Money is going into data centres and AI in US... now India will be on everyone’s list: Prem Watsa

You've just made a big bet on India at a time when a lot of investors are repatriating money back to the US. What's the impulse behind this call?

Well the reason is simple. India is the best country to make an investment. But the big thing now is that by the end of this year... You know, (commerce and industry minister) Piyush Goyal came and told us that you might have 60, 70-plus free trade agreements. I mean, that's unbelievable. You know what that means? You make in India and then you can sell all over the world. And we're, you know, building a pasta plant outside Mumbai-this is AGT. The plant's cost is about 25%, 30% of what it would be in the US or Canada. And the operating cost is half. You're going to get an economic boom in India for the next 10 years, I think, of very significant proportions.

Also Read: Looking to ride India boom over next decade with IDBI Bank, says Fairfax chief Prem Watsa


What were your first thoughts when you heard the news yesterday that you had won the bid?

We've been working on it for four years and maybe even longer. And so it's a long time. The board asked-why do you want to put so much money into India? I went to the board. I convinced the board... And then everybody on board, officers, everyone, 100% were on. And it looked like we'd get it early in the year. It looked like we won the auction.

But they have a process in the government because it's the government selling it, LIC selling it. So they had to go through the process and, you know... So like yesterday at 7 o'clock... I'm on the telephone and I'm seeing a lot of congratulations coming to me and I'm wondering what it is. Really excited for us. Because we really think India is on a tremendous economic trajectory.

And then Sumit (Sumit Maheshwari of Fairbridge Capital) called me and said the government just announced that we had won. And we thought we knew that some time back. But just really excited.

You have other investments in the financial services industry in India. You have Catholic Syrian Bank, IIFL Capital. What is the course of action?

What we're doing is putting in GoDigit, the insurance company. And we're putting in IIFL Capital. So you have an insurance operation with the bank run by Kamesh (Kamesh Goyal of GoDigit). And you have an investment bank and wealth management in the bank to provide all those services for their clients. Like a private bank would do, right? Very, very oriented towards service.

Just to be clear, when you say putting in, you will merge these entities with IDBI?

No, they're a public company, both of them. So they'll be owned 51% in one case, IIFL Capital. And the other one, yeah, about 60% or something. And... IDBI will end up owning 51% and 60% in these... 51% will be, you know, market prices for cash. And the same with GoDigit.

What is your positioning going to be for IDBI? There's a strong banking market with a lot of strong franchises and brands. How do you plan to stand out?

First the two areas, right? But first of all, we need Reserve Bank approval. We need IRDAI approval. We need Sebi approval because they're public companies. Once that's done, then we want to work on making sure these services are brought to the customers of IDBI Bank. We want to make sure we can provide those customers effectively. We want to be foremost. We want to really increase.

Already they're doing a lot of digital work, but we'd like to take it to a higher level. We're trying to bring the best technology, best worldwide to IDBI Bank from wherever it is.

Under the structure you're proposing, IDBI Bank will acquire the shares of GoDigit and IIFL, which are currently held by Fairfax?

That's right. So Fairfax will sell. Fairfax will have 60% of the company (IDBI Bank), but it'll sell these two companies (GoDigit and IIFL Capital) to IDBI Bank for cash. And they'll become subsidiaries of IDBI Bank.

So in a sense, it's a transfer from your holding company here to this particular business unit.

Yeah, that's what will happen. I said in the conference call that we've got a 27% capital adequacy ratio, which is right up where the big banks are. We want to always be very sound.

Do you intend to retain the current management?

(IDBI Bank MD and CEO) Rakesh Sharma has done a fantastic job. Obviously, it will continue. And NS Kannan (former ICICI Bank ED) we're proposing to be chairman, subject to RBI approval. And we're going to have an adviser, CV Rajendran, the person who ran CSB Bank very successfully. He's retired now, so he's going to help.

Was the structure mandated by RBI, to bring GoDigit and IIFL Capital within the fold?

No, no, no. It was what we came up with and we went to the divestment people and RBI. And it still has to be approved by the RBI, but they felt comfortable with it.

What about ownership of CSB Bank-will you merge it with IDBI Bank or sell it?

We have 2 years to decide on that from the RBI.

IDBI Bank shares fell today...

Yeah, I know. Prices go up and down. I've been in the stock market for 50 years. And I'm never worried about individual day stock prices. Our stock price is higher than anyone else's. No one knows why it goes up or goes down. There might have been some speculation that there might be a higher bid. We're looking at stock prices five years from now, 10 years from now.

What did you name the project-was there a code name?

It's called Sirius.

Would this be the longest you have pursued a deal?

The longest by far. We're used to three months, six months, with due diligence and all of that, maximum. Mostly it's two or three months.

But when your first-round bid was rejected and when they opened it the second time, you were still interested. You didn't feel like... this is going on forever.

No, we really liked how the bank was doing. And in the last 12 months, ending June, the bank had made a billion dollars-that's right, in profit.

What will be the timeline for holding the IDBI Bank investment?

IDBI Bank we have 15 years. The 60% stake has to go to 40% in 10 years and 26% in year 15. Indian insurance companies were only 26%, then they changed it to 49% and then they changed it to 74% and now it's 100%.

There's some concern on macros here. We have seen net FDI falling.

Money is going into data centres and AI and all of it's in the US. That might change and the money will go to countries like India, particularly, and other countries in Asia but India is going to be on everyone's list. Right now there's a lot of excitement in AI but that already is coming down.

Have you made significant investments in AI?

Zero.

So you're not a believer?

It's not our field. We would love to have invested five to 10 years ago but we weren't smart enough to invest in it.