouseCoopers, on the 2025 statements.
In addition, I declare 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 the meeting. In each case, not less than 95% of all votes that may be cast on such matters at this meeting. Voting today will be conducted by electronic ballot for those attending virtually and by a show of hands for those attending in the room. I will ask that balloting be open to registered shareholders and appointed proxy holders. The polls are now open on the platform at this point. All registered shareholders and appointed proxy holders attending virtually who have properly logged in will be able to see on the screen all motions to be brought forth at this meeting.
Following the presentation of the motions, Jennifer Pankratz will confirm for us when the polls have closed. Once the electronic balloting closes, your vote will be submitted. With your consent, I will now move directly to the election of the directors. I now invite nominations for directors.
I am Debbie Chalkley, and I nominate as directors of the corporation for the ensuing year, Christopher Hodgson, Sharmila Karve, Jason Kenney, Sumit Maheshwari, William McFarland, Satish Rai, Chandran Ratnaswami, Gopal Soundarajan, Lauren Templeton, Benjamin Watsa, and Prem Watsa.
Thank you. Fairfax India's bylaws require that nominations of directors and shareholders be received by the corporation at least 30 days in advance of the meetings in order to be valid. As no nominations for directors other than those set forth in management information circular were received 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 corporation. 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 now invite a resolution regarding the appointment of an auditor.
I am Jennifer Pankratz, and I move that PricewaterhouseCoopers LLP be appointed as auditor of the corporation to hold office until the next annual meeting.
I second the motion.
For those attending in person, I would ask that you please vote by a show of hands. All in favor? Contrary? Okay. 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 at this meeting.
Mr. Chairman, the voting is now complete and the polls are closed.
Okay. I have been advised by the scrutineers that the proxies deposited for the meeting have been voted. I can confirm the nominated directors have been appointed as directors of the corporation to hold office until the next annual meeting. In addition, I confirm that PricewaterhouseCoopers has been appointed as auditor of the corporation to hold office until the next meeting. We will file a report on SEDAR, setting out voting results following the meeting. I propose now to terminate this meeting. After that, Gopal and I would like to talk to you about the operations, and then we will proceed with our Q&A session. I now invite a motion for termination.
I move that this meeting be terminated.
I second the motion.
Okay. The meeting is now terminated. Okay. Now, good morning, ladies and gentlemen, and a warm welcome to the 11th annual meeting of Fairfax India. It's a privilege to see all of you. I am Ben Watsa, as I said before, Chairman of Fairfax India. Fairfax India remains the first and only publicly listed company in Canada designed explicitly for sustained large-scale investment. I just wanted to walk you through, frame the discussion at a high level. My part today has four items. First, an update on India's progress in describing the environment in which our investment companies are operating in. Looking at Fairfax India, the vehicle, and the valuation Fairfax India is available at. Gopal will take you through Fairfax India and our operating companies in more detail. After our remarks, we'll open it up to you, our shareholders, for questions.
As always, all the talent of Fairfax India is in the room, including Fairbridge, our on-the-ground team in India led by Sumit, plus the managers of our businesses we've invested in. We look forward to the discussion. I'm going to start with the compounding opportunity. This shows the 25-year market returns for the BSE 500, India's 500 largest companies, compared to the S&P 500, America's 500 largest companies in U.S. dollars.
Now, Prime Minister Modi has been an important contributor to India's progress, including supporting a more business-friendly environment and bringing more people into the fuller economic participation. The point of this slide is broader than any one leader. Indian equities have compounded strongly across different political cycles. They have not moved in a straight line, but over long periods of time, compounding has been very powerful, including outperforming the U.S. over the last 25 years, despite its success with technology over the last decade.
The next two slides have been updated from last year, and we're comparing India to China, the U.S., and we have Canada because we live there, and the world. As a reminder, Canada has 42 million people, and I gave you this insight last year. Every two years, more than 42 million people are born in India. What makes India so unusual is it's not just the growth, it is the growth at scale. Plenty of countries can grow large from a small base, but few can compound at India's rate with a population this large, 1.5 billion people. The largest in the world.
The economy is already of meaningful size at over $4 trillion. India lags China by about 17-18 years in economic development. You can see where India is heading by using China as a guide. India's much higher GDP growth rate will lead to higher per capita GDP. Later, we'll show you how this is spreading throughout the population. The combination of inclusion and rising incomes is what makes the opportunity so compelling for long-term investors.
Now, here we show India's progress to becoming the third largest economy in the world. It's in dark blue. Now, India's GDP could reach $10 trillion in the next decade, meaning 2035. Roughly 5x when we started Fairfax India in 2015. This is an enormous change in such a short relative period of time. India is now recognized as a market of substantial scale, capable of attracting global capital, delivering not just competitive returns, but world-leading returns and offering decades of growth. We think the move to becoming the world's third-largest economy will reinforce that. Despite the tariffs in 2025 to more recent challenges in 2026, it wasn't as smooth as we perhaps hoped, like AI, high oil prices with the war, India still should reach the third-largest economy in 2029, overtaking Germany.
Now, this chart compares real GDP growth rates for 2025, showing India standing out among emerging markets. We also show the actual GDP size of each country within the bars at the bottom. India is a much larger economy than most emerging markets outside of China, and India is growing much faster than most. An economy like Vietnam is one-eighth the size.
Now, this chart shows the next five years, the economies, what they'd look like in 2030. India is also projected to continue growing at attractive rates over the next five years. That matters because it gives businesses operating in India a very strong underlying tailwind. It is easier to build good businesses in an economy that is expanding very quickly, and that will continue to give us opportunities to invest in more entrepreneurs like the ones in the Fairfax India portfolio.
Before I move on to the next slide, look at Vietnam there at $700 billion. That's what it's projected to be, that size, in 2030, and India is at $6.6 trillion. Now, India's annual GDP incremental growth is becoming country-sized, and this chart makes that visual. By 2030, India's nominal GDP is forecast to grow at 10.8%, so that includes inflation. It'll add roughly $600 billion in a single year. To put that in perspective, a single year's gain exceeds the entire economies of Singapore, the UAE, Thailand, Vietnam, and nearly every country shown on the list. It is as if India is adding one of these nations to its economy every single year. The growth level India has reached is simply astounding.
Now let's go to why Fairfax India is unique. This portfolio chart shows Fairfax India's $4 billion portfolio split between public and private investments. A defining characteristic of Fairfax India is that we are not limited to public markets. Nearly 70% of our investments are in private companies. That flexibility lets us back businesses with the most attractive long-term compounding attributes, whether listed or not. While private, we value them very conservatively, and we're going to go over that. Much of the portfolio is carried below where public markets might value it today. We'll give some examples later on.
Here we illustrate how Fairfax India's portfolio positioning is different than the benchmarks. We compare against the BSE 500, again, the 500 largest companies in India. If you were to buy an ETF, most likely based off the BSE 500 or the MSCI India, the weighting would be like the gray bars. This is where Fairfax India is quite different from the benchmarks. We're not trying to look like an index where over half your investment would be in companies over $25 billion in market cap. The benchmark has very little in companies under $4 billion. Fairfax India's largest company has a value under $4 billion. We are allocating capital to businesses and sectors where we think the long-term payoff is very attractive. We're very different than the benchmarks, and intentionally so.
Now, these are two IPO charts for India. The left is the number of IPOs in India in recent years, and the right is the amount raised. This is important for our private holdings. India's capital markets continue to deepen, and the IPO market was very active last year. In 2025, there were 367 IPOs raising nearly $23 billion. India represented nearly 30% of all global IPOs. That gives us confidence that over time, there will be multiple paths to value realization for our private companies. Not just through ongoing compounding, but also through a much more developed market for listings, spin-offs, and exits.
Now, this table compares India to major emerging markets on metrics such as listed company depth and market characteristics. This is a feature we value because it shows the breadth of opportunity. Among emerging markets, India is unusual in both company size and future prospects. It also stands out for sheer number of listed companies and the economy's consumption-driven nature. Korea and Taiwan, despite much smaller populations, are more developed markets. The average person makes a lot more there. They have a higher percentage of listed companies with market caps above 250 million. That is what happens when economies develop.
With a large population, the probability also rises that a higher percentage of public companies will exceed 250 million as India develops. For example, China, not shown here, has nearly 80% of its public companies above the $250 million market cap threshold. India could move in that direction. In 20 years, perhaps 5,000 Indian companies could have market caps above $250 million, up from 1,148 today. That would increase the odds that some of Fairfax India's smaller businesses can grow larger while giving us far broader hunting ground than many other emerging markets could offer.
Here we show emerging market funds allocations to India from 2023- 2026. Over 1/2 the money invested, and sometimes up to 80% of the money invested in India by foreign institutional investors, comes from emerging market funds. Despite India's strengths, many emerging market funds remain underweight India, and in fact, they've reduced their weight in India. We think this is notable. We believe investors are allocating to emerging markets primarily to diversify away from the U.S. and its AI-dominated themes. Given India's size today, we believe it should account to close to 20% of emerging market portfolios, over double what these emerging market funds have invested today.
This chart shows where the average emerging market fund has 40% of their investments. Most emerging market funds have leaned heavily into AI-linked stocks, and we understand why. The enthusiasm is real. Many argue India offers little direct AI exposure. Investors want diversification, but investment managers want AI. Our approach has not changed. We want good businesses at sensible prices that can compound value over a long period of time. Nearly all of our businesses should benefit over time from AI-driven efficiencies, much like businesses benefited from the internet-driven collapse in communication and data costs more than 20 years ago. Like any portfolio, we have risks, but not ones tied to who wins the AI gold rush.
Here's a summary of Fairfax Financial, our parent, and its investments in India. Some shareholders have told me they don't need to invest in Fairfax India because they already own Fairfax Financial. Here we just softly demonstrate, if you want more exposure to India, you need more Fairfax India. Fairfax Financial manages $7.3 billion of Indian investments, an impressive commitment. Of that, $4.3 billion is Fairfax Financial's share. Roughly 5% of its investment portfolio is linked to India. If you believe in India, the most efficient way to express that conviction in public markets is through Fairfax India. Fairfax India gives you 100%. Enough said.
Okay, now let's turn back to the indices within India. Here is a comparison of Fairfax India versus the small- and mid-cap indices, focused on growth and valuation. We think Fairfax India offers hard-to-find combination, higher growth at more reasonable valuations, supported by India leading the world among major countries in GDP growth. Our P/E is 66% below mid-cap index and 33% below the small-cap index. On revenue growth and profitability, we far outperform. We far outperformed the index on a six-year compound annual growth rate, CAGR.
Taken together, those valuation and growth characteristics give us a much lower risk profile than the index. We are better positioned because our team assesses each company's underlying economics and the quality of the management teams we back. The indices have lower growth and profitability profiles because they include all the poor-performing businesses in the index we set out to avoid. I thought I'd touch on tariffs. This is the U.S. tariff timeline on India.
Now you may have heard last year that some Americans consider the most beautiful word in the English language, tariff. One American. The U.S. announced 25% tariffs on India on April 2nd, 2025, and then they announced they would raise them to 50% on August 6th, 2025, my birthday, so happy birthday. On February 6th, 2026, they announced the tariffs would be reduced to 18%. Yes, there was some near-term noise and uncertainty, and that fits the U.S. president's pattern of creating chaos to try and end up with something better than the U.S. had before.
Even so, India's economic fundamentals remain strong. Very small deficits, low debt to GDP, high economic growth, low inflation, high foreign currency reserves, well, foreign currency reserves are at a good level. More importantly, for our portfolio, just 3% of all revenue from our companies is exported from India to the U.S. Only 3%, versus roughly 25% for the BSE 500. Most of our businesses' revenue is focused on domestic consumption.
The India story. Again, very different from the benchmark index. Also, the U.S. tariffs brought India closer to many countries, including Canada and China. Prime Minister Modi went there for the first time in seven years, and India signed an important trade deal with the EU. As John Templeton said, "Trouble is opportunity."
Okay, let's go. Two major themes. Here is a portfolio chart highlighting infrastructure as Fairfax India's largest exposure of its $4 billion portfolio, $2.2 billion in BIAL. Infrastructure assets, well located, well managed, can combine durability, pricing power, and very long runways for growth. That brings us naturally to BIAL, which remains our single largest investment. The city of Bengaluru or Bangalore has one of the highest per capita incomes in India, where BIAL, our airport, is located. It is the Silicon Valley of India, home to more than 40% of the 126 unicorns in India. India actually ranks the third largest for unicorns in the world.
This slide is a table comparing major global airports and the highest trafficked global airports in the world. I'll keep showing this because we'll be on this list soon. BIAL currently serves 44 million passengers annually. That's more than Munich, and we're nearly where Toronto's Pearson Airport processes per year. BIAL anticipates growth to 80 million by 2029 and reach 100 million by 2040. We're nearly to be a top five airport, and that's only three to four years away.
Now, here's a table showing recent airport transactions. BIAL has tremendous potential and has already been executing. It's scaled, it's a high-quality platform, not a concept asset. Located in one of India's fastest-growing cities with increasing air traffic and growing international connectivity, meaning high margin business. Its long-term economics are driven not only by passenger growth, but by non-aero spend, real estate development, and broader surrounding real estate opportunity. When we compare BIAL to recent global airport transactions, it also appears to offer compelling value. At roughly 10x EBITDA, the implied enterprise value is about $3.8 billion, well below the average of 21x . We're at 10x . The average transaction in the last few years has been 21x for comparable airport assets in recent years.
Now, no two airports are identical, but the comparison is still instructive. Assets of this quality have generally changed hands at much higher valuations. Now, the pie chart below shows the second-largest exposure for our portfolio, being financial services at 29%. Between infrastructure and the financial sector, it covers 84% of our portfolio. Explaining some characteristics of this sector is very important.
The three largest holdings of the portfolio are CSB Bank, a private sector bank that also does a lot of retail and small business lending. IIFL Finance is a diversified non-banking lender. Then IIFL Capital Services, which is a full- service capital markets firm. Gopal will expand on these companies and metrics for banking in his section. What I'll delve into is why financials are so attractive for investment at this moment in time, and especially after the last 11 years of progress.
This table is from 2015 when we began Fairfax India to 2025. Why financials are so exciting is because you have rising incomes. Plus, financial inclusion has expanded dramatically for 1.5 billion people. We've mentioned in the past the bank accounts in prior years of growth, but the number of borrowers with loans has tripled in the last 11 years. Demat accounts, which is the equivalent of investment accounts, have surged from 23 million to 216 million, and could reach 300 million by just 2030. Underpinning all of this explosion is internet access, because without affordable data and mobile access, this scale of financial inclusion simply would have not happened.
Another comment I've heard on India was that only the ultra-wealthy are participating in India's growth. I wanted to show some progress that's been made. Since liberalization in 1991, when India started to open its economy, the top three cities, Mumbai, Delhi, and Kolkata, held 56% of bank deposits. Today, the top three states. The last chart was the top three cities. Now we're showing the top three states. The bank deposits have dropped to 39%, and Kolkata state doesn't make the top five. In 1991, those cities only represented 4% of the population, but they had 56% of the bank accounts. Today, the top three states represent 27% of the population, yet a reduced 39% of deposits. Financial inclusion is growing. Obviously not perfect, but vastly improving.
Now, here we chose 1991 again because it's when India opened its economy. In just 30 years, and largely over the last 11 years since Prime Minister Modi, the defining challenges that held India back have been largely solved or are well on their way to being eradicated. What is striking is that these were not production problems. They were distribution problems. Getting electricity, clean water, healthcare, and financial access to 1.5 billion people is a governance challenge of extraordinary complexity. This government tackled it head on. This is solving Maslow's hierarchy of needs for the individual in India.
When basic needs are met, human energy shifts from survival to opportunity. A farmer with electricity, a bank account, and healthcare is not just better off, he is now a productive participating member of the economy. Remember today, over 40% of India's population depends on agriculture for income. Now, India didn't just expand infrastructure. It built the equivalent of entire developed nations in a decade. The incremental additions alone since 2015 match the total footprint of a Japan, a France, or Germany, depending on the metric. This is the critical link to financials. Physical infrastructure is the delivery mechanism for financial services. A new road connects a rural merchant to a supply chain and to working capital loan.
A new airport unlocks banking, insurance, and investment products that follow. As India's middle class grows by roughly half a billion through 2025, the demand for mortgages, consumer credit, insurance, and investment accounts will be unprecedented. This slide shows the loan market share shifts between public or government banks and private sector banks over the last 20 years, and it tells an important story.
Twenty years ago, private banks held less than 20% of the total loans in India. Today, that has nearly doubled to 40%, a steady gain taken directly from the public sector banks. We believe this trend has significant room to run, taking more share from government-run banks. The reason is structural. Public sector banks are constrained by government ownership in hiring, incentives, and innovation. Private banks attract better talent, deploy better technology, and are relentlessly focused on returns. The incentive gap does not close, it compounds. Our financial holdings, CSB Bank among them, are well positioned to continue taking share for years to come. The tailwind is structural. The opportunity is large.
One of the best ways to participate in a fast-growing economy is through real estate and banking. However, real estate is difficult to access at scale and in a diversified way. All your money might be tied up in a couple buildings, as an example. Banking is different. It touches every sector of the economy simultaneously and profits from whichever sector needs capital to grow. This chart makes the case. Since inception, the NSE Nifty Financial Services Index has compounded at 17.3% over 22 years, a cumulative 3,200%. The BSE 500 outperformed the S&P 500 and returned 14% in local currency. That 3.3% annual performance gap sounds modest, but compounding over 22 years, it produces nearly double the cumulative return. That is the math of compounding, and it's why the financial sector is our second largest.
Okay, last section. This is the discount, and here we show book value per share since inception versus the SENSEX. The number that matters most is book value per share, the true measure of lasting value creation. Since IPO, book value per share, excluding buybacks, has compounded at 7.3% annually versus 6.6% for the SENSEX. With much of the portfolio privately held and conservatively valued, the true gap may be even wider. Now we add buybacks. Book value per share, including buybacks, compounded at 6.6%, adding 65 basis points per year, earned by repurchasing shares below intrinsic value. Since inception, we have bought back nearly 23 million shares for nearly $300 million below book value.
As Buffett notes, you reduce the share count at the right price and the remaining shareholder owns a larger piece of a more valuable business. Together, buybacks and business growth has added 130 basis points annually, translating to, well, 130 basis points annually outperforming the SENSEX, and that translates to 28 percentage points of cumulative outperformance over that SENSEX. If projected forward another nine years at the same rates, that gap could exceed 100%. Small differences in compounding, sustained long enough, produce extraordinary results. Of course, we aim to achieve even higher results.
Now, here's the sum of the parts slide that we showed last year, and we updated this, and we have described this as a discount on a discount, and I think that remains the right way to think about it. BIAL is held at a conservative valuation and is worth 93% of the market value of Fairfax India. You're getting all of the other investments essentially for free, including all of our financial service investments. As always, you should make your own assumptions, but our view is that the current market price does not fully reflect the long-term value of the collection of businesses we own.
Just in conclusion, four points. India the country is a rare large-scale compounding environment. Fairfax India is a unique vehicle to grow in that environment. There are two major themes that we have, infrastructure and financials. That's 84% of the portfolio, and we trade at a large discount.
Now, our CEO, Gopal, will take you through Fairfax India in more detail. Over to you, Gopal. Thank you.
Thank you, Ben. Am I audible? Thank you, Ben. Good morning to all of you. I intend to summarize Fairfax India's 2025 performance and the five largest investments in our portfolio. It has been over 11 years since Fairfax India began its journey, and our core values have stayed the same. Our Founder, Prem Watsa, has emphasized this aspect at every AGM. To quote him, "We believe deeply in decentralization that it helps drive organic growth. You would see that culture that drives our growth acts as a moat that gives us an edge." You'll find them well amplified in the book, "The Fairfax Way," released last November.
The profound influence of these core values, decentralization, trust, and transparency, has influenced the entire leadership team of Fairfax India and our investee companies. Many of the leaders of our investee companies are here with us today. This value system permeates our approach in Fairfax India and the investee companies. In our communication to you, we outlined India's resilience as a country and its economy under the current global conditions. Notwithstanding the short-term underperformance of Indian equities, for us, it is always about the long term. I would also emphasize that our investee companies are resilient, well positioned for strong growth, and maintain a disciplined approach to business with strong financial conditions.
Here is a summary of our investments. We have detailed information about each company in our letter and accompanying annual report. Our companies are well positioned for growth, as I said, as evidenced by their strong growth over the past six years, which has outpaced India's nominal GDP growth substantially. By valuations, as Ben had already shown in one of the slides, and you can see here as well, the valuations are better than the benchmarks for Indian equities. Specifically, seven of them grew by over 20%, and two grew by over 15% CAGR. If they continue to grow in 15%-20% range, these companies only will double every three to five years, depending on their respective growth.
Two of our investee companies are under a turnaround, as we have always said, and I'm happy to report NCML turned around already, and we divested Sanmar very recently after the December closing. We didn't want to commit more capital to keep invested in it. We needed to prioritize what is in the best interest of Fairfax India and our shareholders. Fairchem is expected to emerge from a temporary down cycle while maintaining a very healthy balance sheet, and the company also did recently their buyback. Fairfax India's existing investments have generated a 10.4% return since inception, while public companies have returned 18.5% and private companies have returned 7.5%. The monetized investments have generated even better returns.
The investment exits are driven by our fundamental assessment of the situation, as we did in the case of National Stock Exchange, and more recently, Sanmar. It could be due to regulatory compliance, as we did in the case of CSB Bank last year. Sometimes the founders want to [champion], they actually request, so we did in the case of Privi and Saurashtra. Sometimes we create additional liquidity in the market so that we improve the investor traction. We did in the case of Fairchem a few years back.
Cumulatively, we have realized gains of over $900 million, and with dividend and interest included, over $1 billion to date. While we don't like our shares trading at a discount to its intrinsic value, we have been buying back shares, adding value to the continuing shareholders in the process. During 2025, we bought 600,000 shares for $10.4 million. Since our inception, we have bought back 23.2 million shares, representing almost 15% of the total shares issued for $304 million at an average price of $13.09. Ben elucidated in one of his slides how the buyback has been so accretive to the book value per share, and I would add that it has also compensated for the dilutive impact of issuing 8.2 million shares to settle the first two performance fees.
Yeah, there has been no accrual of performance fees in 2025. The total fees incurred to date, including the performance fees, as a percentage of average cash and investments, amount to 1.8% per annum. Fairfax includes all expenses of Fairfax India and we feel it's fair and reasonable. Book value has grown from $9.50 to $22.94, while investments per share has grown from $9.35 to $30.14 over the past 11 years. Currently, the net worth is $3.1 billion, with over $4 billion in total cash and investments, and 134 million shares outstanding. Fairfax India is well positioned with $1.3 billion in cash and public securities against a total borrowing of $500 million senior notes, with a leverage ratio of only 16% over common equity and also supported with a revolving credit line of $220 million.
Now let me move on to our five largest investments. In addition to the overview covered in this presentation, our leaders are here present today, and we will have the opportunity to hear directly from them during the Q&A session. Bengaluru International Airport Limited. BIAL is a flagship infrastructure asset and one of the most compelling long-term investment opportunities in India's rapidly expanding aviation sector.
India's airports have almost tripled in the last 24 years from 50 to 164. This growth primarily reflects a rising middle class with travel aspirations that is young. For instance, the average age of passengers traveling via Bangalore Airport is 28 years, and rapid urbanization, large aircraft orders by Indian carriers over 1,800 in number, which is supporting the expansion of aircraft in operation from current around 850 to 1,400 by 2030. Also supported by improving regional connectivity, thanks to the UDAN scheme. Bengaluru is strategically positioned to capture a disproportionate share of this upside.
We now own 74% of BIAL, with the rest being owned equally by the provincial and the federal governments. BIAL is now 55% of our total investments. Under the exceptional leadership of Hari Marar, Managing Director and CEO, BIAL has established itself as an airport synonymous with quality, superior customer service, technology, and innovation. It is evidenced by the numerous awards that they have won, both nationally and at global stage. Since Fairfax India's initial investment, BIAL has demonstrated consistent operational excellence, disciplined capital allocation, and strong governance. For more information, I would suggest listening to the podcast featuring Hari Marar. It can be accessed on the Fairfax India's website.
In 2025, BIAL handled 43.8 million passengers, a 7.6% increase over the previous year. Significantly, the international traffic grew by 28.7%, the highest among major Indian airports. High-yielding international passengers now contribute 16% of the total traffic, with a clear focus on further improving this number over time. Last year, we shared the news that two leading domestic airlines, Air India and IndiGo, forged a transformative partnership with BIAL to position Bengaluru as a premier aviation hub. IndiGo, the largest domestic airline, has already demonstrated this with the introduction of new destinations connecting India to many locations in Asia and elsewhere for the first time. We also shared with you that both these airlines are setting up a large MRO facility at Bengaluru.
BIAL's cargo operations also hit an all-time high. In particular, 26% of India's total perishable exports pass through the airport, making it the number one airport for such cargo movement. BIAL is becoming a logistics hub for Southern India. On the financial front, BIAL delivered outstanding results. In percentage terms, BIAL's revenue increased by 26% year-over-year. Aero revenue increased by 39%, while non-aero revenue and other operating income increased by 54%. EBITDA increased by 29% over the previous year to $374 million, and profit after tax of around $108 million increased by 119% over the previous year.
BIAL's valuation is primarily driven by three revenue streams, aeronautical revenue, non-aeronautical revenue, and the monetization of approximately 460 acres of land available adjacent to the airport, which is earmarked for real estate development. The aeronautical revenue is governed by regulated aeronautical tariffs determined by the Airports Economic Regulatory Authority, AERA. These tariffs are set for a fixed period of five years and are designed to allow BIAL to earn a return on equity of approximately 15.05% on its approved regulated asset base, RAB.
The fourth control period, CP4, commenced on 1st April 2026. BIAL's management has submitted its business plan for CP4, including the detailed CapEx program to be implemented over the CP4 period. We expect to receive AERA's approval in a timely manner, supported by BIAL's impeccable track record of on-time project delivery and execution within sanctioned budgets. BIAL currently has the capacity to handle 50 million passengers, and BIAL's growth plans will increase its capacity from 50 million to 80 million by 2029 and to over 90 million passengers by 2033, have a significant impact on its valuation. This will be achieved by adding a phase 2 expansion to Terminal 2, ongoing refurbishment of Terminal 1, and rebuilding a new third terminal. The total cost is approximately $2.5 billion to be funded through internally generated funds and debt.
BIAL is currently the only airport to receive the strong domestic credit rating of AAA, which we reported last year, which has enabled it to refinance the entire project loan for the phase 1 of T2 through a bond issuance during the year. In the process, we saved 120 basis points of interest per annum.
Non-aeronautical revenue is a key strength for BIAL, growing 38% in 2025 to $294 million. Driven by innovative retail concepts, digital initiatives, and loyalty programs, non-aero spend per passenger reached $14.8 in 2025. BIAL's hospitality platform, 080 Lounge, is a global benchmark and was awarded the best lounge of the year, both regional and global, in 2025.
On the real estate front, significant progress has been made. We have shared with you the various initiatives undertaken during the year, including approximately 94 acres of incremental development, totaling in all around 128 acres so far. This leaves approximately 335 acres available for future development. Coupled with the upcoming metro rail connectivity, which we expect to happen by end of 2026 or by early 2027, the airport city is catalyzing the growth of North Bengaluru and generating immense value in the process.
BIAL is one of the world's sustainability pioneers in aviation, including in reducing greenhouse gas emissions and achieving water positivity. The airport has been running on 100% renewable energy for a few years now. Valuation of BIAL at $2.2 billion, implying an equity value of approximately $3 billion for the entire company. Excluding any cash flow from the real estate monetization, this is 13.8x normalized free cash flow. Yet, this valuation does not reflect the full intrinsic value. If one considers the near monopolistic characteristics of airport assets and significant embedded value in the growth optionality that's available in BIAL and our conservative cash flow assumptions and the future monetization of real estate, which is not counted in the 13.8x multiple. These factors provide a long runway for compounding value, aligned with Fairfax's long-term investment philosophy.
As for Anchorage, in 2019, Fairfax India established Anchorage Infrastructure Investment Holding as its flagship vehicle for investments in airports and other infrastructure projects in India. We are still awaiting approvals to complete the Anchorage IPO, which has taken much longer than we had expected. We are excited about the prospects of BIAL and the growth and the potential of the aviation industry in India. Financial services.
As Ben has said, financial services are a significant part of our investments. I will touch upon our three significant investments in the financial sector. Before that, I'll just give a quick update on the sectors, what happened in 2025, and what is the state of the sector, despite all the progress that has been made so far. India still remains a market with substantial untapped potential. For instance, the RBI's financial inclusion index stands at 67, up from 43 in 2017. Only half of the account holders have ever made a digital payment, and just 15% of them have ever accessed a credit from the formal system, either banks or NBFCs. Mortgage penetration is so low, only 11% of GDP compared to China and U.S., it's far, far lower. Pointing to a long-term growth headroom in the sector.
Reflecting this confidence in this opportunity, the banking and financial sector attracted the highest FDI inflows of any industry in 2025, including seven landmark transactions totaling $12.6 billion. To cover quickly on the regulatory measures in 2023, 2024, we have discussed with you in the past, we have also outlined in our letter, RBI aimed at moderating the consumer-oriented lending temporarily, which slowed the sector growth, with bank credit and deposit growth moderating to 11%. This contrasts with the sector's 25-year track record of compounding growth of over 14% in deposits and 16% in advances, which underscores the durability of the long-term growth trajectory. By September 2025, most of these measures were reversed by the central bank, Reserve Bank of India, which has played a pivotal role, shifting in 2025 to a more accommodative stance.
With 125 basis points of policy rate cut, 100 basis- point reduction in the cash reserve ratio, CRR ratio, introduction of expected credit loss framework for the system, and RBI also announced its intention to allow the local banks, Indian banks, to participate in the acquisition financing. RBI has also been injecting durable long-term liquidity into the financial system, therefore improving the overall financial conditions. These moves actually signal the long-term confidence in the stability and expansion of credit markets. India's banking system remains resilient with gross NPA at 2.1%, a 14-year low, and net NPA of just 50 basis points and a capital adequacy ratio for the whole system at 17.2%.
CSB. CSB is one of the oldest private sector banks in India. We own 40% of the bank and our investment is valued $ 354 million at the year-end.
Under the leadership of Pralay Mondal, CSB Bank has embraced a disciplined transformation journey. In 2019, recapitalization positioned the bank for growth. Today, CSB operates across India, particularly in the southern and western states. In 2025, CSB delivered a 28% growth in loan advances against the industry growth of 11.3%, a 21% growth in deposits compared to the industry growth of 11.1%, and 46% growth in the gold loan portfolio. The yield on advances increased by 15 basis points to 11.3%. Net interest income grew by 9.2%. Net interest margin remained healthy at 3.7%. Net asset quality is excellent with a gross NPA of 2% and net NPA of 70 basis points and the provision coverage ratio stood at 80%. Its return on asset is very healthy at 1.2%. Its ROE is at 13% at its capital adequacy ratio of 19.4%.
The bank is under-leveraged with the potential for better profitability in the future. The bank has also executed major technology upgrades during the year. The new core banking system, risk, payments, and digital platforms, laying the groundwork for scale under the bank's 2030 framework called Sustain, Build and Scale. We believe CSB is now in the scaling phase and is on track to become a full service modern private sector bank. We are very excited about CSB's long-term prospects. IIFL Finance. IIFL Finance has grown into one of India's most diversified NBFCs, with an AUM of $10 billion, a five-year CAGR of 18%, and serves more than 4 million customers across India. Let me briefly touch upon the NBFC sector's performance. NBFC sector continues to play a key role in reaching the underserved segment of the society.
Credit extended by NBFCs have grown to 14.6% of GDP and represents over 21% of India's overall credit market, compared to over 50% in the U.S., up from 12% in the pre-Lehman crisis year of 2007-2008. NBFCs have thrived despite many challenges such as the IL&FS crisis, the pandemic, and the regulatory impediments that we discussed sometime back, and growing from $347 billion in 2018-2019 to $586 billion by September of 2025. The fiscal year ending March 2025, NBFC credit growth was over 19% compared to just 11% for the banking system.
Under the stewardship of Nirmal Jain and his long-term partner, R. Venkataraman, who is with us today, the IIFL Group has evolved into a leading domestic financial conglomerate. We own 15.2% of the company, valued at $438 million. IIFL Finance has consistently grown over the years, largely driven by organic growth to emerge as a significant player across its key segments, gold loans, housing finance, small business finance and microfinance. IIFL has successfully regained its market share in the gold loan segment following the lifting of RBI ban in September 2024.
The gold loan market is estimated to be $49 billion in India, with NBFCs accounting for 50% of the gold loans market. IIFL currently holds a 13.2% share of the NBFC gold loan market, recovering from 6.2% in September of 2024, after peaking at 15% prior to the RBI action. This accomplishment is despite intense competition from banks and new entrants. The company continues to scale its balance sheet through co-lending and asset assignments, primarily with banks, which now represents approximately 35% of their AUM.
Two thousand twenty-five marked a year of strategic recalibration for IIFL across their portfolios of MSMEs, microfinance, housing finance, alongside the rebuilding of the gold loan franchise. AUM grew by 38% year- on- year, with gold loans accounting for 44%, housing 32%, and microfinance 9% of the portfolio. Revenue increased 8%, while net income rose 91%, but resulting in an ROE of only 10%. The lower ROE actually reflects a one-time increase in provisioning on investments, their larger equity base post rights issue, which we did do just soon after the RBI ban, and higher capital levels at IIFL Home Finance of around 47% following the 2022 capital infusion.
Asset quality remains stronger than the industry average, with gross NPAs at 1.6%, down from 2.4% in the prior year, and net NPAs at 80 basis points. Credit costs were elevated in certain segments, particularly microfinance and unsecured small business lending, reflecting the broader macro and industry-wide trends rather than company-specific stress. Provisioning remains conservative with the provision coverage ratio of 92% as of December 2025, and rating standards are prudent with loan to value ratio of 71% for home loans and only 61% for gold loans, while they are allowed to finance up to 90%, and 47% for secured business loans. The portfolio is very well diversified, with 98% of assets in retail, robust capitalization, and net interest margin of 7.5%. This balance sheet strength positions IIFL well to capitalize on the opportunities across NBFC sector in India.
Now moving on to IIFL Capital. IIFL Capital is a leading capital market player offering full service capabilities across brokerage, investment banking, risk management, and financial product distribution. The platform is supported by a strong research franchise covering over 280 companies, serving over 1,000 institutional clients and broad retail base of over 3 million clients. As Ben outlined, India's capital markets have deepened significantly over the past decade, driven by strong domestic investor participation. More than 190 million securities accounts have been added, while active NSE clients and equity cash market volumes have grown at approximately 26% and 18% CAGR respectively.
The derivatives segment has expanded particularly rapidly, with volumes growing at about 85% CAGR over the past five years, reflecting greater liquidity, sophistication, and investor confidence. At the same time, domestic savings are increasingly flowing into financial markets, strengthening market depth and stability. Mutual fund accounts and AUM have grown at roughly 23% and 22% CAGR. Monthly SIP inflows, systematic investment plan inflows of $3 billion-$3.5 billion highlight rising investor discipline and provide a solid foundation for sustained growth.
To enhance investor protection, SEBI, the Securities and Exchange Board of India, the market regulator, tightened regulations around the retail participation in derivatives trading in late 2024. The measures included higher margins, larger contract sizes, limits on the weekly expiries across exchanges and uniform transaction charges. This led to an immediate drop of 38% in volumes, activity has since partially recovered and it still remains of course, 19% below the peak volume that we got in November of 2024.
Despite near-term revenue volatility, these measures reinforce market resilience and the capital markets industry remains structurally positioned for long-term growth supported by rising participation, financialization of savings and strong domestic investor base. We own 27.2% of IIFL Capital. In 2024, IIFL Capital made the strategic entry into wealth management business, investing in senior leadership, new offices and technology platforms. This business we expect is going to remain in an investment phase over the next 18-24 months. The addressable asset pool for high net worth and ultra- high net worth clients is estimated around $1 trillion currently. Bain & Company projects India's serviceable wealth to grow from current $3 trillion to over $9 trillion by 2035, with specialized wealth under management expanding from $300 billion to $1.6 trillion, implying an 18% CAGR.
Backed by a strong talent base, IIFL Capital is well positioned to capture its due share of this structurally expanding market. 2025 was another strong year for IIFL Capital's Institutional and Investment Banking franchise. The retail business, accounting for 65% of total revenue, was impacted by regulatory actions I just discussed some time back, along with planned investments in building the wealth management platform. As a result, overall revenue declined 7% and net income declined 25% during the year.
As India's capital market continues to deepen, now ranking fifth globally by market capitalization, IIFL Capital remains one of the top three domestic players, supported by brand equity and a loyal client base. We expect it to remain an attractive long-term investment, benefiting from structural market growth and operating leverage as the recent investments in wealth management and others fructify.
Seven Islands Shipping. Let me briefly introduce you to Seven Islands. Seven Islands Shipping Limited is the second largest private tanker shipping company in India and is based in Mumbai. It transports oil products, crude and LPG along the Indian coast and in international waters, holding a 25% market share. Seven Islands is a very good example of what can happen when Fairfax India finds an outstanding entrepreneur, backs that person with long-term capital and allows management to keep building the business. It really exemplifies Fairfax India's investment philosophy. We are fortunate that Seven Islands' management team has created a short video presentation that provides an excellent overview of the company and its growth trajectory. Can we have the video?
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[Presentation]
I hope this has given you a clear sense of the quality of the business and the people behind it. We are very proud to partner with Captain Pinto, who is also here with us today, who founded Seven Islands and built it into one of India's leading private sector tanker shipping companies. The company's track record has been exceptional. Since 2019 investment of $84 million for 48.5% stake, Seven Islands has generated $388 million in free cash flow, and Fairfax India has received approximately $70 million in cumulative dividends. This has been a highly successful investment for us. Today, we carry Seven Islands at under 5x earnings and 4x free cash flow. We believe its intrinsic value can compound meaningfully over time as India continues to develop. Please join me in thanking Seven Islands for an excellent video. Thank you.
Fairfax India has got investment in several other companies. In manufacturing, we have four manufacturing companies comprising of 8% of our portfolio run by excellent founders we are proud to partner with. Fairfax India now has Fairchem Organics, an oleochemical company, Maxop Engineering, an aluminum die casting and machining company, Jaynix Engineering, an aluminum electrical parts manufacturer, and Global Aluminium, manufacturer of extruded aluminum profiles and parts.
These businesses have delivered strong, consistent growth, with Fairchem revenues compounding at 9%, and those of the other businesses compounding 18% to 22% over the past six years, supported by disciplined capital allocation and strong balance sheets. Maxop, Jaynix, and Global Aluminium are well positioned in fast-growing aluminum end markets, benefiting from both domestic demand and export growth. Maxop, in particular, is gaining from the global shift towards lightweight materials in the automotive sector, serving both the passenger and commercial vehicle platforms. Common strengths across these companies include operational flexibility, the capability to manufacture complex, high-precision components, adherence to strict quality standards, and the ability to build long-term relationships with global and Indian OEMs by participating early in the product design process.
In financial services, we have 5paisa Capital, a discount broker and a technology-based financial services company, part of the IIFL Group. In logistics and storage, we have NCML, an agriculture warehousing company that has been fully turned around under Sanjay Gupta's leadership. Our annual report provides more detailed information about each of these companies, and many of the leaders are with us today.
Before I conclude, I just wanted to take just one minute to comment on the current Middle East situation, because many of you may be asking how we are positioned. How is the Middle East situation impacting our businesses? Actually, I just thought over it before coming here. Contrasting today's environment with the Gulf War of 1991, which is 35 years ago. Back then, India was facing a severe balance of payment crisis with limited foreign exchange reserves and a heavily regulated, stagnant economy. The country was forced to seek emergency funding from the IMF to avert a full-blown economic crisis.
Today's situation, while clearly concerning, particularly given India's dependence on oil imports from the Middle East, the significant remittances from its diaspora in the region, which account for nearly 40% of the total remittances, approximately $50 billion. Is fundamentally different. India enters this period of geopolitical uncertainty from a position of considerable strength and resilience. Several factors are worth emphasizing. One is demonstrated fiscal and monetary discipline. India has got far more fiscal room for supporting the short-term problems. Substantial foreign exchange reserves of approximately $700 billion, providing a meaningful external buffer, and continued economic growth of over 6%, despite all the recent downward revisions. The latest IMF projection is 6.5%. Strong domestic balance sheets, and the banking sector's NPA at historical low levels. And a government which is reform-oriented, and that has already implemented significant structural economic reforms.
Taken together, these factors give India a very high degree of macroeconomic resilience that simply did not exist in earlier periods of global crisis. That said, the situation in the Middle East does have real near-term implications for some of our investing companies. Our view is that the fundamentals of our investing companies are sound, and the current period is a difficult transitional one, but we are very confident that our companies will manage this period of global uncertainty with versatility and dexterity, supported by strong financials.
With that, I'll turn the microphone back to Ben, and thank you all for listening. Thank you, sirs.
Thank you. Can you hear me? Thank you very much, Gopal. That was excellent. Okay. Let's open it up for questions now. We have three microphones for questions. Two in the room. Microphone one is to my left, microphone two is to the right. Jeff Stacey is over there, and he will take online questions if you have any for him. And then microphone four will be for management and people from our companies to answer questions, should you ask them. Why don't we start? We already have people at microphone one, so why don't we start right there?
Good morning.
Good morning.
Is this on? Thank you. Sreeni Meka from Lakeland Wealth Management from Memphis, Tennessee. The question about the Bangalore Airport, one of your biggest assets.
Yeah.
Three years back, when I was talking to one of the Bangalore Airport executives, he mentioned you have strategically talking about with Air India. Air India is going to add direct flights from both U.S. and Canada, as well as from Europe directly to Bangalore, bypassing the Arab airports like in Dubai, Abu Dhabi, and Qatar. The global citizens, mostly Indian Americans, they can directly fly to Bangalore and that's the strategy he mentioned. For the past three years, we don't see any significant improvements, especially Air India still acting as a government entity rather than private. Still a lot of issues with their maintenance and all that. Could you please expand on that and how you are strategically are working with the Air India, and making Bangalore as a major hub? Thank you.
Thank you. Well, that's an excellent question, because one of the big ways for the airport to increase margins is these international flights that you're alluding to. I think Hari has the best perspective on all the international routes that we're trying to get. Why don't we have Hari come up and speak? We might have some new people in the room, so I'll just introduce him. Hari Marar is the CEO of BIAL, but he began at ITC Hotels and moved to Jet Airways, and then joined BIAL in 2006, and has risen to CEO in 2017. Now we're underway with a $2 billion expansion to take us from 44 million to 80 million passengers by 2029.
Hari, why don't you come up and speak? Just one thing on that 80 million. I was just looking up. Atlanta was the biggest airport in terms of passenger traffic. It took 21 years to go from 40 million to 80 million. Hari and his team plan to go from 40 million to 80 million in five years. Very ambitious. Quite amazing. Yeah, please on the India hub, but then maybe an update on the airport overall, because I think that's gonna come up.
Okay, good. Can I give a quick update on the airport overall before I come to your question very specifically?
Sure.
I think the best way to describe the year that has just gone by is that it was a year that we saw very exciting growth, but it was also peppered with some significant challenges. This is something that wasn't covered in what Gopal mentioned. Since COVID, I think India, Indian civil aviation industry, specifically Bangalore Airport, has seen a very aggressive period of growth. This is a trajectory that we were continuing to expect over the next few years.
This year, on the other hand, that has been a little muted because of three very important events that happened. One, of course, you would recall in June, we had the very unfortunate and tragic collapse, a crash of the Air India flight. That, of course, had an impact on the sentiment of flyers. Obviously, that remained muted for some time, the desire to travel domestically.
Second, of course, was the border conflict between India and Pakistan, and of course, the ongoing wars, Ukraine, Russia, Israel, Palestine. In all of these areas, there were periods of time when airspace was closed. When airspace remains closed, carriers have to fly around these airspace, which means that it reduces the economic feasibility of operating these flights, resulting in several cancellations, and that also resulted in lowering demand a little bit.
Last but not least, I'm not sure how many of you follow Indian aviation stories strongly, but we saw the operational meltdown of India's largest airline, IndiGo, in December, where the operations were actually brought to a standstill for a period of 48 hours. They had to cancel all their flights and then started a period of slow, deliberate, but painstaking recovery from that, moderated by the government, which meant that they could not go back to the full scale of operations, resulting, of course, in lowering.
Despite all this, you saw Gopal mention we had a 29% growth in international traffic. Overall, 8% growth in traffic. So you can imagine if all these challenges hadn't happened, we would have been well on our way to that 80 million mark faster than what we had projected it to be. So that's been a great story from a traffic perspective. Hub development is a very central part of what we are planning to do.
Now, like Ben mentioned, that's really where airports make money. When we finished COVID, just coming out of COVID, our transfer numbers were just about 4% annually. We've grown that to about 17% now. There are three, four important elements of what we're trying to put in place to make sure this development happens. First and foremost, our capacity creation. To date, we remained the only airport in India that has significant capacity because we've invested well in time with the dual runway independent operation. We're capable of handling up to 96 aircraft movements per hour, which means that we can go straight up to 100 million passenger numbers without any more investment on runway capacity.
This also means that we need to make a few other investments. This, as part of our current capacity expansion program, which involves spending about $2 billion in the next four years, we're investing in taxiway networks, aircraft parking stands, cross-field taxiways, phase 2 of Terminal 2, which will take the passenger handling capacity to about 80 million.
Eastern connectivity tunnel, which will bring in traffic from the city, from the other side of the airport, from the eastern side of the airport. We're connected to the city only from the western side of the airport. All of this means that we're building the capacity that is required to cater to the kind of growth that's coming up in the next few years. Second part is airline partnerships. IndiGo and Air India are two of the biggest and the most important carriers in India. We've got great partnerships with both of them. What you would recall us talking about was our partnership with Air India that was in the works. We announced it last year. We signed the agreement with Air India that said that they will operate Bangalore as their secondary hub, the southern hub.
Of course, the predominant and the major hub will remain in Delhi, which is the capital of the country. I think the reason why you haven't seen some of that playing out is largely because of the fact that the airline has not received the aircraft orders. They placed orders for over 550-600 planes, but with the aircraft manufacturers being in difficulties themselves, they've not been able to deliver. When the aircraft manufacturers started getting to a point where they could manufacture enough aircraft, you had all the component manufacturers, the OEMs, starting to struggle. If the aircraft were in place, there were not enough seats being manufactured. Engine manufacturers were not able to produce engines fast enough. As a result of which, we haven't seen the aircraft yet come into the country.
This year, IndiGo should be receiving about 36 of the aircraft that they've ordered, and I think Air India will receive another 20, 30 aircraft as well. I would say that this is the year from which we will actually see some of that playing out. The good news is that the other important thing for us to do was to make sure we tie these airlines down to Bangalore, and that's why we signed the agreements with them to establish their maintenance, repair, and overhaul bases in Bangalore. With both these airlines, with Air India, we leased them 40 acres of land. With IndiGo, we leased them 36 acres of land. With that, both these airlines have committed to building the largest maintenance, repair, and overhaul facility in the country in Bangalore.
Between these two, we'll have the capability of servicing 29 codes equivalent aircrafts at any given point of time, which not only makes Bangalore one of the largest MRO bases in India, but potentially one of the largest in Asia as well. What this means is that these aircrafts will now be based in Bangalore because that's where the maintenance base is, which means the crew base will have to be established there, which means the training bases will have to be established there, and that would mean that more and more operations will have to happen out of Bangalore itself. This, I think, is a positive move that we made very early on. That, again, is not good enough because we also need to make sure that the processes work.
When we built Terminal 2, we did not connect Terminal 2 to Terminal 1 because traffic volumes at that point of time did not justify that connection. Now, as we move from 4% transfer traffic to 17%, as part of the current expansion, creating that connectivity between Terminal 1 and Terminal 2 is very much part of the plan, which means we'll have seamless connectivity. We already have 2 million people that go between these two terminals, which will grow to 5 million or 7 million by the end of this five-year period. We're connecting Terminal 1 and Terminal 2 as part of the expansion program. We've also launched a new product called Connections by BLR.
Connections by BLR is our transfer product, which keeps the customer who's transferring at the center of everything that we do, which means that with that program, we're able to focus on the customer experience and deliver an outstanding transfer experience to our customers. We're also working with our regulatory authorities at the same time to make sure the processes are simplified in terms of re-scanning of bags or having to re-scan people multiple times so that the whole experience is that much better. With all these investments that we are making, we see that we're well placed to grab that opportunity. Hopefully next year when I come here or the year after that, we'll have more good news to share.
Strategically, direct flights to India adds a lot of value. That's what most of us wanted to see.
Thank you for the question. Hari, one thing to just touch on, there's 1,800 planes on order. I think you touched on part of the problem with the delivery, but 1,800 planes on order. There's only 800 planes in India today for travel.
That's right.
The big constraint is they're getting delivered every week, right? A plane is coming to India.
This year onwards, the delivery starts, so every week we'll see planes coming in. Initially, of course, remember that Delhi is the political capital of the country. Mumbai is the commercial capital of the country. Bangalore is the third most important city. Initially these planes will get deployed out of Delhi and Bombay. I think the next set of deliveries will come to Bangalore. I think we spoke about, if I may take a couple of more minutes, we spoke about the crisis, the Middle Eastern crisis or the West Asian crisis. I think in there's a hidden opportunity for India.
I've said this many times over that India has squandered the opportunity to create hubs because India is geographically placed for serving as a hub between East and West, and we haven't really taken advantage of that beautiful geographic position to create great hubs in India. I think the crisis in West Asia now presents an opportunity for us if the airlines in India capitalize on the new fleet deliveries and start direct flights to Europe and to United States. We don't have to travel through the Middle East anymore because these hubs have been developed on the back of Indian travelers traveling to Europe and the United States. If you see a plane landing in Dubai, you'll see 80% of the people moving towards connections or transfers and only 20% going to pick up their bags.
Really, if you can prevent that leakage happening, we have the potential to create great hubs in India itself, and Bangalore is well positioned to do that.
Thank you, Hari. I'm one of those people that fly through Dubai to Mumbai, so thanks. Mic two .
Hi, I'm Harsha Gopianandan. I've been a Fairfax shareholder for 17 years and Fairfax India for 10 years, so I'm a true believer. I think the next five years for Fairfax India is going to be fantastic, driven by BIAL. The worst-case scenario I'm increasingly concerned about, especially with the recent Kennedy Wilson transaction by Fairfax and the cash building up in Fairfax, is if the discount continues to persist. Is there a chance that the minority shareholders could be taken out for a small premium? Ben, I'd like to get your thoughts on this. I know these things are hard to predict, but is this scenario even plausible? How Fairfax India leadership can make sure that the minority shareholders continue to participate in this upside?
Good question. Well, for one thing, the last time when we had the performance fee paid, we took cash. We didn't take shares in it. So we were very careful not to be dilutive to the shareholders to protect that. I don't know, Gopal, if you have any other comments on that.
No. Right now there is no plan for us. I don't think we intend to take it private. I know there are quite a few other investors. In one of our interactions, they brought up the same topic. I think we have time and again clarified that. That's not our intention.
[inaudible] Fairfax India.
When we brought Fairfax India as a listed entity, I think it was brought with a very well laid out thought from a long-term perspective. Having a listed vehicle gives us an edge. That's the reason why even in Anchorage, we want Anchorage to be listed. If we want to raise capital, if we want to unlock capital, I mean, unlock value of BIAL, we can do it at any moment today. Enough and more, every day we get calls from many private equities. There is a huge hunger for owning that asset. We feel there's a lot of flexibility it offers, being a listed company and not the LP/GP model.
Therefore, I think we feel at some point in time, the value unlocking will happen and people also will perceive growth opportunities, and there is a great platform to— I think Ben has elaborated enough in today's presentation. I think you have enough to carry on.
Another point I'd bring up is 69% of the assets are private. Again, if we were able to take Anchorage public at this value, it'd be 85% of the assets would be public and the market would be dictating the value of the assets, not us. Likely the average transaction was 21x , not 10x like we're valuing it. We've heard a lot of negativity about not being able to take the airport in the last five years. If you think about the development, BIAL was a concept if you went back five years ago, and we're wanting to take it public, right?
Now we have Terminal 2, where it's one of the most beautiful airports in the world. We think it's the most beautiful, and the best travel experience. It's proof of concept, and it's really a profitable entity now. If we are going to market today, it would be much better than it would have been five years ago. It's actually been a blessing to have this delay of five years, if you think about it. For you, the shareholder, you know what Buffett says, right? When you see something of compressed value you can accumulate now, you have to make your own decision. There's the opportunity to accumulate something that appears to be a coiled spring in our view. Thank you for your question.
Yep, thank you. I share the same view that it's a coiled spring.
Yeah, thank you.
Thanks.
Okay, great. Thanks. Should we go to Jeff? Yeah.
Good morning, Ben and Gopal. First question here is about CSB Bank. CSB Bank is now halfway through its SBS Sustain, Build, Scale 2030 plan. Are you on schedule or ahead or behind schedule at this point?
For CSB Bank, I think—
I think the bank is on schedule. As we rightly mentioned in our 2030 framework, so right now we're just now in the scaling. What we feel is the scaling phase. They just completed the IT, the core banking, new core banking system in place. We have all the bandwidth in terms of manpower, human resources, investments, all have happened. I think the bank is clearly positioned for growth.
Of course, we have seen in the last two years, there was a pocket of kind of a slow growth in the sector as well, that one has to keep in mind when you look at the bank. You have seen already CSB growing far superior to what this industry growth has been. Again, 11.1% growth in advances, 11.3% growth in deposits. They have grown at 28% and 21%. The bank is well positioned for generating growth.
Expects to be a mid-size bank by 2030, right? From sort of the small bank category, and it's won them multiple awards too last year, right?
Given its size, we have seen it going back in history, if you've seen, Paresh is here, HDFC Bank, for example, over 25-30 years, they have continued to grow at least 5 percentage points-6 percentage points higher than the banking sector growth, which used to be those days, 16%-17% annual growth. They used to grow at anywhere from 20%-25%, depending on the—s imilarly, if you see CSB, its size right now is also an advantage in terms of it is a fast-growing bank, and as I've already seen, even this year, against 11% growth of the industry, they have grown over 20%. With the RBI's shift of stance in terms of accommodative credit policy and liquidity injection and accommodative stance, we feel the banking sector is coming back to the growth.
We are already seeing the early signs of 11% is now 14%, the running number latest. We feel the bank should, as Ben rightly mentioned, it'll be a mid-size bank by 2030. If you want, Sumit sits on the Board, if he wants to add anything more.
Where is Sumit? Do you have anything? Yeah, that's good? That's it. Okay. Yeah. Great. Let's go back to mic one. mic one.
Good morning. Congratulations on your 11th year and having increased book value per share by 9.4% in 2025. I have a two-part question. You mentioned in your letter, and you touched a little bit on this, Ben, that you intend to complete an IPO of Anchorage, and you're still in the process of obtaining regulatory approvals. Kindly, can you please share with us what your expectations are for crystallizing the value of BIAL investment and what you expect that will look like post-IPO?
The second part of the question is, in one of your slides shared, smartphone usage is about 1.2 billion or a little slightly over 1.2 billion users. According to my calculations, that's more than 90% of the Indian population. Have you looked at opportunities to increase banking penetration through digital platforms and smartphones? Thank you.
Thanks. Well, the second part I could go with first. It is the most digitally advanced place for banking digitally. They've created Aadhaar, which is people are identified through their retina or their fingerprint, and so you can access your bank account, and they've created a Unified Payments Interface. You can scan a QR code even with a feature phone, and it'll deduct money from your bank account and go to the vendor. If the vendor is a local coffee seller, let's say, you scan it with your QR code, and it pays him automatically. Actually, what they've found is people are willing to, t he local tea seller is willing to pay the tax, the GST, instead of using cash, because they can serve two or three coffees at a time.
Going a little bit further into this, what's great about that is that now this tea seller can go to a bank and prove his revenue stream on a monthly basis, and so now the bank can make a good informed decision on giving him a loan. That has happened, and they've created all the people that were unbanked. I think I showed on the chart also there was 150 million or something bank accounts, you're going back 10 years ago. Now there's 500 million. Basically, everybody, every household has a bank account. That penetration has happened, and that smartphone usage has enabled that to leapfrog, much like landlines to a cellphone.
On the IPO, we talked about that it is in the regulators' hands, and we await their decision on that. They haven't given us a final word. Maybe, I don't know, Sumit, you've probably talked recently. You could probably talk about 2025, the update on what you've heard back from the regulators on the process.
Sure. Hi. As I'm walking towards over here, Hari is giving me a big smile saying that, "Okay, you have to answer this difficult question." Here I am again with my same answer as last year. We are awaiting the approvals, and we are doing everything that we can. One additional thing I must say this year is we have Amitabh Kant. He spent 40 years building the regulations, and now he's helping us kind of navigating through these regulations. He's helping us immensely. Under his guidance, we are making good progress in going through the bureaucracy of getting that approval.
As I mentioned last year and explained the structure of Indian bureaucracy, the approval of Anchorage IPO has to come from a cabinet committee, which is chaired by Prime Minister of India and bunch of senior ministers and lot of ministries have to give their recommendation. Among everything that is going on in that part of the world, all the wars and the internal crisis and all sorts of things, Anchorage IPO is extremely low priority for any bureaucrat kind of working on this particular file, to kind of go up to this particular committee and stick their head out to say that, "Okay, there's this commercial entity which needs to go public, and we need to allocate time for this."
Under Amitabh's guidance, we are kind of doing well. Hopefully, again, it's been three, four years. I'm giving you timelines. I don't want to give you timelines now this time, but yeah, we should get the approval soon and you'll see the value coming out of Bangalore Airport. In the meantime, Hari is doing a terrific job on the ground, as you heard all the numbers. This year, Hari, you did cash flow of about $300 million and $350 million, and that cash is all accumulating within BIAL. We need a way to kind of work with Hari to take it out in IPO process and distribute to everybody.
Like we mentioned before, over the last five years, it's gone from concept to a real asset. In five years from now, well on its way to 80 million is the projection. It might be much more profitable asset when it hits market. Is someone standing in line for okay. Yeah.
Hi.
Sue?
Hello.
Hi.
Hi. Can you hear me? My question goes more for the Bangalore Airport. I'm very curious how you guys think about the revenue opportunity broken down between regulated, non-regulated, specifically, what is the opportunity there? What is the lease term for concessions, et cetera? And then the valuation. If the valuation is below market, what is the reason? It's like these three legs. Appreciate it.
I'll have Hari talk on the regulated versus non-regulated. Valuation. We value it at 13.8x free cash flow in our model. We use free cash flow as a way to for all our companies on valuation and try to be a conservative way value. The transactions though, in the public markets are based on EBITDA. Not CapEx spending is included and all that. That's why we showed EBITDA on the slides because that's the way to compare it to recent transactions. That's how we value it. Hari, do you want to go on? I don't know if you have any—
Revenue at an airport falls in two large buckets, regulated aeronautical revenues, the unregulated non-aeronautical revenues, two large buckets. Our aim as an airport is to constantly grow the non-aeronautical revenue stream. The large buckets that fall under the stream are duty-free revenues, retail, food and beverage. There's advertising revenue and parking and taxi concessions. These are the large numbers. What we've done, we've sort of had a clear plan in place to continuously grow our non-aeronautical footprint. On one side, what we've done is maximize the footprint in the terminals. Now as we're expanding Terminal 2, phase two, we'll be adding another 12,000 sq m of retail and food and beverage space.
What we're also doing, because Bangalore Airport has done a successful experiment with some retail and food and beverage formats just outside the terminal in the forecourt area, which has turned out to be very successful, which means that people are traveling from the city, even if they're not traveling on a flight, but just coming to the airport to experience the environment that we've created. This has been a successful experiment, and as a result of which we're now creating a retail dining entertainment village in our airport city. The Terminal 1 and Terminal 2 forecourts, we're developing them into really exciting, vibrant spaces with areas for concerts, retail and food and beverage, a lot of bars. It's turning out to be a very vibrant space.
Between this year and the next year, we'll be adding another 60,000 sq m of retail dining entertainment space as well. We're continuously expanding our retail dining footprint, which means our non-aeronautical revenues will grow inorganically, not just the organic growth that comes from passenger traffic, but inorganically as well. To that, we're also expanding our service offerings. For example, we are expanding our hospitality business. We think we do that well. Currently we operate lounges, meet- and- assist services, transit hotel and so on and so forth. Now as we go forward, we think that there are opportunities to launch our own brands of restaurants and cafes. This year we'll be launching our own brands of restaurants and cafes under our 080 flagship brand.
Also getting into, as we build out our business parks in the airport city, we're going to operate our own brand of co-working spaces, very much like WeWork, but our own brand of co-working spaces as well. All of that's going to add to our non-aeronautical footprint, growing that significantly at a faster pace than the aeronautical revenues. However, always remember that aeronautical revenues are determined on the basis of the investments that we make in the aeronautical space. We're in a high- investment phase right now. We're investing $2 billion in the next four years. As this gets capitalized, that gets added to the regulatory asset base and therefore when tariff is determined, tariff will always remain at that slightly elevated level, multiplied by the high growth of passengers that we're having.
The percentage between aeronautical and non-aeronautical revenue may not therefore change that much in the immediate future. As we move, let's say, for the first five years, it'll remain in the same region, but between five and the next 15 years, you will see that as we depreciate our regulated asset base, we will see that the non-aeronautical revenues will move from currently 35% to 50% and probably even higher over a period of time. I hope that answers your question. Thank you.
Thank you.
Thank you for the question. Jeff, why don't we go over to you, mic three.
A question on foreign investment in India. The level of new foreign investment in India has softened somewhat over the last few years. Is government policy in India doing enough to unlock India's full potential?
Great. That's actually a great question for Amitabh Kant, who we have here with us. He has 45 years at the highest levels of the Indian government and was an IAS officer. His batch year was 1980, and he launched Make in India, Startup India, and Incredible India. He was the CEO of NITI from 2016 to 2022 and India's G20 Sherpa in 2023, and he's been a Senior Advisor to us. We're fortunate to have him. He's also the key leader for Fairfax's initiative of the Free Enterprise Center. Amitabh, it'd be interesting to hear on government policy and what they're doing to unlock India's full potential. What Jeff just asked. Yeah. Thank you.
Let me put this in perspective that India is the fastest growing large economy in the world. The IMF estimates have just come out yesterday, and it shows that India will continue to be the fastest growing large economy at growth of higher than 6.5% despite global turbulence and turmoil. India is today a $4 trillion economy, but the Prime Minister set the vision that by the time it becomes 100 in 2047, it should be a $30+ trillion economy. The aim is to take its GDP by about 9x higher.
What India has done is that in the last seven or eight years, it has carried out major structural reforms in the Indian economy. It has brought in one tax across the economy, which is Goods and Services Tax. It has brought in IBC, the Insolvency and Bankruptcy Code. It's lowered the corporate tax. It's focused heavily on ease of doing business, and I'll dwell on that. It's scrapped about 2,000 laws. It's scrapped a number of rules, regulations, procedures.
The most important thing that's happened in India is the digitization of India. Its 1.5 billion people have a digital identity called Aadhaar. Between 2015-2017, India opened up 550 million bank accounts. Every second bank account opened in the world was opened in India. At that point of time, only 18% of the women had bank accounts. Today, 91% of the women have bank accounts. All these bank accounts were then seeded with the digital identity and the mobile number, and that enabled India to do fast payments on the mobile. Everybody in India does fast payments on mobile.
Fifty percent of the fast payments in the world happen on mobile. India does credit, India does stock market transactions, India does insurance, all on the mobile within 30 seconds to 1 minute from anywhere in the world. This does not happen anywhere else in the world. The Bank for International Settlements said that India has achieved in seven years what it would have taken India 50 years to achieve in making a digital leapfrogging of India. The third thing that India has done is it's focused heavily on CapEx . The CapEx on infrastructure has gone up enormously from less than 1% to 4.5%.
India, in the last eight years, has built for its citizens about 45 million houses. Forty-five million houses means that it's built more than Australia within India. It's provided electricity connection to more than 130 million citizens of India, which is more than the population of Germany. It has provided 253 million citizens water supply connection, which is more than the population of Brazil. More important is build roads, expressways, highways. It's taken them from about 88,000 km to about 146,000 km and built an enormous number of airports. This infrastructure has been the key driver of growth.
The most important thing about India is that the average age of India is 29. It's demographically a very young country. The rest of the world is aging. The rest of the world is all aging. Japan has aged. America is aging. Canada is aging. Even China is aging. Even when India is 100 in 2047, the average age will just be 35, when it'll be a $30+ trillion economy.
My view is that this is not merely India's decade, it's going to be India's century because of demography, because it's the only country which is building 30 km of roads and 12 km of railway lines every single day. It's the only country which is doing about 12 metros every year. It's the only country which does 50% of its transactions on mobile, all payments, all on mobile through QR codes. It's the only country which has increased its solar energy 32x in the last six years. No other country has been able to do this. This is going to be India's decade.
Thanks. Thank you, Amitabh. I would add, not just in foreign inflows into equity markets, right? If you look at, like a Microsoft or Google or Amazon, they've committed almost $70 billion to India to invest. Amazon alone, Amazon loves India, $35 billion they're committing to India. If you look at semiconductor investment now, India's made that in their budget as a priority. $18 billion has been invested into the country. Prime Minister Modi goes himself to open every plant to show what a priority semiconductor investment is.
In terms of foreign inflows into markets, India created this systematic investment plan, SIP accounts, and that's grown dramatically. That's why the demat accounts that I was showing you from 23 million to over 200 million now have grown. Twenty twenty-two when the Fed was tightening, and inflation took off, and markets around the world were losing. Even the bond market was losing. Equities and bonds lost in the same year. India was only down 1%, and that was because all this domestic money was flowing into the markets.
I think when we look back in history, that'll be the year that India took control of their markets away from the foreign investor. Prior to that, the foreign investor would come in and out of markets and destroy India's market. If America sneezed, India would be in the hospital from that type of event. Not anymore. That's a big difference. India is no longer dependent on the foreign investors. It's nice to have it. I think a lot of you look at Apple. Apple is making that a priority to India as well.
Thank you very much. We are on mic one.
Sure. Hi there. Thanks for taking my question. My name is Asheef Lalani, and I'm from Toronto. My question is, it seems like there's a significant amount of dividend capacity increasing in the holdings at Fairfax India as the portfolio has matured. Obviously, the biggest portion of that is the airport. I'm curious, as the dividends start to come from these entities, or first of all, do you have an estimate of what they might be in a few years, if that's possible to give? I understand if it's not. But where would that capital be used? And is there a potential to increase the leverage at the whole co even more, given the asset base has grown from when the debt was first taken on?
Depends on CapEx needs of the companies, but you could see increased dividend capacity. I don't think we can give an estimate at the time. Hari, I don't know if you want to talk about why you're not paying us a dividend. No, he's trying to expand to 80 million passengers in the next five years, and so there's $2 billion in commitments to get there. Then also take it to 100 million, so there's another, I think, $600 million for that expansion. We take it into consideration. Seven Islands is a great example of paying big dividends for us, and they're very careful of how they buy ships and when they sell ships. I don't know if you have anything to add on. No, you're good? Okay.
You will get to hear from us at the right time. It's work in progress. Just balancing the CapEx and obviously, I think it's a no-brainer. You'd get some dividend flows from the airport, but we don't want to be committing to any time and what amount right now. Because our priority is to make sure that its capacity from 50 million-80 million, all of that happens. There are certain other adjacent things. Also in the real estate, we felt certain projects earlier would have been outsourced to third-party development. I think certain projects are far more profitable if we internally do. We want to have kind of flexibility with cash flows. The dialogue between AERA management, of course, there is enough pressure on, y ou know, to pay dividend. Well, you will get to hear more.
We like dividends, but India is growing so fast, right? They have a lot of opportunities to invest and grow their operations.
Well, I was thinking at the holding company, I think there's a perception amongst investors, and perhaps you can dispel it, that the holding company is capital-starved because we can't raise new capital because our cost of capital is too high. Is there an opportunity to take dividends, reinvest, or to add leverage to make more?
If we ever need more capital, I don't think it's a problem to get more capital for us.
I guess the question is how that capital gets in when the equity is very cheap versus interest in value.
Yeah.
I'll leave it there.
You don't always have to do it through equity issuance anyways, but I'll leave it at that. Thank you. Mic two ?
Hi, Ben and Gopal. Thank you so much for having us. My name is Gobinath. I'm coming from outside of Washington, D.C., a long-term Fairfax India shareholder. I have a two-part question, two different ones. The first one is regarding less talked about subject, Sanmar Chemical investments. The disclosures since the beginning of the investments, even up to now, hasn't been very clear to investors. I was wondering, like now the investment is over, could you talk a little bit about what the thesis was and what went wrong, what we've learned, and what to expect going forward?
The second part of the question was, I'm thinking about banking or India in general in terms of what kind of risks have surfaced recently or likely to surface over time, and how do we protect against those kind of potential risks, specifically to finance and banking, because that is our second largest investment in Fairfax India. Thank you.
On Sanmar, just on the exit, it would've needed more capital committed, and the controlling shareholder wanted to buy it. We thought we had other opportunities. That's really what we thought with Sanmar. On banking and risks, I'd say India went through a non-banking financial crisis from 2018- 2019, and it was quite severe. The government decided not to help, and so it went on for a couple of years. From that, banks were in the best financial shape that they've ever been, well, at least for 20, 30 years. The banking industry is actually well capitalized, actually much better capitalized than most markets. Then in the private sector, banks are better capitalized than the government-run banks as well. They've been doing very well.
Paresh is here, and Paresh is one of the most respected banking minds. He started HDFC Bank in 1994. He spent 24 years helping building it into one of India's most valuable private sector banks, and rising to Deputy Managing Director. Prior to HDFC, he spent nine years at Citibank. We're fortunate to have him as a Senior Advisor at Fairfax India. He might also have a good perspective on where the industry stands today, so I'll let him answer.
Yeah. From my perspective, actually, the financial services sector overall and banking in particular is clearly a structural secular growth opportunity in India. If you believe in India as an economy, and we've heard enough and more of what's been happening over the years, you can't but be optimistic about financial services and banking. The way it works is it's a virtuous cycle, because if India has to grow at 6.5%, 7%, whatever percent you believe real GDP growth will be, it requires the support of financial services, credit growth, payments. Similarly, when you have that growth and the trickle-down effect of that growth into income levels, saving levels, the middle class growing, that generates the need for financial services. It's very much a virtuous cycle.
We've seen, therefore, that the banking industry tends to grow at a little ahead of nominal GDP growth. It's been 1.3x-1.5x the growth rate of nominal GDP, and which is why we've seen earlier that growth rates have been typically in the low- to mid-teens. That's for the industry as a whole, as far as banks are concerned. The private sector banks tend to gain market share from the public sector, and therefore it's possible for those banks who have a good strategy and who can execute on it to grow at anywhere between mid-teens to maybe high teens or faster.
Obviously, that has required investments in terms of the right people, the right technology, distribution. Again, because India is a large country, traditionally, the costs of distribution were much higher. Now with the digitization that we just spoke about, it's easier to access customers. Costs of servicing low- ticket, small- ticket transactions has come down. It's clearly a huge opportunity. On the risk side, traditionally, at least certain specific banks and sometimes one sector more than the other has taken the usual shocks which come with banking in terms of credit costs.
We've been through credit cycles. I think we've spoken about this a little earlier, that historically, we haven't ever been in a situation where the Indian banking industry has had as low non-performing loans as it is today. It's one of the strongest it has been, around 2%. There have been times when the banking industry in India used to be at high single digits. Today it's at 2%. Even if there are some cyclical pressures, headwinds which come along with all that's happening in the world, banks are coming off a very low base. They are very well capitalized, and I'm not saying that this is something which we are seeing, but you have that foundation.
For banks which are then placed in a position to gain market share, either on the back of their deposit franchises or the way they balance growth and management of risk, the opportunity still remains extremely compelling.
Okay. Thank you very much, Paresh. Let's go to Jeff, mic three.
We have a question about Jaynix and Maxop. While relatively new investments, both Jaynix and Maxop have grown dramatically since being acquired by Fairfax India. However, the fair value estimates decreased slightly in 2025. What were the main reasons for this, and what is the longer-term outlook for both companies?
There's a guy south of the border that might have helped decrease the value a little bit. Last year, India was a target, which was a little bit unexpected. They had to launch the 25% tariff, then took it to 50% tariffs. Actually, poor Jaynix and Maxop and Global Aluminium really had to deal with it. Jaynix actually in particular had quite had to deal with this. Let's bring up Nikhil, and I think he would give a good answer. Nikhil and his brother co-founded Jaynix in 2008. We own about 70% of the company. Anyways, Nikhil studied industrial engineering at the Institute of Technology and spent his career building Jaynix. They've been exporting to Europe and North America since 1999.
I think, Nikhil, you'd be great to talk about how you dealt with it. Also, you've been dealing with data centers as well, and so that would be probably an interesting thing to update people on the business too.
This time last year was when we got the shock with the tariffs, and India particularly was singled out as we saw it. Essentially for us as a company, we never had a situation where any customers came back to us with a price decrease or the option that absorb the tariffs. The reason we think is because we were not selling commodity like aluminum as a commodity, but high engineering, high value add critical components. Also, since we deal almost exclusively with the North American market, so my customers are based out of Canada, U.S. and Mexico. In 2017, we saw a huge demand come for all electrical components. The products that we make are highly regulated because they need to undergo severe testing under the UL test labs.
There was a dearth of capacity for these components in North America, and at which time Jaynix stepped in, we supported our customers, and there were years between 2017- 2020 where we were growing more than 50% a year. Because we had demonstrated that in the past, we have a very strong relationship with all our OEM customers. Therefore, one of my customers made the comment that the failing supply chain is more expensive than tariffs. We sustained that storm. What's happened now is the tariffs have come down substantially. We still get taxed a lot because of the Section 232 tariff, which is applicable on aluminum. April 6, there has been a declaration, which says that anything that's going to the power grid, infrastructure projects in the U.S. might get taxed less at 15%.
We are currently investigating if our products fall in that category, and we're hoping if they will, then, the tariff impact is that much lower. Data centers, it started actually with COVID, because people started going more on Zoom and Teams and Netflix, and so the demand for data centers went up. Now it's because of AI. Any data center that's built requires a huge power infrastructure to support it. Whenever power infrastructure comes in, that's where our products come in too. We are seeing good demand on our legacy lugs where we would see very muted or very low demand because they're large lugs, expensive lugs. We're seeing that demand jump, and we're hoping this year they will form a big chunk of our revenue.
What we are also investigating with our customers is that we are hearing from our customers that they are facing challenges with some other critical components which are needed for a data center build-out. What we are trying to work with customers and seeing if we can expand our product portfolio to include those products as well, so we can help. What we did in 2017 is essentially, we have the ability to quickly install capacity, quickly grow the business, and support the customers. We're trying to see if we can do the same with some other mission-critical components that are used in data centers.
Nikhil, can you just give them a sense of the scale of how many products you produce?
It almost changes by the month. I think last count, we do totally about 250-260 different types of SKUs. This year we registered Jaynix as a brand name in the U.S. and Canada. This year we will start selling directly to distributors. Small electrical distributors, contractors, they can buy our products directly, essentially catalog sales. Our first cut catalog is 88 different SKUs spread over 12 categories. For us, that's a mammoth task because each product that we make has to undergo that UL testing. Typical testing lead times are three months. Typical testing cost is roughly between $3,000-$6,000. It's not a cheap test, it's not a quick test. It's a very difficult test, expensive, very difficult to pass. We figured it out how to do it. That's what's keeping the lights on.
Thanks, Nikhil. Okay. Mic one. Richard, you've asked me questions in Portugal. You asked me a question when I presented in Greece, and now in Toronto. Great to see you.
I went to ask you the question I asked you in Portugal.
Thank you.
There are two quick things. The first is on valuation of BIAL. You talked about the valuation of EBITDA a moment ago, but I assume that that is an outcome of the DCF valuation. Will you talk about that? Particularly in the DCF valuation, you used a growth rate of 3.5%, which doesn't seem in great shape, with an economy growing at in real terms by more than 6%. Would you talk about that? Secondly, the 26%, which I think is owned by the governments, federal and state, would it be a good thing or a bad thing if they reduced their stake? Have they participated in buybacks? Sorry, forget the buyback. That's nonsense, of course. There haven't been any buybacks of BIAL.
Well, we enjoy our partnership with the government very much. I don't know. Gopal, do you have anything to say on the 26% on the government? I think that we've taken it to the max that we can take it to.
Yeah, 13% each, that is the provincial and the federal government. That's what they hold. It's always good to have the state government as your partner for the simple reason, there are a lot of regulatory stuff, and they're very supportive and there's a kind of an alignment of interest, so to say. Because it's highly regulated industry per se. The government ownership and they have been, at least from our experience, the governments have given us a bit of free hand in terms of how to manage, how to run. Precisely that's well exhibited in the way that BIAL has performed as a company and how they have distinguished themselves from the airports globally and the way the airport has emerged so far. It is despite the government being a partner.
Thanks to the great team, we have the flexibility to have who has to be the CEO, who is the management. Like as we outlined, we were able to transform our philosophy of total decentralization and empowering the right management and just participate at the CapEx and at the board level. That has been working very well for us, and the government has been very supportive so far.
On the growth rate, we're going to have Debbie, our CFO. She built her career at PricewaterhouseCoopers before joining Northbridge in 2012. She took VP roles over the last seven years there and then became CFO at Onlia before joining us directly in 2024. She was appointed our CFO in March of last year. Debbie, please just address on the DCF models of a 3.5% growth rate when India is growing much faster.
Thank you, Ben. Thank you for the question. My first year and I'm in the hot spot. I'll get used to this. That's fine. I think, in general, you mentioned it. We use a DCF to value all of our private company investments. It's a conservative, prudent way of looking at our private investments, and we know that our intrinsic value is much higher. We look at a number of different factors, of course, and we've seen our investment in BIAL increase from 2024 to 2025 for a few reasons.
We obviously took the opportunity to invest an additional 10% in BIAL to bring us up to the maximum of 74% equity interest, which is really great because we see the value that this asset has in our portfolio. Furthermore, the results have been fantastic in terms of delivery. That just automatically contributes to our value growth.
One of the challenging parts this year was, of course, the impact that the rupee depreciation has had. I think if you look at note 5 and note 6, I'm an accountant, I will have to call out our notes. We've got great disclosure around the impact that some of those variables have had on the valuation. I think in terms of the airport, the terminal lev growth rate, we tend to take a conservative approach. We look at this. We monitor the growth in the sector. We monitor the growth in the industry. We're comfortable right now with where our valuation is.
Yeah. We want to base our investments on fundamentals, not on—w e want the market to discover the value.
Yeah. It's a good question. Thank you for raising it for the simple reason. I know that's also adding to the fact that how conservatively the airport is valued.
Yeah.
India has a history of, if you take a 25-30-year, where the economic growth rate was even slower than what it has been over the last decade. The overall passenger growth average has been 6%+ .
Thank you very much.
Yeah. Thank you very much, Richard. Richard Oldfield is a great value investor. He actually has a book that he's written, well worth reading on value investing called "Simple but Not Easy," but you won't learn much about India from the book. Let's go to mic two, please.
Good morning. My name is Jim [McGah]. I'm from Toronto, and I'm a shareholder. My question is for Ben and for Gopal. What I'm interested in knowing is, what is the Fairfax management team right now seeing as their most significant risk or the thing that you are focused on with respect to long-term impacts, potential downside impacts? And what kind of risk mitigation are you guys putting in place around those risks?
If you like elevated oil prices would be for an extended period of time, that would be like $200, keep going up, because it'll going up. That would be a problem. I think Iran attacking energy facilities all over the Middle East would not be very good for India, because India, while 45% of their energy use is coal-based, they use about 25% as oil, but they import almost 90% of their oil. So oil hits them quite hard in a high-priced environment because they're using U.S. dollars to purchase that oil, which then depreciates their currency. So that would be probably one of the bigger risks. High oil price is not good for air travel, although it could be good for our shippers for Seven Islands, but not good for them. I don't know, Gopal, if you have any big risks.
Generally, I mean, for India, for every $1 increase in oil price costs about $2.5 billion. Say for a ton of freight, $10 increase will have an impact of over 30 basis points on inflation and roughly 50 basis points on similar— 25 basis points on the external account. That's the kind of impact we see. As far as India's oil requirement is concerned, they import about 4.8 million bbl of oil per day. Right now, I think they are still, they have diversified their sources to 41 different countries. No longer the dependency of the Middle East is so high as it used to be, and they have quickly been able to diversify, and they are now also allowed to import from Russia.
I think right now what they are doing is, they are running short of 1 million bbl per day for imports. India has a capacity of, strategic capacity of about 200 million bbl of oil. If these conditions continue for 200 days, then we'll run out of oil. Otherwise, they will continue to. The thing which is more critical is, of course, 90% of the LPG is imported, and there's a lot of dependency from Middle East, which is why there is a problem. Then government is now trying to make as much as possible the refiners to make more LPG. Although the efficiency-wise, it's far less, but then they have to support the masses because in the last decade, they have increased the number of cylinders to the households so much. They need to actually secure the LPG.
Probably this crisis is only a wake-up call, and India will take measures which are required to de-risk.
One of the ways they've reduced this risk is last year, I talked about Modi going to visit, Prime Minister Modi going to see President Trump. They talked about Mission 500, which was taking the $150 billion or so at the time of bilateral trade to $500 billion in 2030. The reason why President Trump took down the tariffs to 18% from 50%, India's committed to buying $500 billion worth of energy and defense equipment and that kind of thing. I think like $80 billion-$100 billion is from Boeing planes, but then the rest is energy from America. That should ensure that India has good access to energy in case the price or the Middle East does continue to escalate. Thank you for the question. We don't—
Some tweaking they have to do. I know India uses a propane, butane, what do you call butane and propane mix. U.S. is largely propane. I think it's a question of time. That's what I said. I mean, it's a wake-up call, and government will quickly. I mean, our industry is very efficient. They'll fix it up.
Thank you. The takeaway for us is that cost of oil on the international market is the biggest risk right now that you would see.
India's had three recessions. In the 78 years or so that they've been since independence. One was COVID, so an external shock, and then one was 1979- 1980 and one was 1972- 1973. Both oil shocks. The 1979- 1980 was more severe, but again, India was fine. India is in a much better position than they were in 1979 and 1980. They have, again, small deficit. They've got good foreign currency reserves. They're a big economy now compared to back then, so much better shape. It's not been a recession from internal problems. It's always been external shocks that have caused India's recession. Again, before COVID, the last recession was 1980.
One key observation to bear in mind, I just came across, just struck me, I should state that is, historically going back, for every $1 of GDP, if we needed a $1 of— I'm just saying in the index basis, if you need a $1 of incremental oil per X amount of growth, that index has actually now come off to half a barrel of oil. The dependency on oil for growth has substantially reduced by this government over the last 10 or 15 years, for sure. That process is on—i ncrementally, we are seeing, for example, the railways. No longer the railways is running on imported diesel. I think 95%+ railway haulage is now entirely electricity and which is all coal domestically generated. Incrementally as well, the power capacity is 80% is all renewable sources.
There is a huge leap forward in terms of what they have accomplished. That the oil thing is substantially reduced, and of course given our population, our aspiration for growth or consumption growing, I mean, we have a lot more to do. In fact, recently, Mr. Kant published an article it'll be worth reading about. He has been voicing what government needs to do at times like this.
Okay.
A quick follow on just to then—
Can we—
I'll surrender the mic if I may.
Okay.
Just curious, do you feel that Fairfax India is well positioned and well insulated from any of the disruptive capabilities of AI in the industries that you have investments in right now? Do you think you're well insulated from AI's disruptive capabilities over the next five years?
I don't think AI is a big risk to our businesses. There are some businesses where they might be more, but it seems more right now the employment talent, right? Its value. IT services exports is the biggest export for India. The billing platform might not be per person, it might be the value added from the business. That's the conversation going on in India right now. In terms of employment, it's only 5- 6 million people. It really has a big impact because of how much revenue it brings in. I think the revenue stream will still be very strong. If you think of the Western world, Europe, the U.S., do they have the right workforces to utilize AI, get the data fidelity up and running, and manage all the different agents that will be deployed?
In my view, India has that workforce, and so what's been developing over the years is the global capability centers, and they've started to employ a lot of people. Where a company, like a JPMorgan or something, that has 50,000, 100,000 employees in India, instead of using an Infosys or a Wipro, they will do it themselves and hire people. I think that will grow. India is the Silicon Valley of that type of talent, IT service talent, and that ecosystem. I think that's very good for India. We don't have the risk of this. I think we're going to benefit from it. Actually, I think Hari has some good examples of how AI has benefited his business. Hari, would you like to just mention maybe a few things where AI's been beneficial?
Yeah, sure. Happy to do that. I think for us, we see AI as a great opportunity, and I think we've seen already a lot of benefit that's come into our enterprise as a result of adoption of AI. Let's break this down into two or three areas. One is the fact that the biggest challenge in an airport is that we have 4,000 acres of land with large number of assets that have been deployed across the 4,000 acres. To manage 4,000 acres, and these disparate assets is always a challenge. We're now building a digital twin-enabled platform, which is built on a BIM model with GIS data, with data that uses IoT sensors, that brings into a single platform to build a digital twin that reflects the actual built-out airport.
We layer AI on top of that, which gives us predictive capability to figure out how these assets will perform and start fixing things before they break. That is something that we're investing in a very big way, from a digital asset management platform. We've got two partnerships with two leading AI service providers on one side, looking at how to use all the data that we produce in an airport, in our retail stores, in our food and beverage stores, to try and use that to maximize revenue. We're working with KPMG on that. We're working with Mu Sigma on that, with KPMG on also improving the internal process of our organization. Today, for instance, we have a large number of procurement contracts that we issue every...
All of this procurement responses to bidder queries, all of that happens using a GenAI engine. We're also now deploying LLMs that we are exposing to our employees and in a secure sandbox environment, allowing enterprise-grade vibe coding. Youngsters who have never coded before are using LLMs to generate code so that they can write little applications that actually solve business problems and friction on an ongoing basis. We are seeing some very fascinating solutions. We don't have to go outside and get companies or to SaaS companies to solve problems for us. Our employees are writing code that enables them to solve their own problems. I think overall, GenAI is just a fascinating opportunity, and we see huge operational improvements, reduction in cost, increase in revenue, all of that coming out of AI.
Thank you very much, Hari. I think we have time for two more questions. We'll turn it over to Jeff, mic three.
Ben, we've got a lot of people waiting on the floor. Maybe I defer and you can take two more questions from the floor then.
Sorry to the people online. Mic one, please.
Thank you, Jeff. Sam Ziff from Oldfield Partners. My two questions are around file. The first is it reasonable to assume that the EBITDA margins are the same in the two parts of the business, the aero and the non-aero business? The second is it possible to give any disclosure around the regulated asset base, how big it is today, and how big it might be at the end of your planned investment over the next three or four years?
Sorry, can you repeat the second part?
The size of the regulated asset base today and in three or four years after you've made the investments that you plan on making.
On EBITDA margin, the non-regulated is much greater, much higher. Do we disclose the—
We never don't disclose, but it'll be much higher than, of course, the regulated asset base EBITDA.
Yeah.
The second question was?
If you look at comparable airports, for example, GMR has some comparable airports. They have a Hyderabad airport, which is similar to ours, where we save 4% on concessions with the government, whereas they have an airport in Delhi that they share 40% of the concessions with the government. The profitability of our airport is very favorable compared to a lot of them. We don't disclose the amount.
The second question of RAB, as I mentioned, the CP4 filings have happened, and we have committed about INR 2+ billion CapEx over the next five-year plan period. The AERA approval also has an approval process for the CapEx plan that's being incurred. We are confident that we will have approval for whatever we plan to spend on the capacities. As a thumb rule, you can expect about 90%-95% of whatever CapEx that we incur will go into that. Okay?
Okay. Thank you.
Thanks. Let's go to mic two.
I guess this is the last question. Thanks for having us here, Ben and Gopal. My name is Adi Shyamsundar. I'm from Sacramento, and I'm a Fairfax India shareholder, both personally and in my firm. My question goes directly to AI and data center as well as power infrastructure. I know Nikhil gave us a view on how he's sort of participating in there. The deeper question on, are you directly looking at data center infrastructure as well as power infrastructure? What does that landscape look like? What can you share in that space that you might be looking at? That's my first question.
My second question is, can you share some of the non-obvious elements when you partially monetize some things in the portfolio, right? Some things, yes, it makes sense, but there are other things that you look at it and you kind of wonder what's the thinking behind it. If you can share some of the broader concepts on how you think about partially monetizing anything that you have.
I think that's a good question for Sumit. I would say one thing, though, on when the area is hot, like AI data centers or power infrastructure, the multiples tend to be quite good, right? We tend to shy away from paying big valuations for things. Just add that. I think, Sumit, why don't you give an update on what we're seeing on the ground in India? That'd be great.
Specifically on power assets and data centers now, as Ben said, both these areas are super hot right now in India. If you look at power, there are two sources of power, primarily in India. One is thermal. Now, thermal a few years back was available at the throwaway prices, but ESG considerations were pretty large in acquiring thermal assets. We evaluated the entire sector, and then because of ESG considerations, we didn't move forward. That was one purely economic consideration. It was compelling opportunity, but for ESG consideration, we never moved forward. The other source of power is renewables between wind, solar, et cetera. Typically, in a good case scenario, the wind, solar, given the CapEx and the revenue, the unit pricing, renewables return somewhere around, in a good case scenario, 13%-14% rupee, and converting to dollars is about 10%-11%.
Now, for Fairfax India, we have given a long-term threshold of 15% dollar. That's what we want to make. We didn't find any compelling opportunity, which is giving high returns. That's the reason why we are sitting on sidelines and still waiting for any particular power asset to acquire. On data center, again, there is limited set of data centers which are coming up. The dynamics which is playing out in India is instead of technology providers creating data centers, a bunch of real estate developers are creating data centers. Quality may not be perfect, but the valuations are just out of control. Real estate in India is as it is overpriced, and that basically spills over in the upfront valuation for data centers. Anything in data centers kind of going for 25x-30x EBITDA.
Again, right now it's not something where we think it's fairly priced to enter, but we are keeping a close control on what all is coming into the market, and as soon as we see any opportunity. We think it's a large opportunity, and at some point in time we'll jump in. But we are kind of staying disciplined and opportunistic about it. This is as far as power and data center is concerned. Anything else, Ben, you would want to add?
That's great. If you look at when they built out fiber optic cable, right? A lot of those companies went bankrupt. Then it allowed Netflix and other companies to grow off of it. For us, when Microsoft and Google and Amazon are going to put in $70 billion into India to invest in this stuff, maybe few years out, you don't need all that infrastructure, maybe then it becomes more interesting to us at that point in time. There's only one other person in the room looking for a question, so we're going to allow one more question.
Thanks, Ben. Thanks, Gopal. Congratulations on a phenomenal presentation. I really enjoyed it. I just have a question regarding the broad changes we have discussed in the economic and political landscape in India. You have rightfully mentioned that there have been a lot of positive changes since over the last decade in India. A lot of bureaucratic rules have been struck down. There is a lot of a dichotomy here. We have Mr. Prem Watsa here, who has been a champion of investing in India, and he has been struggling to get an approval for an IPO for the past five years.
I'm so glad we have Mr. Amitabh Kant here, so if we could hear his perspective, how do we reconcile these two things where we are still struggling in the bureaucratic mess to get approval for an IPO, and at the same time, we see all these positive developments happening in India. Thank you.
Yeah, ita's not just India, right? If you want to get a mine approved in Canada, it can take over 15 years too, right? There are processes that take time. Again, it's put us in a better position. The airports worked out better than we could have imagined in terms of. If you wanted to build what Hari and his team have built, you couldn't build it economically in the West or in Europe. You couldn't build it even in India now. I don't think you could build it at the same price. It would cost much more to be economic. It'd be hard to build a competing airport of our quality. Yeah, to get the approval, it does take time. I don't know. Amitabh, would you like to comment anything about how the ease of access has improved?
I would say one thing, I think an insight in patents. If you go back more than 10 years ago, some thousands of patents were being approved, and last year, 150,000 patents were approved, and so they hired a lot more people to approve patents. They're figuring out all sorts of ways to make the system better, but there still is a process to the system. I think that's fine, actually. I don't know. Right? Yeah.
Only optimism on which I would like to close is, as I mentioned to you when I was remarking about the Mideast problem, going back 35 years, back in 1991, it was just that after the Gulf War, after whatever we went through, India reforms got unleashed under Dr. Manmohan Singh and Narasimha Rao's government. After that, every successive crisis, I don't think India has lost its opportunity. Every government has reformed. Reform after reform.
Even last year, we saw this government taking certain reforms. I think every crisis is an opportunity, and I feel all the more optimistic if these global conditions persist for some time. Government will have to do things be it privatization or be it giving approvals or doing more reforms. All of those things will be considered very positive changes. I feel government will be forced to do it for any reason.
Thank you.
Thank you very much. That's our meeting. Just a couple of concluding remarks. If you want to go on a wonderful trip through India and learn more about our opportunities, you can speak to Cassie. There he is. Cassie's in the corner there in his booth, and it's a wonderful trip through multiple cities in India, and you get to see some of our companies. I even heard we might be having a quasi celebrity joining the trip from Fairfax, a guy named Peter, you might have heard of. You might get to spend some time with him, too, if you go on the trip.
Lastly, events like this don't happen alone, so thank you to The Ritz-Carlton, Gary and his team, Jen, Debbie, and their teams, Brad, Jennifer, John, Sumit, and his team at Fairbridge, Jeff, Prem, Chandran, and of course, Gopal, for making this event a great event. We're also happy to see Canada and India getting along better because much improvement from the prior meeting.
Also thank you all of you for taking the time to hear our story. Fairfax India is a result of a tremendous collective effort, and we think we have the best team to find ideas and solve problems together. Over the long term, Fairfax India offers global capital a vehicle to invest in this fast-growing economy. We hope you left today with a clear picture of our vision. Thank you very much.