Fairfax India Holdings Corporation Annual Report 2020

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FY2020 Annual Report · Fairfax India Holdings Corporation

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HOLDINGS CORPORATION

2020 Annual Report

Contents

Fairfax India Corporate Performance . . . . . . . .

Corporate Profile . . . . . . . . . . . . . . . . . . . . . .

Letter to Shareholders . . . . . . . . . . . . . . . . . . .

Management’s Responsibility for the

Consolidated Financial Statements . . . . . . . .

Independent Auditor’s Report . . . . . . . . . . . . .

Fairfax India Consolidated Financial Statements .

Notes to Consolidated Financial Statements

. . .

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

Corporate Information . . . . . . . . . . . . . . . . . .

135

HOLDINGS CORPORATION
8MAR201619315321

2020 Annual Report

Fairfax India Corporate Performance

(in US$ thousands, except as otherwise indicated)(1)

Book
value Closing
share
price Income

per
share(2)

Net
earnings
(loss)

Total
assets Investments

Common
share-
holders’

Shares
out-

Earnings
(loss)
per
share

equity standing(1)

As at and for the years ended December 31
Initial public offering
2015
2016
2017
2018
2019
2020

10.00
9.50
10.25
14.46
13.86
16.89
16.37

10.00(3)
10.10
11.55
15.00
13.13
12.80
9.60

Compound annual growth

8.7%(4) (0.7)%

65,251
128,604
609,670
166,518
712,689
(12,972)

1,025,421
40,939
1,303,497
107,825
2,672,221
452,509
2,707,057
96,432
516,338
3,244,937
(41,476) 3,072,998

978,569
1,095,569
2,635,726
2,661,347
3,171,332
3,027,648

1,013,329
1,075,446
2,132,464
2,117,945
2,577,851
2,446,934

106.7
104.9
147.4
152.9
152.6
149.5

0.42
1.01
2.94
0.63
3.30
(0.27)

(1) All share references are to common shares; Closing share price and per share amounts are in U.S. dollars; Shares outstanding are

in millions.

(2) Calculated as common shareholders’ equity divided by common shares effectively outstanding.

(3) On January 30, 2015, upon completion of the company’s initial public offering price of $10.00 per share, Fairfax India Holdings

Corporation’s subordinate voting shares began trading on the Toronto Stock Exchange under the symbol FIH.U.

(4) The company’s book value per share of $16.37 at December 31, 2020 represented a compound annual growth rate from the initial public

offering price of $10.00 per share at January 30, 2015 of 8.7%.

FAIRFAX INDIA HOLDINGS CORPORATION

Fairfax India Holdings Corporation (‘‘Fairfax India’’) is an investment holding company whose objective is to
achieve long term capital appreciation, while preserving capital, by investing in public and private equity securities
and debt instruments in India and Indian businesses (‘‘Indian Investments’’).

Corporate Profile

Indian Investments(1)

Fairfax India’s Public Indian Investments are comprised of various percentages of ownership in the following
companies whose shares are listed on both the BSE (formerly known as Bombay Stock Exchange Limited) and the
National Stock Exchange of India:

IIFL Finance Limited (‘‘IIFL Finance’’) is a publicly traded diversified financing company located in Mumbai,
India that offers home loans, gold loans, business loans (including loans against property and small-to-medium
enterprise loans, microfinance, construction and real estate finance) and capital market finance. IIFL Finance’s
revenues for the twelve months ended December 31, 2020 were $423 million. At year end, IIFL Finance had
shareholders’ equity of $716 million and there were approximately 18,000 employees. Additional information can
be accessed from IIFL Finance’s website www.iifl.com.

IIFL Wealth Management Limited (‘‘IIFL Wealth’’) is a publicly traded wealth management firm with principal
lines of business in wealth management and asset management, located in Mumbai, India. The wealth management
business serves the highly specialized needs of high net worth and ultra-high net worth individuals, affluent families,
family offices and institutional clients through a comprehensive range of tailored wealth management solutions.
The asset management business provides a diversified suite of alternative investment funds, portfolio management
services and mutual funds that span public and private equities, fixed income securities and real estate. IIFL Wealth’s
revenues for the twelve months ended December 31, 2020 were $127 million. At year end, IIFL Wealth had
shareholders’ equity of $406 million and there were approximately 900 employees. Additional information can be
accessed from IIFL Wealth’s website www.iiflwealth.com.

IIFL Securities Limited (‘‘IIFL Securities’’) is a publicly traded leading investment advisory firm providing
diversified financial services and products such as financial planning, equity, commodities and currency broking
(both cash and derivatives), depository participant services, investment banking, portfolio management as well as
distribution of mutual funds, bonds and other products. IIFL Securities is located in Mumbai, India. IIFL Securities’
revenues for the twelve months ended December 31, 2020 were $111 million. At year end, IIFL Securities had
shareholders’ equity of $140 million and there were approximately 2,300 employees. Additional information can be
accessed from IIFL Securities’ website www.iiflsecurities.com.

CSB Bank Limited (‘‘CSB Bank’’) is a publicly traded company located in Thrissur, India, established in 1920 and is
a full-service bank offering retail banking, non-resident Indian banking services, small-to-medium enterprise and
wholesale banking services through 454 branches and 319 automated teller machines across India. Prepared in
accordance with International Financial Reporting Standards (‘‘IFRS’’), CSB Bank’s revenues for the twelve months
ended December 31, 2020 were $159 million. At year end, CSB Bank had shareholders’ equity of $300 million and
there were approximately 4,000 employees. Additional information can be accessed from CSB Bank’s website
www.csb.co.in.

Privi Speciality Chemicals Limited (‘‘Privi Speciality’’) is a publicly traded specialty chemical manufacturer
located in Mumbai, India. Privi Speciality is a supplier of aroma chemicals to the fragrance industry. Privi Speciality’s
world-class products are the result of its very strong research and development team that has proven expertise in
developing new products, customizing aromas per customer specifications, scaling up products from basic research
to commercial scale, and designing process improvements to drive quality and cost optimization. Based on IFRS,
Privi Speciality’s revenues for the twelve months ended December 31, 2020 were $166 million. At year end, Privi
Speciality had shareholders’ equity of $91 million and there were approximately 1,400 employees. Additional
information can be accessed from Privi Speciality’s website www.privi.com.

Fairchem Organics Limited (‘‘Fairchem Organics’’) is a publicly traded specialty chemical manufacturer located
in Ahmedabad, India. Fairchem Organics manufactures oleochemicals used in the paints, inks and adhesives
industries, as well as intermediate neutraceutical and health products. Based on IFRS, Fairchem Organics’ revenues
for the twelve months ended December 31, 2020 were $44 million. At year end, Fairchem Organics had shareholders’
equity of $21 million and there were approximately 190 employees. Additional information can be accessed from
Fairchem Organics’ website www.fairchem.in.

(1) All of the Indian Investments’ figures are based on Indian Accounting Standards (Ind AS) unless otherwise stated.

5paisa Capital Limited (‘‘5paisa’’), located in Mumbai, India, is a publicly traded online financial services
provider with a ‘‘do-it-yourself’’ investment brokerage model that allows customers to execute investment
transactions for low brokerage fees. 5paisa is primarily engaged in providing a technology platform through online
and mobile applications for trading securities on the BSE and the NSE of India. 5paisa’s revenues for the twelve
months ended December 31, 2020 were $24 million. At year end, 5paisa had shareholders’ equity of $20 million and
there were approximately 900 employees. Additional information can be accessed from 5paisa’s website
www.5paisa.com.

Fairfax India’s Private Indian Investments are comprised of various percentages of ownership in the following
companies whose fair values cannot be derived from an active market and accordingly, are valued internally using
industry accepted valuation techniques and models:

Bangalore International Airport Limited (‘‘BIAL’’) is a private company located in Bengaluru, India. BIAL,
under a concession agreement with the Government of India until the year 2068, has the exclusive rights to carry out
the development, design, financing, construction, commissioning, maintenance, operation and management of the
Kempegowda International Airport Bengaluru (‘‘KIAB’’) through a public-private partnership. KIAB is the first
greenfield airport in India built through a public-private partnership. Based on IFRS, BIAL’s revenues for the twelve
months ended December 31, 2020 were $83 million. At year end, BIAL had shareholders’ equity of $372 million and
there were approximately 1,300 employees. Additional information can be accessed from BIAL’s website
www.bengaluruairport.com.

Sanmar Chemicals Group (‘‘Sanmar’’), a private company located in Chennai, India, is one of the largest
suspension polyvinyl chloride (‘‘PVC’’) manufacturers in India, operating in India and Egypt. Sanmar also
manufactures caustic soda, calcium chloride, chloromethanes, refrigerant gases, industrial salt and specialty
chemical intermediates. Based on provisional IFRS figures, Sanmar’s revenues for the twelve months ended
December 31, 2020 were $691 million. At year end, Sanmar had a shareholders’ deficit of $17 million and there were
approximately 1,800 employees. Additional
from Sanmar’s website
www.sanmargroup.com.

information can be accessed

Seven Islands Shipping Limited (‘‘Seven Islands’’), a private company located in Mumbai, India, is the second
largest private sector tanker shipping company in India and transports liquid cargo along the Indian coast as well as
in international waters. At December 31, 2020 Seven Islands owned 19 vessels with a total deadweight capacity of
approximately 1.0 million metric tons. Its vessels are registered in India and operate as Indian owned and flagged
vessels. Seven Islands’ revenues for the twelve months ended December 31, 2020 were $122 million. At year end,
Seven Islands had shareholders’ equity of $126 million and there were approximately 80 employees. Additional
information can be accessed from Seven Islands’ website www.sishipping.com.

National Collateral Management Services Limited (‘‘NCML’’), a private company located in Gurugram,
India, offers end-to-end solutions in grain procurement, storage and preservation, testing and certification, collateral
management, and market and weather intelligence. NCML’s wholly-owned subsidiary, NCML Finance Private Ltd,
focuses on rural and agri-business finance. Based on IFRS, NCML’s revenues for the twelve months ended
December 31, 2020 were $76 million. At year end, NCML had shareholders’ equity of $92 million and there were
approximately 1,700 employees. Additional information can be accessed from NCML’s website www.ncml.com.

Saurashtra Freight Private Limited (‘‘Saurashtra’’), a private company located in Mumbai, India, operates one
of the largest container freight stations (‘‘CFS’’) at Mundra port (Gujarat). Services provided by Saurashtra’s CFS
include transportation of containers to and from the port, stuffing and destuffing of containers, cargo storage,
transportation of cargo to the end customer, and the storage, maintenance and repair of empty containers.
Saurashtra’s subsidiary, Fairfreight Lines, focuses on services for container shipping, offering integrated logistics
solutions to its customers by providing containers, which are leased by Saurashtra, to importers and exporters to
transport cargo. Saurashtra’s revenues for the twelve months ended December 31, 2020 were $25 million. At year
end, Saurashtra had shareholders’ equity of $36 million and there were approximately 150 employees. Additional
information can be accessed from Saurashtra’s website www.saurashtrafreight.com.

National Stock Exchange of India Limited (‘‘NSE’’), a private company located in Mumbai, India, operates
India’s largest stock exchange. In addition to providing a platform for exchange-traded financial products in India,
NSE’s flagship index, Nifty50, is used extensively by investors in India and around the world as a barometer of the
Indian capital markets. NSE’s revenues for the twelve months ended December 31, 2020 were $708 million. At year
end, NSE had shareholders’ equity of $1.5 billion. Additional information can be accessed from NSE’s website
www.nseindia.com.

FAIRFAX INDIA HOLDINGS CORPORATION

To Our Shareholders,

After a good five-year run from inception when Fairfax India’s book value per share (BVPS), our key performance
measure, grew at a compound annual rate of 11.2%, Fairfax India’s BVPS declined by 3.1% in 2020 (mostly reflecting
a 2.3% decline in the Indian rupee during the year) from $16.89* at the end of 2019 to $16.37. Common
shareholders’ equity declined by 5.1% after increasing by 21.7% the previous year.

Here is a snapshot of Fairfax India’s performance since it began:

Book value per share
Income
Net earnings (loss)
Return on equity
Total assets
Investments
Common shareholders’

equity

Shares outstanding

(millions)

2020

2019

2018

2017

2016

16.37 $

16.89 $

13.86 $

14.46 $

10.25 $

(12,972)
(41,476)
(1.7)%
3,072,998
3,027,648

712,689
516,338
22.0%
3,244,937
3,171,332

166,518
96,432
4.5%
2,707,057
2,661,347

609,670
452,509
28.2%
2,672,221
2,635,726

128,604
107,825
10.3%
1,303,497
1,095,569

2015

9.50
65,251
40,939
4.0%
1,025,451
978,569

CAGR(1)
8.7%

11.2%(2)
20.4%
21.0%

2,446,934

2,577,851

2,117,945

2,132,464

1,075,446

1,013,329

16.1%

149.5

152.6

152.9

147.4

104.9

106.7

(1)

Since Fairfax India’s inception on January 30, 2015, when it raised $1.03 billion at $10 per share. From an initial value of $9.62 (after
IPO expenses), book value per share has compounded at 9.4% annually.

(2)

Simple average of the return on equity for each of the six years

After a good year in 2019, Asian emerging markets’ performance was mixed in 2020. You will see from the table below
(based on the leading US$ equity index in each country named) that India grew by 12.8%, outperformed only by
China’s and Vietnam’s equity indices, which grew by 35.7% and 15.2% respectively.

China
Vietnam
India
Sri Lanka
Malaysia
Hong Kong
Thailand
Singapore

35.7%
15.2%
12.8%
8.0%
4.2%
(3.0)%
(8.3)%
(10.2)%

And here is a comparison of Fairfax India’s change in BVPS in 2020 with the change in major Indian US$
equity indices:

Fairfax India BVPS
S&P BSE Sensex 30
S&P BSE 500
BSE midcap
Nifty 50

(3.1)%
12.8%
13.9%
16.9%
12.0%

Over the six years since Fairfax India’s inception, Fairfax India has outperformed the Indian markets, as
demonstrated in the following table showing the annual percentage change over six years:

Fairfax India BVPS(1)
US$ S&P BSE Sensex 30
US$ S&P BSE 500

+8.7%
+5.7%
+5.5%

(1) Fairfax India’s 6-year annualized growth in BVPS is calculated based on its January 30, 2015 IPO price of $10 per share.

All dollar amounts in this letter are in U.S. dollars unless specified otherwise. Numbers in the tables in this letter are in U.S.
dollars and $ thousands except as otherwise indicated.

Please note that Fairfax India’s book value is based on publicly traded market values only for the approximately half
of its investments which are publicly traded (the rest are based on more restrained internal valuations), whereas the
Sensex and BSE 500 are of course based entirely on publicly traded market values.

That said, there is no denying that, in the past year, Fairfax India has underperformed the listed equity markets in
India. However, please note that at current levels, the Indian markets are trading at extremely elevated valuations:

Price to earnings ratio
Price to book value
Dividend yield
Market cap to GDP ratio

Year-end 2020

10-year average

26.0
2.8
1.3%
97.4%

20.8
2.8
1.4%
73.7%

Also, similar to the western markets, where technology stocks like Facebook, Amazon, Apple, Netflix and Google are
disproportionately driving markets, in India too, the top five companies accounted for 77% of the growth of the
SENSEX and 71% of the growth of the Nifty 50.

Fairfax India’s net loss in 2020 was $41.5 million versus a profit of $516.3 million in 2019, largely as the result of net
unrealized losses on investments of $26.6 million compared to net unrealized gains of $530.4 million in 2019. Net
loss also reflects interest income of $6.0 million and net foreign exchange losses of $14.2 million. Fully diluted loss
per share was $0.27 in 2020 versus earnings per share of $3.30 in 2019.

The significant contributors and detractors to the changes in BVPS recorded in 2020 were:

Privi Speciality / Fairchem Organics
NSE
NCML
IIFL Finance
Sanmar

($ millions)

65.6
15.4
(34.5)
(34.5)
(74.3)

Since we began, Fairfax India has completed investments in ten companies (13 currently, as one has split into four
listed entities), all sourced and reviewed by Fairbridge, Fairfax Financial Holdings’ (Fairfax) wholly-owned
sub-advisor in India. Fairbridge does outstanding work under the excellent leadership of CEO Sumit Maheshwari,
supported by its Director, Anish Thurthi, Vice President, Sheetal Sancheti, and analysts Jinesh Rambhia and Ramin
Irani. Fairfax India’s Mauritius subsidiary, FIH Mauritius Investments, ably led by its CEO Amy Tan, supported by its
senior manager Vishal Mungur and its independent Board of Directors, is an integral part of the investment process.
Also, since we began, Deepak Parekh, both as a trusted advisor and a member of the Board of Directors, has provided
us with invaluable advice on almost all of our transactions.

FAIRFAX INDIA HOLDINGS CORPORATION

All of Fairfax India’s investments are in outstanding companies with a history of strong financial performance, led by
founders and management who are not only excellent but also adhere to the highest ethical standards. The details of
these investments in chronological order of the initial investment are as follows:

Date of Initial
Investment

Ownership

89.5%

22.4%

13.8%

26.5%

26.6%

48.8%

42.9%

1.0%

51.0%

54.0%

49.7%

48.5%

NCML

IIFL Finance*

IIFL Wealth*

IIFL Securities*

5paisa*

Fairchem Organics(2)

Privi Speciality(2)

August 2015

December 2015

February 2016

August 2016

Sanmar Chemicals Group

National Stock Exchange of

April 2016

July 2016

India

Saurashtra Freight

February 2017

Bangalore International Airport

March 2017

CSB Bank

Seven Islands Shipping

Other Indian Investments

Total

October 2018

March 2019

Aggregate: IIFL Finance, IIFL Wealth, IIFL
Securities and 5paisa

(1) Calculated using the internal rate of return

Fair Value at
Amount December 31,
2020
Invested
($ millions)
($ millions)
101.1
188.3

Compound
Annualized
Return(1)

(12.4)%

–

191.5

91.3

23.5

19.4

55.0

199.0

26.8

30.0

653.0

169.5

83.8

131.8

131.5

166.7

55.6

27.8

54.6

138.4

338.6

72.6

32.8

1,396.1

214.3

103.5

173.1

23.5%

24.3%

16.9%

29.0%

2.3%

23.8%

13.7%

13.2%

19.9%

1,862.9

3,006.7

306.3

381.6

9.2%

(2) Presented based on the initial investment before the merger in March 2017

While the BVPS of Fairfax India is $16.37, we believe that the underlying intrinsic value is much higher, since all the
companies listed above have characteristics that give them the potential for a significant increase in their value. We
have taken the opportunity over the last three years to buy back 5.6 million Fairfax India shares for $64.1 million or
an average price of $11.40 per share, including the 3.2 million shares we bought in 2020 for $28.9 million or an
average price of $9.14 per share.

We believe that listing some of the private companies that Fairfax India owns will result in better discovery of the true
value of these companies. Let us take the example of Bangalore International Airport Limited (BIAL)/Anchorage.

In June 2019, Fairfax India created a 100% owned subsidiary in India named Anchorage Infrastructure Investments
Holdings (Anchorage). It is intended that this company will be Fairfax India’s flagship investment vehicle for airports
and other infrastructure investments in India and that all the shares it owns in BIAL will eventually be transferred
to Anchorage.

In 2019, Fairfax India signed definitive agreements with OMERS (the pension plan for municipal employees in the
province of Ontario, Canada) whereby it will transfer 43.6% out of the 54% that it owns in BIAL to Anchorage and
OMERS will invest about $130 million to acquire from Fairfax India an 11.5% interest on a fully diluted basis in
Anchorage. This will result in OMERS indirectly owning approximately 5% of BIAL. The transaction values 100% of
BIAL at $2.6 billion. We are awaiting one final approval from the government of India and expect to close this
transaction in March 2021.

Fairfax India intends to complete an IPO of Anchorage that values the underlying shares for 100% of BIAL at a target
valuation of $2.9 billion (a valuation of $1.3 billion for 100% of Anchorage). A ‘‘ratchet’’ mechanism has been agreed
with OMERS whereby if the IPO is completed at a valuation below $1.3 billion, the investor will receive an
incremental share of Anchorage to compensate for the difference between the actual IPO valuation and $1.3 billion.

BIAL is a profitable airport in India and is a highly sought-after asset. The marketability of BIAL to large pension funds
and strategic global airport operators, even as an unlisted company, is very high. This is supported by several recent
examples of stake sales and privatisation of airport assets in India. A public listing of Anchorage will help in
discovering the true value of BIAL. We believe that it could be much higher than $2.9 billion.

Once Anchorage is listed, the proportion of the market value of the publicly listed investments in Fairfax India will
increase from the current 31% to about 80% of the overall portfolio. We are also in the process of listing two of our
other private investments. Once these companies are listed, the proportion of Fairfax India’s public investments will
increase to over 90% of the overall portfolio.

Also, while the markets are being driven by a few high-flying names, as described above, there are many excellent
companies that are trading at extremely attractive valuations with potential to be rerated by the markets. Take the
example of one of our portfolio companies, IIFL Securities:

Total market capitalization(1)

4 years to March 2020(2)

Return on equity (average)
Net worth growth (CAGR)
Earnings growth (CAGR)

Closing share price on February 18, 2021

Estimated March 2021
Earnings per share
Price(1) / Earnings
Price(1) / BVPS
Dividend yield

Unit
$mn

206

26.7%
28.5%
26.9%

47.15

6.0
7.9x
1.4x
4.2%

(1) Based on the rupee closing share price on February 18, 2021

(2) March is the fiscal year-end.

IIFL Securities is trading at a price to estimated March 2021 earnings of only 7.9 times and price to BVPS of only
1.4 times. With IIFL Securities’ strong historical growth and return on equity metrics, we believe there is potential for
significant upside on the value of this investment.

Performance Fee

You will recall that under the investment advisory agreement with Fairfax Financial Holdings Limited (Fairfax),
Fairfax India’s sponsor and controlling shareholder, and Fairfax’s investment counsel subsidiary Hamblin Watsa,
Fairfax is entitled to a performance fee intended to be 20% of any increase in Fairfax India’s BVPS (including
distributions) above a non-compounded 5% increase each year from the BVPS at inception in 2015. The performance
fee will be calculated at the end of each three-year period since inception, and the amount payable as at the end of
any three-year period would be reduced by the aggregate of the performance fees paid in respect of all prior three-year
periods.

At the end of the second three-year period in 2020, a performance fee of $5.2 million was payable and settled with
the issue of 546,263 subordinate voting shares of Fairfax India to Fairfax in compliance with the above-described
intent, even though the language of the investment advisory agreement, failing to fully recognize performance fees
already paid, would have provided for the payment of a higher performance fee. The language of the investment
advisory agreement will be amended to make this correction permanent.

FAIRFAX INDIA HOLDINGS CORPORATION

Investment and Advisory Fee

An investment and advisory fee of 0.5% of the value of undeployed capital, plus 1.5% of Fairfax India’s common
shareholders’ equity less the value of undeployed capital, is calculated and payable quarterly.

Indian Investments(1)

Bangalore International Airport (BIAL)

Between March 2017 and May 2018, Fairfax India invested, in 3 tranches, $653.0 million to acquire 54% of BIAL,
implying an equity value of approximately $1.2 billion for the whole company. It is the third largest airport in India
and in 2019 it was the fastest growing airport in the world and was the first airport ever to win Airports Council
International’s best customer service award for both arrivals and departures. Bangalore, considered India’s Silicon
Valley, is the third largest and fastest growing city in India.

My most recent departure from BIAL was on February 4, 2020. On that day, despite the Indian economy growing at
its lowest rates in the last 12 quarters, BIAL clocked a total of 80,062 passengers (68,617 domestic and
11,445 international), and was well on its way to handling its planned 36 million passengers in 2020, 7% higher than
in 2019 and its highest ever annual passenger count. On March 11, 2020, the WHO announced that COVID-19 was a
global pandemic and acting under government orders, the entire airport was shut down for passenger traffic on
March 25, 2020.

Despite these extraordinary circumstances, under the exceptional leadership of Managing Director and CEO Hari
Marar and his executive team, BIAL has had a commendable year, turning what could have been significant problems
into opportunities for changes that addressed both short term needs and longer term operational excellence. They
took on the challenge by organizing into action groups that were tasked to address specific issues. During the
lockdown, the BIAL team opportunistically brought forward many maintenance projects such that future
disruptions will be minimised.

While cargo operations were never suspended during the entire shutdown, passenger operations for domestic
passengers recommenced, on a very limited basis, on May 25, and were gradually ramped up to 95% of domestic
routes being reopened by year-end, but with much reduced flight schedules. International flights are still limited to
‘‘repatriation’’ flights for returning Indians and for flights between India and countries considered to be in mutual
‘‘bubbles’’.

With passenger traffic down to zero for almost two months and followed by a very gradual recovery, BIAL revenues
dropped by 79% in the two quarters ending in September 2020 to $23 million. Managements’ first priority was to
minimize losses and conserve cash but without resorting to layoffs of the permanent workforce. It did an admirable
job by generating annualized savings of $10 million by implementing operational efficiencies. It also optimised the
capex schedules to efficiently manage its cash flow. Further, by utilizing loan moratoriums, deferment of dues under
the concession, and tax efficiencies, they realized cash savings of $27 million. It is also in the process of securing
additional short term credit lines for about $55 million.

In cargo operations BIAL was not affected by the pandemic related shutdowns, other than by the loss of capacity due
to reduced belly capacity resulting from fewer passenger flights. Despite this limitation, in October 2020 BIAL
recorded all-time high numbers in monthly cargo, outbound tonnage, international cargo and perishable goods
(the highest in India).

Given the impact of the pandemic on the travel industry across the world, BIAL’s financial performance in 2020 did
not come as a surprise. Passenger traffic fell 60% from the previous year to about 14 million and cargo handled
dropped 17% primarily because of the reduced belly capacity as described above. Based on IFRS, BIAL’s revenue
dropped 58% to $83.1 million, resulting in a loss after tax of $66.8 million versus a profit of $53.8 million in 2019.
This is only temporary! As discussed in greater detail below, we expect higher user fees in the third five-year control
period which will start in April 2021.

Despite the unprecedented events that impacted operations and financial performance in 2020, we estimate that
BIAL will generate a total ROE of 16.5% for the second control period and an ROE of 17.7% for the combined first and
second control periods.

(1) All of the Indian Investments’ figures are based on Indian Accounting Standards (Ind AS) unless otherwise stated.

The valuation (including foreign currency translation) of Fairfax India’s interest in BIAL remained at $1.4 billion in
2020, the same as in 2019, implying an equity value of approximately $2.6 billion for the whole company. This
valuation is supported by future cash flow estimates driven by the growth plans described in the two following
paragraphs.

In 2018 BIAL entered a phase of significant investment of about $1.9 billion to expand its designed capacity of
20 million passengers to about 50 million in 2021 by re-configuration and system improvements in the existing
terminal (to be completed concurrently with the construction of phase 1 of a second terminal), building a second
runway and building phase 1 of a second terminal and associated supporting infrastructure. The second runway was
commissioned as planned in 2019, and significant progress has been made in the construction of phase 1 of the
second terminal, which is expected to be completed in 2022. A financing plan for this expansion, based on a
debt-to-equity ratio of 80:20, has been approved by a syndicate of Indian banks at attractive interest rates.

Then plans were added for the building of phase 2 of the second terminal and related infrastructure for an
incremental investment of about $1.2 billion, to take the capacity to about 70 million passengers by 2029. In 2019,
BIAL added a plan for a third terminal and related infrastructure for an incremental investment of approximately
$1.0 billion, taking the capacity of the airport beyond 90 million passengers by 2034. The total investment of about
$2.2 billion required to complete the above expansions will be funded through internally generated funds and debt.

BIAL has three potential sources of revenue:

(cid:127) Aero Revenue: Aero revenue, which had grown at a CAGR of 12% from 2009 to 2020, is the revenue earned
for providing services such as landing, parking and other services charged as user development fees (UDF) to
airlines and passengers. The aero tariffs for these services are set for five-year periods (called ‘‘control periods’’)
and are fixed by the Airport Economic Regulatory Authority (AERA) to provide a 16% return on equity
deployed in the Regulatory Asset Base (RAB). AERA treats 30% of non-aero revenue as aero revenue as a subsidy
for the purpose of tariff calculations. The tariff order for the second control period (from April 2016 to
March 2021) was finalized by AERA in August 2018, well after the control period had begun. Any under or over
recovery of tariffs in any control period will be adjusted in the subsequent control period. This is achieved
primarily by adjusting downwards or upwards the fee that the airport is allowed to charge for its aero services
to passengers and airlines. The tariffs that the airport can charge have a very significant impact on the cash
flow generated which, in turn, has a major impact on the financing for the planned expansion of the airport.

Because of the significant underachievement of passenger traffic in the last year of the second control period
and the completion, during the third control period (from April 2021 to March 2026), of capital projects, UDFs
are expected to increase significantly in the third control period. With the higher UDFs and the ultimate
return of passenger volumes to pre-pandemic growth levels, aero revenue is expected to return to normal
levels in the fiscal year ending March 2023.

(cid:127) Non-aero Revenue: All revenue other than aero revenue, such as revenue from food and beverage sales and
duty-free shops, constitutes non-aero revenue. Non-aero revenue had grown at a CAGR of 17% from 2009 to
2020 and is also expected to resume its growth trajectory from 2023 due to the return to normal passenger
growth rates, the availability of additional space and the increasing propensity of passengers at the airport to
make purchases. BIAL has undertaken many innovative projects that engage passengers and enhance their
experience at the airport. Plans are in place to grow non-aero revenue by five times over the next decade.

During the pandemic, BIAL has been a leader among airports in being flexible and working collaboratively
with concessionaires (who also were extremely stressed from the shutdown of their businesses), helping them
to survive and resume business as passenger traffic comes back.

(cid:127) Real Estate Monetization: BIAL has approximately 460 acres of land adjoining the airport that can be
developed. Most of this land is undeveloped and Bangalore’s historical population areas are getting congested,
so the city is expanding in the airport’s direction. BIAL anticipates significant upside, over time, from
monetization of this real estate. We provide below an update on the significant progress made in the actions to
monetize the land available for development.

(cid:127) A 100% owned special purpose vehicle (SPV) subsidiary of BIAL was incorporated to carry on the real
estate activities of BIAL. This entity, Bangalore Airport City Limited (BACL), is now capitalized and staffed
and is expected to be self-funding as we move forward. Plans to develop the first 176 acres of land have

FAIRFAX INDIA HOLDINGS CORPORATION

been advanced and several deals are being negotiated. Infrastructure planning and detailed design for this
parcel have been completed.

(cid:127) Anchored on the principles of a smart city, BACL will focus on four asset classes – business parks; a retail,

dining and entertainment village (RDE); hospitality; and convention and exhibition centres.

(cid:127) Despite potential partners’ and investors’ inability to visit the site because of the pandemic, significant

progress has been made in project plans.

(cid:127) A land lease for a 3D printing facility has been completed and the first payment received.

(cid:127) A land lease for a large central kitchen for the premier airline services company has been agreed,

although payment has been delayed because of pandemic related disruptions.

(cid:127) A term sheet has been signed for a joint development ‘‘built to suit’’ campus for a multinational

corporation.

(cid:127) A term sheet has been signed for a joint development trade centre.

Despite being tumultuous, 2020 featured the following significant achievements by BIAL:

(cid:127) Two important new international routes were established to start in 2021: Air India and United Airlines flights

to San Francisco and American Airlines flights to Seattle.

(cid:127) It won the award for the world’s best airport experience in arrivals.

(cid:127) It implemented contactless processing for a passenger’s end-to-end journey.

(cid:127) It has many construction projects underway, including refurbishment of the existing runway; building a new
terminal; and constructing utilities, transportation and road infrastructure for the planned growth. Despite
the disruptions in the availability of labour and materials caused by the pandemic, all projects have made good
progress and expect to be completed no later than 12 months beyond the original target dates.

(cid:127) BIAL has been at the forefront of designing and implementing its sustainability goals and touching lives of its

community. Recent successes of BIAL’s sustainability goals include:

(a) BIAL is a net contributor to the ground water whereby it generates more water from the rainwater

harvesting and waste-water treatment than it uses.

(b) Renewable energy sources were utilized for 95% of the airport’s energy needs.

of 2021.

Anchorage Infrastructure Investments Holdings (Anchorage)

In March 2021, Fairfax India expects to close the transaction whereby it will transfer 43.6% out of the 54% that it
owns in BIAL to Anchorage and will sell 11.5%, on a fully diluted basis, of Anchorage to OMERS for cash
consideration of $130 million. The transaction values 100% of BIAL at $2.6 billion and will result in OMERS
indirectly owning approximately 5% of BIAL.

The expected closing of this transaction has taken much longer than we expected, and we have learned that
government approvals in India can take much longer than we might anticipate, though the pandemic might have
resulted in some of the delays.

As mentioned earlier, Anchorage is intended to be Fairfax India’s flagship investment vehicle for airports and other
infrastructure investments in India. Since its inception in June 2019, Anchorage has actively participated in bidding
for Indian airports’ and railway stations’ privatisation processes. It continues to look for unique and value-accretive
infrastructure and allied businesses. We have also started the preparation work to list Anchorage on the Indian stock
exchanges.

Sanmar Chemicals Group (Sanmar)

Despite considerable disruptions as a result of the pandemic, Sanmar had much improved financial results in 2020.
Based on provisional IFRS estimates, for the year ended December 31, 2020, Sanmar’s revenue was flat at around

$700 million, but EBITDA increased from a loss of $8.6 million in 2019 to a profit of $123.7 million in 2020. Net loss
in 2020 was reduced to $143.2 million from a loss of $187.4 million in 2019.

In 2016, Fairfax India lent Sanmar the rupee equivalent of $300.0 million by way of non-convertible debentures
(NCDs) for a period of seven years. The NCDs provided for 3% payment-in-kind interest and a redemption premium
such that the annual yield of the NCDs would be 13%. In addition, for $1.0 million Fairfax India received a 30%
equity interest in Sanmar’s entire chemicals business.

In 2019 Sanmar settled our $300.0 million of 13% bonds for $433.9 million, of which we invested $198.0 million in
additional common shares of Sanmar based on an effective equity valuation of approximately $1.0 billion for the
whole company, thereby increasing our equity ownership interest from 30% to 43%. This transaction returned
approximately 76% of the capital Fairfax India originally invested while increasing our ownership of Sanmar.

N. Sankar, the chairman of the Sanmar group, and his son Vijay Sankar, the deputy chairman, have grown the group
into a large private conglomerate with sales of around $1 billion and an asset base of around $2 billion. Founded in
the early sixties, its business interests spanned chemicals, engineering technology and shipping, with operations in
India, the Middle East and the Americas. Fairfax India’s investment is in the chemicals business, which constitutes
more than 70% of the group’s operations and is housed within three operating companies, two in India – Chemplast
Sanmar Limited (CSL) and Chemplast Cuddalore Vinyls Limited (CCVL) – and one in Egypt – TCI Sanmar (TCI). The
group is renowned for its high integrity and the highest levels of corporate governance and environmental and social
responsibility.

(cid:127) CSL is the largest manufacturer of paste polyvinyl chloride (PVC) in India. It also manufactures
chloromethanes, ethylene dichloride (EDC) and vinyl chloride monomer (VCM) at Mettur and Karaikal.
Sanmar Speciality Chemicals, which manufactures custom made chemicals for customers in the
agro-chemical, pharmaceutical and fine chemical industries, is also a part of this division.

(cid:127) CCVL is the second largest suspension PVC player in India.

(cid:127) TCI, Egypt, after its expansion was completed in 2018, became a balanced integrated manufacturing facility

and is the MENA region’s largest manufacturer of suspension PVC and caustic soda.

CSL, Sanmar’s flagship Indian chemical business, has been in operation for over 50 years, celebrating its golden
anniversary in 2017. N. Sankar is considered a pioneer in the PVC industry in India. With his visionary leadership, in
2009 CSL commissioned one of the largest greenfield PVC projects in India, with an annual capacity of 300 metric
kilotons per annum (ktpa).

Sanmar acquired TCI in 2007, with the intention of setting up a large greenfield PVC plant in Egypt to cater to the
high growth markets of North Africa, the Middle East and parts of Europe. TCI until recently had a 200 ktpa capacity
PVC plant. In 2018, with help from the financing provided by Fairfax India, TCI completed a major expansion plan
and added a new 200 ktpa PVC plant, taking total PVC capacity to 400 ktpa, a 130 ktpa calcium chloride plant and a
75 ktpa caustic soda by-product line. These were ramping up to full production, with full capacity expected to be
attained in 2020, to take advantage of Sanmar’s significant investment in infrastructure in Egypt.

Then the pandemic hit!

In response to government-imposed lockdowns, CSL’s PVC production was shut down from the end of March and
only resumed in May. Though paste PVC demand, which is largely driven by the auto sector, leather garments and
footwear, was severely reduced from March to July, CSL made the deliberate decision to resume production as soon as
the lockdowns were lifted in May and built inventory. This proved to be a good decision because demand picked up
from August and has since been very strong. Demand for caustic soda and calcium also fell substantially despite
increased demand from the soaps and detergent industry and continues to remain depressed. The specialty
chemicals business was not affected because it is considered an essential business and remained open throughout.
Industry experts anticipate a very bullish future for paste PVC because of plant closures in South Korea, China,
Germany and the United Kingdom due to environmental and other concerns and there is no new capacity coming
onstream. CSL, which uses an environmentally friendly process, expects to capitalize on the situation by meeting
incremental demand for paste PVC which has grown at a CAGR of 7% over the last 10 years. It is in the process of
increasing its paste PVC capacity from 66 ktpa to 101 ktpa for an investment of about $35 million. Industry experts
also anticipate that over the medium term, demand for caustic soda will exceed supply and normalcy will return to
the commodity.

FAIRFAX INDIA HOLDINGS CORPORATION

CCVL’s production was also severely constrained from the end of March to the middle of May, but since then the
plant has been running nearly to full capacity. Global demand for suspension PVC has been strong, driven by
infrastructure investment in China, housing starts in the U.S. and agriculture-related infrastructure investment in
India. At the same time global supply has been constrained because of a myriad of technical and other issues at
producing companies in the U.S., Europe, Mexico and South Korea. As a result, there is extreme tightness in the
market and prices for suspension PVC are near all-time highs. Since May 2020, CCVL has been able to realize 18 price
increases. As positive as the global situation is for the manufacturers, the outlook is even better in India. With
consumption projected to grow at a CAGR of 7.5% to 8.0% over the next few years, demand is expected to grow
significantly, resulting in a large deficit, which will need to be imported. Because CCVL has the advantages of an
existing plant, land and infrastructure; the logistic advantage of supplying the South Indian market; long term
strategic relationships with feedstock suppliers; and strong customer relationships, it will be the ideal time for it to
implement its plan to expand its capacity from 300 ktpa. The timing of the expansion will be determined based on
completion of the balance sheet changes that Sanmar is in the process of making as described below.

In 2020, TCI had a better year financially, but pandemic-related issues slowed its progress to full and efficient
operation of its plant. EBITDA was nearly at breakeven versus a loss of $74.1 million in 2019, and pretax loss
improved from $215.2 million to $106.6 million. Curfews in Egypt resulting in limited availability of workers,
reduced demand in target markets, supply chain disruptions and travel restrictions preventing expert resources from
visiting the plant to make planned adjustments to ramp up to 100% capacity utilization, all due to the pandemic,
resulted in capacity utilization reaching only 80%.

However, the biggest impact of the pandemic on all the Sanmar companies has been the squeeze on their liquidity
position. In order to rectify this and to reduce the overall debt of the company, Sanmar is actively pursuing
opportunities to raise additional equity capital to repay and restructure debt. Only after this is accomplished, Sanmar
will make investments in projects that exploit excellent growth and cost saving opportunities.

CSB Bank (formerly The Catholic Syrian Bank) (CSB)(1)

During the pandemic lockdown, banks were allowed to operate since they were considered to be an essential service.
Also, the government and the Reserve Bank of India (RBI), in order to mitigate the impact of business interruptions,
directed banks and NBFCs to extend loan moratoriums to their customers until August 2020. During this
moratorium period, borrowers could choose to stop making interest and principal payments and banks were allowed
to disregard these delinquencies in calculating their regulatory capital adequacy. Fortunately for CSB, while 15% of
the total loan book had opted for moratoriums, only 0.5% of the loan book had not serviced their accounts at all
during the moratorium period. All the other borrowers serviced their accounts to the extent possible. Banks were
expecting to find the extent of the distress among its borrowers 90 days after the end of the moratorium, when they
would have had to recognise delinquencies and make loan loss provisions, as required by banking regulations.
However, the Supreme Court of India made a ruling in September 2020 that no loans were to be classified as
non-performing, in effect extending the moratorium indefinitely. Therefore, the banks will have to wait to
determine the extent of their loan losses and make provisions. Because of this uncertainty, in addition to its general
loan loss provisions for its loan book of $1.8 billion, CSB has made extra provisions of about $7 million towards NPAs
of about $28 million that may arise as a result of the pandemic.

CSB also proactively took steps to ring fence the bank during these uncertain times. Employees were encouraged to
use up vacation time and branches and offices were told to work with 50% of staff. As per guidelines, branch timing
was reduced, and services restricted to essential ones. Other services were rendered on a best effort basis. Given an
uncertain economic outlook, credit sanctions were temporarily put on hold.

In 2019 Fairfax India completed its purchase of a 51% interest in CSB for consideration of $169.5 million (140 rupees
per share), implying a multiple of 1.1 times the September 30, 2017 BVPS. This was the culmination of an effort that
began in December 2016, when the RBI gave Fairfax India permission to acquire a 51% stake in CSB. This was the first
time in the history of the RBI that anyone was given approval to acquire a majority stake in a bank in India. Our
entire investment was infused into CSB as primary capital, thereby increasing its capital adequacy ratio (CAR) to
21.0% at the end of 2020. The improved CAR enabled the bank to make adequate provisions for loan losses, invest in
more branch openings, higher quality people and technology and grow its loan book with well underwritten loans.

(1) All of the CSB figures are based on Indian Generally Accepted Accounting Principles (Indian GAAP) unless otherwise

stated.

In November 2019 CSB completed its successful IPO and was listed on the Indian stock exchanges. The IPO, which
was oversubscribed 87 times, was completed at a price of 195 rupees per share (our cost is 140 rupees per share) and
consisted largely of existing shareholders selling to new ones (Fairfax India did not sell any shares).

CSB is one of the oldest private sector banks in India and has a strong base in Kerala along with a significant presence
in the states of Tamil Nadu, Karnataka and Maharashtra. The bank currently operates 454 branches and
319 ATMs across India. With its branches primarily located in south India, it focuses on retail, gold and small and
medium enterprise (SME) loans, which together comprise about 77% of total advances. CSB also owns 38 residential
and commercial properties and land banks, some purchased several years ago, and others acquired by enforcement
of security.

Mr. C.V.R. Rajendran, who has been the CEO of the bank for the last four years, has now completed most of the
changes that he wanted to implement in the management of the bank, including:

(cid:127) Performance and productivity oriented human resource policies

(cid:127) Rounding out his management team by filling all the key senior management positions

(cid:127) Appointment of Pralay Mondal, a very senior banker, as the President of the bank

(cid:127) Reorganization of the operations of the bank into three verticals-

(cid:127) retail banking (comprised of branch banking, gold loans, two-wheeler loans, micro, small and medium
enterprise (MSME) loans, microfinance under financial inclusion (MFI) loans and agricultural loans);

(cid:127) SME banking; and

(cid:127) wholesale banking.

CSB for its internal purposes classifies loan assets of up to five million rupees as MSME and monitors these under the
retail banking vertical. Loan assets between five million and 250 million rupees are monitored and serviced
separately by the SME banking vertical. Any amount higher than 250 million rupees is managed by the wholesale
banking vertical.

Pralay will lead the effort to develop branch banking which will primarily focus on retail deposits comprising lower
cost current and savings accounts (CASA) and cross selling of products to generate non-interest income.

Despite a weak economy, as a result of the pandemic, and high levels of system liquidity which constrained
opportunities for lending, CSB made excellent progress in its key performance measures in 2020, with loan advances
growth of 22% (including gold loans growth of 61%) and deposits growth of 16% (including CASA growth of 24%).
Net interest income grew 48% and the credit to deposit ratio improved from 71% to 74%, while non-interest income
was up 107%. In addition, the yield on loans improved to 10.9% from 10.7%, CASA improved to 30.4% from 28.6%
of total deposits, net interest margin (NIM) improved to an industry leading 5.2% from 3.9% and the cost of deposits
decreased to 4.9% from 5.9%. It is likely that NIM will moderate to around the 4% level.

As a result of these improvements, gross non-performing assets (NPA) reduced to 1.8% from 3.2%, net NPAs reduced
to 0.7% from 2.0%, the provision coverage ratio (PCR) improved from 80.3% in December 2019 to 91.0% in
December 2020 and the CAR was 21.0%. Based on IFRS, CSB’s revenues for 2020 increased by 56% to $158.9 million
and net income increased to $40.2 million from $7.5 million in 2019. As you can see, Mr. Rajendran is making very
good progress toward his objective of focusing on profitability, productivity, efficiency and asset quality.

We are pleased that Mr. Paresh Sukthankar, former deputy managing director and a member of the Board of Directors
of India’s leading private sector bank, HDFC Bank, continues to guide us as an advisor.

IIFL Wealth Management Limited (IIFL Wealth)

Upon the advent of the pandemic, IIFL Wealth, keeping in mind the health and safety of its clients and employees,
converted almost its entire workforce to working from home. However, backed by strong digital tools and
technological interventions, it was able to make the transition with virtually no disruption. Despite the significant
contraction of the Indian economy during 2020 and consequent poor investment sentiment, IIFL Wealth was able to
achieve reasonable financial performance. Consolidated assets under management (AUM), including custody assets,
grew 18% to $28.8 billion, total revenue increased by 3% to $127.2 million, profit after tax declined by 8% to
$35.5 million and ROE declined from 9.4% to 8.9%.

FAIRFAX INDIA HOLDINGS CORPORATION

IIFL Wealth’s strong client franchise in the Indian ultra-high net-worth individual (UHNI) segment, an innovative,
diversified product offering, and superior execution make it the leading player in this niche wealth management
market. It is the number one wealth manager in India for UHNIs with AUM of $23.0 billion, 29 offices in India and
abroad, 800 plus employees and 64 teams consisting of 269 relationship managers serving over 6,700 families.

Since it was founded in 2008 under the IIFL brand umbrella by Karan Bhagat and Yatin Shah, with the leadership of
IIFL Holdings Limited (IIFL Holdings) founder Nirmal Jain and his partner R. Venkataraman, IIFL Wealth has been an
independently managed company in the stable of IIFL Holdings businesses. However, in September 2019 with the
demerger of IIFL Holdings, the original company that Fairfax India had invested in, into three separate companies,
IIFL Wealth became a separate company listed on the Indian stock exchanges and became the only listed pure play
wealth management company in India.

After its listing, because it had other owners at the subsidiary level, its ownership is now distributed among the
promoters with 22.9%, the U.S. private equity firm General Atlantic with 21.3%, Fairfax and Fairfax India with
18.4%, with the remaining distributed between employees, institutional and retail investors.

You will recall that IIFL Wealth began its journey as an independently listed company at a time when the wealth
management business in India had undergone a very significant change. Effective in October 2018, the Indian
capital markets regulator (SEBI) banned the long-established practice of mutual funds paying distributors and
investment advisors upfront commissions or upfronting trailing commissions that were not disclosed to investors,
requiring instead that mutual funds, except in certain very limited situations, pay only trailing commissions that are
fully disclosed as part of the funds’ management expense ratios.

While this was a very positive and investor-friendly change in regulation that in the long run would benefit the
industry, in the short term, it caused the industry to adjust to the new reality by transforming its business models.
The change has resulted in the upfront commissions being paid over the life of the investment – reducing upfront
revenue but creating a stream of recurring revenue in the future.

IIFL Wealth has two businesses – wealth management (the larger one) and asset management. The wealth
management business, which was directly impacted by the above-described change in regulation, had to transform
from a transactional upfront commission-driven business model to a client fee and distribution services based
recurring revenue model. As IIFL Wealth makes this transition, revenue from the former upfront commissions will
decline while annual recurring revenues (ARR) will increase. In 2020, the upfront commission and brokerage revenue
declined by 12% to $46.2 million, while ARR grew by 9% to $76.1 million, and ARR assets accounted for 43% of
AUM. The wealth management business has embedded in it a non-bank finance company (NBFC) which makes
loans to its clients secured by their assets held by IIFL Wealth, and has never had a bad loan.

The smaller asset management business is India’s leading manager of alternate investment funds (AIF). AUM for this
business grew by 20% in 2020 to $4.4 billion while revenues grew by 41% to $24.4 million. This business was
strengthened by the addition of a new CIO, Anup Maheshwari, an experienced fund manager with a proven 25-year
track record, and he has been successful in attracting more institutional asset management mandates.

To capitalize on the opportunity created by the fee-based model, IIFL Wealth has launched a new platform called
‘‘IIFL-ONE’’. Backed by strong product creation, deep research, specialist teams and innovative technology and using
a portfolio management approach, IIFL-ONE is currently in the process of converting IIFL Wealth’s existing
customers to this platform and already has AUM of $3.6 billion.

Over the last five years, IIFL Wealth has generated an internal rate of return of about 10% and is now relatively
overcapitalized for its level of earnings, resulting in ROEs dropping from about 16% to 9%. In order to address this, in
addition to its policy of paying out about 70% of its earnings in dividends, IIFL Wealth paid a special dividend of
40 rupees per share in 2020 and will continue to look for avenues to maintain its ROEs sustainably in the 20% range.

Given the low penetration of wealth management in India and the high rate of wealth creation and growth in dollar
millionaires, we believe that IIFL Wealth has a very bright future.

IIFL Finance Limited (IIFL FIN)

For over 50 years, NBFCs in India have been a source of debt financing for individuals and companies. Being
relatively less regulated and therefore less bureaucratic than banks, NBFCs are able to meet customer needs on a faster
and more flexible, albeit more expensive, basis. Today India has around 9,500 NBFCs of which 58 are permitted to
take customer deposits and 292 are considered to be systemically important because they have assets of over

$70 million (five billion rupees). With total loans outstanding of $330 billion, NBFCs account for approximately 19%
of the $1.7 trillion bank and NBFC loans outstanding in India.

Based on total revenue, IIFL FIN, which is non-deposit taking, is one of the larger NBFCs in India.

Under the able leadership of its CEO, Nirmal Jain, who is also the founder and significant shareholder of all the IIFL
group companies, IIFL FIN is moving forward aggressively to consolidate its position as one of the major NBFCs in
India. With over 2,400 branches and over 18,000 employees, it services over 6 million customers. Despite some of the
challenges it faced due to the pandemic, described in more detail below, its AUM, which has grown at a CAGR of 18%
over the past 5 years, grew 17% over the previous year to $5.8 billion in 2020. Loan to value is very conservative, at
71% for home loans, 72% for gold loans, 47% for business loans and 47% for construction and real estate loans. With
a well-diversified asset portfolio of which 90% is retail in nature, a CAR of 21.4%, net interest margins at an all-time
high of 7.4% and cost to income ratio down from 53% to 33%, IIFL FIN is well positioned to take advantage of the
post-pandemic economic recovery expected to commence in 2021. In 2020, IIFL FIN’s revenue increased 21% to
$422.9 million and profit after tax excluding extraordinary items decreased by 30% to $70.5 million (mostly as a
result of conservative provisions for NPAs), generating an ROE of 10%.

In spite of this good operational performance, IIFL FIN continues to have trouble accessing long term debt capital,
which appears to be as a result of the continuation of the turmoil that started in late 2018 as a result of the default by
a quasi-government lender, Infrastructure Leasing and Financial Services Limited (IL & FS). Other than a handful,
most NBFCs are facing restricted access to longer term funding which they need as they have significantly reduced
their dependence on short term commercial paper (CP) financing.

Another factor that appears to be adversely affecting IIFL FIN’s access to long term funding is its construction and real
estate loan book which amounts to about $591.1 million (10% of loans). Though gross NPAs in this category of loans
are only 2.7% and net NPAs are 1.3% and well provided for, potential providers of financing to IIFL FIN are concerned
because of the distressed state of the real estate market in India, which was further exacerbated by the pandemic.

During the pandemic, NBFCs were allowed to remain open during the government-imposed lockdown. However,
in-person collection activity, which is an important part of their operations, to a large extent was not possible.
Similar to the banks, NBFCs were also required by the government and the RBI to provide moratoriums to their
borrowers. The extent of the NPAs that will result due to the moratoriums will only be known later in 2021. IIFL FIN
has made provisions of about $177.2 million (including provisions of about $62.8 million to cover real estate loans)
and it is expected that this will adequately cover pandemic-related delinquencies as well.

Despite these good results, IIFL FIN is trading at a deeply discounted valuation of only 12.6 times price to estimated
March 2021 earnings and price to estimated March 2021 BVPS of 1.6 times. We believe there is potential for
significant upside on the value of this investment.

IIFL Securities (IIFL SEC)

IIFL SEC is one of the major capital market players in Indian financial services. It offers advisory and broking services
(both retail and institutional), financial products distribution, institutional research and investment banking
services. It operates in over 2,500 locations across India, comprised of a wide branch and sub-broker network
providing unparalleled research coverage on over 225 companies. It serves over 1 million customers and has a strong
online presence. Mobile trading has significantly aided in increasing the number of customers: mobile trading clients
in 2020 accounted for 61% of trading.

IIFL SEC operates in three broad areas within the capital markets and financial services sector in India:

(cid:127) Retail broking and financial products distribution (76% of revenue) – in retail broking it has established itself
as a leading institution through a combination of leading-edge technology, diverse product offerings,
management expertise, and a wide network of branches across India. IIFL Securities’ mobile trading app, IIFL
Markets, targeting retail clients, continues to be the highest rated among its peers with over 5.4 million
downloads. Mobile brokerage constituted about 48% of total broking revenue in 2020. IIFL Securities’ mutual
fund app had over 909,000 downloads and is steadily building on its customer base. In financial products
distribution, it offers retail clients a wide range of products including mutual funds, insurance, IPOs and debt
instruments.

(cid:127) Institutional broking (16% of revenue) – it is a leading independent (not associated with any international
bank) broker, with a highly acclaimed, pedigreed 80-member strong sales and research team that covers over

FAIRFAX INDIA HOLDINGS CORPORATION

225 Indian companies accounting for about 80% of India’s market capitalization. It is a market leader in block
sales placements, placing over $14 billion in blocks over the past five years. It has more than 700 domestic and
foreign clients and has developed trusted long-term relationships with them through sustained high-quality
performance.

(cid:127) Investment banking (5% of revenue) – it is a highly regarded category 1 merchant banker in India and, despite
volatile markets, completed 19 transactions in 2020, including 3 IPOs. It continues to have a substantial
pipeline of transactions which are at various stages of execution.

IIFL SEC also owns a portfolio of commercial properties, rented mostly to group companies. In 2020, IIFL SEC
monetized one of the properties and realized close to $10 million. With a current market value of about $89 million
(amounting to about 42% of its market capitalization), this portfolio generates annual rental income of
approximately $6 million. These assets may be monetized in the future.

IIFL SEC is one of the companies in our portfolio that appears to have benefited from the consequences of
the pandemic:

(cid:127) After the initial fall, Indian stock markets have boomed, ending the year up about 13%. The resultant stock

market volumes have been very positive for both the retail and institutional broking businesses.

(cid:127) Implementation of online processes in order to be able work remotely has resulted in short and long-term cost

savings, leading to better margins.

In 2020 IIFL SEC’s revenue increased 3% to $110.8 million and profit before tax (before exceptional items) increased
17% to $32.9 million and the dividend was increased by over 80% to 2 rupees per share. IIFL SEC also recently
completed a buy back of about 5.3% of its shares outstanding. Despite these strong results, the stock is trading at a
price to earnings ratio of 8.5 times 2020 earnings and a price to BVPS ratio of 1.5 times. Over the last four years IIFL
SEC has generated an average ROE of 27%.

Based on its strong business franchise, growth potential and attractive ROE, we expect that IIFL SEC will be another
successful investment for Fairfax India.

5paisa Capital Limited (5paisa)

5paisa, which literally means ‘‘5 cents’’, was spun off from IIFL Holdings in 2017 and Fairfax India owns a 26.6%
equity interest in it. It is one of India’s fastest growing technology-led financial services companies and offers an
array of financial products and services through a digital platform and mobile application. Its services are targeted at
retail investors and high-volume traders who actively invest and trade in securities markets and seek DIY
(do-it-yourself) services at a low cost. With its diverse services and products encompassing online discounted stock
broking, depository services, research and distribution of mutual funds and other financial products, 5paisa
successfully fulfils its customers’ diverse needs. Recently, 5paisa launched its digital peer-to-peer lending platform
which is registered as an NBFC. 5paisa remains focused on innovation based on understanding customer behaviour,
and constantly strives to achieve technological superiority, as it has done through the development of its robust
trading platform, its advanced mobile app, an artificial-intelligence powered robo-advisory platform, and its
paperless account opening process.

5paisa has sustained a strong pace of client acquisition since inception, taking its total client base to over 1 million in
2020. The 5paisa mobile app has been hugely popular, in 2020 recording over 6,000,000 downloads and has a rating
of 4.0+ on Playstore.

This is another business in the Fairfax India portfolio that seems to have benefited from the situation caused by the
pandemic. It had its best year ever in 2020 – total revenue grew 92% to $24.3 million and for the first time ever it
made a small profit after tax.

While it is still a small startup, 5paisa has the potential to be a major player in digital discount broking and financial
products distribution.

Privi Speciality Chemicals Limited (Privi)

In August 2020 Privi, the aroma chemicals business, was separated as planned from Fairchem Speciality Limited, the
former combined oleochemicals and aroma chemicals listed entity, and started trading as an independent company
on the Indian stock exchanges.

Privi, founded in 1992 and led by Mahesh Babani and D. B. Rao, is one of India’s leading manufacturers of aroma
chemicals. Privi started manufacturing aroma chemicals with only two products, which it gradually expanded to a
range of over 65 products today, with a capacity of over 32 ktpa. Its products are used as fragrance additives in
perfumes, soaps, shampoos and packaged food. Privi enjoys a dominant position and economies of scale in its
product categories. Privi also develops and produces custom-made aroma chemicals to specific requirements of its
customers. Privi sources most of its raw materials from pulp and paper companies globally and competes primarily
with pure play and niche suppliers such as IFF and DRT.

One of Privi’s significant strengths is its established research and development (R&D) capabilities in aroma
chemicals, with a staff of 98 people comprised of PhDs in chemistry, chemical engineers and instrumentation
engineers. The research specialists continuously strive to develop new products and processes. Importantly, one of
the R&D labs is completely focused on developing, through biotechnology, green products and green technologies in
technical collaboration with the University Institute of Chemical Technology, Mumbai.

Privi has made significant investments in manufacturing facilities that convert a waste product in pulp and paper
manufacturing, crude sulphated turpentine (CST), into aroma chemicals. CST, a more cost-effective raw material
than the more traditional plant-based gum turpentine oil (GTO), is procured through annual contracts, while GTO
has to be purchased on volatile spot markets.

On April 26, 2018 there was a major fire at Privi’s main production facility. In subsequently rebuilding its facilities, it
has created a world class manufacturing plant, with the highest safety standards.

After an outstanding year in 2019, Privi faced many challenges in 2020, including pandemic – related disruptions.
Privi’s sales to customers who sell high-end products (fragrances) fell sharply because the customers’ sales, which are
primarily at duty-free stores at international airports, fell sharply. The loss of sales in this segment was only partially
offset by increased sales to customers who had increased sales due to higher demand for soaps, detergents and
handwash. Privi also had lower margins in some of its products due to higher raw material costs. In addition, it lost
some volumes as production had to be shut down due to demerger related administrative requirements.

As a result, in 2020 Privi’s revenue decreased 12% to $166.4 million and its net earnings decreased 44% to
$12.3 million, although its shareholders’ equity grew 15% to $90.6 million, generating an ROE of 14%.

Despite the above results, Privi’s stock price has performed well, resulting in a 2020 investment value of our
investment in Privi of $138.4 million versus our cost of $55.0 million.

Fairchem Organics Limited (Fairchem)

In August 2020, following the separation of the Privi business from the former combined listed entity, Fairchem
Speciality Limited, as noted above, Fairchem became an independent oleochemical company. In December 2020,
after the completion of certain regulatory requirements, it started trading as an independent company on the Indian
stock exchanges.

Fairchem is led by its founder Nahoosh Jariwala. Oleochemicals are, broadly, chemicals that are derived from plant or
animal fat, which can be used for making both edible and non-edible products. In recent years, the production of
oleochemicals has been moving from the U.S. and Europe to Asian countries because of the local availability of key
raw materials.

Fairchem occupies a unique niche in this large global playing field. It has developed an in-house technology that uses
machinery manufactured by leading European companies to convert waste generated during the production of soya,
sunflower and corn oils into valuable chemicals. These chemicals include acids that go into non-edible products like
soaps, detergents, personal care products and paints, and other products that are used in the manufacture of health
foods and vitamin E. The company’s customers include major multinational companies including BASF, Archer
Daniels Midland, Cargill, Arkema and Asian Paints. Fairchem operates out of a single plant in Ahmedabad, the largest
city in Gujarat, the home state of Prime Minister Modi: the plant has one of the largest processing capacities for
natural soft oil-based fatty acids in India. Over the last ten years Fairchem’s sales have grown on average 20% per year,
net earnings have grown on average 22% per year, and the average annual ROE was around 24%.

Fairchem had a very strong start in 2020 and was on track to achieve annual sales of over $45 million when the
pandemic caused the plant to be shut down on March 24, 2020, resulting in significant disruptions to the operations
of Fairchem. In addition to the lockdowns imposed nationally, Fairchem was subject to further disruptions because it
was located in a part of Ahmedabad which had an extremely high level of COVID-19 infections. This, combined with

FAIRFAX INDIA HOLDINGS CORPORATION

poor demand from customers, caused it to resume production only after a 58-day shutdown of the plant. Fairchem
utilized this prolonged shutdown period to undertake a thorough clean-up of the plant that would not have been
possible under normal circumstances. Since the plant re-started production, sales have been very strong.

Despite the above-mentioned disruptions, based on IFRS, for the year ended December 31, 2020 Fairchem’s revenue
grew by 18% to $44.1 million, net earnings grew by 30% to $4.8 million, and shareholders’ equity grew 30% to
$20.8 million, generating an ROE of 23%. In December 2020, Fairfax India’s investment in Fairchem was valued at
$54.6 million versus our cost of $19.4 million.

We believe that Fairchem is poised to have another record-breaking year in 2021.

Seven Islands Shipping (SISL)

SISL, Fairfax India’s most recent investment, had one of its best years ever in 2020!

While as a result of the pandemic it faced some operational difficulties and increased expenses, it was able to manage
these issues while remaining fully operational through the entire lockdown and the subsequent gradual reopening of
the economy.

In 2020, SISL’s revenues grew by 57% to $121.7 million, net income grew by 87% to $21.6 million and shareholders’
equity grew by 16% to $125.9 million, generating an ROE of 17%. SISL has demonstrated stable and consistent
revenue and EBITDA CAGR of over 30% in the last 10 years.

Founded by Captain Thomas Wilfred Pinto, a passionate entrepreneur and operator, SISL owns and operates tanker
shipping vessels that sail primarily along the Indian coast as well as in international waters. SISL is the second largest
private tanker shipping company in India.

In March 2019 Fairfax India acquired a 41.4% equity interest in SISL for $71.8 million through a direct subscription
of $28.9 million and a secondary acquisition from existing shareholders of $42.9 million. In September and
October 2019, Fairfax India acquired an additional 7.1% from existing shareholders for $12.1 million, bringing our
total ownership interest to 48.5%. At December 2020 our investment was valued at $103.5 million.

At the time of our initial transaction, SISL owned 14 vessels with a total deadweight capacity of about 1 million
metric tons. Today, SISL owns 20 vessels with a capacity of about 1.1 million metric tons. All SISL’s vessels are
registered in India and operate as Indian-owned and flagged vessels.

SISL focuses on the pre-owned vessel market. It identifies good quality vessels (generally manufactured in Japan or
South Korea, which are well maintained and are subject to stringent inspections) and acquires them
opportunistically.

For operations along the Indian coast, the freight rates are based purely on bids and there is no distinction between
old and new vessels. SISL benefits from lower upfront capital investment and enjoys the same status as those of the
younger ships in bidding for customer contracts. The operating and maintenance costs for its fleet are not
significantly different from those of the younger ships. SISL’s current vessels range in age from 14 to 25 years, with an
average age of around 18 years, and it will endeavour to reduce the average age of its vessel fleet over the next few
years. Consistent with this objective, in 2020 SISL sold four older ships, and acquired four younger ships.

Until now SISL had only owned and operated tankers that transported liquid cargo. But based on the current ship
prices and charter rates, it is seeing potential for better growth from gas carrier containers. They are in the process of
assessing this opportunity in greater detail.

Under the current Indian regulatory framework, Indian owned and flagged vessels are given preference over foreign
vessels for transporting any cargo that originates from India. This is implemented by giving the Indian owned vessels
a ‘right of first refusal’ (also known as ‘‘cabotage’’) before a contract can be awarded to a foreign vessel owner. It is our
understanding that, because of cabotage protection, foreign vessel owners typically refrain from bidding for
contracts for movement of goods along the Indian coast. Hence, the charter rates in domestic shipping are
apparently about 30-40% higher than the rates quoted in international shipping markets. SISL bids competitively
and does not rely on cabotage protection to win contracts. Strategically, SISL operates a majority of its vessels in the
domestic cargo oil market and has benefited from the general rate arbitrage in domestic vs. international
deployment.

In order to assist Indian shipping companies to compete with their global counterparts, the government has
implemented tax provisions that have resulted in SISL historically enjoying lower tax rates, resulting in higher cash
flow. SISL has obtained a ruling from the Indian tax authorities that it is entitled to the beneficial tax regime until the
year ending March 31, 2026, so the lower tax rate is applicable at least until that time.

SISL has a small and efficient operations team consisting of about 80 permanent employees at the head office who
manage the entire business. It has significantly strengthened this organization with the addition of experienced
senior executives from the industry. It has also completely revamped its information technology system, which has
enabled the implementation of robust operational, safety and security procedures.

SISL plans to become listed through an IPO on the Indian stock exchanges in 2021. Regulatory documentation has
been filed, and the IPO will be launched once SISL gets regulatory approval.

National Collateral Management Services (NCML)

NCML was Fairfax India’s very first investment, completed in August 2015. NCML has operated for over 15 years in
the agriculture value chain by offering end-to-end solutions in grain procurement, testing, storage and collateral
management. NCML has about 1.4 million metric tons of storage capacity across 624 warehouses in 16 states in
India. It has a network of 22 regional offices, more than 800 touch points at agricultural produce markets and
thousands of farmers and traders to facilitate procurement of commodities. With AUM of $555.1 million, NCML has
a 20% share of the agricultural commodities’ collateral management business in India, offering custodial services to
about 65 banks and financial institutions for the management of collateralized agricultural commodities, based on
which those institutions advance post-harvest loans to farmers or dealers owning commodities. Beyond its major
business segments, NCML offers a commodity and weather intelligence service and an online commerce portal
(NCML MktYard)

In 2016 and 2017, NCML won 16 concessions from Food Corporation of India to build, own and operate (and in
some instances transfer) modern grain storage silo projects across the agrarian states of Punjab, Haryana, Uttar
Pradesh and Bihar. These projects will significantly improve India’s grain quality and reduce storage losses.

In 2015, Fairfax India invested a total of $148.7 million to acquire an 88% interest in NCML: $30.7 million in
primary infusion to fund growth plans and the remaining $118.0 million to buy out existing shareholders. In
August 2017, Fairfax India acquired an additional 1.4% stake through a rights issue for $25.6 million. In
September 2019, Fairfax India infused $14.0 million as compulsorily convertible debentures to meet equity
requirements for construction of silos. At December 2020, NCML is valued at $101.1 million compared to our
investment cost of $188.3 million.

NCML’s performance in its various business verticals is linked to the underlying economic activities in two areas: the
post-harvest agriculture value chain and the financing of agricultural produce by banks and financial institutions.
The agriculture sector has been in a negative business cycle since 2016 and activity has yet to recover to previous
levels. In addition, the credit crisis in India has had a continuing negative impact on the post-harvest agri value
chain. These conditions have resulted in poor results for NCML.

Siraj Chaudhry, the new CEO appointed in 2019, and his management team have been working diligently to turn the
business around by:

(cid:127) restructuring and right-sizing NCML’s balance sheet

(cid:127) focusing on completion of silo construction

(cid:127) redirecting capital to businesses with better return potential

(cid:127) downsizing businesses with poor risk-reward characteristics, and

(cid:127) reducing overheads to better align with the size of the business.

In addition to the many challenges they faced in trying to achieve the above objectives, they also had to navigate
extremely tight financial liquidity conditions.

The arrival of the pandemic turned the situation into a perfect storm for NCML. Among all the Fairfax India portfolio
companies, NCML was probably the business most seriously impacted by the pandemic. The four key business
segments of storage and preservation, testing, supply chain management and collateral management all had steep
declines in the April to September quarters as agri product deliveries fell sharply. Pandemic-related construction

FAIRFAX INDIA HOLDINGS CORPORATION

shutdowns also impacted timelines for silo construction. In 2020, NCML surrendered projects at 3 locations that
were unviable. The business has since recovered but still not to pre-pandemic levels.

As a result, 2020 was a particularly difficult year: revenue declined 46% to $75.9 million and net loss increased to
$9.4 million (including one-time charges of $4.4 million related to losses incurred on silos as discussed above and
$3.0 million in other provisions) from $0.8 million in 2019.

With the easing of the pandemic, business is improving, and with the implementation of the initiatives described
above, we expect the NCML business to stabilize in 2021 and return to profitability in 2022.

National Stock Exchange of India (NSE)

In July 2016, Fairfax India acquired a 1% stake in NSE for $26.8 million. NSE is the largest stock exchange in India
with a market share of over 94% in cash equity trading and 100% in equity derivatives trading. With approximately
200,000 terminals in over 2,000 centres, NSE provides trading facilities with national reach. The exchange uses the
latest communications technology for automated screen-based trading. Our investment is currently valued at
$72.6 million. In 2020, NSE’s revenue grew 37% to $708.1 million, net income before exceptional items grew 53% to
$380.5 million and shareholders’ equity grew 31% to $1.5 billion, generating an ROE of 25%. The planned initial
public offering of NSE is now expected sometime in 2021 or 2022.

Saurashtra Freight (Saurashtra)

Saurashtra’s principal business is owning and operating container freight stations (CFS), which are an important link
between transport operators and shipping lines and effectively work as an extension of a port. It is in the port’s best
interest to focus on maximizing container traffic and not get bogged down handling containers that are waiting to be
dispatched. Also, ports lack adequate storage facilities to hold containers for extended periods of time. CFSs provide a
facility outside of congested ports for temporary storage of goods pending customs clearance and further
distribution. Activities like stuffing and destuffing of containers, which might otherwise have to be done in the port,
are done at the CFS.

Launched in 2005, Saurashtra is located five kilometers from Mundra port. With 24⁄7 operations, Saurashtra has the
capacity to handle 180,000 TEUs (twenty-foot-equivalent unit shipping containers) per annum and handled about
100,000 TEUs in 2020, implying capacity utilization of about 54%. It has achieved a market share of about 14% at
Mundra port, the highest among all CFSs there.

Despite the restricted capacity utilization described below, Saurashtra, under the able leadership of Raghav Agarwalla
and Ashutosh Maheshwari, produced excellent financial results in 2020. Volume of containers handled remained
stable at about 100,000 TEUs but revenues increased by 24% to $25.1 million and net profit grew by 26% to
$4.7 million. Saurashtra generated $4.9 million of free cash in 2020, and at year-end had a cash balance of
$22.2 million and no debt.

In the five years prior to our acquisition of Saurashtra in 2017, it generated an average ROE of 17%. However, as of
2020, performance has eroded significantly from the time of our investment and ROEs have dropped to an average of
9% over the last three years. Also, Raghav’s efforts to grow the business inorganically through acquisitions have not
been successful because he has been unable to find good businesses at reasonable valuations.

Since Saurashtra has been unable to find good acquisition targets, it has focused more on organic opportunities for
growth. Fairfreight Lines, the non-vessel operating common carrier (NVOCC) business that Saurashtra launched in
2017, has made excellent progress in 2020. It has increased its dry box inventory from about 1,069 to 1,172 and its
tank inventory from about 200 to 365. As a result, in 2020 this business accounted for 25% of Saurashtra’s revenues
and 15% of its net profit, up from 19% and 7% respectively in 2019.

India, in its zeal to improve its ‘‘ease-of-doing-business’’ scores, has implemented changes in its customs clearance
processes that simplify the steps and improve the speed at which goods clear customs both for exporters and
importers. This reduces the ‘‘dwell’’ time of goods in CFSs, reducing their revenues. Also, some exporters have
adopted the ‘‘self-sealing exports’’ methodology which enables them to send their goods directly from their factory
to the port, completely bypassing CFSs. In response, Saurashtra is making a small investment in building a five-acre
logistics park in Mundra that will provide storage capacity to exporters and importers who don’t need the full
services offered by a CFS.

In February 2017 Fairfax India invested $30.0 million to acquire a 51% interest in Saurashtra. At the end of 2020, this
investment was valued at $32.8 million.

Financial Position

Fairfax India came into being on January 30, 2015, when it issued 106.7 million shares at $10.00 per share, raising
gross proceeds of $1.03 billion by completing a public offering, a placement to cornerstone investors and an issue to
Fairfax. In September 2016, the company arranged a $225 million two-year secured loan from a syndicate of
Canadian banks. In January 2017 Fairfax India issued 42.6 million shares at $11.75 per share in a public offering and
a concurrent private placement to OMERS and Fairfax, raising gross proceeds of $500 million. In March 2017, the
company repaid its term loan of $225 million to the syndicate of Canadian banks, and then in July 2017 it arranged a
$400 million one-year secured loan from a Canadian bank. In June 2018 Fairfax India replaced its expiring secured
loan with a $550 million secured loan with a syndicate of Canadian banks; the original one-year term of the loan has
since been extended until June 2021. Fairfax India currently has about $207 million in cash and liquid marketable
securities for new investments and ongoing expenses. This amount will increase by about $130 million to about
$337 million when the sale of 11.5% of Anchorage to OMERS is completed, expected to take place later this month.

At December 31, 2020, the financial position of Fairfax India was as follows:

Undeployed cash and investments(1)
Secured term loan (from a syndicate of Canadian banks, maturing in

June 2021)

Common shareholders’ equity
Total debt to equity

($ millions)
207.0

550.0
2,446.9
22.5%

(1)

Includes passive investments in publicly traded Indian companies

We are pleased to report that on February 26, 2021 Fairfax India completed its maiden bond issue, selling
$500 million of seven-year unsecured senior notes with a coupon of 5%. The net proceeds of the issue were used to
repay most of Fairfax India’s above-described $550 million secured term loan.

Developments in India

India is currently rolling out its vaccination plan to deal with COVID-19, aiming to immunize 300 million people by
August. It is the world’s largest such program. On many important measures, India is showing progress: declining
positivity rates, lower fatality rates than the world average and a sharp decline in the overall number of cases. Even
before the pandemic hit India in spring of 2020, the country’s economy was already experiencing slower growth. The
pandemic intensified the challenges faced by India. The Modi government ordered a country-wide lockdown from
the end of March to the end of May. Since then, COVID-19 cases have declined and the economy began to recover
towards the end of 2020, with business activity ramping up across many sectors.

Despite significant economic challenges, India had important accomplishments in 2020. While foreign direct
investments (FDI) declined in many Asian countries, India witnessed an increase of 13%, mainly in the digital sector.
Similarly, India’s continued progress on a number of measures, including its ranking in the World Bank’s ‘‘Ease of
Doing Business Measure’’ (#63 in 2019 from #130 in 2016) and the Global Innovation Index (#48 in 2020 from
#66 in 2013), and its becoming a Top 10 FDI destination, attracting over $70 billion between January 2019 and
August 2020. India’s foreign exchange reserves reached an all-time high, surpassing $500 billion by mid-2020.
Significantly, a number of business-friendly policy reforms were undertaken by the Modi government in the last
calendar year.

India benefited from a good monsoon season, the second year in a row, resulting in increased agricultural production
in the two crop seasons, Kharif, which is from July to October, and Rabi, which is from October to March. As well, a
significant drop in food prices mitigated the inflationary effects. Agricultural output increased a healthy 3.4% on an
annualized basis. The central bank, RBI, was able to maintain its inflation target of 2% – 6%.

Upcoming state elections in key jurisdictions like West Bengal and the southern states of Tamil Nadu and Kerala will
have national implications, as will the ongoing farmer protests on the recently passed farm liberalization laws.
Nevertheless, Prime Minister Narendra Modi is in a commanding position with broad support for his policies. In a
recent national poll, almost three-fourths of respondents expressed satisfaction with Prime Minister Modi’s handling

FAIRFAX INDIA HOLDINGS CORPORATION

of the pandemic and his overall performance. In addition, a fractured opposition party has given the ruling BJP a
stronger hand in promoting reform-oriented policies.

Prime Minister Modi’s government is a majority government, with the next national elections in 2024. This political
stability has facilitated important policy initiatives in 2020. Modi’s goal of becoming a $5 trillion economy in the
next few years can become a reality with continued liberalization. The policy changes initiated during the pandemic
are significant measures targeted to attract foreign capital. Notable policies include:

(cid:127) Production Linked Incentives (PLI): The aim of this program is to position India as an investment destination.
The focus is to increase domestic manufacturing by providing incentives to large foreign companies to locate
in India, especially those seeking to diversify their global value chains. As companies seek to build more
resilience and shorten their supply chains, India’s aim is to be one of the main alternatives to China. Over ten
sectors have been identified for PLI: electronics/technology, textile products, automobiles and auto
components, pharmaceuticals, advance chemistry cell batteries, telecom and networking products, specialty
steel, food products, white goods (air conditioners and light emitting diodes), and high frequency solar
photovoltaic modules. These sectors are expected to advance the stated goal of becoming more self-reliant
(Atmanirbhar).

(cid:127) Farm Trade Reforms: In September 2020, the government passed three farm laws designed to modernize the
agricultural sector. These three laws seek to promote freer inter-state trade including e-trade, facilitate contract
farming, and greater deregulation in production and storage aspects of the sector. These new laws provide for a
greater role for the private sector, enhance bulk procurement, reduce the role of middlemen and improve
storage infrastructure. Adverse reaction from farmers’ organizations has centered principally on the reduction
of government procurement and a stronger guarantee for the minimum support price. The government and
the farmer organizations have been in a series of discussions to resolve the outstanding concerns.

(cid:127) Labour Law Reforms: These reforms represent a consolidation of 29 existing laws into four legislative areas: the
Wage Code, the Industrial Relations Code, social security and occupational health, safety and working
conditions. These four codes provide flexibility for employers and represent an important update from
previous disparate pieces of legislation. Important areas of autonomy pertain to retrenchment of the
workforce, inclusion of workers in the key service sectors and reducing compliance costs for companies.

(cid:127) Rise of e-commerce & Start-ups: COVID-19 accelerated the pace of adoption of e-commerce and the Indian
e-commerce market is expected to grow from $120 billion to $200 billion by 2026. Internet connections are
now at 760 million, with three-fifths of it in urban areas. India is emerging as a vibrant hub for innovation and
start-ups, now with 35 unicorn start-ups, 11 of them in 2020 alone.

These developments represent a welcome signal to the global investor community. The combination of a reform-
oriented government, a large population with rising consumer demand and the accelerated rate of technological
adoption mean that India is in a unique position to capitalize on the opportunities in a post-pandemic world.

India recently announced a strong growth-oriented, yet fiscally responsible, budget that is very business-friendly.
The key initiatives in the budget include privatization of several government owned companies, increased spending
on infrastructure, increased FDI limit in insurance to 74% and creation of a bad bank to ease the bad loan crisis. As
well, the government did not raise personal or corporate taxes. These measures, combined with a healthy level of
foreign exchange reserves and stable inflation levels, make this one of the strongest pro-growth budgets in
recent memory.

As we end our first six years of operations, we would like to acknowledge the strong support and leadership provided
by Amy Sherk, Chief Financial Officer, Keir Hunt, General Counsel and Corporate Secretary, Gopalakrishnan
Soundarajan (Gopal), Hamblin Watsa Managing Director for Indian Investments, John Varnell, Vice President of
Corporate Affairs, and Jennifer Allen, Vice President. We would also like to thank our independent directors – Tony
Griffiths, Chris Hodgson, Alan Horn, Deepak Parekh and Lauren Templeton – for their wise advice, support and
encouragement.

We are looking forward to connecting with you at our online annual meeting at 2:00 p.m. (Eastern time) on
April 15, 2021.

March 5, 2021

8MAR201612231920

Chandran Ratnaswami
Chief Executive Officer

10MAR201607580995

V. Prem Watsa
Chairman

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FAIRFAX INDIA HOLDINGS CORPORATION

Management’s Responsibility for the Consolidated Financial Statements

The preparation and presentation of the accompanying consolidated financial statements, Management’s
Discussion and Analysis of Financial Condition and Results of Operations (‘‘MD&A’’) and all financial information
are the responsibility of management and have been approved by the Board of Directors (the ‘‘Board’’).

The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board. Financial statements, by nature, are not precise
since they include certain amounts based upon estimates and judgments. When alternative methods exist,
management has chosen those it deems to be the most appropriate in the circumstances.

Management maintains appropriate systems of internal controls. Policies and procedures are designed to give
reasonable assurance that transactions are properly authorized, assets are safeguarded and financial records properly
maintained to provide reliable information for the preparation of the consolidated financial statements.

We, as Fairfax India’s Chief Executive Officer and Chief Financial Officer, have certified Fairfax India’s annual
disclosure documents filed with the Canadian Securities Administrators in accordance with Canadian securities
legislation.

The Board is responsible for ensuring that management fulfills its responsibilities for financial reporting and is
ultimately responsible for reviewing and approving the consolidated financial statements and MD&A. The Board
carries out this responsibility principally through its Audit Committee which is independent from management.

The Audit Committee is appointed by the Board and reviews the consolidated financial statements and MD&A;
considers the report of the independent auditor; assesses the adequacy of the internal controls of the company;
examines the fees and expenses for audit services; and recommends to the Board the independent auditor for
appointment by the shareholders. The independent auditor has full access to the Audit Committee and meet with it
to discuss their audit work, Fairfax India’s internal control over financial reporting and financial reporting matters.
The Audit Committee reports its findings to the Board for consideration when approving the consolidated financial
statements and MD&A for issuance to the shareholders.

March 5, 2021

Chandran Ratnaswami
Chief Executive Officer

8MAR201612231920

28FEB202001500334

Amy Sherk
Chief Financial Officer

Independent Auditor’s Report

To the Shareholders of Fairfax India Holdings Corporation

Our opinion

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the
financial position of Fairfax India Holdings Corporation and its subsidiaries (together, the Company) as at
December 31, 2020 and 2019, and its financial performance and its cash flows for the years then ended in accordance
with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS).

What we have audited
The Company’s consolidated financial statements comprise:

(cid:127) the consolidated balance sheets as at December 31, 2020 and 2019;
(cid:127) the consolidated statements of earnings (loss) for the years then ended;
(cid:127) the consolidated statements of comprehensive income (loss) for the years then ended;
(cid:127) the consolidated statements of changes in equity for the years then ended;
(cid:127) the consolidated statements of cash flows for the years then ended; and
(cid:127) the notes to the consolidated financial statements, which include significant accounting policies and other

explanatory information.

Basis for opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial
statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence
We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the
consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with
these requirements.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the
consolidated financial statements for the year ended December 31, 2020. These matters were addressed in the
context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.

FAIRFAX INDIA HOLDINGS CORPORATION

Key audit matter

How our audit addressed the key audit matter

Valuation of Private Indian common stocks

Refer to note 3 – Summary of Significant Accounting Policies,
note 4 – Critical Accounting Estimates and Judgments,
note 5 – Indian Investments and note 6 – Cash and
Investments to the consolidated financial statements.

The Company held financial instruments categorized as
Private Indian common stocks measured at fair value of
$2,055.3 million as at December 31, 2020. Valuation of
these Private Indian common stocks uses valuation
techniques that depend on the type of investment.
Management uses unobservable inputs, as there is little,
if any, market activity in these investments and no
relevant observable inputs as at the measurement date.

these

Indian

Private

common

Of
stocks,
$1,957.3 million are primarily valued by management
using discounted cash flow analyses that incorporate
significant unobservable inputs, including multi-year
free cash flow forecasts, after-tax discount rates and long
term growth rates. The development of these significant
unobservable inputs included added uncertainty related
to the impacts of COVID-19.

We considered this a key audit matter due to the
significant judgment required by management when
developing the fair value estimate of these investments.
This determination required the use of discounted cash
flow analyses, which included significant unobservable
inputs. This in turn led to a high degree of auditor
in performing
subjectivity,
procedures
these
investments. The audit effort involved the use of
professionals with specialized skills and knowledge in
the field of valuation.

judgment and effort
relating

the valuation of

Our approach to addressing the matter included the
following procedures, among others:

(cid:127) Tested how management determined the fair
values of the Private Indian common stocks,
which included the following:

(cid:127) Evaluated

the appropriateness of

the
discounted cash flow analyses used by
the
including
management,
reasonableness of the COVID-19 impact on
the analyses and on
significant
unobservable inputs.

assessing

the

(cid:127) Tested

the underlying data used

in
management’s discounted cash flow analyses
by reviewing historical financial performance
and the current environment, considering
the degree of historical accuracy of
management’s assumptions and forecasts and
considering
company-specific
information including benchmarking against
peers and current market conditions.

other

(cid:127) Evaluated the reasonableness of significant
unobservable inputs such as multi-year free
cash flow forecasts, after-tax discount rates
and long term growth rates by considering
consistency with, as applicable:

(cid:127) current and past performance of the

particular investment;

(cid:127) relevant external market and industry

data; and,

(cid:127) evidence obtained in other areas of the

audit.

evaluating

(cid:127) Professionals with specialized skills and
knowledge in the field of valuation assisted us
appropriateness of
in
management’s discounted cash flow analyses,
including the after-tax discount rate and long
term growth rate.

the

assisted

(cid:127) In testing one investment, professionals with
specialized skill and knowledge in the field of
valuation
the
appropriateness of a component of the valuation
utilizing a market comparable approach by
establishing an independent point estimate using
relevant market and industry data.

evaluating

(cid:127) Tested the disclosures made in the consolidated
financial
the
sensitivity of significant unobservable inputs
used.

statements, particularly on

Other information

Management is responsible for the other information. The other information comprises the Management’s
Discussion and Analysis of Financial Condition and Results of Operations and the information, other than the
consolidated financial statements and our auditor’s report thereon, included in the annual report. The other
information does not include information contained in the websites of the Company’s Indian investments as
disclosed in the annual report.

Our opinion on the consolidated financial statements does not cover the other information and we do not express
any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other
information identified above and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.

Responsibilities of management and those charged with governance for the consolidated
financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in
accordance with IFRS, and for such internal control as management determines is necessary to enable the
preparation of consolidated financial statements that are free from material misstatement, whether due to fraud
or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or
has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it
exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate,
they could reasonably be expected to influence the economic decisions of users taken on the basis of these
consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional
judgment and maintain professional skepticism throughout the audit. We also:

(cid:127) Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is
sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement
resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.

(cid:127) Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control.

(cid:127) Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and

related disclosures made by management.

FAIRFAX INDIA HOLDINGS CORPORATION

(cid:127) Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on
the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may
cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our
conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future
events or conditions may cause the Company to cease to continue as a going concern.

(cid:127) Evaluate the overall presentation, structure and content of the consolidated financial statements, including
the disclosures, and whether the consolidated financial statements represent the underlying transactions and
events in a manner that achieves fair presentation.

(cid:127) Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Company to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the group audit. We remain solely responsible
for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about
the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our
report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest
benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Steven Wilson.

Chartered Professional Accountants, Licensed Public Accountants

4MAR202117123405

Toronto, Ontario
March 5, 2021

Consolidated Financial Statements

Consolidated Balance Sheets
as at December 31, 2020 and December 31, 2019
(US$ thousands)

Assets
Cash and cash equivalents
Restricted cash
Bonds
Common stocks

Total cash and investments

Interest and dividends receivable
Income taxes refundable
Other assets

Total assets

Liabilities
Accounts payable and accrued liabilities
Payable to related parties
Deferred income taxes
Income taxes payable
Borrowings

Total liabilities

Equity
Common shareholders’ equity

See accompanying notes.

Notes

December 31, December 31,
2019

2020

6, 15
6, 7
5, 6
5, 6

22,057
16,315
35,873
2,991,775

48,713
16,915
138,425
3,032,907

3,066,020

3,236,960

1,911
2,803
2,264

3,453
2,866
1,658

3,072,998

3,244,937

931
14,428
63,477
–
547,228

626,064

1,174
50,519
64,477
3,688
547,228

667,086

12
10
10
7

2,446,934

2,577,851

3,072,998

3,244,937

Signed on behalf of the Board

10MAR201607580995
Director

10MAR201607580340
Director

Notes

2020

2019

6
6
6
6
6

12
12
14
7

9
9
9

6,013
16,449
5,372
(26,618)
(14,188)

(12,972)

33,922
(41,991)
4,233
29,844

26,008

(38,980)
2,496

(41,476)

4,859
10,141
181,123
530,372
(13,806)

712,689

27,473
48,514
5,300
38,781

120,068

592,621
76,283

516,338

$
$

(0.27) $
(0.27) $

3.38
3.30
152,654,875

151,001,909

FAIRFAX INDIA HOLDINGS CORPORATION

Consolidated Statements of Earnings (Loss)
for the years ended December 31, 2020 and 2019
(US$ thousands except per share amounts)

Income

Interest
Dividends
Net realized gains on investments
Net change in unrealized gains (losses) on investments
Net foreign exchange losses

Expenses

Investment and advisory fees
Performance fee (recovery)
General and administration expenses
Interest expense

Earnings (loss) before income taxes
Provision for income taxes

Net earnings (loss)

Net earnings (loss) per share
Net earnings (loss) per diluted share
Shares outstanding (weighted average)

See accompanying notes.

Consolidated Statements of Comprehensive Income (Loss)
for the years ended December 31, 2020 and 2019
(US$ thousands)

Net earnings (loss)

2020

2019

(41,476) 516,338

Other comprehensive loss, net of income taxes

Item that may be subsequently reclassified to net earnings (loss)

Unrealized foreign currency translation losses, net of income taxes of nil (2019 – nil)

(60,606)

(53,445)

Other comprehensive loss, net of income taxes

Comprehensive income (loss)

(60,606)

(53,445)

(102,082) 462,893

See accompanying notes.

FAIRFAX INDIA HOLDINGS CORPORATION

Consolidated Statements of Changes in Equity
for the years ended December 31, 2020 and 2019
(US$ thousands)

Balance as of January 1, 2020
Net loss for the year
Other comprehensive loss:

Unrealized foreign currency translation

losses

Purchases for cancellation (note 8)
Amortization

Subordinate
voting shares

Multiple
voting shares

1,295,005
–

300,000
–

–
(33,271)
–

–
–
–

Share-based
payments,
net

(82)
–

–
–
70

Retained
earnings

1,200,603
(41,476)

Accumulated
other
comprehensive
loss

Common
shareholders’
equity

(217,675)
–

2,577,851
(41,476)

–
4,366
–

(60,606)
–
–

(60,606)
(28,905)
70

Balance as of December 31, 2020

1,261,734

300,000

(12)

1,163,493

(278,281)

2,446,934

Balance as of January 1, 2019
Net earnings for the year
Other comprehensive loss:

Unrealized foreign currency translation

losses

Purchases for cancellation (note 8)
Purchases and amortization

1,297,426
–

300,000
–

(93)
–

684,842
516,338

(164,230)
–

2,117,945
516,338

–
(2,421)
–

–
–
–

–
–
11

–
(577)
–

(53,445)
–
–

(53,445)
(2,998)
11

Balance as of December 31, 2019

1,295,005

300,000

(82)

1,200,603

(217,675)

2,577,851

See accompanying notes.

Consolidated Statements of Cash Flows
for the years ended December 31, 2020 and 2019
(US$ thousands)

Operating activities
Net earnings (loss)
Items not affecting cash and cash equivalents:

Net bond premium amortization
Performance fee (recovery)
Deferred income taxes
Amortization of share-based payment awards
Net realized gains on investments
Net change in unrealized (gains) losses on investments
Net foreign exchange losses

Net decrease (increase) in restricted cash in support of borrowings
Net purchases of short term investments
Purchases of investments
Sales of investments
Changes in operating assets and liabilities:

Interest and dividends receivable
Payable to related parties
Income taxes payable
Other

Cash provided by operating activities

Financing activities

Borrowings:
Proceeds
Issuance costs
Repayments

Subordinate voting shares:

Purchases for cancellation

Cash used in financing activities

Increase (decrease) in cash and cash equivalents

Cash and cash equivalents – beginning of year
Foreign currency translation

Cash and cash equivalents – end of year

See accompanying notes.

Notes

2020

2019

(41,476)

516,338

12
10

6
6
6

15
15

7
7
7

937
(41,991)
484
70
(5,372)
26,618
14,188
600
–
(185,911)
231,193

1,441
7,586
(3,556)
6,080

68
48,514
64,689
96
(181,123)
(530,372)
13,806
(3,082)
(30)
(563,952)
666,407

3,480
(6,200)
2,220
5,739

10,891

36,598

–
(5,545)
–

50,000
(5,545)
(50,000)

(28,905)

(2,998)

(34,450)

(8,543)

(23,559)
48,713
(3,097)

28,055
21,240
(582)

22,057

48,713

FAIRFAX INDIA HOLDINGS CORPORATION

Index to Notes to Consolidated Financial Statements

1. Business Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2. Basis of Presentation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3. Summary of Significant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

4. Critical Accounting Estimates and Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Indian Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6. Cash and Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7. Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8. Common Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

9. Net Earnings (Loss) per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10.

Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11. Financial Risk Management

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12. Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13. Segment Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

14. General and Administration Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

15. Supplementary Cash Flow Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notes to Consolidated Financial Statements
for the years ended December 31, 2020 and 2019
(in US$ and thousands except share and per share amounts and as otherwise indicated)

1. Business Operations

Fairfax India Holdings Corporation (‘‘the company’’ or ‘‘Fairfax India’’) is an investment holding company whose
objective is to achieve long term capital appreciation, while preserving capital, by investing in public and private
equity securities and debt instruments in India and Indian businesses or other businesses with customers, suppliers
or business primarily conducted in, or dependent on, India (‘‘Indian Investments’’). The company makes all or
substantially all of its investments either directly or through one of its wholly-owned subsidiaries based in Mauritius,
FIH Mauritius Investments Ltd (‘‘FIH Mauritius’’) and FIH Private Investments Ltd (‘‘FIH Private’’). In 2019 the
company formed Anchorage Infrastructure Investments Holdings Limited (‘‘Anchorage’’), a wholly-owned
subsidiary of FIH Mauritius based in India.

Fairfax Financial Holdings Limited (‘‘Fairfax’’) is Fairfax India’s ultimate parent and acts as its administrator. Fairfax is
a holding company which, through its subsidiaries, is engaged in property and casualty insurance and reinsurance
and the associated investment management. Hamblin Watsa Investment Counsel Ltd. (the ‘‘Portfolio Advisor’’), a
wholly-owned subsidiary of Fairfax and registered portfolio manager in the province of Ontario, is the portfolio
advisor of the company and its consolidated subsidiaries, responsible to source and advise with respect to all
investments. Refer to note 12 for details on Fairfax’s voting rights and equity interest in the company.

The company is federally incorporated and is domiciled in Ontario, Canada. The principal office of the company,
Fairfax and the Portfolio Advisor is located at 95 Wellington Street West, Suite 800, Toronto, Ontario M5J 2N7.

2. Basis of Presentation

The company’s consolidated financial statements for the year ended December 31, 2020 have been prepared in
accordance with International Financial Reporting Standards (‘‘IFRS’’) as issued by the International Accounting
Standards Board (‘‘IASB’’). The company has determined that it continues to meet the definition of an investment
entity under IFRS (see note 3).

The consolidated balance sheets of the company are presented on a non-classified basis. Except for bonds, common
stocks, and deferred income taxes, all other assets expected to be realized and liabilities due to be settled within one
year are considered current.

The preparation of the company’s consolidated financial statements requires management to make a number of
estimates and judgments that affect the reported amounts of assets and liabilities at the date of the consolidated
financial statements, the reported amounts of income and expenses during the reporting periods covered by the
consolidated financial statements and the related note disclosures. Critical accounting estimates and judgments are
described in note 4.

These consolidated financial statements were approved for issue by the company’s Board of Directors on
March 5, 2021.

3. Summary of Significant Accounting Policies

The principal accounting policies applied to the preparation of these consolidated financial statements and the
methods of computation have been consistently applied to all periods presented unless otherwise stated, and are as
set out below.

Determination of investment entity status

An entity that meets the IFRS 10 Consolidated Financial Statements (‘‘IFRS 10’’) definition of an investment entity is
required to measure its investments in subsidiaries at fair value through profit or loss (‘‘FVTPL’’) rather than
consolidate them (other than those subsidiaries that provide services to the company).

FAIRFAX INDIA HOLDINGS CORPORATION

An investment entity is an entity that obtains funds from one or more investors for the purpose of providing them
with investment management services, commits to its investors that its business purpose is to invest funds solely for
returns from capital appreciation, investment income, or both, and measures and evaluates the performance of
substantially all of its investments on a fair value basis. The company continues to meet the definition of an
investment entity, as its strategic objective of investing in Indian Investments and providing investment
management services to investors for the purpose of generating returns in the form of long term capital appreciation,
remains unchanged. The company has also determined that FIH Mauritius and FIH Private continue to provide
investment related services to the company and should continue to be consolidated.

The company may from time to time seek to realize on any of its Indian Investments. The circumstances under which
the company may sell some or all of its investments include: (i) where the company believes that the Indian
Investments are fully valued or that the original investment thesis has played out; or (ii) where the company has
identified other investment opportunities which it believes present more attractive risk-adjusted return
opportunities and additional capital is needed to make such alternative investments.

The company would exit its private Indian Investments (‘‘Private Indian Investments’’, as disclosed later in note 5)
either through initial public offerings (‘‘IPO’’) or private sales. For publicly traded Indian Investments (‘‘Public Indian
Investments’’, as disclosed later in note 5), exit strategies may include selling the investments through private
placements or in public markets.

Consolidation

Subsidiaries – A subsidiary is an entity that the company controls. The company controls an entity when it has
power over the entity, is exposed to, or has rights to, variable returns from its involvement with the entity and has
the ability to affect those returns through its power over the entity. As an investment entity the company is required
to account for its investments in subsidiaries (Privi Speciality Chemicals Limited (‘‘Privi Speciality’’, formerly known
as Fairchem Speciality Limited), Fairchem Organics Limited (‘‘Fairchem Organics’’), National Collateral Management
Services Limited (‘‘NCML’’), and Saurashtra Freight Private Limited (‘‘Saurashtra’’)) at FVTPL in accordance with
IFRS 9 Financial Instruments (‘‘IFRS 9’’) rather than by consolidation.

As FIH Mauritius and FIH Private continue to be consolidated all intercompany balances, profits and transactions
with these subsidiaries are eliminated in full.

Investments in associates

An associate is an entity over which the company has the ability to exercise significant influence, but not control. As
an investment entity, the company accounts for its investments in associates (IIFL Finance Limited (‘‘IIFL Finance’’),
IIFL Securities Limited (‘‘IIFL Securities’’), CSB Bank Limited (‘‘CSB Bank’’), 5paisa Capital Limited (‘‘5paisa’’),
Bangalore International Airport Limited (‘‘BIAL’’), Sanmar Chemicals Group (‘‘Sanmar’’) and Seven Islands Shipping
Limited (‘‘Seven Islands’’)) at FVTPL in accordance with IFRS 9 rather than under the equity method of accounting.

Foreign currency translation

Functional and presentation currency – The consolidated financial statements are presented in U.S. dollars
while the Indian rupee is the functional currency of the company and its consolidated subsidiaries.

Although the company’s Indian Investments are denominated in Indian rupees, its primary financial reporting
objective is to measure long term capital appreciation in U.S. dollars. Accordingly, the company presents its
consolidated financial statements in U.S. dollars to provide comparability with other North American investment
entities.

Foreign currency transactions – Foreign currency transactions are translated into the functional currency using
the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities
denominated in foreign currencies are recognized in net foreign exchange gains (losses) in the consolidated
statements of earnings (loss). Non-monetary items carried at cost are translated using the exchange rate at the date of
the transaction. Non-monetary items carried at fair value are translated using the exchange rate at the date the fair
value is determined.

Translation to the presentation currency – The consolidated balance sheets and consolidated statements of
earnings (loss) of Fairfax India and its consolidated subsidiaries are translated to the presentation currency as follows:

(cid:127) assets and liabilities are translated using exchange rates at the balance sheet dates;

(cid:127) income and expenses are translated at average exchange rates for the periods presented; and

(cid:127) net unrealized gains or losses resulting from this translation are recognized in accumulated other

comprehensive income (loss).

Upon disposal or partial disposal of FIH Mauritius or FIH Private, a proportionate share of the cumulative amount of
exchange differences recognized in accumulated other comprehensive income (loss) and accumulated in a separate
component in equity would be recycled to the consolidated statements of earnings (loss) as part of the determination
of the gain or loss on disposal of these consolidated subsidiaries.

Comprehensive income (loss)

Comprehensive income (loss) consists of net earnings (loss) and other comprehensive income (loss), and includes all
changes in common shareholders’ equity during a period, except for those resulting from investments by owners and
distributions to owners. Unrealized foreign currency translation gains (losses), net of income taxes, arising from the
translation of the company’s Indian rupee functional currency consolidated financial statements to the U.S. dollar
presentation currency are recognized in other comprehensive income (loss) and included in accumulated other
comprehensive income (loss) until recycled to the consolidated statements of earnings (loss) in the future.
Accumulated other comprehensive income (loss) is included in the consolidated balance sheets as a component of
common shareholders’ equity.

Consolidated statements of cash flows

The company’s consolidated statements of cash flows are prepared in accordance with the indirect method,
classifying cash flows by operating, investing and financing activities.

Cash and cash equivalents – Cash and cash equivalents consist of cash on hand, demand deposits with banks
and other short term highly liquid investments with maturities of three months or less when purchased, and exclude
cash that is restricted. The carrying value of cash and cash equivalents approximates fair value.

Restricted cash – Restricted cash primarily consists of amounts required to be maintained on deposit with
Canadian banks to support the borrowings (see note 7). The carrying value of restricted cash approximates fair value.

Total Cash and Investments

Total cash and investments include cash and cash equivalents, restricted cash, short term investments, derivatives,
bonds and common stocks. Management determines the appropriate classifications of investments at their
acquisition date.

Classification – Short term investments, derivatives, bonds and common stocks are classified as FVTPL. The
company manages these investments on a fair value basis, using fair value information to assess investment
performance and to make investment decisions.

Recognition and measurement – The company recognizes purchases and sales of investments on the trade date,
the date on which the company commits to purchase or sell the investment. Transactions pending settlement are
reflected on the consolidated balance sheets as payable for partly paid securities. Transaction costs related to
investments classified as FVTPL are expensed as incurred in the consolidated statements of earnings (loss). The
company recognizes cash and investments at fair value upon initial recognition.

Subsequent to initial recognition, investments classified as FVTPL are measured at fair value with changes in fair
value reported in the consolidated statements of earnings (loss) as income comprised of interest, dividends, net
realized gains (losses) on investments and net change in unrealized gains (losses) on investments. Interest represents
interest income on short term investments and bonds (except for Sanmar bonds where estimated interest income
was included in its fair value measurement (see note 5)) calculated using the effective interest method, net of
investment expenses and includes bank interest. Calculation of a debt instrument’s effective interest rate does not
consider expected credit losses and requires estimates of future cash flows considering all contractual terms of the
financial instrument including the stated interest rate, discount or premium, and any origination or structuring fees.

FAIRFAX INDIA HOLDINGS CORPORATION

Interest receivable is shown separately on the consolidated balance sheets based on the debt instruments’ stated rates
of interest. Dividends represent dividends received on holdings of common stocks and are recognized when the
company’s right to receive payment is established. All other changes in fair value are reported in net realized gains
(losses) on investments and net change in unrealized gains (losses) on investments in the consolidated statements of
earnings (loss). For short term investments and bonds, the sum of interest income, net realized gains (losses) on
investments and net change in unrealized gains (losses) on investments is equal to their total change in fair value for
the reporting period.

Interest, dividends, net realized gains (losses) on investments and net change in unrealized gains (losses) on
investments are reported as operating activities in the consolidated statements of cash flows.

Derecognition – An investment is derecognized when the rights to receive cash flows from the investment have
expired or have been transferred and when the company has transferred substantially all the risks and rewards
of ownership.

Short term investments – Highly liquid debt instruments with maturity dates between three and twelve months
when purchased are classified as short term investments.

Bonds – Debt instruments with maturity dates greater than twelve months when purchased, or illiquid debt
instruments with maturity dates of less than twelve months when purchased, are classified as bonds. The carrying
value of bonds excludes the debt instrument’s accrued interest receivable at the stated rate of interest.

Derivatives – Derivatives represent forward contracts and warrants, which derive their value primarily from
changes in underlying equity instruments. The fair value of derivatives in a gain position are presented on the
consolidated balance sheets within total cash and investments, as derivatives. The fair value of derivatives with no
upfront cost and in a loss position are presented on the consolidated balance sheets in derivative obligations. The
initial premium paid for a derivative contract, if any, would be recorded as a derivative asset and subsequently
adjusted for changes in the fair value of the contract at each reporting date. Changes in the fair value of derivatives
are recorded within net change in unrealized gains (losses) on investments in the consolidated statements of
earnings (loss).

Determination of fair value – Fair values for substantially all of the company’s financial instruments are
measured using market or income approaches. Considerable judgment may be required in interpreting market data
used to develop estimates of fair value. Accordingly, actual values realized in future market transactions may differ
from the estimates presented in these consolidated financial statements. The use of different market assumptions
and/or valuation methodologies may have a material effect on the estimated fair values. The fair values of financial
instruments are based on bid prices for financial assets and ask prices for financial liabilities. The company
categorizes its fair value measurements using a three-level fair value hierarchy in accordance with IFRS as described
below:

Level 1 – Inputs represent unadjusted quoted prices for identical instruments exchanged in active markets. The
fair values of the company’s Public Indian Investments that are not subject to selling restrictions are based on
published quotes in active markets.

Level 2 – Inputs include directly or indirectly observable inputs (other than Level 1 inputs) such as quoted prices
for similar financial instruments exchanged in active markets, quoted prices for identical or similar financial
instruments exchanged in inactive markets and other market observable inputs. The fair values of the company’s
investments in Government of India and Indian corporate bonds are based on information provided by
independent pricing service providers.

Level 3 – Inputs include unobservable inputs that require management to use its own assumptions regarding
unobservable inputs as there is little, if any, market activity in these instruments or related observable inputs that
can be corroborated at the measurement date. The fair values of the company’s Public Indian Investments
subject to selling restrictions are based on published quotes in active markets, net of a discount for lack of
marketability, which is not a market observable input. The majority of the company’s Private Indian
Investments are based on discounted cash flow analyses and recent third party transactions which utilize inputs
that are not market observable such as after-tax discount rates, long term growth rates, and third party
transaction prices.

Transfers between fair value hierarchy levels are considered effective from the beginning of the annual reporting
period in which the transfer is identified.

Valuation techniques used by the company’s independent pricing service providers and third party broker-dealers
include use of prices from similar instruments where observable market prices exist, discounted cash flow analysis,
option pricing models, and other valuation techniques commonly used by market participants. The company
assesses the reasonableness of pricing received from these third party sources by comparing the fair values received to
recent transaction prices for similar assets where available, to industry accepted discounted cash flow models (that
incorporate estimates of the amount and timing of future cash flows and market observable inputs such as credit
spreads and discount rates) and to option pricing models (that incorporate market observable inputs including the
quoted price, volatility and dividend yield of the underlying security and the risk-free rate).

Net realized gains (losses) on investments, and Net change in unrealized gains (losses)
on investments

Where a financial instrument continues to be held by the company at the end of a reporting period, changes in the
fair value of that instrument during the reporting period, excluding those changes reported as interest and
dividends, are presented in net change in unrealized gains (losses) on investments. On disposition of that financial
instrument, its inception-to-date net gain (loss), excluding those changes previously reported as interest and
dividends, is presented as net realized gains (losses) on investments in the consolidated statements of earnings (loss).
The cumulative unrealized net gain (loss) recognized in prior periods on that financial instrument is then reversed in
net change in unrealized gains (losses) on investments in the consolidated statements of earnings (loss). The sum of
the net realized gain (loss) and the cumulative reversal of prior period unrealized gains (losses) equals that financial
instrument’s net gain (loss) on investment for the current reporting period.

Performance fees

Performance fees are estimated and accrued at the end of each reporting period within the calculation period. An
estimate is also made for the number of shares to be issued, if any, on settlement for the purposes of the calculation of
diluted earnings per share based on the volume-weighted average trading price of the company’s subordinate voting
shares for the 10 trading days prior to and including the last day of the reporting period. The amount of the
performance fee payable and the subordinate voting shares to be issued which are determined at the end of each
calculation period, if any, may differ when performance fee is settled in accordance with the terms as disclosed in
note 12.

Income taxes

The provision for income taxes for the period comprises current and deferred income tax. Income taxes are
recognized in the consolidated statements of earnings (loss), except when related to items recognized in other
comprehensive income (loss) or directly in equity. In those cases, income taxes are also recognized in other
comprehensive income (loss) or directly in equity, respectively.

Current income tax is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period in the countries where the company and its subsidiaries operate and generate taxable income.

Deferred income tax is calculated under the liability method whereby deferred income tax assets and liabilities are
recognized for temporary differences between the financial statement carrying amounts of assets and liabilities and
their respective income tax bases at the current substantively enacted tax rates. Changes in deferred income tax
associated with components of other comprehensive income (loss) are recognized in other comprehensive income
(loss) while all other changes in deferred income tax are included in the provision for income taxes in the
consolidated statements of earnings (loss).

Deferred income tax assets are recognized to the extent that it is probable that future taxable profit will be available
against which the temporary differences can be utilized. Carry forwards of unused losses or unused tax credits are tax
effected and recognized as deferred tax assets when it is probable that future taxable profits will be available against
which these losses or tax credits can be utilized.

Deferred income tax is not recognized on unremitted earnings from the company’s subsidiaries’ holdings of Indian
Investments where the company has determined it is not probable that those earnings will be repatriated in the
foreseeable future.

Current and deferred income tax assets and liabilities are offset when income taxes are levied by the same taxation
authority and there is a legally enforceable right of offset.

FAIRFAX INDIA HOLDINGS CORPORATION

Borrowings

Borrowings are initially recognized at fair value, net of incremental and directly attributable transaction costs, and
subsequently measured at amortized cost. Interest expense on borrowings is recognized in the consolidated
statements of earnings (loss) using the effective interest method. Borrowings are derecognized when extinguished,
with any gain or loss on extinguishment recognized in other expenses in the consolidated statements of earnings
(loss).

Equity

Common stock issued by the company is classified as equity when there is no contractual obligation to transfer cash
or other financial assets to the holder of the shares. Incremental costs directly attributable to the issue or purchase for
cancellation of equity instruments are recognized in equity, net of tax.

Dividends and other distributions to holders of the company’s equity instruments are recognized directly in equity.

Share-based payments

The company has restricted share plans or equivalent for its directors with vesting periods of up to ten years from the
date of grant. The fair value of restricted share awards on the grant date is amortized to salaries and employee benefit
expenses, included in general and administration expenses in the consolidated statements of earnings (loss), over the
vesting period, with a corresponding increase in share-based payments, net, in the consolidated statements of
changes in equity. At each balance sheet date, the company reviews its estimates of the number of restricted share
awards expected to vest.

Net earnings (loss) per share

Basic net earnings (loss) per share is calculated by dividing the net earnings (loss) by the weighted average number of
subordinate and multiple voting shares issued and outstanding during the period.

Net earnings (loss) per diluted share

Diluted net earnings (loss) per share is calculated in the same manner as basic net earnings (loss) per share except that
the weighted average number of subordinate and multiple voting shares outstanding during the period is adjusted
for the dilutive effect, if any, of the contingently issuable subordinate voting shares or settlement in subordinate
voting shares relating to the performance fee payable to Fairfax (see note 12) that would have been outstanding
during the period had all potential subordinate voting shares been issued at the beginning of the period.

New accounting pronouncement adopted in 2020

Conceptual Framework for Financial Reporting (‘‘Conceptual Framework’’)

The revised Conceptual Framework includes revised definitions of an asset and a liability as well as new guidance on
measurement, derecognition, presentation and disclosure. It does not constitute an accounting pronouncement and
did not result in any immediate change to IFRS, and will be used by the IASB and IFRS Interpretations Committee in
setting future standards. Adoption of the revised Conceptual Framework on January 1, 2020 did not have an impact
on the company’s consolidated financial statements. The revised Conceptual Framework will apply when the
company has to develop an accounting policy for an issue not addressed by IFRS.

Definition of Material (Amendments to IAS 1 and IAS 8)

The amendments to IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting
Estimates and Errors clarify the definition of ‘‘material’’. Prospective adoption of these amendments on January 1,
2020 did not have a significant impact on the company’s consolidated financial statements.

New accounting pronouncements issued but not yet effective

The following new standards and amendments have been issued by the IASB and were not yet effective for the fiscal
year beginning January 1, 2020. The company does not expect to adopt any of them in advance of their respective
effective dates.

Interest Rate Benchmark Reform – Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)

On August 27, 2020 the IASB issued amendments to IFRS 9 Financial Instruments, IAS 39 Financial Instruments:
Recognition and Measurement, IFRS 7 Financial Instruments: Disclosures, IFRS 4 Insurance Contracts and IFRS 16 Leases to
address financial statement impacts and practical expedients when an existing interest rate benchmark such as
LIBOR is replaced with an alternative reference rate. The amendments are effective for annual periods beginning on
or after January 1, 2021 and are to be applied retrospectively without restatement of prior periods. The amendments
are not expected to have a significant impact on the company’s consolidated financial statements.

Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37)

On May 14, 2020 the IASB issued amendments to IAS 37 Provisions, Contingent Liabilities and Contingent Assets to
clarify the types of costs an entity includes in determining the cost of fulfilling a contract for the purpose of assessing
whether a contract is onerous. The amendments are effective for annual periods beginning on or after January 1,
2022 and apply to contracts for which the entity has not yet fulfilled all its obligations at the beginning of the annual
reporting period in which the entity first applies the amendments. Comparatives are not restated and instead the
cumulative effect of applying the amendments is recognized as an adjustment to opening equity at the date of initial
application. The amendments are not expected to have a significant impact on the company’s consolidated financial
statements.

Annual Improvements to IFRS Standards 2018 – 2020

On May 14, 2020, the IASB issued amendments to certain IFRS Standards as a result of its annual improvements
project, which includes an amendment to IFRS 9 Financial Instruments to clarify which fees an entity includes when it
applies the ‘10 per cent test’ in assessing whether to derecognize a financial liability. The amendment to IFRS 9 is
applied prospectively on or after January 1, 2022 and is not expected to have a significant impact on the company’s
consolidated financial statements.

Classification of Liabilities as Current or Non-current (Amendments to IAS 1)

On January 23, 2020 the IASB issued amendments to IAS 1 Presentation of Financial Statements to clarify the criteria for
classifying a liability as non-current which was to be applied retrospectively on or after January 1, 2022. On July 15,
2020 the IASB issued another amendment to IAS 1 Presentation of Financial Statements to defer the effective date of the
January 2020 amendments to IAS 1 by one year to annual reporting periods beginning on or after January 1, 2023.
The company is currently evaluating the expected impact of the amendments on its consolidated financial
statements.

4. Critical Accounting Estimates and Judgments

In the preparation of the company’s consolidated financial statements, management has made a number of critical
accounting estimates and judgments which are discussed below, including the effects of the COVID-19 pandemic on
the company’s development of critical accounting estimates in 2020. The broad effects of the COVID-19 pandemic
on the company are described in note 11. Estimates and judgments are continually evaluated and are based on
historical experience and other factors, including expectations of future events that are believed to be reasonable
under the circumstances.

Where estimates were made, the reported amounts of assets, liabilities, income and expenses may differ from the
amounts that would otherwise be reflected if the ultimate outcome of all uncertainties and future earnings were
known at the time the consolidated financial statements were prepared.

Valuation of Private Indian Investments

The valuation of the company’s Private Indian Investments are assessed at the end of each reporting period.

For each Private Indian Investment acquired during the reporting period, the transaction price is generally
considered to be representative of fair value, subject to changes in market conditions and factors specific to the
investee. The company monitors various factors impacting the businesses of its investees and the transaction price of
a Private Indian Investment may no longer be an appropriate estimate of fair value upon occurrence of certain events
such as significant variances from budgeted earnings; changes in market conditions; changes to the regulatory

FAIRFAX INDIA HOLDINGS CORPORATION

environment; movements in interest rates, foreign exchange rates and other market variables; and the passage
of time.

Estimates and judgments for Private Indian Investments are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be reasonable under the
circumstances. The company utilizes Fairfax’s valuation personnel to assist with the valuation of its investment
portfolio. Detailed valuations are performed for those financial instruments that are priced internally, while external
pricing received from independent pricing service providers and third party broker-dealers are evaluated by the
company for reasonableness. The company does not use independent valuation experts to determine the fair value
of its Private Indian Investments. The company’s Chief Financial Officer oversees the valuation function and
regularly reviews valuation processes and results, including at each quarterly reporting period. Significant valuation
matters, particularly those requiring extensive judgment, are communicated to the company’s Audit Committee.

Notwithstanding the rigour of the company’s valuation processes, the valuation of Private Indian Investments,
including the company’s valuation of BIAL, Sanmar, Seven Islands, NCML, and Saurashtra, inherently has
estimation uncertainty and different assumptions could lead to materially different fair values. Significant
judgments and assumptions are required to determine the discounted cash flow, including multi-year free cash flow
forecasts, after-tax discount rates and long term growth rates. Further discussion on these assumptions specific to
each Indian Investment are included in note 5 under the respective heading of each Indian Investment. Discounted
cash flows are subject to a sensitivity analysis (see note 6) given the uncertainty in preparing forecasts. Refer to
notes 5 and 6 for additional disclosure related to the valuation of the company’s Private Indian Investments.

COVID-19 pandemic

The development of unobservable inputs included added uncertainty related to the global economic disruption
caused by the ongoing and developing COVID-19 pandemic. Estimates of the amount and timing of future cash
flows, discount rates, growth rates and other inputs incorporated into fair value measurements of Private Indian
Investments are inherently more difficult to determine due to the unpredictable duration and impacts of the
COVID-19 pandemic, including further actions that may be taken by governments to contain it and the timing of
the re-opening of the economy in various parts of the world. The company has assumed that the economic impacts
of COVID-19 will remain for the duration of government mandated restrictions by jurisdiction as currently known,
with gradual lifting of those restrictions. In particular, these restrictions include the lockdown imposed by the Indian
government on March 25, 2020 which was later extended to May 31, 2020 and remains in place for containment
zones until March 31, 2021 (and may extend further as the COVID-19 pandemic continues to evolve) while
lockdown restrictions were being lifted in phases for districts that are deemed safe (‘‘India’s lockdown’’). The
company has incorporated assumptions related to the COVID-19 pandemic into the estimates of the amount and
timing of future cash flows, and the uncertainty in those assumptions has been incorporated into the company’s
valuations of Private Indian Investments primarily through higher risk premiums. Additional volatility in the fair
values of Private Indian Investments may arise in future periods if actual results differ materially from the company’s
estimates. Refer to notes 5 and 6 for details on the valuation of company’s Private Indian Investments at
December 31, 2020.

Income taxes

The company is subject to income taxes in Canada, Mauritius and India, and the company’s determination of its tax
liability or receivable is subject to review by those applicable tax authorities. The company exercised judgment in
assessing that unremitted earnings related to its subsidiaries’ holdings of Indian Investments, as disclosed in note 10,
are not expected to result in taxable amounts as the company has determined it is not probable that those
unremitted earnings will be repatriated in the foreseeable future; as a consequence no tax has been recorded in the
consolidated financial statements on these unremitted earnings. While the company believes its tax positions to be
reasonable, where the company’s interpretations differ from those of tax authorities or the timing of realization is
not as expected, the provision for income taxes may increase or decrease in future periods to reflect actual
experience. The company has Fairfax tax specialist personnel responsible for assessing the income tax consequences
of planned transactions and events, and undertaking the appropriate tax planning.

Realization of deferred income tax assets is dependent upon the generation of taxable income in those jurisdictions
where the relevant tax losses and temporary differences exist. Tax legislation of each jurisdiction in which the
company operates is interpreted to determine the provision for (recovery of) income taxes and expected timing of

the reversal of deferred income tax assets and liabilities. The company exercised judgment that certain carryforwards
of unused losses or unused tax credits and timing differences disclosed in note 10 should not be recognized as a
deferred income tax asset as it was considered not probable that those losses could be utilized by the company.

Indian Investments

Throughout the company’s consolidated financial statements for the year ended December 31, 2020, the term
‘‘Indian Investments’’ refers to deployed capital invested in Public and Private Indian Investments as disclosed
within this note.

Summary of Changes in the Fair Value of the Company’s Indian Investments

A summary of changes in the fair value of the company’s Public and Private Indian Investments during 2020 is
as follows:

2020

Balance as

Fairchem
of January 1 Purchases Reorganization

Sales

Net realized

Net change in
unrealized
gains on gains (losses) on
investments(1)

investments

Net unrealized
foreign
currency

translation Balance as of
gains (losses) December 31

Public Indian Investments:

Common stocks:

IIFL Finance

IIFL Wealth

IIFL Securities

CSB Bank

Privi Speciality (formerly

Fairchem)(2)

Fairchem Organics(2)
5paisa

Other

166,014

191,476

48,796

229,262

127,413

–

18,176

95,892

–

84,672

Total Public Indian Investments

877,029

84,672

Private Indian Investments:

Bonds – NCML CCD

Common stocks:

BIAL

Sanmar

Seven Islands

NCML

Saurashtra

NSE

IH Fund

14,286

1,429,854

412,930

88,800

120,734

31,204

57,210

15,146

Total Private Indian Investments

2,170,164

–

9,506

Total Indian Investments

3,047,193

94,178

–

(34,895)

34,895

–

(41,913)

3,782

–

(277)

–

(30,262)

(20,058)

7,823

(9,484)

48,732

18,808

9,889

5,896

31,344

(4,274)

(4,716)

(1,016)

(5,437)

(2,837)

863

(277)

(725)

131,478

166,702

55,603

214,341

138,413

54,566

27,788

147,604

(18,419)

936,495

915

(317)

14,884

(669)

(63,844)

16,558

(31,277)

2,297

16,493

1,249

(33,068)

(10,465)

(1,815)

(3,241)

(689)

(1,086)

(270)

1,396,117

338,621

103,543

86,216

32,812

72,617

25,354

(58,278)

(50,951)

2,070,164

(42,190)

3,782

(26,934)

(69,370)

3,006,659

(1) All Private Indian Investments and certain CSB Bank common shares (subject to selling restrictions) were classified as Level 3 in the fair value hierarchy. Net
change in unrealized gains (losses) on investments classified as Level 3 in the fair value hierarchy related to unrealized gains (losses) on investments held at
the end of the reporting period.

(2) On August 12, 2020 as part of the Fairchem Reorganization, Fairchem spun off Fairchem Organics, whose shares were subsequently listed on the BSE and
NSE of India on December 24, 2020. Concurrent with the spin off transaction, Privi Organics merged with the remaining Fairchem business and was
renamed Privi Speciality Chemicals Limited (‘‘Privi Speciality’’). Common shares of Privi Speciality continue to trade on the BSE and NSE of India.

FAIRFAX INDIA HOLDINGS CORPORATION

A summary of changes in the fair value of the company’s Public and Private Indian Investments during 2019 is
as follows:

Balance
as of

Sales /
IIFL Holdings
January 1 Purchases Reorganization Transfer Redemptions

Net
realized
gains
(losses) on
investments

Net
change in
unrealized
gains
(losses) on

Net
unrealized
foreign
currency
translation
investments(1) gains (losses)

Balance
as of
December 31

2019

Public Indian Investments:

Common stocks:

IIFL Finance

(formerly IIFL
Holdings)(2)
IIFL Wealth(2)
IIFL Securities(2)
CSB Bank(3)
Fairchem
5paisa(4)
Other

613,458

–

93,081

96,574

11,913

98,180

–

80,987

–

6,483

–

Total Public Indian
Investments

913,206

87,470

Private Indian Investments:

Loan – NCML Loan

Bonds:

NCML CCD

Sanmar bonds

Common stocks:

BIAL
Sanmar(5)
NCML

Seven Islands

Saurashtra

NSE

IH Fund

Derivatives:

5paisa forward
derivative(4)
Sanmar forward
derivative(5)

–

392,776

704,077

217,170

165,380

13,970

–

178,422

–

83,846

24,843

60,285

–

14,893

–

19,617

Total Private Indian

Investments

1,564,531

310,748

Total Indian

Investments

2,477,737

398,218

(282,753)

191,443

91,310

–

(19)

–

36,112

–

(45)

–

(36,907)

7,115

(196,040)

4,620

(40,916)

60,901

33,412

30,182

(4,763)

(4,587)

(1,598)

(5,643)

(2,573)

(232)

(2,678)

166,014

191,476

48,796

229,262

127,413

18,176

95,892

(36,926)

43,182

(107,829)

(22,074)

877,029

(13,970)

13,970

–

241

–

(433,873)

156,540

(107,758)

(7,685)

–

(24)

–

(2,706)

2,767

–

(19,816)

751,487

23,062

(41,594)

7,119

7,001

(1,779)

482

–

(25,710)

(5,724)

(3,052)

(2,165)

(640)

(1,296)

(205)

(61)

199

–

14,286

–

1,429,854

412,930

120,734

88,800

31,204

57,210

15,146

–

(436,603)

139,491

638,261

(46,264)

2,170,164

(473,529)

182,673

530,432

(68,338)

3,047,193

–

(1) All Private Indian Investments and CSB Bank common shares (subject to selling restrictions) were classified as Level 3 in the fair value hierarchy. Net change
in unrealized gains (losses) on investments classified as Level 3 in the fair value hierarchy related to unrealized gains (losses) on investments held at the end of
the reporting period, with the exception of $107,758 of net change in unrealized losses recorded in 2019, related to the reversal of prior period unrealized gains
recorded on Sanmar bonds.

(2) On May 31, 2019 IIFL Holdings spun off IIFL Wealth and IIFL Securities in the IIFL Holdings Reorganization. IIFL Holdings was renamed IIFL Finance, and
shares of IIFL Wealth and IIFL Securities were publicly listed on the BSE and NSE of India in September 2019. The amount recorded in net realized gains on
investments was $36,112 (all of which was recognized as unrealized gains on investments in prior periods).

(3) On December 4, 2019 CSB Bank closed its IPO and commenced trading on both the BSE and NSE of India.

(4) On August 20, 2019 Fairfax India participated in a 5paisa rights offer and acquired additional 5paisa common shares for cash consideration of $3,777. As a
result the company derecognized the 5paisa forward derivative asset with a carrying value of $2,706, recorded a realized gain of $2,767 and recorded its
investment in 5paisa common shares at a fair value at that date of $6,483.

(5) On December 21, 2019 Fairfax India acquired additional Sanmar common shares for cash consideration of $198,039. As a result the company derecognized
the Sanmar forward derivative obligation with a carrying value of $19,617, recorded a realized loss of $19,816 and recorded its investment in Sanmar
common shares at a fair value at that date of $178,422.

Public Indian Investments

The fair values of Fairfax India’s Public Indian Investments with shares listed on both the BSE (formerly known as
Bombay Stock Exchange Limited) and the National Stock Exchange of India (‘‘NSE of India’’), are determined using
the bid prices of those investments (without adjustments or discounts) at the balance sheet date, with the exception
of certain CSB Bank common shares subject to selling restrictions.

Investment in IIFL Holdings Limited / IIFL Finance Limited

IIFL Holdings Limited

In December 2015 and February 2017 the company acquired 84,641,445 common shares of IIFL Holdings
(representing a 26.9% equity interest) for aggregate cash consideration of $276,734 (approximately 18.5 billion
Indian rupees). In October 2017 IIFL Holdings spun off its wholly-owned subsidiary 5paisa Capital Limited
(‘‘5paisa’’) which resulted in a reduction to the company’s cost of its investment in IIFL Holdings by $19,758. Upon
closing of this transaction the company had invested $256,976 for a 26.9% equity interest in IIFL Holdings.

On May 31, 2019 IIFL Holdings spun off its wholly-owned subsidiary IIFL Securities Limited (‘‘IIFL Securities’’,
comprised of investment brokerage, distribution and investment banking businesses) and its 53.3% equity interest
in its subsidiary IIFL Wealth Management Limited (‘‘IIFL Wealth’’, comprised of the wealth management and asset
management businesses) in a non-cash transaction (the ‘‘IIFL Holdings Reorganization’’). Shareholders of IIFL
Holdings received seven common shares of IIFL Securities and one common share of IIFL Wealth for every seven IIFL
Holdings common shares held. The distribution of new common shares to IIFL Holdings shareholders was
characterized as a return of capital which exceeded Fairfax India’s cost basis in IIFL Holdings and resulted in the
company recording the initial cost of its investments in IIFL Securities and IIFL Wealth at their estimated fair values
at that date of $91,310 (approximately 6.4 billion Indian rupees) and $191,443 (approximately 13.3 billion Indian
rupees) respectively. Upon completion of the spin off transactions, IIFL Holdings Limited was renamed IIFL Finance
Limited (‘‘IIFL Finance’’) and continued to trade on the BSE and NSE of India. The shares of IIFL Wealth and IIFL
Securities were listed on the BSE and NSE of India in September 2019. Additional details on the IIFL Holdings
Reorganization, specific to IIFL Wealth and IIFL Securities, are disclosed later in note 5.

IIFL Finance Limited

IIFL Finance is a publicly traded diversified financing company located in Mumbai, India that offers home loans,
gold loans, business loans (including loans against property and small-to-medium enterprise loans, microfinance,
construction and real estate finance) and capital market finance.

In March 2020 IIFL Finance was granted an NBFC license by the Reserve Bank of India (‘‘RBI’’) and on March 30, 2020
completed the merger with its subsidiary, India Infoline Finance Limited (‘‘India Infoline’’) through the issuance of
58,654,556 common shares of IIFL Finance to India Infoline’s minority shareholders. Minority shareholders of India
Infoline received 135 common shares of IIFL Finance for every 100 common shares of India Infoline held. As a result
of the merger Fairfax India’s equity interest in IIFL Finance decreased from 26.5% at December 31, 2019 to 22.4% at
March 30, 2020.

At December 31, 2020 the fair value of the company’s investment in IIFL Finance was $131,478 (December 31, 2019 –
$166,014) comprised of 84,641,445 common shares representing a 22.4% equity interest (December 31, 2019 –
26.5%). The changes in fair value of the company’s investment in IIFL Finance in 2020 and 2019 aggregated with IIFL
Holdings are presented in the tables disclosed earlier in note 5.

Investment in IIFL Wealth Management Limited

IIFL Wealth is a publicly traded wealth management firm with principal lines of business in wealth management and
asset management, located in Mumbai, India. The wealth management business serves the highly specialized needs
of high net worth and ultra-high net worth individuals, affluent families, family offices and institutional clients
through a comprehensive range of tailored wealth management solutions. The asset management business provides
a diversified suite of alternative investment funds, portfolio management services and mutual funds that span public
and private equities, fixed income securities and real estate.

On May 31, 2019 IIFL Holdings spun off its 53.3% equity interest in its subsidiary IIFL Wealth in a non-cash
transaction that resulted in Fairfax India receiving one new common share of IIFL Wealth for every seven common
shares of IIFL Holdings held. Upon completion of the IIFL Holdings Reorganization Fairfax India received
12,091,635 common shares of IIFL Wealth representing a 14.2% equity interest with an estimated fair value at

FAIRFAX INDIA HOLDINGS CORPORATION

May 31, 2019 of $191,443 (approximately 13.3 billion Indian rupees), which was determined based on a third party
valuation.

The shares of IIFL Wealth were listed on the BSE and NSE of India on September 19, 2019.

At December 31, 2020 the fair value of the company’s investment in IIFL Wealth was $166,702 (December 31, 2019 –
$191,476) comprised of 12,091,635 common shares representing a 13.8% equity interest (December 31, 2019 –
13.9%) with the changes in fair value in 2020 and 2019 presented in the tables disclosed earlier in note 5.

Investment in IIFL Securities Limited

IIFL Securities is a publicly traded leading investment advisory firm providing diversified financial services and
products such as financial planning, equity, commodities and currency broking (both cash and derivatives),
depository participant services, investment banking, portfolio management as well as distribution of mutual funds,
bonds and other products. IIFL Securities is located in Mumbai, India.

On May 31, 2019 IIFL Holdings spun off its wholly-owned subsidiary IIFL Securities in a non-cash transaction that
resulted in Fairfax India receiving one new common share of IIFL Securities for every one common share of IIFL
Holdings held. Upon closing of the IIFL Holdings Reorganization Fairfax India received 84,641,445 common shares
of IIFL Securities representing a 26.5% equity interest with an estimated fair value at that date of $91,310
(approximately 6.4 billion Indian rupees). At May 31, 2019 the fair value of IIFL Securities was estimated based on the
company’s internal valuation model.

The shares of IIFL Securities were listed on the BSE and NSE of India on September 20, 2019.

At December 31, 2020 the fair value of the company’s investment in IIFL Securities was $55,603 (December 31,
2019 – $48,796) comprised of 84,641,445 common shares representing a 26.5% equity interest (December 31, 2019 –
26.5%) with the changes in fair value in 2020 and 2019 presented in the tables disclosed earlier in note 5.

Investment in CSB Bank Limited

During 2018 and 2019 Fairfax India invested aggregate cash consideration of $169,511 (approximately 12.1 billion
Indian rupees) for a 51.0% equity interest in CSB Bank through the following transactions:

(i) October 19, 2018: the company completed its initial investment in CSB Bank and on closing recorded
$88,524 (approximately 6.5 billion Indian rupees) in common stocks within the consolidated balance sheet
relating to 100.0% of the common shares and 40.0% of the warrants, and on that date recorded $28,367
(approximately 2.1 billion Indian rupees) in payable for partly paid securities relating to 75.0% of the
consideration payable on the common shares (‘‘Tranche 1’’).

(ii) March 20, 2019: the company invested in an additional 30.0% of the warrants of CSB Bank and recorded
$40,547 (approximately 2.8 billion Indian rupees) in common stocks (‘‘Tranche 2’’) within the consolidated
balance sheet.

(iii) June 29, 2019: CSB Bank issued a capital call for the remaining consideration payable for 30.0% of the
warrants ($40,440) (‘‘Final Tranche’’) and 75.0% of the common shares ($30,167). The company recorded
$40,440 (approximately 2.8 billion Indian rupees) in common stocks within the consolidated balance sheet,
representing the Final Tranche of CSB Bank warrants, which were considered in-substance equity.

(iv) July 8, 2019: the company funded the June 29, 2019 capital call.

(v) August 7, 2019: the company exercised its CSB Bank warrants to acquire CSB Bank common shares. No CSB

Bank warrants remain outstanding.

On December 4, 2019 CSB Bank closed its IPO, issuing 1,230,769 shares and commenced trading on both the BSE and
NSE of India. In 2019 CSB Bank also issued 5,000,000 shares to CSB Bank’s employee stock option trust which
together with the IPO decreased Fairfax India’s ownership slightly from 51.0% to 49.7%.

The company is restricted from selling a certain percentage of its common shares of CSB Bank for a specified period to
August 7, 2024 due to restrictions imposed by the RBI and the Securities and Exchange Board of India (‘‘SEBI’’).

As a result of CSB Bank’s IPO the company was restricted from selling 17,372,952 of its shares of CSB Bank for one
year from the IPO closing. On December 2, 2020 the selling restriction on 16,880,645 common shares of CSB Bank
held by the company was released and the difference of 492,307 common shares remains restricted. The remaining
69,382,331 common shares of CSB Bank held by the company continue to be restricted until August 7, 2024.

At December 31, 2020 the company estimated the fair value of its investment in CSB Bank based on the bid price less
a discount for lack of marketability of 20.9% on the remaining common shares subject to selling restrictions
(December 31, 2019 – 12.0%). At December 31, 2020 the fair value of the company’s investment in CSB Bank was
$214,341 (December 31, 2019 – $229,262) comprised of 86,262,976 common shares representing a 49.7% equity
interest (December 31, 2019 – 49.7%) with the changes in fair value in 2020 and 2019 presented in the tables
disclosed earlier in note 5.

Investment in Fairchem Speciality Limited / Privi Speciality Chemicals Limited

Fairchem Speciality Limited

Fairchem Speciality Limited (‘‘Fairchem’’) was a publicly traded specialty chemical manufacturer located in
Ahmedabad, India. Fairchem manufactures oleochemicals used in the paints, inks and adhesives industries, as well as
intermediate neutraceutical and health products. Privi Organics Limited (‘‘Privi’’), a wholly-owned subsidiary of
Fairchem located in Mumbai, India, was a supplier of aroma chemicals to the fragrance industry.

In March 2017, upon closing of the merger of Fairchem and Privi, the company acquired a 48.8% equity interest in
Fairchem for aggregate cash consideration of $74,384 (approximately 5.0 billion Indian rupees).

On August 12, 2020 Fairchem spun off its wholly-owned subsidiary Fairchem Organics Limited (‘‘Fairchem
Organics’’, comprised of the oleochemicals and neutraceuticals businesses) in a non-cash transaction (‘‘Fairchem
Reorganization’’). Shareholders of Fairchem received one common share of Fairchem Organics for every three
Fairchem common shares held. The distribution of new common shares to Fairchem shareholders was characterized
as a return of capital and resulted in the company recording the initial cost of its investment in Fairchem Organics at
its estimated fair value at that date of $34,895 (approximately 2.6 billion Indian rupees). Concurrent with the spin off
transaction, Privi amalgamated with the remaining Fairchem business and renamed Privi Speciality Chemicals
Limited (‘‘Privi Speciality’’). Common shares of Privi Speciality continue to trade on the BSE and NSE of India.
Common shares of Fairchem Organics listed on the BSE and NSE of India on December 24, 2020. Additional details
on the Fairchem Reorganization, specific to Fairchem Organics, are disclosed later in note 5.

Privi Speciality Chemicals Limited

Privi Speciality is a publicly traded specialty chemical manufacturer located in Mumbai, India. Privi Speciality is a
supplier of aroma chemicals to the fragrance industry.

At December 31, 2020 the fair value of the company’s investment in Privi Speciality was $138,413 (December 31,
2019 – $127,413) comprised of 19,046,078 common shares representing a 48.8% equity interest (December 31,
2019 – 48.8%) with the changes in fair value in 2020 and 2019 presented in the tables disclosed earlier in note 5.

Subsequent to the anticipated closing of an open offer being made to public shareholders of Fairchem Organics as
disclosed later in note 5 under the heading Investment in Fairchem Organics Limited, the company intends to
decrease its equity interest in Privi Speciality to 38.9% from its current 48.8% and increase its equity interest in
Fairchem Organics to 66.7% from its current 48.8% through a series of transactions with Privi’s founders in the first
quarter of 2021, subject to applicable regulatory approvals and customary closing conditions.

Investment in Fairchem Organics Limited

FAIRFAX INDIA HOLDINGS CORPORATION

held. Upon completion of the Fairchem Reorganization Fairfax India received 6,348,692 common shares of Fairchem
Organics representing 48.8% equity interest with an estimated fair value at that date of $34,895 (approximately
2.6 billion Indian rupees) which was estimated based on the company’s internal market approach valuation model
which referenced the earnings multiple of a peer group of comparable companies. The distribution of new common
shares of Fairchem Organics to Fairchem shareholders was characterized as a return of capital which resulted in
Fairfax India recording the initial cost of its investment in Fairchem Organics at its fair value at that date.

On December 24, 2020 common shares of Fairchem Organics were listed on the BSE and NSE of India. At the time of
listing and in accordance with Indian regulations, as a result of the anticipated changes in ownership of Fairchem
Organics, the company announced an open offer for the acquisition of up to 3,377,953 common shares, representing
the entire public float or 25.9% of the issued and outstanding shares, at a price of 575.53 Indian rupee per common
share (‘‘Fairchem Open Offer’’). The potential obligation is approximately 1.9 billion Indian rupees ($26,607 at
period end exchange rates). In support of the Fairchem Open Offer, the company was required to place on deposit,
cash of approximately 19.5 million Indian rupees ($267 at period end exchange rates) and a bank guarantee for
approximately 486.1 million Indian rupees ($6,652 at period end exchange rates), representing 1.0% and 25.0% of
the potential obligation, respectively. The cash deposit was recorded in restricted cash within the consolidated
balance sheet at December 31, 2020. The Fairchem Open Offer is subject to regulatory approvals and customary
closing conditions, and is expected to close in the first quarter of 2021.

At December 31, 2020 the fair value of the company’s investment in Fairchem Organics was $54,566 comprised of
6,348,692 common shares representing a 48.8% equity interest with the changes in fair value in 2020 presented in
the table disclosed earlier in note 5.

Subsequent to the anticipated closing of the Fairchem Open Offer, the company intends to decrease its equity
interest in Privi Speciality to 38.9% from its current 48.8% and increase its equity interest in Fairchem Organics to
66.7% from its current 48.8% through a series of transactions with Privi’s founders in the first quarter of 2021, subject
to applicable regulatory approvals and customary closing conditions.

Subsequent to December 31, 2020

The tender period related to the Fairchem Open Offer commenced on February 9, 2021 and closed on February 23,
2021 with a total of 290 common shares of Fairchem Organics tendered. On March 2, 2021 the company completed
the settlement of the common shares tendered. The company’s equity interest in Fairchem Organics remains at
48.8%.

Investment in 5paisa Capital Limited

5paisa Capital Limited (‘‘5paisa’’) is a publicly traded online financial services provider with a ‘‘do-it-yourself’’
investment brokerage model that allows customers to execute investment transactions for low brokerage fees. 5paisa
is primarily engaged in providing a technology platform through online and mobile applications for trading
securities on the BSE and the NSE of India. 5paisa is located in Mumbai, India.

In October 2017 IIFL Holdings spun off its wholly-owned subsidiary 5Paisa Digital Undertaking, through the
formation of a new public company, 5paisa Capital Limited, listed on the BSE and the NSE of India. This non-cash
transaction resulted in Fairfax India receiving one new common share of 5paisa for every 25 common shares of IIFL
Holdings held for a total of 3,385,657 common shares of 5paisa with a fair value of $19,758.

On May 29, 2019 5paisa announced a rights offer to existing shareholders whereby shareholders were given the right
to participate on a pro rata basis in a common share issuance at a price of 80.00 Indian rupees per share (‘‘5paisa
Rights Offer’’). In connection with the 5paisa Rights Offer, Fairfax India committed to participate and acquire
3,385,657 common shares of 5paisa and as a result the company recorded a forward derivative asset (‘‘5paisa forward
derivative’’). On August 20, 2019 Fairfax India participated in the 5paisa Rights Offer and acquired 3,385,657 5paisa
common shares for cash consideration of $3,777. As a result the company derecognized the 5paisa forward derivative
with a carrying value of $2,706, recorded a realized gain of $2,767 and recorded its investment in 5paisa common
shares at a fair value at that date of $6,483.

At December 31, 2020 the fair value of the company’s investment in 5paisa was $27,788 (December 31, 2019 –
$18,176) comprised of 6,771,314 common shares representing a 26.6% equity interest (December 31, 2019 – 26.6%)
with the changes in fair value in 2020 and 2019 presented in the tables disclosed earlier in note 5.

Investment in Other Public Indian Investments

During 2018 the company acquired common shares of public companies in India’s financial services sector, listed on
both the BSE and NSE of India, for aggregate cash consideration of $94,090. In 2019 the company partially sold an
investment in Other Public Indian Investments for total net proceeds of $36,907, resulting in a realized gain
of $7,115.

In 2020 the company acquired common shares of public companies in India’s utilities and financial services sectors,
listed on both the BSE and NSE of India, for aggregate consideration of $84,672. In 2020 the company partially sold
investments in Other Public Indian Investments for total net proceeds of $41,913, resulting in a realized gain
of $3,782.

At December 31, 2020 the fair value of the company’s investment in Other Public Indian Investments was $147,604
(December 31, 2019 – $95,892) and represents less than 1.0% equity interest in each of the public Indian companies.
The changes in fair value of the company’s investment in Other Public Indian Investments in 2020 and 2019 are
presented in the tables disclosed earlier in note 5.

Private Indian Investments

The fair values of Fairfax India’s Private Indian Investments cannot be derived from an active market and
accordingly, are determined using industry accepted valuation techniques and models. Market observable inputs are
used where possible, with unobservable inputs used where necessary. Use of unobservable inputs can involve
significant judgment and may materially affect the reported fair value of these investments.

Investment in Bangalore International Airport Limited

During 2017 and 2018 Fairfax India had invested aggregate cash consideration of $652,982 (approximately
42.7 billion Indian rupees) (inclusive of $74,202 of costs incurred, approximately 4.8 billion Indian rupees) for a
54.0% equity interest in BIAL through the following transactions: (i) in March 2017 the company acquired a 38.0%
equity interest in BIAL for cash consideration of $385,498 (approximately 25.2 billion Indian rupees); (ii) in
July 2017 the company acquired an additional 10.0% equity interest in BIAL for cash consideration of $200,093
(12.9 billion Indian rupees) which the company determined included $74,202 of consideration in excess of the fair
value of those additional shares acquired; and (iii) in May 2018 the company acquired an additional 6.0% equity
interest in BIAL for cash consideration of $67,391 (approximately 4.6 billion Indian rupees).

On December 16, 2019 the company entered into an agreement with Ontario Municipal Employees Retirement
System (‘‘OMERS’’) to sell an interest in Anchorage of approximately 11.5% on a fully-diluted basis for gross proceeds
of approximately 9.5 billion Indian rupees (approximately $130 million at the 2020 period end exchange rate).
Anchorage was formed in 2019 and is a wholly-owned subsidiary of FIH Mauritius, intended to be its flagship
company for investing in companies, businesses and opportunities in the airport and infrastructure sectors of India
as well as its platform for bidding on airport privatization projects in India. As part of the transaction, the company
shall restructure approximately 43.6% equity interest in BIAL of its 54.0% equity interest such that it shall be held
through Anchorage, implying an equity valuation of BIAL of approximately 189.7 billion Indian rupees
(approximately $2.6 billion at the 2020 period end exchange rate) for 100%. Upon closing of the transaction, the
company’s effective ownership interest in BIAL will decrease to approximately 49.0% on a fully-diluted basis, while
its actual ownership will remain unchanged. The transaction is subject to customary closing conditions, including
various third party consents. The company expected to close the transaction in 2020, however due to the impacts of
COVID-19 and resulting delays in obtaining required consents, the company and OMERS agreed to extend the
long-stop date to March 31, 2021 and estimate the transaction will close in the first quarter of 2021.

Upon closing of the transaction with OMERS, the company intends to use commercially reasonable efforts to list
Anchorage by way of IPO in India, subject to regulatory approvals and market conditions. If the valuation of
Anchorage upon closing of the IPO is below 91.6 billion Indian rupees (approximately $1.3 billion at period end
exchange rates), then OMERS’ ownership in Anchorage will increase to a maximum of 15.0%.

FAIRFAX INDIA HOLDINGS CORPORATION

The COVID-19 pandemic has significantly impacted BIAL’s airport business in 2020, which faced reduced passenger
traffic starting in February 2020. Effective March 23, 2020 and March 25, 2020 all scheduled international and
domestic commercial airlines ceased operations as a result of India’s lockdown. Domestic flights resumed on May 25,
2020, while international flights will remain suspended until March 31, 2021 with the exception of certain countries
with which India has established air bubble arrangements. The suspension may be extended further as the
COVID-19 pandemic continues to evolve. Cargo flights and flights catering to medical emergencies and other
essential requirements remain operational. Construction activities for BIAL’s capital projects and real estate
development were slowed down and have since resumed as lockdown restrictions were gradually lifted. The airport is
expected to commence regular operations upon lifting of the present restrictions with a gradual recovery in domestic
passenger traffic by BIAL’s fiscal year 2022 and international passenger traffic in BIAL’s fiscal year 2023 to levels
witnessed before the pandemic.

At December 31, 2020 the company estimated the fair value of its investment in BIAL using a discounted cash flow
analysis for its three business units based on multi-year free cash flow forecasts with assumed after-tax discount rates
ranging from 12.8% to 15.0% and a long term growth rate of 3.5% (December 31, 2019 – 12.9% to 13.4%, and 3.5%,
respectively). At December 31, 2020 free cash flow forecasts were based on EBITDA estimates derived from financial
information for BIAL’s three business units prepared in the fourth quarter of 2020 (December 31, 2019 – fourth
quarter of 2019) by BIAL’s management.

Free Cash Flow Forecast Inputs

The primary drivers of the free cash flow estimates are future domestic and international passenger traffic, airport
tariff assumptions for future control periods and plans to monetize and develop leasehold land. In the event that
forecasted passenger traffic or expected airport tariff levels are not met in future periods, this may result in a negative
impact on the fair value of the company’s investment in BIAL.

Current Model Assumptions

As a result of the continued business disruptions caused by the COVID-19 pandemic free cash flow forecasts were
revised by BIAL’s management in 2020 to primarily reflect (i) a temporary reduction, including a halt during the
lockdown period, in passenger traffic as a result of travel restrictions imposed by the Indian government; (ii) a
gradual recovery in passenger traffic over two years to levels expected before the pandemic; (iii) updates to estimated
airport tariffs for the third control period commencing in BIAL’s fiscal year 2022 to reflect a recovery of lost return
during the lockdown and subsequent period; and (iv) delays in BIAL’s capital projects and real estate development
plans.

The COVID-19 pandemic did not have a significant impact on BIAL’s fair value at December 31, 2020 as BIAL is an
infrastructure investment that is currently in a period of capital expansion and as a result a significant amount of its
fair value is driven by expected growth in passenger traffic in the later years of the forecasting period once various
capital projects are complete. As a result of the COVID-19 pandemic, BIAL’s forecast reflected a delay in expected
discretionary capital expenditures, an increase in the expected total cost for Terminal 2 and a revised timeline for its
real estate development plans. Additionally, BIAL’s aeronautical revenues are primarily driven by user development
fees (‘‘UDF’’) charged to airlines and passengers, which are set by the Airports Economic Regulatory Authority of
India in five-year control periods and are fixed in a manner to generate a 16.0% per annum return on invested equity
for the airport operator. BIAL is operating in its second control period until March 31, 2021. As the tariff setting
mechanism adjusts for periods of underperformance, it is expected that underachievement in aeronautical revenues
due to the COVID-19 pandemic in the second control period will be substantially recovered through, among other
factors, higher UDFs in the third control period.

A gradual recovery in passenger traffic over a two year time horizon to levels expected before the pandemic is
supported by significant efforts by BIAL’s management and the Indian government to support a return to normal
patterns of travel and the recovery of airport operations, including the implementation of contactless passenger
experiences, the easing of capacity limits for airlines, the reconnection of several domestic city pairs and the
resumption of certain international flights.

term growth rates were based on the expected long term sustainable growth rate of the economic environment and
sectors in which BIAL operates and were not adjusted downward for the short term impacts of COVID-19.

At December 31, 2020 the company’s internal valuation model indicated that the fair value of the company’s
investment in BIAL was $1,396,117 (December 31, 2019 – $1,429,854), which approximates the equity valuation of
BIAL implied by the Anchorage transaction discussed above. The changes in fair value of the company’s investment
in BIAL in 2020 and 2019 are presented in the tables disclosed earlier in note 5.

In 2020 net change in unrealized losses of $669 was primarily driven by business disruptions caused by the
COVID-19 pandemic as discussed above, partially offset by delayed discretionary capital spending to conserve cash
including delaying capital spending on maintenance and on the construction of Terminals 2 and 3, and updated
airport tariff assumptions for future control periods which were expected to be adjusted for past periods of
underperformance.

In 2019 net change in unrealized gains of $751,487 was primarily driven by BIAL management’s finalization of plans
for a Terminal 3 expansion and related infrastructure, and the development of its monetizable leasehold land
(approximately 460 acres).

Investment in Sanmar Chemicals Group

In April 2016 Fairfax India invested $250,000 in Sanmar comprised of $1,000 in common shares (representing a
30.0% equity interest) and $249,000 in Sanmar bonds, and in September 2016 invested an additional $50,000 in
Sanmar bonds. Both tranches of Sanmar bonds had a maturity date of April 22, 2023 (7 years from the date of
issuance of the first tranche), subject to earlier redemption at the option of Sanmar under certain circumstances. In
lieu of cash, the coupon payment on the bond was payable in kind in the form of additional Sanmar bonds over the
life of the bond. A redemption premium was also payable in kind to the company resulting in an effective annual
interest rate of 13.0%.

On December 21, 2019 the company completed its previously announced transaction with Sanmar, resulting in the
settlement of Sanmar bonds with a principal amount of $300,000 for net cash proceeds of $425,472 (30.3 billion
Indian rupees) ($433,873 net of withholding tax of $8,401), which was equal to the bonds’ principal amount plus an
effective annual interest rate of 13.0%. The company recorded a net gain on investment of $48,782 (realized gains of
$156,540, of which $107,758 was recorded as unrealized gains in prior periods). The company reinvested cash of
$198,039 (approximately 14.1 billion Indian rupees) into 171,710 newly issued common shares of Sanmar,
increasing the company’s equity interest from 30.0% to 42.9%.

Upon closing of the transaction the company settled a forward derivative obligation at a fair value of $19,617
(approximately 1.4 billion Indian rupees), which was a result of the agreed upon transaction price for Sanmar
common shares exceeding the transaction date fair value. The company recorded its additional investment in
Sanmar common shares at a fair value of $178,422 (approximately 12.7 billion Indian rupees).

The COVID-19 pandemic resulted in a temporary closure of Sanmar’s plants in India due to India’s lockdown in
2020. The plant at Sanmar Egypt was temporarily closed on March 18, 2020 and re-opened its operations on April 3,
2020. The operations at the suspension PVC plant in India was constrained until May 15, 2020. The remaining plants
in India, including the specialty PVC plant, gradually re-opened operations in May 2020. Specialty Chemicals has
not been significantly impacted by the COVID-19 pandemic.

At December 31, 2020 the company estimated the fair value of its investment in Sanmar common shares using a
discounted cash flow analysis for its three business units based on multi-year free cash flow forecasts with assumed
after-tax discount rates ranging from 15.0% to 20.5% and long term growth rates ranging from 3.0% to 4.0%
(December 31, 2019 – four business units ranging from 12.9% to 19.0% and 3.0% to 4.0%, respectively). At
December 31, 2020 free cash flow forecasts were based on EBITDA estimates derived from financial information for
Sanmar’s three business units (with additional financial information and analysis completed for Chemplast’s
underlying business units involved in new capital projects) prepared in the fourth quarter of 2020 (December 31,
2019 – four business units prepared in the fourth quarter of 2019) by Sanmar’s management.

FAIRFAX INDIA HOLDINGS CORPORATION

Free Cash Flow Forecast Inputs

The primary driver of the free cash flow estimates is the future commodity price of petrochemical products. In the
event that the commodity price of petrochemical products does not develop favourably in future periods, this may
result in a negative impact on the fair value of the company’s investment in Sanmar.

Current Model Assumptions

As a result of the business disruptions caused by the COVID-19 pandemic free cash flow forecasts were revised by
Sanmar’s management to primarily reflect (i) downward pressure on forecasted sales and profit margins at Sanmar
Egypt over Sanmar’s fiscal years 2021 to 2023; (ii) indefinite postponement of the planned Kem One Chemplast joint
venture and various capital expansion projects as Sanmar shifts its focus to deleveraging; and (iii) new planned
capital projects in specialty PVC resin and at Specialty Chemicals.

The overall impact on the valuation of the indefinite postponement of capital expansion projects was negative as the
near-term cash savings from the delay of discretionary capital spending was more than offset by lower forecasted
revenues and EBITDA in the later years of the discreet forecast period given a decrease in future production capacities.
The company reflected Sanmar’s increased pressure on liquidity by increasing its after-tax discount rates, primarily
reflecting a higher cost of debt. The valuation also reflected an increase in Sanmar’s net debt, which lowered the fair
value of the company’s equity interest.

Discount rates were based on the company’s assessment of risk premiums to the appropriate risk-free rate of the
economic environment in which Sanmar operates. These risk premiums were reflective of the increased uncertainty
of the free cash flow forecasts due the economic and social impacts of the COVID-19 pandemic as well as the
resulting liquidity pressures. Long term growth rates were based on the expected long term sustainable growth rate of
the economic environment and sectors in which Sanmar operates and were not adjusted downward for the short
term impacts of COVID-19.

At December 31, 2020 the company’s internal valuation model indicated that the fair value of the company’s
investment in Sanmar common shares was $338,621 (December 31, 2019 – $412,930) with the changes in fair value
in 2020 and 2019 presented in the tables disclosed earlier in note 5.

The changes in fair value of the company’s investment in Sanmar bonds in 2019 are presented in the table disclosed
earlier in note 5.

Investment in Seven Islands Shipping Limited

In 2019 Fairfax India had invested aggregate cash consideration of $83,846 (approximately 5.8 billion Indian rupees)
for a 48.5% equity interest in Seven Islands through the following transactions: (i) on March 29, 2019 the company
acquired a 41.4% equity interest in Seven Islands for cash consideration of $71,767 (approximately 4,972.0 million
Indian rupees) through a direct subscription and secondary acquisition; (ii) on September 11, 2019 the company
acquired an additional 7.1% equity interest in Seven Islands in a secondary acquisition for cash consideration of
$12,056 (approximately 863.9 million Indian rupees); and (iii) on October 24, 2019 the company acquired an
additional 0.01% equity interest in Seven Islands for cash consideration of $23 (approximately 1.7 million
Indian rupees).

During 2020 Seven Islands continued to operate as transportation of goods is considered an essential service under
India’s lockdown guidelines.

At December 31, 2020 the company estimated the fair value of its investment in Seven Islands using a discounted
cash flow analysis based on multi-year free cash flow forecasts with an assumed after-tax discount rate of 13.5% and a
long term growth rate of 3.0% (December 31, 2019 – 11.5% and 3.0%, respectively). At December 31, 2020 free cash
flow forecasts were based on EBITDA estimates derived from financial information for Seven Islands prepared in the
fourth quarter of 2020 (December 31, 2019 – fourth quarter of 2019) by Seven Islands’ management.

Free Cash Flow Forecast Inputs

The primary driver of the free cash flow estimates is the vessel profile composition, including planned vessel
acquisitions and charter rates.

Current Model Assumptions

Free cash flows were revised by Seven Islands’ management primarily to reflect market conditions of the shipping
industry in the near term, including the planned addition of larger vessels with higher contribution margins.
Discount rates were based on the company’s assessment of risk premiums to the appropriate risk-free rate of the
economic environment in which Seven Islands operates. These risk premiums were reflective of the increased
uncertainty of the free cash flow forecasts due to the economic and social impacts of the COVID-19 pandemic. Long
term growth rates were based on the expected long term sustainable growth rate of the economic environment and
sectors in which Seven Islands operates.

At December 31, 2020 the company’s internal valuation model indicated that the fair value of the company’s
investment in Seven Islands was $103,543 (December 31, 2019 – $88,800) with the changes in fair value in 2020 and
2019 presented in the tables disclosed earlier in note 5.

Investment in National Collateral Management Services Limited

NCML Common Shares

In August 2015 and August 2017 Fairfax India acquired an 89.5% equity interest in NCML for cash consideration of
$174,318 (approximately 11.3 billion Indian rupees).

At December 31, 2020 the company estimated the fair value of its investment in NCML common shares using a
discounted cash flow analysis based on multi-year free cash flow forecasts with assumed after-tax discount rates
ranging from 11.3% to 11.7% and long term growth rates ranging from 2.4% to 6.0% for two of NCML’s business
units (December 31, 2019 – free cash flow forecasts with assumed after-tax discount rates ranging from 12.7% to
23.5% and long term growth rates ranging from 2.4% to 6.0% for three business units). At December 31, 2020 free
cash flow forecasts were based on EBITDA estimates derived from financial information for two business units
prepared in the fourth quarter of 2020 (December 31, 2019 – second quarter of 2019 for all three business units) by
NCML’s management.

Free Cash Flow Forecast Inputs

The primary drivers of free cash flow estimates are warehouse capacity and future EBITDA growth of NCML’s
commodity management solutions business.

Current Model Assumptions

In the fourth quarter of 2020 free cash flow forecasts were revised by NCML’s management to primarily reflect
changes to its business strategy resulting in a planned reduction of owned and leased warehouse capacity and a shift
toward a less capital-intensive franchisee model with lower margins. Discount rates were based on the company’s
assessment of risk premiums to the appropriate risk-free rate of the economic environment in which NCML operates.
These risk premiums were reflective of the increased uncertainty of the free cash flow forecasts due to the economic
and social impacts of the COVID-19 pandemic. Long term growth rates were based on the expected long term
sustainable growth rate of the economic environment and sectors in which NCML operates and were not adjusted
downward for the short term impacts of COVID-19.

FAIRFAX INDIA HOLDINGS CORPORATION

continued business disruptions in agri-businesses caused by the COVID-19 pandemic and India’s lockdown. As a
result, NCML’s management commenced a process of scaling down its loan book. Accordingly, the company
determined growth rates would not be relevant and it was more appropriate to value NCML’s NBFC business unit
using an asset-based approach rather than performing a discounted cash flow analysis as it had done previously.

At December 31, 2020 the company’s internal valuation model indicated that the fair value of the company’s equity
investment in NCML was $86,216 (December 31, 2019 – $120,734) with the changes in fair value in 2020 and 2019
presented in the tables disclosed earlier in note 5.

NCML Compulsorily Convertible Debentures

On September 17, 2019 the company invested an additional $13,970 (approximately 1.0 billion Indian rupees) in
NCML to pre-fund an allotment of compulsorily convertible debentures (‘‘NCML CCD’’). The company recorded the
pre-funded amount as an interest-free bridge loan (‘‘NCML Loan’’) maturing on October 1, 2019 upon NCML’s
issuance of the CCDs. On October 1, 2019 the company was issued 12.5% unsecured NCML CCD, due September 30,
2029. The company has the option to convert the NCML CCD into common shares of NCML at any time prior to the
maturity date, at which time the conversion is compulsory, at a conversion price of 68.00 Indian rupees per
common share.

At December 31, 2020 the fair value of the company’s investment in NCML CCD was $14,884 (December 31, 2019 –
$14,286) with the changes in fair value in 2020 and 2019 presented in the tables disclosed earlier in note 5.

Investment in Saurashtra Freight Private Limited

Saurashtra Freight Private Limited (‘‘Saurashtra’’), a private company located in Mumbai, India, operates one of the
largest container freight stations (‘‘CFS’’) at Mundra port (Gujarat). Services provided by Saurashtra’s CFS include
transportation of containers to and from the port, stuffing and destuffing of containers, cargo storage, transportation
of cargo to the end customer, and the storage, maintenance and repair of empty containers. Saurashtra’s subsidiary,
Fairfreight Lines, focuses on services for container shipping, offering integrated logistics solutions to its customers by
providing containers, which are leased by Saurashtra, to importers and exporters to transport cargo.

In February 2017 Fairfax India acquired a 51.0% equity interest in Saurashtra for cash consideration of $30,018
(approximately 2.0 billion Indian rupees).

During 2020 Saurashtra’s businesses continued to operate as transportation of goods was considered an essential
service under India’s lockdown guidelines.

At December 31, 2020 the company estimated the fair value of its investment in Saurashtra using a discounted cash
flow analysis based on multi-year free cash flow forecasts with assumed after-tax discount rates ranging from 14.3%
to 17.7% and long term growth rates ranging from 4.0% to 5.0% (December 31, 2019 – 13.4% to 14.4%, and 4.0% to
5.0%, respectively). At December 31, 2020 free cash flow forecasts were based on EBITDA estimates derived from
financial information for Saurashtra’s two business units prepared in the fourth quarter of 2020 (December 31,
2019 – second quarter of 2019) by Saurashtra’s management.

Free Cash Flow Forecast Inputs

The primary drivers of free cash flow estimates are the import and export handling capacity and utilization.

Current Model Assumptions

Discount rates were based on the company’s assessment of risk premiums to the appropriate risk-free rate of the
economic environment in which Saurashtra operates. These risk premiums were reflective of the increased
uncertainty of the free cash flow forecasts due to the economic and social impacts of the COVID-19 pandemic. Long
term growth rates were based on the expected long term sustainable growth rate of the economic environment and
sectors in which Saurashtra operates.

At December 31, 2020 the company’s internal valuation model indicated that the fair value of the company’s
investment in Saurashtra was $32,812 (December 31, 2019 – $31,204) with the changes in fair value in 2020 and
2019 presented in the tables disclosed earlier in note 5.

Investment in National Stock Exchange of India Limited

In the third quarter of 2016 Fairfax India acquired a 1.0% equity interest in NSE for cash consideration of $26,783
(approximately 1.8 billion Indian rupees).

At December 31, 2020 the company’s estimated fair value of its investment in NSE of $72,617 (December 31, 2019 –
$57,210) was based on recent third party transactions completed in the fourth quarter of 2020 (December 31, 2019 –
fourth quarter of 2019). The changes in fair value of the company’s investment in NSE in 2020 and 2019 are
presented in the tables disclosed earlier in note 5.

Investment in India Housing Fund

On December 24, 2018 the company entered into an agreement whereby it committed to invest 1.7 billion Indian
rupees (approximately $25,000 at the date of the agreement) in the India Housing Fund (‘‘IH Fund’’). IH Fund is a
closed-ended fund of IIFL Private Equity Fund (the ‘‘Trust’’) registered as a Category II Alternative Investment Fund
(‘‘AIF’’) under SEBI AIF Regulations. IH Fund is a fund incorporated to focus on investing in India’s real estate sector
by investing in equity, debt and equity-linked instruments of real estate and construction companies involved in
projects or ventures with expected growth potential.

At December 31, 2020 Fairfax India had invested aggregate cash consideration of $24,399 (approximately 1.7 billion
Indian rupees) in IH Fund through the following transactions: (i) on January 7, 2019 the company invested 25.0% or
437.0 million Indian rupees ($6,272) of the committed investment amount in IH Fund; (ii) on November 7, 2019 the
company invested an additional 35.0% or 611.8 million Indian rupees ($8,621) of the committed investment
amount in IH Fund; and, (iii) on December 24, 2020 the company invested the remaining 40.0% or 699.2 million
Indian rupees ($9,506) of the committed investment amount in IH Fund.

At December 31, 2020 the company estimated the fair value of its investment in IH Fund of $25,354 (December 31,
2019 – $15,146) based on the net asset value provided by the third party fund manager. The fair values of the
underlying assets are determined using quoted prices for short term investments, and industry accepted valuation
models for debt and equity instruments. The changes in fair value of the company’s investment in IH Fund in 2020
and 2019 are presented in the tables disclosed earlier in note 5.

FAIRFAX INDIA HOLDINGS CORPORATION

6. Cash and Investments

Fair Value Disclosures

The company’s use of quoted market prices (Level 1), valuation models using observable market information as
inputs (Level 2) and valuation models without observable market information as inputs (Level 3) in the valuation of
securities by type of issuer was as follows:

December 31, 2020

December 31, 2019

Significant
other

Significant

Total fair
value of
assets in

Significant
other

Significant

Quoted observable unobservable Total fair
value

prices
(Level 1)

inputs
(Level 2)

inputs
(Level 3)

prices
of assets (in millions) (Level 1)

inputs
(Level 2)

Indian Quoted observable unobservable Total fair
value
rupees

inputs
(Level 3)

Total fair
value of
assets in
Indian
rupees
of assets (in millions)

Cash and cash equivalents
Restricted cash(1)

Bonds:

Government of India(2)
Indian corporate(2)
NCML CCD

Common stocks:

IIFL Finance

IIFL Wealth

IIFL Securities

Privi Speciality /
Fairchem(3)

Fairchem Organics(3)
5paisa

Other

BIAL

Sanmar
CSB Bank(4)
Seven Islands

NCML

Saurashtra

NSE

IH Fund

22,057

16,315

38,372

–

131,478

166,702

55,603

138,413

54,566

27,788

147,604

–

50,410

–

772,564

–

20,989

–

22,057

16,315

38,372

20,989

–

14,884

20,989

14,884

35,873

–

131,478

166,702

55,603

138,413

54,566

27,788

147,604

1,396,117

338,621

163,931

103,543

86,216

32,812

72,617

25,354

338,621

214,341

103,543

86,216

32,812

72,617

25,354

–

1,612

1,192

48,713

16,915

2,804

65,628

1,533

–

1,088

2,621

–

9,607

166,014

12,180

191,476

4,063

48,796

10,113

127,413

3,987

2,030

10,785

102,011

24,742

15,661

7,566

6,300

2,398

5,306

1,853

–

18,176

95,892

–

88,775

35,364

–

14,286

48,713

16,915

65,628

88,775

35,364

14,286

124,139

14,286

138,425

–

166,014

191,476

48,796

127,413

–

18,176

95,892

1,429,854

412,930

229,262

88,800

412,930

229,262

88,800

120,734

31,204

57,210

15,146

31,204

57,210

15,146

–

3,477

1,207

4,684

6,337

2,524

1,020

9,881

11,850

13,667

3,483

9,095

–

1,297

6,845

102,060

29,474

16,364

6,338

8,618

2,227

4,084

1,081

2,219,211

2,991,775

218,602

647,767

2,385,140

3,032,907

216,483

Total cash and investments

810,936

20,989

2,234,095

3,066,020

224,027

713,395

124,139

2,399,426

3,236,960

231,048

26.4%

0.7%

72.9%

100.0%

22.0%

3.8%

74.2%

100.0%

(1) Primarily comprised of funds set aside as restricted cash to fund the borrowings interest payments.

(2) Priced based on information provided by independent pricing service providers at December 31, 2020 and 2019.

(3) On August 12, 2020 as part of the Fairchem Reorganization, Fairchem spun off Fairchem Organics, whose shares were subsequently
listed on the BSE and NSE of India on December 24, 2020. Concurrent with the spin off transaction, Privi Organics merged with the
remaining Fairchem business and was renamed Privi Speciality Chemicals Limited (‘‘Privi Speciality’’). Common shares of Privi
Speciality continue to trade on the BSE and NSE of India. At December 31, 2019 the fair value of $127,413 represented the fair value of
the company’s investment in Fairchem.

(4) The company is restricted from selling its investment in CSB Bank for a specified period ranging from December 1, 2020 to August 7,
2024 and has applied a discount for lack of marketability (a significant unobservable valuation input) to the quoted price for the
remaining restricted common shares of CSB Bank held by the company at December 31, 2020.

Transfers between fair value hierarchy levels are considered effective from the beginning of the annual reporting
period in which the transfer is identified. During 2020 and 2019 there were no transfers of financial instruments
between Level 1 and Level 2.

During 2020 as a result of the Fairchem Reorganization and the subsequent listing of the shares of Fairchem Organics
on the BSE and NSE of India, described in note 5, the company’s investment in Fairchem Organics is presented as
Level 1 in the fair value hierarchy. During 2020 as a result of the release of selling restrictions on 16,880,645 common
shares of CSB Bank held by the company, described in note 5, a portion of the company’s investment in CSB Bank
was transferred out of Level 3 and into Level 1 in the fair value hierarchy.

A summary of changes in the fair value of the company’s Indian Investments classified as Level 3 in the fair value
hierarchy, denominated in the company’s functional currency of the Indian rupee for the years ended December 31
was as follows:

2020

2019

Year ended

Balance
as of

Balance as
of
January 1 Purchases Sales Transfers investments December 31 January 1 Purchases Redemptions Transfers investments investments December 31

Balance as
of

Balance
as of

Sales /

Net change
in
unrealized
gains
(losses) on

Net realized
gains
(losses)on

Net change
in
unrealized
gains
(losses) on

Indian rupees
(in millions)

Loan:

NCML Loan

Bonds:

NCML CCD

Sanmar bonds

Common stocks:

BIAL

Sanmar

CSB Bank

Seven Islands

NCML

Saurashtra

NSE

IH Fund

Derivatives:

5paisa forward
derivative

Sanmar forward
derivative

–

1,020

–

102,060

29,474

16,364

6,338

8,618

2,227

4,084

1,081

–

699

(20)

–

(3,639)

–

1,088

–

27,422

(49)

102,011

(4,732)

(747)

1,228

(2,318)

171

1,222

–

24,742

11,978

7,566

6,300

2,398

5,306

1,853

–

49,155

15,162

6,498

–

11,546

1,734

4,209

–

1,003

–

12,689

5,583

5,837

–

1,049

(30,856)

–

(1)

–

(2)

–

(1,003)

1,003

–

11,020

(7,586)

–

1,020

–

52,905

102,060

–

(3)

–

1,623

4,287

501

(2,928)

493

(125)

29,474

16,364

6,338

8,618

2,227

4,084

1,081

–

(194)

1,395

–

194

(1,395)

–

Total

171,266

699

(20)

(3,639)

(5,064)

163,242

115,726

27,556

(31,053)

9,816

49,221

171,266

The changes in fair value of the company’s Indian Investments classified as Level 3 in the fair value hierarchy in the
company’s presentation currency of U.S. dollars are disclosed in note 5. For all Indian Investments classified as
Level 3 in the fair value hierarchy, net change in unrealized gains (losses) on investments related to unrealized gains
(losses) on investments held at the end of the reporting periods, with the exception of net change in unrealized losses
of 7,586 million Indian rupees recorded in 2019, which related to the reversal of prior period unrealized gains
recorded on the Sanmar bonds.

The table that follows illustrates the potential impact on net earnings (loss) of various combinations of changes in
unobservable inputs in the company’s internal valuation models for its Indian Investments classified as Level 3 in the
fair value hierarchy at December 31, 2020. The analysis assumes quarterly variations within a reasonably possible
range determined by the company based on an analysis of the return on various equity indices, management’s
knowledge of the Indian equity markets and the potential impact of changes in interest rates. To reflect increased
market volatility due to the economic and social impacts of the COVID-19 pandemic in 2020, management widened
its reasonably possible range of after-tax discount rates to changes within 100 basis points at December 31, 2020 from
changes within 50 basis points at December 31, 2019. The change reflects the additional uncertainty in determining
the discounted cash flows for assessing the fair values of Private Indian Investments. This sensitivity analysis
excludes the company’s investments in NCML CCD, NSE and IH Fund as the company determined that there were
no significant unobservable inputs suited for a sensitivity analysis.

FAIRFAX INDIA HOLDINGS CORPORATION

Fair
value of
Level 3
investment

Valuation
technique

Significant
unobservable
inputs

Investments

Common stocks:

Significant
unobservable
inputs used
in the
internal
valuation
models

Hypothetical
$ change
effect on
fair value
measurement(1)

Hypothetical
$ change
effect on
net earnings(1)(2)

BIAL

$1,396,117

Discounted After-tax discount rate

12.8% to 15.0% (346,345) / 453,435 (300,455) / 393,355

cash flow

Long term growth rate

3.5%

22,648 / (21,465)

19,647 / (18,620)

Sanmar

$338,621

Discounted After-tax discount rate

15.0% to 20.5%

(74,099) / 86,967

(64,281) / 75,444

cash flow

Long term growth rate

3.0% to 4.0%

10,159 / (9,755)

8,813 / (8,463)

CSB Bank(3)

$163,931

Bid price, net of
discount

Discount for lack of
marketability

20.9%

(3,287) / 3,307

(2,851) / 2,869

Seven Islands

$103,543

Discounted After-tax discount rate

13.5%

(18,055) / 22,088

(15,663) / 19,161

cash flow

Long term growth rate

3.0%

3,662 / (3,490)

3,176 / (3,028)

NCML(4)

$86,216

Saurashtra

$32,812

Discounted cash flow After-tax discount rate 11.3% to 11.7%
and adjusted net book

value Long term growth rate

2.4% to 6.0%

(17,953) / 24,366

(15,575) / 21,137

2,796 / (2,575)

2,426 / (2,234)

Discounted After-tax discount rate

14.3% to 17.7%

(1,733) / 2,087

(1,504) / 1,810

cash flow

Long term growth rate

4.0% to 5.0%

405 / (386)

352 / (335)

(1) The impact on the internal valuation models from changes in significant unobservable inputs deemed to be subject to the most judgment
and estimates disclosed in the table above shows the hypothetical increase (decrease) in net earnings. Changes in the after-tax discount
rates (100 basis points), long term growth rates (25 basis points) and discount for lack of marketability (19.3% and 22.5%), each in
isolation, would hypothetically change the fair value of the company’s investments as noted in the table above. Generally, an increase
(decrease) in long term growth rates, or a decrease (increase) in after-tax discount rates and discount for lack of marketability would result
in a higher (lower) fair value of the company’s Indian Investments classified as Level 3 in the fair value hierarchy. After-tax discount rates
are subject to a mitigating factor: increases (decreases) in after-tax discount rates tend to be accompanied by increases (decreases) in free
cash flows, and the resulting changes in the fair value of an investment may offset each other.

(2) For the purpose of this sensitivity analysis, the hypothetical $ change effect on net earnings includes an income tax impact that is
calculated using the company’s marginal tax rate. Actual income tax expense (recovery) may differ significantly when earnings (losses)
are realized.

(3) A discount for lack of marketability is applied to the quoted price of common shares that the company is restricted from selling for a
specified period, and is determined using an industry accepted option pricing model that incorporates unobservable long-dated historical
share price volatility. A higher (lower) historical share price volatility generally results in a higher (lower) option value and a lower (higher)
fair value of the common shares.

(4) During the third quarter of 2020, NCML’s NBFC business unit experienced decreased funding from public sector banks which limited its
ability to advance loans, in addition to a decline in the demand for lending as a result of the continued business disruptions in
agri-businesses caused by the COVID-19 pandemic and India’s lockdown. As a result, NCML’s management commenced a process of
scaling down its loan book. Accordingly, the company determined growth rates would not be relevant and it was more appropriate to value
NCML’s NBFC business unit using an asset-based approach rather than performing a discounted cash flow analysis as it had done
previously. The company determined that there were no significant unobservable inputs suited for a sensitivity analysis for this
business unit.

Fixed Income Maturity Profile

Bonds are summarized by their earliest contractual maturity date in the table that follows. Actual maturities may
differ from maturities shown below due to the existence of call and put features. At December 31, 2020 and 2019
there were no bonds containing call or put features. The decrease in bonds due in 1 year or less and after 1 year
through 5 years primarily reflects the net sales of Government of India and Indian corporate bonds, the proceeds of
which were partially reinvested in Other Public Indian Investments and IH Fund, and used to fund the debt service
reserve account.

Due in 1 year or less
Due after 1 year through 5 years
Due after 5 years through 10 years

Effective interest rate

Investment Income

December 31, 2020

December 31, 2019

Amortized cost
–
20,936
13,724

Fair value Amortized cost
7,054
117,360
14,048

–
20,989
14,884

Fair value
6,983
117,156
14,286

34,660

35,873

138,462

138,425

7.3%

6.7%

An analysis of investment income for the years ended December 31 is summarized in the table that follows:

Interest and dividends

Interest:

Cash and cash equivalents
Short term investments
Bonds(1)

Dividends: Common stocks

2020

2019

–
5,919

670
54
4,135

6,013

4,859

16,449

10,141

(1)

In 2019, excludes Sanmar bonds as the estimated interest income was included in its fair value measurement.

Net gains (losses) on investments and net foreign exchange gains (losses)

2020

2019

Net
realized
gains

Net
change in
unrealized Net gains
(losses)

Net
realized
gains

Net
change in
unrealized Net gains
(losses)

(losses) gains (losses)

Net gains (losses) on investments:

Short term investments
Bonds
Common stocks
Derivatives

Net foreign exchange gains (losses) on:

Cash and cash equivalents
Investments
Borrowings
Other

–
1,590
3,782(2)

–

–
1,231
(27,849)(2)

–

–
2,821
(24,067)
–

154,919(1)

43,182(2)(3)
(17,049)(2)

–

(107,577)(1)
637,949(2)(3)

–

47,342(1)

681,131
(17,049)

5,372

(26,618)

(21,246)

181,123

530,372

711,495

(514)
–
–
(1,153)

(1,667)

–
–
(12,521)
–

(514)
–
(12,521)
(1,153)

549
(102)
(1,669)(4)
(533)

–
–

(12,051)(4)

–

549
(102)
(13,720)(4)
(533)

(12,521)

(14,188)

(1,755)

(12,051)

(13,806)

(1)

In 2019, net gains on bonds primarily comprised of realized gains from Sanmar bonds ($156,540), partially offset by net change in
unrealized losses, primarily related to the reversal of prior period unrealized gains recorded on Sanmar bonds ($107,758).

(2) Refer to note 5 for a summary of changes in the fair value of the company’s Public and Private Indian Investments during 2020 and 2019.

(3) On May 31, 2019 IIFL Holdings spun off IIFL Wealth and IIFL Securities in the IIFL Holdings Reorganization. The amount recorded in
net realized gains on investments was $36,112 (all of which was recorded as unrealized gains on investments in prior periods).

(4)

In 2019 foreign exchange losses on borrowings of $13,720 primarily comprised of net change in unrealized losses of $12,051 related to
unrealized foreign exchange losses on the $550.0 million term loan and realized foreign exchange losses of $1,669 related to the
Revolving Credit Facility (repaid on December 31, 2019).

FAIRFAX INDIA HOLDINGS CORPORATION

7. Borrowings

1 Year Secured Term Loan, floating rate due June 28,

2021

550,000

547,228

550,000

547,228

550,000

December 31, 2020

December 31, 2019

Principal

Carrying

Fair
value(1) value(2) Principal

Carrying
value(1)

Fair
value(2)

(1) Principal net of unamortized issue costs.

(2) Principal approximated fair value at December 31, 2020 and 2019.

Secured Term Loan

On June 28, 2018 the company completed a $550,000 principal amount, 1 year secured term loan, with an option to
extend for an additional year (‘‘$550.0 million term loan’’), with a syndicate led by a Canadian bank. The
$550.0 million term loan is secured by way of a general lien on the company’s assets and had an interest rate of LIBOR
plus 350 basis points. On June 28, 2019 the company amended and restated the existing $550.0 million term and
extended the maturity to June 26, 2020 while maintaining the interest rate and option to extend for an additional
year. On June 26, 2020 the company amended the $550.0 million term loan to extend the maturity to June 28, 2021
while maintaining the option to extend for an additional year. The $550.0 million term loan now bears interest at a
rate of LIBOR plus 400 basis points.

At December 31, 2020 the $550.0 million term loan was recognized net of unamortized issuance costs of $2,772
(issuance costs of $5,545 less amortization of $2,773) (December 31, 2019 – $2,772 (issuance costs of $5,545 less
amortization of $2,773)) and recorded in borrowings within the consolidated balance sheets. The issuance costs are
amortized over the remaining life of the $550.0 million term loan and recorded in interest expense in the
consolidated statements of earnings (loss).

Under the terms of the $550.0 million term loan, the company is required to maintain a debt service reserve account
to fund the term loan interest payments. The cash held in the debt service reserve account is classified as restricted
cash within the consolidated balance sheets. The $550.0 million term loan includes a financial covenant requiring
the company to maintain common shareholders’ equity of not less than $1.5 billion. At December 31, 2020 the
company was in compliance with the $550.0 million term loan financial covenant.

Revolving Credit Facility

Concurrent with amending and restating the $550.0 million term loan on June 28, 2019, the company entered into a
$50.0 million, 1 year secured revolving credit facility with a Canadian bank bearing interest at a rate of LIBOR plus
350 basis points, with an option to extend for an additional year (‘‘Revolving Credit Facility’’). The Revolving Credit
Facility was fully drawn on June 28, 2019 and the proceeds were used to partially finance the settlement of the
payable for partly paid securities on July 8, 2019 relating to the company’s investment in CSB Bank and to fund the
debt service reserve account. On December 31, 2019 the company repaid the Revolving Credit Facility using a
portion of the proceeds received from the redemption of the Sanmar bonds. The option to extend was not exercised
and the Revolving Credit Facility was cancelled on June 26, 2020.

Interest Expense

In 2020 interest expense of $29,844 (2019 – $38,781) was comprised of coupon payments of $24,299 (2019 –
$33,236) and the amortization of issuance costs of $5,545 (2019 – $5,545).

Subsequent to December 31, 2020

On February 26, 2021 the company completed an offering of $500.0 million principal amount of 5.0% unsecured
senior notes due February 26, 2028 at par for net proceeds after commissions and expenses of $496,350. The
company used the net proceeds from the offering and cash to repay $500,000 of its $550.0 million term loan. Fairfax
purchased $58,400 of the $500.0 million principal amount under the same terms as the other participants.

8. Common Shareholders’ Equity

Authorized Capital

The company’s authorized share capital consists of: (i) an unlimited number of multiple voting shares that may only
be issued to Fairfax or its affiliates; (ii) an unlimited number of subordinate voting shares; and (iii) an unlimited
number of preference shares, issuable in series. Except as provided in any special rights or restrictions attaching to
any series of preference shares issued from time to time, the preference shares will not be entitled to vote at any
meeting of the shareholders of the company.

Issued Capital

Issued capital at December 31, 2020 included 30,000,000 (December 31, 2019 – 30,000,000) multiple voting shares
and 119,470,571 (December 31, 2019 – 122,631,481) subordinate voting shares without par value. Each subordinate
voting share carries one vote per share at all meetings of shareholders except for separate meetings of holders of
another class of shares. Fairfax India’s subordinate voting shares trade on the Toronto Stock Exchange (‘‘TSX’’) under
the symbol FIH.U. Each multiple voting share carries fifty votes per share at all meetings of shareholders except for
separate meetings of holders of another class of shares. Fairfax, through its subsidiaries, owns all the issued and
outstanding multiple voting shares, which are not publicly traded. At December 31, 2020 there were no preference
shares outstanding.

Common Stock

The number of shares outstanding was as follows:

Subordinate voting shares – January 1

Purchases for cancellation

Subordinate voting shares – December 31
Multiple voting shares – beginning and end of year

Common shares effectively outstanding – December 31

Capital Transactions

Subsequent to December 31, 2020

2020
122,631,481
(3,160,910)

2019
122,861,534
(230,053)

119,470,571
30,000,000

122,631,481
30,000,000

149,470,571

152,631,481

On March 5, 2021 the company issued 546,263 subordinate voting shares to Fairfax to settle the performance fee
payable of $5,217 for the second calculation period (three-year period ending on December 31, 2020). Under the
terms of the Investment Advisory Agreement (defined in note 12), settlement of the performance fee was through
the issuance of subordinate voting shares, calculated based on the performance fee payable at December 31, 2020 of
$5,217 divided by the volume-weighted average trading price of the company’s subordinate voting shares for the
10 trading days prior to and including the last day of the calculation period (‘‘VWAP’’) of $9.55. Refer to note 12 for
additional details on the settlement of the December 31, 2020 performance fee payable.

Purchase of Shares

During 2020, under the terms of the normal course issuer bid, the company purchased for cancellation
3,160,910 subordinate voting shares (2019 – 230,053) for a net cost of $28,905 (2019 – $2,998), of which $4,366 was
recorded as a benefit to retained earnings (2019 – $577 was charged to retained earnings).

Subsequent to December 31, 2020

Subsequent to December 31, 2020, under the terms of the normal course issuer bid, the company purchased for
cancellation 375,337 subordinate voting shares for a net cost of $4,106.

Dividends

The company did not pay any dividends on its outstanding multiple and subordinate voting shares during 2020
and 2019.

FAIRFAX INDIA HOLDINGS CORPORATION

9. Net Earnings (Loss) per Share

Net earnings (loss) per common share is calculated in the following table based on the weighted average common
shares outstanding:

Net earnings (loss) – basic and diluted

Weighted average common shares outstanding – basic
Settlement of performance fees in subordinate voting shares(1)

Weighted average common shares outstanding – diluted

Net earnings (loss) per common share – basic
Net earnings (loss) per common share – diluted

2020
(41,476)

2019
516,338

151,001,909
546,263

152,654,875
3,748,129

151,548,172

156,403,004

$
$

(0.27) $
(0.27) $

3.38
3.30

(1)

In 2019, the issuance of 3,748,129 subordinate voting shares to settle the performance fee was contingent on the
performance fee payable recorded at December 31, 2019 being payable at the end of the second calculation period.

At December 31, 2020 there were 546,263 subordinate voting shares expected to be issued to Fairfax relating to the
performance fee payable for the second calculation period (December 31, 2019 – 3,748,129 contingently issuable
subordinate voting shares). The performance fee for the second calculation period is assessed quarterly and relates to
the three-year period from January 1, 2018 to December 31, 2020. The performance fee payable to Fairfax for the
second calculation period (ending on December 31, 2020) was settled on March 5, 2021 by the company issuing
546,263 subordinate voting shares to Fairfax. Under the terms of the Investment Advisory Agreement (defined in
note 12), settlement of the performance fee will take place in subordinate voting shares of the company if the market
price per share is less than two times the then book value per share (defined in note 12). The number of subordinate
voting shares issued was calculated based on the VWAP. Refer to note 12 for further details on the performance
fee payable.

10. Income Taxes

The company’s provision for income taxes for the years ended December 31 are summarized in the following table:

Current income tax:

Current year expense
Adjustment to prior years’ income taxes

Deferred income tax:

Origination and reversal of temporary differences

Provision for income taxes

2020

2019

1,820
192

11,594
–

2,012

11,594

484

64,689

2,496

76,283

A significant portion of the company’s earnings (loss) before income taxes is earned or incurred outside of Canada.
The statutory income tax rates for jurisdictions outside of Canada generally differ from the Canadian statutory
income tax rate (and may be significantly higher or lower).

On March 27, 2020 India enacted the Finance Act 2020 which amended the regulations pertaining to dividend
income. Dividend income which was received by the company from an Indian company on or before March 31,
2020 was exempt from tax in India, while dividend income received by the company from an Indian company
subsequent to March 31, 2020 will be taxable. The Indian company is liable to withhold the appropriate tax.

At December 31, 2020 the company evaluated the potential impact of the application of capital gains tax in India on
any future dispositions of investments in equity shares held by FIH Mauritius and FIH Private. The company
recorded deferred income taxes of $484 in 2020 attributable to unrealized gains on the company’s investment in
equity shares acquired subsequent to April 1, 2017, primarily Seven Islands, 5paisa, and Other Public Indian
Investments, partially offset by a reversal of prior period deferred taxes recognized on the company’s investment in

IIFL Wealth and CSB Bank. The company recorded deferred income taxes of $64,689 in 2019 attributable to
unrealized gains on the company’s investment in equity shares acquired subsequent to April 1, 2017, primarily BIAL,
IIFL Wealth resulting from the IIFL Holdings Reorganization, CSB Bank, Saurashtra, Other Public Indian
Investments, and Seven Islands. The company will continue to evaluate the potential impact of the Indian capital
gains tax as it relates to any future dispositions of investments in equity shares of its Indian Investments.

The company’s earnings (loss) before income taxes by jurisdiction and the associated provision for income taxes for
2020 and 2019 are summarized in the following table:

Earnings (loss) before income taxes
Provision for income taxes

2020

2019

Canada Mauritius
4,751
(43,731)
2,496
–

Total
(38,980)
2,496

Canada Mauritius
(51,759)
644,380
–

76,283(1)

Total
592,621
76,283

Net earnings (loss)

(43,731)

2,255

(41,476)

(51,759)

568,097

516,338

(1)

Includes $64,689 of potential capital gains tax in India (primarily related to unrealized gains on BIAL, IIFL Wealth resulting from the
IIFL Holdings Reorganization, and CSB Bank) and $7,788 of Indian withholding taxes (primarily related to the redemption of
Sanmar bonds).

The decrease in loss before income taxes in Canada during 2020 compared to 2019 principally related to decreased
interest expense. The decrease in earnings before income taxes in Mauritius during 2020 compared to 2019 primarily
reflected net unrealized losses on investments during 2020 compared to net unrealized gains on investments during
2019, decreased net realized gains on investments, and increased investment and advisory fees, partially offset by a
performance fee recovery in 2020 and increased interest and dividend income.

A reconciliation of the provision for (recovery of) income taxes calculated at the Canadian statutory income tax rate
to the provision for income taxes at the effective tax rate in the consolidated financial statements for the years ended
December 31 are summarized in the following table:

Canadian statutory income tax rate

Provision for (recovery of) income taxes at the Canadian statutory income tax rate
Tax rate differential on income earned outside of Canada
Provision relating to prior years
Change in unrecorded tax benefit of losses and temporary differences
Foreign exchange effect
Other including permanent differences

Provision for income taxes

2020
26.5%

2019
26.5%

(10,330)
3,198
192
6,333
3,080
23

157,044
(110,966)
–
27,658
2,521
26

2,496

76,283

The tax rate differential on income earned outside of Canada of $3,198 in 2020 principally reflected the impact of net
investment losses recorded in India and taxed at a lower rate, partially offset by earnings taxed in India and Mauritius
at lower rates. The tax rate differential on income earned outside of Canada of $110,966 in 2019 principally reflected
the impact of net investment income taxed in India and Mauritius at lower rates.

The change in unrecorded tax benefit of losses and temporary differences of $6,333 in 2020 principally reflected
changes in unrecorded deferred tax assets related to net operating loss carryforward in Canada of $7,730, foreign
accrual property losses of $6,343 with respect to the company’s wholly-owned subsidiaries, the potential impact of
the application of capital loss benefit in India on future dispositions of investments in equity shares of $3,409, the
impact of foreign exchange of $2,829, partially offset by temporary timing differences on performance fee and
professional fees of $11,724 and temporary timing differences on debt and equity issuance costs of $2,254 that were
not recorded by the company as the related pre-tax losses did not meet the recognition criteria under IFRS. The
change in unrecorded tax benefit of losses and temporary differences of $27,658 in 2019 principally reflected
changes in unrecorded deferred tax assets related to foreign accrual property losses of $16,283 with respect to the
company’s wholly-owned subsidiaries, net operating loss carryforwards in Canada of $7,258, the potential impact of
the application of capital loss benefit in India on future dispositions of investments in equity shares of $3,531, and

FAIRFAX INDIA HOLDINGS CORPORATION

temporary timing differences of issuance costs on borrowings of $586 that were not recorded by the company as the
related pre-tax losses did not meet the recognition criteria under IFRS. At December 31, 2020 deferred tax assets of
$71,268 in Canada and $8,410 in India (December 31, 2019 – $69,747 in Canada and $5,069 in India) were not
recorded as it was considered not probable that those losses could be utilized by the company.

Foreign exchange effect of $3,080 in 2020 (2019 – $2,521) principally reflected the impact of fluctuations in the
value of the Canadian dollar relative to the U.S. dollar and the Indian rupee as the company computes its corporate
tax liability in Canadian dollars pursuant to the requirements of Canadian tax authorities, whereas the functional
currency of the company and its Mauritius subsidiaries is the Indian rupee.

Income taxes refundable and payable were as follows:

Income taxes refundable
Income taxes payable

Net income taxes refundable (payable)

December 31, December 31,
2019
2,866
(3,688)

2020
2,803
–

2,803

(822)

Changes in net income taxes refundable (payable) for the years ended December 31 were as follows:

Balance – January 1

Amounts recorded in the consolidated statements of earnings (loss)
Payments made during the year
Foreign currency translation

Balance – December 31

2020
(822)
(2,012)
5,568
69

2019
1,423
(11,594)
9,349
–

2,803

(822)

Management reviews the recoverability of potential deferred tax assets on an ongoing basis and adjusts, as necessary,
to reflect their anticipated realization. Deferred income tax liability of $63,477 at December 31, 2020 (December 31,
2019 – $64,477) principally related to the potential impact of the application of capital gains tax in India on any
future dispositions of investments in equity shares as noted above. At December 31, 2020 deferred tax assets not
recorded by the company of $79,678 (December 31, 2019 – $74,816) were primarily comprised of foreign accrual
property losses of $39,519 (December 31, 2019 – $43,409), net operating loss carryforwards of $32,341
(December 31, 2019 – $24,786), and potential impact of the application of capital loss benefit in India on future
dispositions of investments in equity shares of $8,410 (December 31, 2019 – $5,069). The net operating loss
carryforwards and foreign accrual property losses expire between 2037 and 2040, and between 2035 and 2040,
respectively.

Deferred income tax has not been recognized for the withholding tax and other taxes that could be payable on the
unremitted earnings of certain subsidiaries. Unremitted earnings amounted to approximately $1,214,285 at
December 31, 2020 (December 31, 2019 – $1,263,217).

11. Financial Risk Management

Overview

The primary goals of the company’s financial risk management are to ensure that the outcomes of activities
involving elements of risk are consistent with the company’s objectives and risk tolerance, while maintaining an
appropriate balance between risk and reward and protecting the company’s consolidated balance sheet from events
that have the potential to materially impair its financial strength. The company’s activities expose it to certain
financial risks during or at the end of the reporting period. There were no significant changes in the types of the
company’s risk exposures or the processes used by the company for managing those risk exposures at December 31,
2020 compared to those identified at December 31, 2019, except as described below.

COVID-19

The rapid spread of the COVID-19 virus, which was declared by the World Health Organization to be a pandemic on
March 11, 2020, and actions taken globally in response to COVID-19, have significantly disrupted business activities
throughout the world. The company’s Indian Investments rely, to a certain extent, on free movement of goods,
services, and capital from around the world, which has been significantly restricted as a result of COVID-19.

Given the ongoing and dynamic nature of the circumstances surrounding COVID-19, it is difficult to predict how
significant the impact of COVID-19, including any responses to it, will be on the global economy and the company’s
Indian Investments in particular, or for how long any disruptions are likely to continue. The extent of such impact
will depend on future developments, which are highly uncertain, rapidly evolving and difficult to predict, including
new information which may emerge concerning the severity of COVID-19 and additional actions which may be
taken to contain COVID-19, as well as the timing of the re-opening of the economy in various parts of the world.
Such further developments could have a material adverse effect on the company’s business, financial condition,
results of operations and cash flows.

Market Risk

Market risk, comprised of foreign currency risk, interest rate risk and other price risk, is the risk that the fair value or
future cash flows of a financial instrument will fluctuate because of changes in market prices. The company is
exposed to market risk principally in its investing activities and to the extent that those activities expose the
company to foreign currency risk. The valuation of the company’s investment portfolio is largely dependent on the
underlying performance of the companies within the portfolio, but may also be affected, along with other financial
statement items, by fluctuations in interest rates, foreign currency exchange rates and market prices.

Foreign Currency Risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument or another asset or
liability will fluctuate due to changes in foreign exchange rates and produce an adverse effect on net earnings and
common shareholders’ equity when measured in Indian rupees, the company’s functional currency. The company’s
net earnings and common shareholders’ equity may also be significantly affected by foreign currency translation
movements as the majority of its net assets and net earnings are denominated in a currency other than the
company’s U.S. dollar presentation currency. The company has not hedged its foreign currency risk. There were no
significant changes to the company’s framework used to monitor, evaluate and manage foreign currency risk at
December 31, 2020 compared to December 31, 2019.

The company’s net foreign currency exposure on balances denominated in currencies other than the Indian rupee
(expressed in U.S. dollars) are primarily comprised as follows:

U.S. dollars
All other currencies

Total

December 31, 2020

December 31, 2019

Cash and cash

equivalents Borrowings

Payable to
related
parties

Net
exposure

Cash and cash

equivalents Borrowings

Payable to
related
parties

Net
exposure

35,369(1)
777

(547,228)
–

(14,404)
(24)

(526,263)
753

25,082(1)
482

(547,228)
—

(50,495)
(24)

(572,641)
458

36,146

(547,228)

(14,428)

(525,510)

25,564

(547,228)

(50,519)

(572,183)

(1) At December 31, 2020 cash and cash equivalents included restricted cash of $16,048 (December 31, 2019 – $16,915) held to fund the

interest payments on borrowings.

The table above shows the company’s net exposure to the U.S. dollar and all other currencies, other than the Indian
rupee. The company’s net liability exposure to the U.S. dollar decreased at December 31, 2020 compared to
December 31, 2019 primarily due to a decrease in payable to related parties as a result of the reversal of the
performance fee accrued at December 31, 2019 and an increase in cash and cash equivalents denominated in
U.S. dollars, partially offset by the performance fee payable at December 31, 2020 and increased investment and
advisory fees payable.

FAIRFAX INDIA HOLDINGS CORPORATION

The following table illustrates the potential impact on pre-tax earnings (loss) and net earnings (loss) of a hypothetical
appreciation or depreciation of the Indian rupee against the U.S dollar and all other currencies.

December 31, 2020

December 31, 2019

Net foreign

Hypothetical $
currency change effect on change effect on
net earnings(1)
exposure pre-tax earnings

Hypothetical $

Net foreign

Hypothetical $
currency change effect on change effect on
net earnings(1)
exposure pre-tax earnings

Hypothetical $

Change in Indian rupee

exchange rate
10.0% appreciation
5.0% appreciation
No change
5.0% depreciation
10.0% depreciation

(472,959)
(499,234)
(525,510)
(551,786)
(578,061)

52,551
26,276
–
(26,276)
(52,551)

38,625
19,313
–
(19,313)
(38,625)

(514,965)
(543,574)
(572,183)
(600,792)
(629,401)

57,218
28,609
–
(28,609)
(57,218)

42,055
21,028
–
(21,028)
(42,055)

(1) For the purpose of this sensitivity analysis, the hypothetical $ change effect on net earnings includes an income tax impact that is
calculated using the company’s marginal tax rate. Actual income tax expense (recovery) may differ significantly when earnings (losses)
are realized.

Certain shortcomings are inherent in the method of analysis presented, including the assumption that the
hypothetical appreciation or depreciation of the Indian rupee against the U.S. dollar and all other currencies
occurred with all other variables held constant.

Interest Rate Risk

Interest rate risk is the risk that the fair values or future cash flows of a financial instrument will fluctuate because of
changes in market interest rates. Typically, as interest rates rise, the fair value of fixed income investments decline
and, conversely, as interest rates decline, the fair value of fixed income investments rise. In each case, the longer the
maturity of the financial instrument, the greater the consequence of a change in interest rates. The company’s
interest rate risk management strategy is to position its fixed income portfolio based on its view of future interest
rates and the yield curve, balanced with liquidity requirements. General economic conditions, political conditions
and many other factors can also adversely affect the bond markets and, consequently, the value of fixed income
securities held. Interest rate movements in India may affect the company’s common shareholders’ equity and net
earnings. The Portfolio Advisor and Fairfax actively monitor interest rates in India and the potential impact changes
in interest rates may have on the company’s investment portfolio. There were no significant changes to the
company’s framework used to monitor, evaluate and manage interest rate risk at December 31, 2020 compared to
December 31, 2019.

The company’s exposure to interest rate risk decreased in 2020 primarily reflecting net sales of Government of India
and Indian corporate bonds, the proceeds of which were partially reinvested in Other Public Indian Investments and
IH Fund, and used to fund the debt service reserve account. The table that follows displays the potential impact of
changes in interest rates on the company’s fixed income portfolio based on parallel 200 basis point shifts up and
down, in 100 basis point increments which the company believes to be reasonably possible in the current economic
environment during COVID-19. This analysis was performed on each individual security, with the hypothetical
effect on net earnings (loss).

December 31, 2020

December 31, 2019

Fair value of
fixed income change effect on
net earnings(1)

portfolio

Hypothetical $ Hypothetical % Fair value of

change in fair
value

fixed income change effect on
net earnings(1)

Hypothetical $ Hypothetical %
change in fair
value

portfolio

Change in interest rates
200 basis point increase
100 basis point increase
No change
100 basis point decrease
200 basis point decrease

35,373
35,621
35,873
36,130
36,392

(367)
(185)
–
189
381

(1.4)%
(0.7)%
–
0.7 %
1.4 %

135,224
136,837
138,425
140,160
141,872

(2,353)
(1,168)
–
1,275
2,533

(2.3)%
(1.1)%
–
1.3 %
2.5 %

Certain shortcomings are inherent in the method of analysis presented above. Computations of the prospective
effects of hypothetical interest rate changes are based on numerous assumptions, including the maintenance of the
level and composition of fixed income securities at the indicated date, and should not be relied on as indicative of

future results. Actual values may differ from the projections presented should market conditions vary from
assumptions used in the calculation of the fair value of individual securities; such variations include non-parallel
shifts in the term structure of interest rates and a change in individual issuer credit spreads.

Market Price Fluctuations

Market price fluctuation is the risk that the fair value or future cash flows of an equity investment will fluctuate
because of changes in market prices (other than those arising from interest rate risk or foreign currency risk), whether
those changes are caused by factors specific to the individual investment or its issuer, or other factors affecting all
similar investments in the market. The company’s exposure to equity price risk through its equity investments at
December 31, 2020 compared to December 31, 2019 are described below.

The company holds significant equity investments. The market value and the liquidity of these investments are
volatile and may vary dramatically either up or down in short periods, and their ultimate value will therefore only be
known over a period of time or on disposition. As discussed earlier, COVID-19 has increased uncertainty and may
adversely impact the fair value and future cash flows of the company’s equity investments.

The company’s exposure to market price risk decreased to $2,991,775 at December 31, 2020 from $3,032,907 at
December 31, 2019 primarily as a result of unrealized losses on Private Indian Investments (principally Sanmar and
NCML common shares) and unrealized losses on Public Indian Investments (principally IIFL Finance, IIFL Wealth
and CSB Bank), partially offset by unrealized gains on Public Indian Investments (principally Privi Speciality
(formerly Fairchem), Fairchem Organics, 5paisa, IIFL Securities, and Other Public Indian Investments), unrealized
gains on Private Indian Investments (principally Seven Islands, NSE and Saurashtra), and the company’s net
purchases in Other Public Indian Investments and IH Fund. Refer to note 6 for the potential impact on net earnings
(loss) of various combinations of changes in significant unobservable inputs in the company’s internal valuation
models for the company’s investments classified as Level 3 in the fair value hierarchy.

The company estimates the potential impact on net earnings (loss) from a 20% increase or decrease in the fair value
of its Public Indian Investments at December 31, 2020 to be an increase or decrease in net earnings (loss) of $158,570
(December 31, 2019 – increase or decrease in net earnings (loss) of $74,812 from a 10% increase or decrease in the fair
value of its Public Indian Investments). For the purpose of this sensitivity analysis, the hypothetical $ change effect
on net earnings includes an income tax impact that is calculated using the company’s marginal tax rate. Actual
income tax expense (recovery) may differ significantly when earnings (losses) are realized.

Credit Risk

Credit risk is the risk of loss resulting from the failure of a counterparty to honour its financial obligations to the
company, and arises predominantly from cash and cash equivalents and investments in debt instruments. There
were no significant changes to the company’s exposure to credit risk (except as set out in the discussion which
follows) or the framework used to monitor, evaluate and manage credit risk at December 31, 2020 compared to
December 31, 2019.

Cash and Cash Equivalents

At December 31, 2020 the company’s cash and cash equivalents of $22,057 (December 31, 2019 – $48,713) were
primarily held in major financial institutions. The company monitors risks associated with cash and cash equivalents
by regularly reviewing the financial strength and creditworthiness of these financial institutions. From these reviews,
the company may transfer balances from financial institutions where it perceives heightened credit risk to others
considered to be more stable.

Investments in Debt Instruments

The company’s risk management strategy for debt instruments is to invest primarily in high credit quality issuers.
Management considers high quality debt instruments to be those with a S&P or Moody’s issuer credit rating of
BBB/Baa or higher. While the company reviews third party credit ratings, it also carries out its own analysis and does
not delegate the credit decision to rating agencies. The company endeavours to limit credit exposure by monitoring
fixed income portfolio limits on individual corporate issuers and limits based on credit quality.

FAIRFAX INDIA HOLDINGS CORPORATION

At December 31, 2020 the company’s debt instruments were all considered to be subject to credit risk with a fair value
of $35,873 (December 31, 2019 – $138,425), representing 1.2% (December 31, 2019 – 4.3%) of the total cash and
investments portfolio.

The composition of the company’s fixed income portfolio is presented in the table below:

Government of India bonds(1)
Indian corporate bonds(2)
Indian corporate bonds
NCML CCD

Total bonds

December 31, 2020

December 31, 2019

Fair value
20,989
–
–
14,884

35,873

Rating
Baa3/BBB(cid:1)
–
–
Not rated

Fair value
88,775
14,046
21,318
14,286

138,425

Rating
Baa2/BBB(cid:1)
Baa3
Not rated
Not rated

(1) Rated Baa3 by Moody’s and BBB – by S&P at December 31, 2020. Rated Baa2 by Moody’s and BBB(cid:1) by S&P at December 31, 2019.
(2) Rated Baa3 by Moody’s at December 31, 2019.

The company’s exposure to credit risk from its investments in fixed income securities decreased at December 31,
2020 compared to December 31, 2019 primarily reflecting net sales of Government of India and Indian corporate
bonds, the proceeds of which were partially reinvested in Other Public Indian Investments and IH Fund, and used to
fund the debt service reserve account. Except as described above, there were no other significant changes to the
composition of the company’s fixed income portfolio classified according to each security’s respective issuer credit
rating at December 31, 2020 compared to December 31, 2019.

Liquidity Risk

Liquidity risk is the risk that the company will encounter difficulty in meeting obligations associated with financial
liabilities that are settled by delivering cash or another financial asset. The company manages liquidity risk by
maintaining sufficient liquid assets to enable settlement of financial commitments on their respective due dates. All
accounts payable and accrued liabilities are due within three months, and income taxes payable, if any, must be
remitted to the respective tax jurisdictions as they are due. There were no significant changes to the company’s
exposure to liquidity risk (except as set out in the discussion below) or the framework used to monitor, evaluate and
manage liquidity risk at December 31, 2020 compared to December 31, 2019.

The undeployed cash and investments at December 31, 2020 provide adequate liquidity to meet the company’s known
significant commitments over the next twelve months, which are principally comprised of interest expense, investment
and advisory fees, and general and administration expenses. At December 31, 2020 the company had a principal
repayment on the $550.0 million term loan coming due in June 2021 that can be extended for an additional year. On
February 26, 2021 the company completed an offering of $500.0 million principal amount of 5.0% unsecured senior
notes due February 26, 2028 at par for net proceeds after commissions and expenses of $496,350. The company used the
net proceeds from the offering and cash to repay $500,000 of its $550.0 million term loan.

The company has the ability to sell a portion of its Indian Investments to supplement its liquidity requirements, by
way of private placements or in public markets for its Public Indian Investments, or through private sales or IPOs for
its Private Indian Investments. At December 31, 2020 the company held common shares of Public Indian
Investments which carry no selling restrictions with a fair value of $772,564 and Government of India bonds with a
fair value of $20,989. The company expects to continue to receive investment income on its holdings of fixed
income securities and dividends from its equity investments to supplement its cash and cash equivalents.
Accordingly, the company has adequate working capital to support its operations.

On December 24, 2020 as part of the Fairchem Open Offer the company announced an open offer for the acquisition of
up to 3,377,953 common shares of Fairchem Organics, representing the entire public float or 25.9% of the issued and
outstanding shares, at a price of 575.53 Indian rupee per common share. The potential obligation is approximately
1.9 billion Indian rupees ($26,607 at period end exchange rates). In support of the Fairchem Open Offer, the company was
required to place on deposit, cash of approximately 19.5 million Indian rupees ($267 at period end exchange rates) and a
bank guarantee for approximately 486.1 million Indian rupees ($6,652 at period end exchange rates), representing 1.0%
and 25.0% of the potential obligation, respectively. The cash deposit was recorded in restricted cash within the
consolidated balance sheet at December 31, 2020. The Fairchem Open Offer is subject to regulatory approvals and
customary closing conditions, and is expected to close in the first quarter of 2021.

The performance fee payable to Fairfax for the second calculation period (ending on December 31, 2020) was settled
on March 5, 2021 by the company issuing 546,263 subordinate voting shares to Fairfax. Refer to note 12 for
additional details on the performance fee payable.

Concentration Risk

The company’s cash and investments are primarily concentrated in India and in Indian businesses or businesses with
customers, suppliers or business primarily conducted in, or dependent on, India. The market value of the company’s
investments, the income generated by the company and the company’s performance will be particularly sensitive to
changes in the economic condition, interest rates, and regulatory environment in India. Adverse changes to the
economic condition, interest rates or regulatory environment in India may have a material adverse effect on the
company’s business, cash flows, financial condition and net earnings. At December 31, 2020 and 2019 the
company’s total cash and investments composition by the issuer’s country of domicile was primarily India, and at
December 31, 2020 represented 98.8% (December 31, 2019 – 99.2%) of the total cash and investments portfolio.

The company’s holdings of Public and Private Indian Investments (see note 5) at December 31, 2020 and 2019 are
summarized by the issuer’s primary industry sector in the table below:

Infrastructure
Financial services
Commercial and industrial
Ports and shipping
Utilities

December 31, 2020 December 31, 2019
1,429,854
821,972
675,363
120,004
–

1,396,117
788,384
632,700
136,355
53,103

3,006,659

3,047,193

During 2020 the company’s concentration risk in the infrastructure sector decreased primarily due to unrealized
foreign currency translation losses on the company’s investment in BIAL. The company’s concentration risk in the
financial services sector decreased primarily due to unrealized losses (including foreign currency translation losses)
on the company’s investments in IIFL Finance, IIFL Wealth, CSB Bank, and an investment in financial services sector
within Other Public Indian Investments, partially offset by an additional investment in the IH Fund and unrealized
gains on the company’s investments in NSE, 5paisa, IIFL Securities, and the IH Fund. The company’s concentration
risk in the commercial and industrial sector decreased primarily due to unrealized losses (including foreign currency
translation losses) on the company’s investment in Sanmar and NCML common shares, partially offset by unrealized
gains on the company’s investments in Privi Speciality (formerly Fairchem) and Fairchem Organics. The company’s
concentration risk in the ports and shipping sector increased primarily due to unrealized gains on the company’s
investments in Seven Islands and Saurashtra. The company’s concentration risk in the utilities sector increased
primarily due to investments in and unrealized gains on Other Public Indian Investments within India’s utilities
sector.

The company will not make an Indian Investment if, after giving effect to such investment, the total invested
amount of such investment would exceed 20.0% of the company’s total assets at the time of the investment;
provided, however, that the company is permitted to complete up to two Indian Investments where, after giving
effect to each such investment, the total invested amount of each such investment would be less than or equal to
25.0% of the company’s total assets (the ‘‘Investment Concentration Restriction’’). The company’s investment limit
for an Indian Investment in accordance with the Investment Concentration Restriction decreased at December 31,
2020 from December 31, 2019 principally as a result of unrealized foreign currency translation losses, investment
and advisory fees, interest expense, net unrealized losses on investments, and purchases of subordinate voting shares
for cancellation, partially offset by dividend and interest income. Indian Investments may be financed through
equity or debt offerings as part of the company’s objective to reduce its cost of capital and provide returns to common
shareholders. At December 31, 2020 the company determined that it was in compliance with the Investment
Concentration Restriction.

FAIRFAX INDIA HOLDINGS CORPORATION

Capital Management

The company’s objectives when managing capital are to protect its lenders, to safeguard its ability to continue as a
going concern, and to maintain an optimal capital structure to reduce the cost of capital in order to optimize returns
for common shareholders. The company will seek attractive risk-adjusted returns, but will at all times seek downside
protection and attempt to minimize the loss of capital. Total capital (comprised of borrowings and common
shareholders’ equity) decreased from $3,125,079 at December 31, 2019 to $2,994,162 at December 31, 2020
principally reflecting a decrease in common shareholders’ equity, as described below.

Common shareholders’ equity decreased from $2,577,851 at December 31, 2019 to $2,446,934 at December 31, 2020
primarily reflecting unrealized foreign currency translation losses of $60,606, a net loss of $41,476, and purchases of
subordinate voting shares for cancellation of $28,905 during 2020.

On June 26, 2020 the company amended the $550.0 million term loan to extend the maturity to June 28, 2021 while
maintaining the option to extend for an additional year. The $550.0 million term loan now bears interest at a rate of
LIBOR plus 400 basis points. The $550.0 million term loan includes a financial covenant requiring the company to
maintain common shareholders’ equity of not less than $1.5 billion. At December 31, 2020 the company was in
compliance with the $550.0 million term loan financial covenant.

12. Related Party Transactions

Payable to Related Parties

The company’s payable to related parties was comprised as follows:

Performance fee
Investment and advisory fees
Investment and advisory fees – recovery

Investment and advisory fees
Other

Investment Advisory Agreement

December 31, 2020
5,217

December 31, 2019
47,850

9,187
–

8,704
(6,064)

9,187
24

14,428

2,640
29

50,519

The company and its subsidiaries have entered into an agreement with Fairfax and the Portfolio Advisor to provide
administration and investment advisory services to the company and its subsidiaries (the ‘‘Investment Advisory
Agreement’’). As compensation for the provision of these services, the company and its subsidiaries pay an
investment and advisory fee, and if applicable, a performance fee. Such fees are determined with reference to the
company’s common shareholders’ equity.

Performance Fee

The performance fee is accrued quarterly and is calculated, on a cumulative basis, as 20% of any increase (including
distributions) in book value per share above a 5% per annum increase less any performance fees settled in prior
calculation periods. On any date, book value per share is calculated as common shareholders’ equity at the end of the
reporting period, divided by the total number of common shares of the company effectively outstanding on that
date. The amount of book value per share at any time which must be achieved before any performance fee would be
payable is sometimes referred to as the ‘‘hurdle per share’’.

Second Calculation Period

performance fee was reassessed and adjusted during 2019 to appropriately account for performance fees settled in
prior calculation periods, and is calculated on a cumulative basis as 20% of any increase in the book value per share
(before factoring in the impact of the performance fee for the second calculation period) above a 5% per annum
increase less the performance fee previously settled in the first calculation period. Under the Investment Advisory
Agreement, the performance fee shall be paid within 30 days after the company issues its annual audited
consolidated financial statements for the year ended December 31, 2020, in subordinate voting shares of the
company unless the market prices per share of those shares is more than two times the then book value per share, in
which event Fairfax may elect to receive that fee in cash. The number of subordinate voting shares to be issued was
calculated based on the VWAP in respect of which the performance fee is paid.

The company determined that a performance fee of $5,217 was payable at December 31, 2020 (December 31, 2019 –
accrual of $47,850). In 2020 the performance fee recovery recorded in the consolidated statements of earnings (loss)
was $41,991 representing the reversal of the performance fee accrual at December 31, 2019, net of the performance
fee payable at December 31, 2020 (2019 – performance fee of $48,514).

Subsequent to December 31, 2020

On March 5, 2021 the company issued 546,263 subordinate voting shares to Fairfax to settle the performance fee
payable of $5,217 for the second calculation period. Under the terms of the Investment Advisory Agreement,
settlement of the performance fee was through the issuance of subordinate voting shares of the company as the
market price per share was less than two times the then book value per share. The number of subordinate voting
shares issued was calculated as the performance fee payable at December 31, 2020 of $5,217 divided by the VWAP of
$9.55. The issuance of these subordinate voting shares, along with the purchases of subordinate voting shares for
cancellation subsequent to December 31, 2020 as disclosed under note 8 (Common Shareholders’ Equity), increased
Fairfax’s equity interest in Fairfax India from 28.0% at December 31, 2020 to 28.4% at March 5, 2021.

Investment and Advisory Fees

The investment and advisory fees are calculated and payable quarterly as 0.5% of the value of undeployed capital and
1.5% of the company’s common shareholders’ equity less the value of undeployed capital. In 2019 the company and
Fairfax retroactively revised the interpretation of the Investment Advisory Agreement to clarify that deployed capital
should exclude any Indian Investments financed by debt, resulting in a recovery of investment and advisory fees
from Fairfax of $6,064. In 2020 the investment and advisory fees recorded in the consolidated statements of earnings
(loss) was $33,922 (2019 – $27,473).

Fairfax’s Voting Rights and Equity Interest

Management Compensation

Pursuant to the Investment Advisory Agreement, Fairfax is required to provide a Chief Executive Officer, a Chief
Financial Officer and a Corporate Secretary to the company. For so long as the Investment Advisory Agreement
remains in effect, all compensation payable to the Chief Executive Officer, the Chief Financial Officer, and the
Corporate Secretary of the company will be borne by Fairfax. In addition, all compensation payable to the Vice
President and Vice President, Corporate Affairs is borne by Fairfax.

FAIRFAX INDIA HOLDINGS CORPORATION

Director Compensation

Compensation for the company’s Board of Directors for the years ended December 31, determined in accordance
with the company’s IFRS accounting policies, was recognized in general and administration expenses in the
consolidated statements of earnings and was as follows:

Retainers and fees
Share-based payments
Other

13. Segment Reporting

2020
150
70
50

2019
150
96
50

270

296

A business segment is a group of assets and operations engaged in providing products or services that are subject to
risks and returns that are different from those of other business segments. A geographical segment is engaged in
providing products or services within a particular economic environment that is subject to risks and returns, that are
different from those of segments operating in other economic environments.

The company has concluded that Fairfax India is engaged in a single geographic and business segment, that of
investing in India and Indian Investments.

14. General and Administration Expenses

General and administration expenses for the years ended December 31 were comprised as follows:

Audit, legal and tax professional fees
Salaries and employee benefit expenses
Administrative expenses
Other

2020
2,071
977
646
539

4,233

2019
2,673
1,083
1,123
421

5,300

15. Supplementary Cash Flow Information

Cash and cash equivalents were included in the consolidated balance sheets and statements of cash flows as follows:

Cash and term deposits with banks
U.S. treasury bills

December 31, 2020 December 31, 2019
46,642
2,071

22,057
–

22,057

48,713

Details of certain cash flows included in the consolidated statements of cash flows for the years ended December 31
were as follows:

Purchases of investments

Bonds
Common stocks

Sales of investments

Bonds
Common stocks

Net interest and dividends received (paid)

Net interest income received
Dividends received
Interest paid on borrowings

Income taxes paid

2020

2019

(91,733)
(94,178)

(152,178)
(411,774)

(185,911)

(563,952)

189,003
42,190

629,457
36,950

231,193

666,407

8,718
16,043
(25,047)

8,434
10,141
(34,746)

(286)

(16,171)

5,568

9,349

FAIRFAX INDIA HOLDINGS CORPORATION

Index to Management’s Discussion and Analysis of Financial Condition and Results of Operations

Notes to Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . . .
Business Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment Objective . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment Selection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indian Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary of Indian Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Summary of Changes in the Fair Value of the Company’s Indian Investments . . . . . . . . . . . . . . . . . . .
Public Indian Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Private Indian Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheet Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capital Resources and Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Book Value per Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liquidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contractual Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounting and Disclosure Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Evaluation of Disclosure Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Management’s Report on Internal Control Over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . .
Critical Accounting Estimates and Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Significant Accounting Policy Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Future Accounting Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quarterly Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock Prices and Share Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compliance with Corporate Governance Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

75
75
75
76
76
78
78
79
79
80
80
81
82
83
96
113
115
117
117
118
119
121
121
123
123
123
123
123
123
124
124
124
132
132
133
133
134

Management’s Discussion and Analysis of Financial Condition and Results of Operations
(as of March 5, 2021)

(Figures and amounts are in US$ and $ thousands except share and per share amounts and as otherwise indicated. Figures may
not add due to rounding.)

Notes to Management’s Discussion and Analysis of Financial Condition and Results of Operations

(1) Readers of the Management’s Discussion and Analysis of Financial Condition and Results of Operations
(‘‘MD&A’’) should review the entire Annual Report for additional commentary and information. Additional
information relating to the company, including its annual information form, can be found on SEDAR at
www.sedar.com. Additional information can also be accessed from the company’s website www.fairfaxindia.ca.

(2) Unless otherwise noted, consolidated financial information of the company within this MD&A is derived
from the consolidated financial statements of the company prepared in accordance with International
Financial Reporting Standards (‘‘IFRS’’) as issued by the International Accounting Standards Board (‘‘IASB’’),
and is presented in U.S. dollars with the Indian rupee as the functional currency of the company and its
consolidated subsidiaries.

(3) The MD&A contains references to book value per share. On any date, book value per share is calculated as
common shareholders’ equity at the end of the reporting period, determined in accordance with IFRS,
divided by the total number of common shares of the company effectively outstanding on that date. Those
amounts are presented in the consolidated balance sheet and note 8 (Common Shareholders’ Equity under
the heading Common Stock) respectively within the consolidated financial statements for the year ended
December 31, 2020. Book value per share is a key performance measure of the company and is closely
monitored as it is used to calculate the performance fee, if any, to Fairfax Financial Holdings Limited
(‘‘Fairfax’’).

(4) The MD&A contains references to ‘‘Cash used in operating activities excluding the impact of changes in
restricted cash and net sales (purchases) of investments’’, which provides a measure of the cash generated by
(used in) the company’s head office operations, primarily comprised of cash inflows (outflows) from interest
and dividend income, interest expense, investment and advisory fees, current income taxes and general and
administration expenses, and excludes the impact of changes to restricted cash and purchases and sales of
investments. This measure is not a standard measurement under IFRS and therefore may not be comparable
to similar measures presented by other issuers.

(5) Throughout this MD&A, the term ‘‘Indian Investments’’ refers to deployed capital invested in Public and
Private Indian Investments as disclosed in note 5 (Indian Investments) to the consolidated financial
statements for the year ended December 31, 2020.

Business Developments

Overview

Fairfax is Fairfax India’s ultimate parent and acts as its administrator. Fairfax is a holding company which, through its
subsidiaries, is engaged in property and casualty insurance and reinsurance and the associated investment
management. Hamblin Watsa Investment Counsel Ltd. (the ‘‘Portfolio Advisor’’), a wholly-owned subsidiary of
Fairfax and registered portfolio manager in the province of Ontario, is the portfolio advisor of the company and its
consolidated subsidiaries, responsible to source and advise with respect to all investments. Fairfax India’s
subordinate voting shares trade on the Toronto Stock Exchange (‘‘TSX’’) under the symbol FIH.U. The multiple
voting shares of the company are not publicly traded.

The book value per share at December 31, 2020 was $16.37 compared to $16.89 at December 31, 2019 representing a
decrease in 2020 of 3.1%, primarily reflecting unrealized foreign currency translation losses of $60,606 and a net loss
of $41,476 (primarily related to investment and advisory fees, interest expense, net change in unrealized losses on
investments, and net foreign exchange losses, partially offset by a performance fee recovery, dividend and interest
income).

The following narrative sets out the company’s key business developments in 2020 and 2019.

FAIRFAX INDIA HOLDINGS CORPORATION

Capital Transactions

Subsequent to December 31, 2020

On March 5, 2021 the company issued 546,263 subordinate voting shares to Fairfax to settle the performance fee
payable of $5,217 for the second calculation period (three-year period ending on December 31, 2020). Under the
terms of the Investment Advisory Agreement (defined in note 12 (Related Party Transactions) to the consolidated
financial statements for the year ended December 31, 2020), settlement of the performance fee was through the
issuance of subordinate voting shares, calculated based on the performance fee payable at December 31, 2020 of
$5,217 divided by the volume-weighted average trading price of the company’s subordinate voting shares for the
10 trading days prior to and including the last day of the calculation period (‘‘VWAP’’) of $9.55.

For further details refer to notes 7 (Borrowings) and 8 (Common Shareholders’ Equity) to the consolidated financial
statements for the year ended December 31, 2020.

Indian Investments

Full descriptions of the Indian Investments committed to and acquired in 2020 and 2019 are provided in the Indian
Investments section of this MD&A.

Operating Environment

Overview

India continues to be one of the world’s largest and fastest growing major economies, despite setbacks during the
year arising from the shift in focus to protect the country from the social and economic impact of the
COVID-19 pandemic, which tested the resilience of countries around the world. India’s economic fundamentals
accelerated in recent years with the combined impact of strong government reforms, higher government spending
on infrastructure development and the Reserve Bank of India’s (‘‘RBI’’) focus on encouraging financial inclusion.

COVID-19 Pandemic

The year 2020 was marked by the rapid surge of the global COVID-19 pandemic. Governments worldwide responded
with border closures, lockdowns, and restrictions on non-essential services in an effort to contain and mitigate the

spread of COVID-19. Positive developments on vaccine deployment arrived towards the end of 2020, contributing to
an improved outlook over recovery into a reshaped post-pandemic environment. According to the World Economic
Outlook Update (January 2021) published by the International Monetary Fund (‘‘IMF’’) global GDP was estimated to
have contracted by 3.5% in 2020 (a less severe contraction than earlier estimates ranging 4.4% to 4.9%) and is
forecasted to grow by 5.5% in 2021, reflecting expectations of a vaccine-powered strengthening of activity and
additional policy support. Against this backdrop, oil prices have fallen and remained subdued during the year as a
result of the combined effect of price wars among large oil-producing countries and a severe reduction in global
demand due to government-imposed lockdowns and travel restrictions. Financial conditions have tightened sharply
in 2020 and emerging markets faced unprecedented withdrawals of foreign capital at the start of the crisis, which
increased sovereign borrowing costs, adding strain to the ability of many emerging market countries to fight the
public health emergency.

India’s Response to the COVID-19 Pandemic

In March 2021 India was ranked second globally in the number of COVID-19 cases after the United States, having
surpassed eleven million cases, although daily infection rates have declined significantly. In an effort to contain the
spread of COVID-19 the Indian government extended the 21-day nationwide lockdown which commenced on
March 25, 2020 to May 31, 2020 and it remains in place for containment zones until March 31, 2021 (and may
extend further as the COVID-19 pandemic continues to evolve) while lockdown restrictions were being lifted in
phases for districts that are deemed safe (‘‘India’s lockdown’’). International travel has been limited to select
countries with which India has established air bubble arrangements.

On January 16, 2021 the Indian government launched its mass COVID-19 vaccination program following the
approval of two COVID-19 vaccines earlier in the month. The program aims to inoculate 300 million people by
July 2021, making it one of the world’s largest mass vaccination campaigns against COVID-19. As part of the 2021
Union Budget of India (described further below) the Indian government budgeted 350 billion Indian rupees towards
the implementation of the COVID-19 vaccination program and committed to provide further funds if needed.

Economic Impact in India

The Indian economy declined sharply as the effects of government-mandated lockdowns and travel restrictions
(discussed above) negatively impacted near-term expectations of India’s economic growth, with GDP contracting
23.9% in the first quarter of its fiscal year 2021 compared to the first quarter of its fiscal year 2020. A faster than
expected recovery in the second quarter of fiscal year 2021 resulted in a significantly softer contraction of 7.5% year
over year. In its January 2021 report the IMF estimated that the Indian economy will contract 8.0% for the
2020-21 fiscal year (decreased from its previous estimate of a 10.3% contraction in October 2020) and forecasted a
strong rebound of 11.5% for the 2021-22 fiscal year (increased from its previous estimate of 8.8%).

The intermittent local lockdowns and remaining restrictions to businesses and movement of labour will continue to
negatively impact the Indian economy. Travel restrictions have reduced demand for domestic and international
travel, impacting various industries such as airlines, hospitality and retail.

The Indian government reacted quickly to the economic downturn and to date, have announced nearly 30.0 trillion
Indian rupees of economic monetary stimulus, making up approximately 15% of India’s GDP, which aims to ease the
economic and social hardships for businesses and individuals impacted by the COVID-19 pandemic and set forth a
path to recovery. The economic stimulus packages included liquidity support through loans and guarantees for
stressed sectors, equity injections into financial institutions and the electricity sector, production-linked incentives
to boost manufacturing capabilities and enhance exports, and housing and infrastructure incentives to encourage
urbanization.

On March 27, 2020 the Reserve Bank of India (‘‘RBI’’) announced a number of measures to ease liquidity such as
cutting interest rates by 75 basis points, providing financial institutions access to more liquidity, implementing
several long term asset purchase programs and allowing financial institutions to grant three-month loan
moratoriums for debt servicing payments due between March 1, 2020 and May 31, 2020. In May 2020 in response to
the increasing economic disruptions caused by COVID-19 the RBI further cut interest rates by 40 basis points and
extended the loan moratorium for another three months to August 31, 2020. In August 2020 the RBI announced a
new resolution plan which would allow lenders to execute a one-time restructuring of loans with borrowers
experiencing financial stress on account of COVID-19 while allowing lenders to continuing classifying such loans as

FAIRFAX INDIA HOLDINGS CORPORATION

standard assets for loan impairment provisioning purposes. Despite a surplus in system liquidity, constrained
lending has resulted in liquidity pressures across many business sectors.

As one of the world’s largest net importers of oil, India will benefit from the sharp decline in oil prices. During the
first quarter of 2020 West Texas Intermediate plunged to $20.48 at March 31, 2020 from $61.06 at December 31,
2019, lower than $26.21 at the peak of the 2016 oil crisis, as a result of the combined impact of price wars among
large oil-producing countries and a severe reduction in global demand due to COVID-19 lockdowns. However, the
benefit of the lower oil prices was partially offset by increased domestic prices of refined products such as gasoline
and diesel, primarily due to higher excise duties. Oil prices partially recovered to $48.52 at December 31, 2020 but
remained lower than levels seen in 2018 and 2019, while gasoline and diesel prices remained high. The partial
recovery in oil prices was primarily due to OPEC+ countries reaching an agreement to reduce oil production output.

Indian Market Indices and Foreign Exchange Rate

In the first quarter of 2020 Indian equity markets experienced significant declines with the S&P BSE Sensex 30 falling
32.6%. The sell-off of Indian equities during this period was consistent with the market decline observed in other
major emerging markets globally and a result of the economic impact of the COVID-19 pandemic. The S&P BSE
Sensex 30 has since recovered beyond pre-pandemic levels and reached new milestone highs in December 2020,
resulting in growth of 13.1% during 2020. The Indian rupee demonstrated recovery over each subsequent quarter but
remained down 2.3% for the calendar year at December 31, 2020, consistent with overall declines observed in other
emerging market currencies. The declines in equity markets and emerging market currencies were primarily
attributable to higher risk aversion in global financial markets, leading to a ‘‘flight to quality’’, with the uptick
towards the end of the year reflective of increased appetite for risk amid positive news on development of a
COVID-19 vaccine and better than expected GDP growth estimates.

Consistent with Indian equity markets, the fair values of the company’s Public Indian Investments declined sharply
in the first quarter followed by a partial recovery throughout the remainder of 2020. The company also recorded
unrealized foreign currency translation losses consistent with the decline in the Indian rupee as the company’s net
assets and net earnings (loss) are primarily denominated in Indian rupees.

The company’s Indian Investments faced varying degrees of business disruption as a result of the response to the
COVID-19 pandemic. While the company’s valuation techniques for Private Indian Investments remained primarily
unchanged during 2020, the development of unobservable inputs included added uncertainty related to the global
economic disruption caused by the ongoing and developing COVID-19 pandemic. Further discussion on the degree
and severity of business disruption specific to each Indian Investment are included in the Indian Investments section
under the respective heading of each Indian Investment of this MD&A.

Union Budget for Fiscal Year 2021-22

On February 1, 2021 Finance Minister Nirmala Sitharaman presented the 2021 Union Budget of India, which focused
on supporting the momentum of India’s economic recovery. The budget placed major emphasis on infrastructure
spending, including healthcare and agriculture, stabilization of the financial sector, education and innovation. Tax
incentives will be granted to infrastructure, real estate and start-up investments which are expected to encourage
more private investments in these sectors and stimulate India’s economic growth.

Business Objectives

Investment Objective

Fairfax India is an investment holding company whose objective is to achieve long term capital appreciation, while
preserving capital, by investing in public and private equity securities and debt instruments in India and Indian
businesses or other businesses with customers, suppliers or business primarily conducted in, or dependent on, India
(‘‘Indian Investments’’). The company makes all or substantially all of its investments either directly or through one
of its wholly-owned subsidiaries based in Mauritius, FIH Mauritius Investments Ltd (‘‘FIH Mauritius’’) and FIH
Private Investments Ltd (‘‘FIH Private’’). In 2019 the company formed Anchorage Infrastructure Investments
Holdings Limited (‘‘Anchorage’’), a wholly-owned subsidiary of FIH Mauritius based in India.

Investment Strategy

The company invests in businesses that are expected to benefit from India’s pro-business political environment, its
growing middle class and its demographic trends that are likely to drive strong growth for several years. Sectors of the
Indian economy that the company believes will benefit most from such trends include infrastructure, financial
institutions, consumer services, retail and exports. The company is not limited to investing solely in these sectors
and intends to invest in other sectors as and when opportunities arise.

The company utilizes, and expects to benefit significantly from, the experience and expertise of Fairfax and the
Portfolio Advisor, and their respective networks in India, to source and evaluate investment opportunities for
the company.

The company employs a conservative, fundamental value-based approach to identifying and investing in high
quality public and private Indian businesses. This approach is designed to compound book value per share over the
long term. The company will seek attractive risk-adjusted returns, but will at all times seek downside protection and
attempt to minimize the loss of capital.

The company intends to make Indian Investments with a view to be a strategic partner to grow the business and as a
result optimize investment returns for the shareholders of Fairfax India. The level and nature of this strategic
relationship will vary by investment. It may include one or more of the following, as deemed appropriate by the
company: (i) board appointment or nomination rights; (ii) board observer rights; (iii) input on management
selection; (iv) the provision of managerial assistance; and (v) ongoing monitoring and cooperation with the board
and management of the portfolio business to ensure that its strategy is being implemented in a manner that is
consistent with the investment objectives of the company and with the company’s and Fairfax’s fundamental values
(as set forth in Fairfax’s guiding principles which are included in Fairfax’s publicly available annual reports).

Fairfax India’s involvement with the Indian Investments may include providing specialized guidance or expertise in
limited circumstances or on a temporary basis and does not extend to any involvement in the day-to-day operations
of those Indian Investments. Activities are expected to be ancillary and undertaken to maximize returns from
investments. Board representation is sought only to maintain protective rights and to maximize the value of the
company’s investment for its shareholders.

The company would exit its private Indian Investments (‘‘Private Indian Investments’’ as disclosed in the Indian
Investments section of this MD&A) either through initial public offerings (‘‘IPO’’) or private sales. For publicly traded
Indian Investments (‘‘Public Indian Investments’’ as disclosed in the Indian Investments section of this MD&A), exit
strategies may include selling the investments through private placements or in public markets.

Investment Selection

To identify potential investments, the company principally relies on the experience and expertise of Fairfax and the
Portfolio Advisor, and their respective networks in India.

The following is an illustrative list of criteria that the company, Fairfax and the Portfolio Advisor believe to be
paramount when identifying and investing in Indian Investments:

Attractive valuation – The company’s conservative fundamental value approach leads it to focus on businesses that
have positive, stable cash flows that can be purchased at discounted multiples. The company does not invest in
start-up businesses or businesses that have speculative business plans.

Experienced and aligned management – The company focuses on businesses with experienced, entrepreneurial
management teams with strong, long term track records. The company generally requires the portfolio businesses to
have in place, either prior to or immediately following investment by the company, proper incentives to drive the
businesses’ profitability and maintain effective governance structures.

Strong competitive position in industry – The company seeks to invest in businesses that hold leading and defendable
market positions, possess strong brand power and are well-positioned to capitalize on the growth opportunities in

FAIRFAX INDIA HOLDINGS CORPORATION

the Indian economy. The company also seeks to invest in businesses that demonstrate significant competitive
advantages as compared to their peers, such that they are in a position to protect their market position and
profitability.

Alignment of the management team with the values of the company – The company, Fairfax and the Portfolio Advisor all
seek to adhere to the highest standards of business practices and ethics. The company requires that the management
teams at each of its portfolio businesses adhere to a similar standard of business practices and ethics and adhere to the
company’s fundamental values, as described above.

The Portfolio Advisor, the company and their affiliates conduct thorough due diligence investigations when
evaluating any Indian Investment prior to making a recommendation to the company and its subsidiaries to invest.
This generally includes consultations with Fairfax’s network of current and former management teams, consultants,
competitors, investment bankers and senior executives to assess, among other things, the industry dynamics, the
character of the management team and the viability of the business plan.

More specifically, due diligence in respect of a particular investment opportunity typically includes, among other
items as deemed necessary from time to time: (i) review of historical and projected financial information; (ii) on-site
visits; (iii) interviews with management, employees, customers and vendors; (iv) review of material agreements;
(v) background checks; and (vi) research relating to the businesses’ management, industry, markets, products and
services, and competitors.

Investment Restrictions

The company intends to make multiple different investments as part of its prudent investment strategy. Indian
Investments may be financed through equity or debt offerings as part of the company’s objective to reduce its cost of
capital and provide returns to common shareholders. At December 31, 2020 the company determined that it was in
compliance with the Investment Concentration Restriction.

Indian Investments

Cautionary Statement Regarding Financial Information of Significant Indian Investments

Fairfax India has agreed to voluntarily provide within the MD&A, summarized financial information prepared in
accordance with IFRS for all of its Indian Investments for which it had previously filed a business acquisition report
in accordance with section 8.2 of National Instrument 51-102 Continuous Disclosure Obligations. National Collateral
Management Services Limited, IIFL Finance Limited (formerly IIFL Holdings Limited), Sanmar Chemicals Group,
Bangalore International Airport Limited and CSB Bank (collectively, ‘‘Significant Indian Investments’’), for which
the company had previously filed business acquisition reports, prepared their financial statements in accordance
with Indian Accounting Standards (‘‘Ind AS’’), with the exception of the financial statements of CSB Bank prepared
in accordance with Indian Generally Accepted Accounting Principles (‘‘Indian GAAP’’) as a result of the RBI’s
decision to defer implementation of Ind AS for scheduled commercial banks until further notice. Ind AS are based on
and substantially converged with IFRS as issued by the IASB. Fairfax India is limited with respect to the amount of
independent verification it is able to perform on the Significant Indian Investments’ financial statements. The
unaudited summarized financial information contained in this MD&A was prepared exclusively for Fairfax India.
Such unaudited financial information is the responsibility of the respective managements and has been prepared by
them using recognition, measurement and presentation principles consistent with IFRS as issued by the IASB, and
provided to the company in Indian rupees.

The company’s Significant Indian Investments’ fiscal years each end on March 31. Summarized financial
information of the company’s Significant Indian Investments has generally been provided for the periods

subsequent to the company’s investment and to the extent that the most recent interim financial information is
available to the company’s management. Significant Indian Investments’ summarized financial information should
be read in conjunction with Fairfax India’s historical consolidated financial statements including the notes thereto
and the related MD&A as well as Fairfax India’s other public filings.

Fairfax India has no knowledge that would indicate that the Significant Indian Investments’ summarized financial
information contained herein requires material modifications. However, readers are cautioned that the Significant
Indian Investments’ summarized financial information contained in this MD&A may not be appropriate for
their purposes.

Summary of Indian Investments

The table below provides a summary of the company’s Indian Investments:

Dates Acquired

Ownership
%

Cost

Fair
value

Net Ownership
%

change

Cost

Fair
value

Net
change

December 31, 2020

December 31, 2019

Public Indian Investments:

Common stocks:

IIFL Finance(1)

IIFL Wealth

IIFL Securities

CSB Bank

Privi Speciality /
Fairchem(2)

Fairchem Organics(2)

5paisa

Other

December 2015 and February 2017

22.4%

–

131,478

26.5%

–

166,014

May 2019

13.8%

191,443

166,702

(24,741)

13.9%

191,443

191,476

26.5%

91,310

55,603

(35,707)

26.5%

91,310

48,796

(42,514)

October 2018, March and June 2019

49.7%

169,447

214,341

44,894

49.7%

169,447

229,262

59,815

February and August 2016

August 2020

October 2017 and August 2019

March and August 2018,
March to June 2020, August 2020

48.8%

26.6%

39,489

138,413

34,895

23,535

54,566

27,788

98,924

19,671

4,253

48.8%

74,384

127,413

53,029

–

26.6%

23,535

18,176

(5,359)

<1.0%

107,734

147,604

39,870

<1.0%

63,674

95,892

32,218

657,853

936,495

278,642

613,793

877,029

263,236

Private Indian Investments:

NCML CCD

Common stocks:

BIAL(3)

Sanmar

October 2019

–

13,970

14,884

914

–

13,970

14,286

316

March and July 2017, May 2018

54.0%

652,982 1,396,117

743,135

54.0%

652,982 1,429,854

776,872

April 2016 and December 2019

42.9%

199,039

338,621

139,582

42.9%

199,039

412,930

213,891

Seven Islands

March, September and October 2019

48.5%

83,846

103,543

19,697

48.5%

83,846

88,800

4,954

NCML

Saurashtra

NSE

IH Fund

August 2015 and August 2017

89.5%

174,318

86,216

(88,102)

89.5%

174,318

120,734

(53,584)

February 2017

July 2016

51.0%

1.0%

30,018

26,783

32,812

72,617

2,794

45,834

51.0%

1.0%

30,018

26,783

31,204

57,210

1,186

30,427

January and November 2019,
December 2020

–

24,098

25,354

1,256

–

14,869

15,146

277

Total Indian Investments

1,862,907 3,006,659 1,143,752

1,809,618 3,047,193 1,237,575

1,205,054 2,070,164

865,110

1,195,825 2,170,164

974,339

(1) On March 30, 2020 IIFL Finance completed the merger with its subsidiary, India Infoline Finance Limited (‘‘India Infoline’’) through the issuance of
58,654,556 common shares of IIFL Finance to India Infoline’s minority shareholders. As a result of the merger Fairfax India’s equity interest in IIFL Finance
decreased from 26.5% at December 31, 2019 to 22.4% (see note 5 (Indian Investments) to the consolidated financial statements for the year ended
December 31, 2020).

(3) Cost and net change includes $74,202 (approximately 4.8 billion Indian rupees) of cash consideration paid attributable to the costs incurred to acquire the

additional 10.0% equity interest in BIAL in July 2017.

FAIRFAX INDIA HOLDINGS CORPORATION

Summary of Changes in the Fair Value of the Company’s Indian Investments

A summary of changes in the fair value of the company’s Public and Private Indian Investments during 2020 is
as follows:

2020

Balance
as of

Fairchem
January 1 Purchases Reorganization

Net
realized
gains on
investments

Sales

Net
change in
unrealized
gains
(losses) on

Net
unrealized
foreign
currency
translation
investments gains (losses)

Balance
as of
December 31

Public Indian Investments:

Common stocks:

IIFL Finance

IIFL Wealth

IIFL Securities

CSB Bank
Privi Speciality (formerly Fairchem)(1)
Fairchem Organics(1)
5paisa

Other

166,014

191,476

48,796

229,262
127,413

–

18,176

95,892

–

–
–

–

84,672

Total Public Indian Investments

877,029

84,672

Private Indian Investments:

Bonds – NCML CCD

Common stocks:

BIAL

Sanmar

Seven Islands

NCML

Saurashtra

NSE

IH Fund

14,286

1,429,854

412,930

88,800

120,734

31,204

57,210

15,146

Total Private Indian Investments

2,170,164

–

9,506

Total Indian Investments

3,047,193

94,178

–

–
(34,895)

34,895

–

–
–

–

–
–

–

(41,913)

3,782

–

(277)

–

(30,262)

(20,058)

7,823

(9,484)
48,732

18,808

9,889

5,896

(4,274)

(4,716)

(1,016)

(5,437)
(2,837)

863

(277)

(725)

31,344

(18,419)

131,478

166,702

55,603

214,341
138,413

54,566

27,788

147,604

936,495

915

(317)

14,884

(669)

(63,844)

16,558

(31,277)

2,297

16,493

1,249

(33,068)

(10,465)

(1,815)

(3,241)

(689)

(1,086)

(270)

1,396,117

338,621

103,543

86,216

32,812

72,617

25,354

(58,278)

(50,951)

2,070,164

(42,190)

3,782

(26,934)

(69,370)

3,006,659

(1) On August 12, 2020 as part of the Fairchem Reorganization, Fairchem spun off Fairchem Organics, whose shares were subsequently listed on the BSE and
NSE of India on December 24, 2020. Concurrent with the spin off transaction, Privi Organics merged with the remaining Fairchem business and was
renamed Privi Speciality Chemicals Limited (‘‘Privi Speciality’’). Common shares of Privi Speciality continue to trade on the BSE and NSE of India.

A summary of changes in the fair value of the company’s Public and Private Indian Investments during 2019 is
as follows:

2019

Balance
as of
January

Sales /
1 Purchases Reorganization Transfer Redemptions

IIFL Holdings

Net
realized
gains
(losses) on
investments

Net
change in
unrealized
gains
(losses) on

Net
unrealized
foreign
currency
translation
investments gains (losses)

Balance
as of
December
31

Public Indian Investments:

Common stocks:

IIFL Finance

(formerly IIFL
Holdings)(1)
IIFL Wealth(1)
IIFL Securities(1)
CSB Bank(2)
Fairchem
5paisa(3)
Other

613,458

–

93,081

96,574

11,913

98,180

–

80,987

–

6,483

–

Total Public Indian
Investments

913,206

87,470

Private Indian Investments:

Loan – NCML Loan

Bonds:

NCML CCD

Sanmar bonds

Common stocks:

BIAL
Sanmar(4)
NCML

Seven Islands

Saurashtra

NSE

IH Fund

Derivatives:

5paisa forward
derivative(3)
Sanmar forward
derivative(4)

–

392,776

704,077

217,170

165,380

–

24,843

60,285

–

13,970

–

178,422

–

83,846

–

14,893

–

19,617

Total Private Indian

Investments

1,564,531

310,748

Total Indian

Investments

2,477,737

398,218

(282,753)

191,443

91,310

–

(19)

36,112

–

(45)

(36,907)

7,115

(196,040)

4,620

(40,916)

60,901

33,412

30,182

(4,763)

(4,587)

(1,598)

(5,643)

(2,573)

(232)

(2,678)

166,014

191,476

48,796

229,262

127,413

18,176

95,892

(36,926)

43,182

(107,829)

(22,074)

877,029

(13,970)

13,970

–

(433,873)

156,540

–

(24)

–

241

(107,758)

751,487

23,062

(41,594)

7,119

7,001

(1,779)

482

(2,706)

2,767

–

(19,816)

–

(7,685)

(25,710)

(5,724)

(3,052)

(2,165)

(640)

(1,296)

(205)

(61)

199

14,286

–

1,429,854

412,930

120,734

88,800

31,204

57,210

15,146

–

(436,603)

139,491

638,261

(46,264)

2,170,164

(473,529)

182,673

530,432

(68,338)

3,047,193

(1) On May 31, 2019 IIFL Holdings spun off IIFL Wealth and IIFL Securities in the IIFL Holdings Reorganization. IIFL Holdings was renamed IIFL Finance, and
shares of IIFL Wealth and IIFL Securities were publicly listed on the BSE and NSE of India in September 2019. The amount recorded in net realized gains on
investments was $36,112 (all of which was recognized as unrealized gains on investments in prior periods).

(2) On December 4, 2019 CSB Bank closed its IPO and commenced trading on both the BSE and NSE of India.

(3) On August 20, 2019 Fairfax India participated in a 5paisa rights offer and acquired additional 5paisa common shares for cash consideration of $3,777. As a
result the company derecognized the 5paisa forward derivative asset with a carrying value of $2,706, recorded a realized gain of $2,767 and recorded its
investment in 5paisa common shares at a fair value at that date of $6,483.

(4) On December 21, 2019 Fairfax India acquired additional Sanmar common shares for cash consideration of $198,039. As a result the company derecognized
the Sanmar forward derivative obligation with a carrying value of $19,617, recorded a realized loss of $19,816 and recorded its investment in Sanmar
common shares at a fair value at that date of $178,422.

Public Indian Investments

FAIRFAX INDIA HOLDINGS CORPORATION

Investment in IIFL Holdings Limited / IIFL Finance Limited

IIFL Holdings Limited

Business Overview

IIFL Holdings Limited (‘‘IIFL Holdings’’) was a publicly traded diversified financial services holding company located
in Mumbai, India with principal lines of business in wealth management, capital markets and other activities
(comprised of retail investment brokerage, institutional equities, investment banking and financial product
distribution) and a non-banking financial company (‘‘NBFC’’). Over the past two decades, IIFL Holdings has created a
brand that is known for its informed research and cutting-edge technology, extensive domestic and global footprint
and high service standards.

Transaction Description

IIFL Finance Limited

Business Overview

Additional information can be accessed from IIFL Finance’s website www.iifl.com.

Transaction Description

In March 2020 IIFL Finance was granted an NBFC license by the RBI and on March 30, 2020 completed the merger
with its subsidiary, India Infoline Finance Limited (‘‘India Infoline’’) through the issuance of 58,654,556 common
shares of IIFL Finance to India Infoline’s minority shareholders. Minority shareholders of India Infoline received
135 common shares of IIFL Finance for every 100 common shares of India Infoline held. As a result of the merger
Fairfax India’s equity interest in IIFL Finance decreased from 26.5% at December 31, 2019 to 22.4% at
March 30, 2020.

At December 31, 2020 the company held 84,641,445 common shares of IIFL Finance representing a 22.4% equity
interest (December 31, 2019 – 26.5%). Fairfax had made an investment in IIFL Holdings prior to Fairfax India’s
investment and in that capacity was able to recommend the appointment of one board representative out of the
eight-member board of directors. At December 31, 2020 the company did not have any representation on the board
of IIFL Finance other than the board member appointed by Fairfax.

Key Business Drivers, Events and Risks

IIFL Finance’s key business drivers include its access to well-diversified sources of funds, a diversified asset portfolio
with a strategic focus on households, and its vast physical network to provide a one-stop shop for financial products
to its customers. At December 31, 2020 IIFL Finance had the largest presence amongst retail focused NBFCs with
2,439 branches across 25 states in India.

IIFL Finance is a pioneer in the adoption of end-to-end digitization across processes with demonstrated ability to
leverage technology to streamline processes, reduce turnaround times and use data-driven analytical models to help
manage delinquencies.

IIFL Finance continues to achieve growth in volume and profit, driven primarily by core growth segments of
affordable home loans, gold loans, small business loans and microfinance. As part of its capital optimization strategy,
IIFL Finance focuses on originating assets that meet bank credit underwriting standards and are Priority Sector
Lending compliant, enabling growth of its assigned and securitized loan book while managing liquidity and credit
risk. In addition, IIFL Finance has entered into various bank partnerships for the co-lending, sourcing and servicing
of loans. These partnerships provide the banks with access to IIFL Finance’s vast branch network and segment
experience to originate and service loans, while allowing IIFL Finance to scale its customer base and leverage capital
more efficiently.

In February 2020 IIFL Finance completed an allotment of $400 million 5.875% senior secured notes due in 2023. The
gross proceeds from the notes will be used to support growth.

At December 31, 2020 IIFL Finance managed assets worth approximately 423 billion Indian rupees (approximately
$6 billion) comprised of home loans (32%), gold loans (29%), business loans (18%), construction and real estate
finance (10%), microfinance (9%) and capital market finance (2%).

In January 2021 IIFL Finance announced plans for the transfer of its construction and real estate loan assets to an
Alternate Investment Fund (‘‘AIF’’). Subject to the completion of due diligence, the AIF is expected to comprise
33.3% sponsor contribution from IIFL Finance, 33.3% contribution from a renowned global alternate investment
manager who has signed a binding agreement with IIFL Asset Management Limited (a subsidiary of IIFL Wealth), and
remaining contribution from other investors. The AIF has a target size of 36 billion Indian rupees (approximately
$0.5 billion) for the secondary purchase of non-convertible debentures of real estate projects and providing
additional liquidity for the projects’ completion.

COVID-19 Impact

During 2020 IIFL Finance continued to operate as financial services are considered essential services under India’s
lockdown guidelines. IIFL Finance has shifted its strategy to focus on optimizing capital through the origination of
secured retail loans suitable for assignment and bank partnerships, while accelerating its technology integration to
improve efficiencies, reduce costs and enhance customer engagement.

As discussed in the Business Developments section under the heading Operating Environment of this MD&A, the RBI
has introduced several measures to assist borrowers facing financial difficulty on account of COVID-19, including
the deferral of the collection of principal and interest payments on all term loans outstanding on March 1, 2020 up to
the extended date of August 31, 2020. IIFL Finance has been sufficiently capitalized to withstand any liquidity
pressures arising from the moratorium period and experienced limited exposure to the one-time debt restructuring
option permitted by the RBI. IIFL Finance continued to source long term funding during the pandemic primarily
through term loans and refinancing from banks and issuances of non-convertible debentures, as well as incremental
funding through the assignment and securitization of loans.

Valuation and Consolidated Financial Statement Impact

At December 31, 2020 the fair value of the company’s investment in IIFL Finance was $131,478 (December 31, 2019 –
$166,014) with the changes in fair value in 2020 and 2019 aggregated with IIFL Holdings and presented in the tables
at the outset of the Indian Investments section of this MD&A. IIFL Finance’s share price decreased by 18.9% from
140.00 Indian rupees per share at December 31, 2019 to 113.50 Indian rupees per share at December 31, 2020.

In 2020 the consolidated statements of earnings (loss) included dividend income earned from the company’s
investment in IIFL Finance of $2,628 (2019 – $6,006).

FAIRFAX INDIA HOLDINGS CORPORATION

Subsequent to December 31, 2020

On February 17, 2021 the company received dividend income from the company’s investment in IIFL Finance of
approximately $3.5 million (254 million Indian rupees).

Summarized Financial Information of IIFL Finance

IIFL Finance’s fiscal year ends on March 31. Summarized below are IIFL Finance’s balance sheets at September 30,
2020 and March 31, 2020.

Balance Sheets
(unaudited – US$ thousands)

Financial assets
Non-financial assets
Financial liabilities
Non-financial liabilities
Shareholders’ equity

September 30, 2020(1) March 31, 2020(1)
4,378,051
161,342
3,886,568
22,880
629,945

4,620,496
165,941
4,064,179
44,585
677,673

(1) The net assets of IIFL Finance were translated at September 30, 2020 at $1 U.S. dollar = 73.78 Indian rupees and at March 31, 2020 at

$1 U.S. dollar = 75.65 Indian rupees. The exchange rates used were the spot rates prevailing on those respective dates.

Financial assets increased primarily as a result of growth in IIFL Finance’s loan book, particularly in gold loans, home
loans and the capital market segment, partially offset by a decrease in construction and real estate loans and
increased COVID-19 provisioning (discussed in further detail below). IIFL Finance’s asset quality remains stable with
gross and net non-performing assets at 1.8% and 0.8% of IIFL Finance’s loans at September 30, 2020, down from
2.3% and 1.0% at March 31, 2020. Non-financial assets increased primarily due to increased deferred tax assets,
partially offset by a decrease in other non-financial assets. Financial liabilities increased primarily due to the issuance
of non-convertible debentures partially offset by net repayments of other borrowings. Non-financial liabilities
increased primarily due to an increase in current tax liabilities and other non-financial liabilities, principally
comprised of advances from customers.

Summarized below are IIFL Finance’s statements of earnings for the six months ended September 30, 2020 and 2019.

Statements of Earnings
(unaudited – US$ thousands)

Revenue
Earnings before income taxes
Net earnings

Six months ended
September 30, 2020(1)
374,148
44,732
32,553

Six months ended
September 30, 2019(1)(2)
343,471
67,894
37,396

(1) Amounts for the six months ended September 30, 2020 and 2019 were translated into US$ using the average exchange rates of $1

U.S. dollar = 75.11 Indian rupees and $1 U.S. dollar = 69.96 Indian rupees prevailing during those periods.

(2) The summarized financial information has been presented for IIFL Finance, the remaining company after the IIFL Holdings

Reorganization and effects of the merger with India Infoline.

IIFL Finance’s revenue increased primarily due to an increase in interest and other income arising from higher assets
under management, particularly across higher yielding segments such as gold loans and microfinance which
increased 65% and 28% respectively from the comparative period. Earnings before income taxes and net earnings
decreased primarily due to the incremental COVID-19 loan loss provisioning of 4.1 billion Indian rupees
(approximately $55 million) recorded in the six month period ended September 30, 2020, partially offset by the
increased interest income discussed above and decreased operating expenses attributable to IIFL Finance’s cost
optimization plan. Net earnings in 2019 were impacted by a reversal of previously recognized deferred tax assets of
1.0 billion Indian rupees (approximately $14 million).

Investment in IIFL Wealth Management Limited

Business Overview

Additional information can be accessed from IIFL Wealth’s website www.iiflwealth.com.

Transaction Description

The shares of IIFL Wealth were listed on the BSE and NSE of India on September 19, 2019.

At December 31, 2020 the company held 12,091,635 common shares of IIFL Wealth representing a 13.8% equity
interest (December 31, 2019 – 13.9%). At December 31, 2020 the company had appointed one of the eleven IIFL
Wealth board members.

Key Business Drivers, Events and Risks

IIFL Wealth provides its clients with investment management services with the aim to preserve capital while
generating steady inflation-adjusted returns from a diversified portfolio with low volatility, along with additional
services such as trust and estate planning and credit solutions. IIFL Wealth has a presence in 29 locations across
6 countries and continues to be one of India’s leading fund managers of alternative investment funds.

India’s wealthy are expected to increase their net assets through organic growth of existing assets or from the sale of
businesses (unlocking potential value through secondary sales), with rising new wealth creators fueled by innovative
startups, family businesses with strong professional management and the demographic advantage of a very large and
young mass affluent segment. In 2019 it was estimated that there were over 260,000 ultra high and high net worth
households, with significant growth expected of both the number of wealthy Indians and their affluence.

In 2020 IIFL Wealth launched IIFL One, a service offering that institutionalizes the complete range of investment
options for clients under a competitive and transparent fee structure. The model redefines client engagement in
India’s wealth management industry in terms of its approach to transparent conduct and open disclosures. IIFL
Wealth will endeavour, over the course of the next few years, to grow this model to be the primary engagement
model with clients over the historical broker/dealer distribution model where commissions were earned on a
transaction by transaction basis. They aim to evolve into a predictable, revenue-led, asset under management-driven
organization, different from an industry dominated by product promotion and distribution.

In its 2020 fiscal year, IIFL Wealth changed its income model to recognize the majority of its distribution income on
an annuity basis, moving away from the upfront income model that was previously followed, leading to a more
stable annual recurring revenue model.

At December 31, 2020 the wealth management business had assets under management of 1,682 billion Indian rupees
(approximately $23 billion) (December 31, 2019 – 1,412 billion Indian rupees (approximately $20 billion)) and the
asset management business had assets under management of 323 billion Indian rupees (approximately $4 billion)
(December 31, 2019 – 269 billion Indian rupees (approximately $4 billion)).

On April 24, 2020 IIFL Wealth completed the acquisition of L&T Capital Markets Limited (‘‘L&T’’), a wealth
management company providing services to individual and institutional investors, for 3.0 billion Indian rupees
(approximately $39 million), which includes cash and cash equivalents at L&T. L&T was subsequently renamed IIFL

FAIRFAX INDIA HOLDINGS CORPORATION

Wealth Capital Markets Limited, and its integration added 99 billion Indian rupees (approximately $1.3 billion) of
assets under management and over 900 relevant families to the IIFL Wealth portfolio.

COVID-19 Impact

During 2020 IIFL Wealth continued to operate at close to full capacity as financial services are considered essential
services under India’s lockdown guidelines. A robust technology platform and an extensive business continuity plan
have ensured that all of IIFL Wealth’s employees have seamless connectivity and zero disruption as they continue to
work from the safety of their homes.

IIFL Wealth continues to monitor the impact of COVID-19 on the economic environment and changes in client
sentiment or investment behaviour. During the period, the business maintained close and impactful client
engagement through multiple touchpoints and completed stringent review of client risk profiles, focusing on long
term portfolio construction. From a liquidity perspective IIFL Wealth along with its NBFC subsidiary, IIFL Wealth
Finance Limited, continue to be well capitalized and insulated from any shocks in the domestic debt markets.

Valuation and Consolidated Financial Statement Impact

At December 31, 2020 the fair value of the company’s investment in IIFL Wealth was $166,702 (December 31, 2019 –
$191,476) with the changes in fair value in 2020 and 2019 presented in the tables at the outset of the Indian
Investments section of this MD&A. IIFL Wealth’s share price decreased by 10.9% from 1,130.30 Indian rupees per
share at December 31, 2019 to 1,007.35 Indian rupees per share at December 31, 2020.

In 2020 the consolidated statements of earnings (loss) included dividend income earned from the company’s
investment in IIFL Wealth of $8,145 (2019 – $1,718).

Subsequent to December 31, 2020

On February 26, 2021 the company received dividend income from the company’s investment in IIFL Wealth of
approximately $4.9 million (363 million Indian rupees).

Investment in IIFL Securities Limited

Business Overview

Additional information can be accessed from IIFL Securities’ website www.iiflsecurities.com.

Transaction Description

The shares of IIFL Securities were listed on the BSE and NSE of India on September 20, 2019.

At December 31, 2020 the company held 84,641,445 common shares of IIFL Securities representing a 26.5% equity
interest (December 31, 2019 – 26.5%). At December 31, 2020 the company did not have any representation on the
board of IIFL Securities.

Key Business Drivers, Events and Risks

IIFL Securities’ key business drivers relate to its ability to identify emerging trends in the capital markets sector in
India and provide a comprehensive range of financial products and services that cater to a diverse customer base. IIFL
Securities is a key player in both retail and institutional segments. The company’s strategy continues to be built on

improving and fortifying its research content, and investing in technology for trading platforms as well as human
resources.

IIFL Securities has a presence in approximately 2,500 locations, covering branches and business partners in over
500 cities in India along with a strong digital presence backed by cutting-edge technology. IIFL Securities’ trading
interfaces have continued to gain traction and popularity, including mobile applications IIFL Markets and IIFL
Mutual Funds which are widely used and highly rated, as well as the Advisor Anytime Anywhere (‘‘AAA’’) platform
for the growing sub-broker segment. AAA is a mobile office solution for investment portfolio management which
empowers aspiring entrepreneurs in the capital markets and enhances their ability to reach investors in smaller
towns and cities. At December 31, 2020 IIFL Securities had assets under management across its retail segment
(comprised of depository participant services and financial product distribution) of 387 billion Indian rupees
(approximately $5 billion).

IIFL Securities’ institutional broking franchise business services over 700 domestic and foreign clients, and provides
comprehensive research coverage over 225 stocks in more than 20 sectors, which account for over 80% of India’s
market capitalization. The investment banking business closed 19 transactions in 2020 across the capital markets
and advisory business segments, despite volatile market conditions, and has a number of transactions in
the pipeline.

In December 2020, IIFL Securities announced an offer for the buy-back of equity shares from shareholders of the
company (excluding promoters, promoter group and persons in control of the company), at a price not exceeding
54.00 Indian rupees per share, up to aggregate consideration of 900 million Indian rupees (approximately
$12 million at period end exchange rates). The buy-back of shares commenced on December 30, 2020.

COVID-19 Impact

During 2020 IIFL Securities continued to operate as financial services were considered essential services under India’s
lockdown guidelines. During the lockdown period, IIFL Securities’ technology platforms continued to provide
uninterrupted service and the account opening process was transitioned to be completely digitized.

Subsequent to December 31, 2020

On February 15, 2021 IIFL Securities announced the completion of the buy-back offer, which resulted in the
buy-back of 17,000,394 common shares of IIFL Securities for 867 million Indian rupees (approximately $12 million).
The company did not tender any shares and as a result, its equity interest in IIFL Securities increased to 27.9%.

On February 24, 2021 IIFL Securities was announced as the successful bidder for the transfer of electronic securities
holding accounts (‘‘demat accounts’’) held by another Indian stock broking and depository participant services
company. IIFL Securities is expected to acquire 1.1 million demat accounts which will increase its assets under
management. The demat accounts had a custody value of approximately 3.0 trillion Indian rupees (approximately
$41 billion) at January 31, 2021.

Valuation and Consolidated Financial Statement Impact

At December 31, 2020 the fair value of the company’s investment in IIFL Securities was $55,603 (December 31,
2019 – $48,796) with the changes in fair value in 2020 and 2019 presented in the tables at the outset of the Indian
Investments section of this MD&A. IIFL Securities’ share price increased by 16.6% to 48.00 Indian rupees per share at
December 31, 2020 from 41.15 Indian rupees per share at December 31, 2019.

Investment in CSB Bank Limited

Business Overview

CSB Bank is a publicly traded company located in Thrissur, India, established in 1920 and is a full-service bank
offering retail banking, non-resident Indian banking services, small-to-medium enterprise and wholesale banking
services through 454 branches and 319 automated teller machines across India.

Additional information can be accessed from CSB Bank’s website www.csb.co.in.

FAIRFAX INDIA HOLDINGS CORPORATION

Transaction Description

(iv) July 8, 2019: the company funded the June 29, 2019 capital call.

(v) August 7, 2019: the company exercised its CSB Bank warrants to acquire CSB Bank common shares. No CSB
Bank warrants remain outstanding.

At December 31, 2020 the company had appointed two of the seven CSB Bank board members.

Key Business Drivers, Events and Risks

According to the RBI, India’s banking sector is sufficiently capitalized and well-regulated. The increase in India’s
working population and growth in disposable income is anticipated to increase the demand for banking related
services, particularly in rural banking locations. In addition, the Indian banking industry has evolved through
technology innovations in digital payments systems, mobile and online banking.

CSB Bank’s key business drivers relate to its ability to provide financial services in India, particularly in the area of
retail, SMEs, gold and corporate lending, and mobilize low cost deposits in the form of current accounts, savings
accounts and non-resident Indian deposits. CSB Bank has recently taken various strategic initiatives, including
attracting talent to its sales and marketing team, as well as creating specialized banking verticals in gold, two-wheeler
vehicles, small-to-medium enterprise and wholesale banking. Non-performing assets (‘‘NPA’’) are being addressed by
CSB Bank through the creation of asset recovery branches to accelerate delinquent loan recovery, with the goal of
effectively minimizing losses by improving credit monitoring and risk management practices. In addition, CSB Bank
continues to strive for increases in employee productivity and will invest in technology across its banking platforms,
providing more efficient and cost effective services for its customers. CSB has plans to open more than 100 branches
in its fiscal year ended March 31, 2021, of which 43 branches were opened as at December 31, 2020.

Banks in India are highly regulated by the RBI including specific regulations on shareholder voting rights,
shareholdings and board representation. The voting rights of any one shareholder of banks in India are limited to
26.0% of available voting rights subject to change as notified by the RBI from time to time. In addition, the RBI

stipulates ownership limits for shareholders of banks in India in the long run. Fairfax India is required to follow a
dilution schedule for its ownership in CSB Bank whereby: (i) the company was required to purchase a minimum of
40.0% of the voting equity shares in CSB Bank within 5 years which was completed; (ii) the company’s shareholding
in CSB Bank must be brought down to 30.0% of the voting equity shares within 10 years; and (iii) the company’s
shareholding in CSB Bank must be brought down to 15.0% of the voting equity shares within 15 years. In addition,
the RBI mandated that CSB Bank list its shares on the BSE and NSE of India through an IPO.

On December 4, 2019 CSB Bank closed its IPO at a price of 195.00 Indian rupees per share.

COVID-19 Impact

During 2020 CSB Bank continued to operate as financial services are considered essential services under India’s
lockdown guidelines, with the exception of certain retail locations located in COVID-19 ‘‘hotspot’’ districts, which
were required to close. In light of the COVID-19 pandemic, CSB Bank has currently shifted its focus to gold loans and
away from retail, SMEs, and corporate lending. CSB Bank has a stable deposit franchise which remains largely
unaffected by the COVID-19 pandemic and deposit inflows remain positive despite interest rate reductions by the
RBI. As discussed in the Business Developments section under the heading Operating Environment of this MD&A, as
a result of measures being implemented by the RBI, the cost of funds for CSB Bank has decreased resulting in healthy
lending spreads and a sustainable net interest income growth.

On March 27, 2020 the RBI permitted all banks and NBFCs to defer the collection of principal and interest payments
on all term loans outstanding on March 1, 2020 by three months to May 31, 2020, and on May 22, 2020 the RBI
extended the deferral by another three months to August 31, 2020. CSB Bank had sufficient capital and adequate
investments which allowed it to withstand liquidity pressures from the moratorium on loan payments.

Valuation and Consolidated Financial Statement Impact

At December 31, 2020 the company estimated the fair value of its investment in CSB Bank based on the bid price less
a discount for lack of marketability of 20.9% on the remaining common shares subject to selling restrictions
(December 31, 2019 – 12.0%). At December 31, 2020 the fair value of the company’s investment in CSB Bank was
$214,341 (December 31, 2019 – $229,262) with the changes in fair value for 2020 and 2019 presented in the tables at
the outset of the Indian Investments section of this MD&A. CSB Bank’s share price increased by 1.2% from
215.55 Indian rupees per share at December 31, 2019 to 218.20 Indian rupees per share at December 31, 2020.

CSB Bank’s Summarized Financial Information

CSB Bank’s fiscal year ends on March 31. Summarized below are CSB Bank’s balance sheets at September 30, 2020 and
March 31, 2020.

Balance Sheets
(unaudited – US$ thousands)

Financial assets
Non-financial assets
Financial liabilities
Non-financial liabilities
Shareholders’ equity

September 30, 2020(1)
2,851,190
155,946
2,674,412
49,795
282,929

March 31, 2020(1)
2,339,259
162,116
2,205,370
44,961
251,044

(1) The net assets of CSB Bank were translated at September 30, 2020 at $1 U.S. dollar = 73.78 Indian rupees and at March 31, 2020 at $1

U.S. dollar = 75.65 Indian rupees. The exchange rates used were the spot rates prevailing on those respective dates.

Financial assets increased primarily as a result of increased investment securities and loans and advances to
customers. Non-financial assets decreased primarily as a result of deferred tax expense in the current period resulting
in decreased deferred tax assets. Financial liabilities increased as a result of increased savings and term deposits from
customers and increased borrowings. Non-financial liabilities moderately increased primarily as a result of increased
interest accrued and other payables.

FAIRFAX INDIA HOLDINGS CORPORATION

Summarized below are CSB Bank’s statements of earnings for the six months ended September 30, 2020 and 2019.

Statements of Earnings
(unaudited – US$ thousands)

Revenue
Earnings before income taxes
Net earnings

Six months ended
September 30, 2020(1)
82,550
44,101
33,024

Six months ended
September 30, 2019(1)
53,681
16,151
10,461

(1) Amounts for the six months ended September 30, 2020 and 2019 were translated into US$ using the average exchange rates of $1

U.S. dollar = 75.11 Indian rupees and $1 U.S. dollar = 69.96 Indian rupees prevailing during those periods.

Revenue increased primarily as a result of an increase in net interest income due to higher yielding advances,
increased investments and reduced cost of deposits. Earnings before income taxes and net earnings for the six
months ended September 30, 2020 increased primarily reflecting increased revenues as discussed above and reduced
cost-income ratio (37.1% for the six months ended September 30, 2020 compared to 54.5% for the six months ended
September 30, 2019).

Investment in Fairchem Speciality Limited / Privi Speciality Chemicals Limited

Fairchem Speciality Limited

Business Overview

Transaction Description

In March 2017 Fairchem and Privi were merged with the surviving entity continuing as Fairchem and with no
changes to management of the underlying companies. Upon closing of the merger of Fairchem and Privi, the
company acquired a 48.8% equity interest in Fairchem for aggregate cash consideration of $74,384 (approximately
5.0 billion Indian rupees).

Privi Speciality Chemicals Limited

Business Overview

Privi Speciality is a publicly traded specialty chemical manufacturer located in Mumbai, India. Privi Speciality is a
supplier of aroma chemicals to the fragrance industry. Privi Speciality’s world-class products are the result of its very
strong research and development team that has proven expertise in developing new products, customizing aromas
per customer specifications, scaling up products from basic research to commercial scale, and designing process
improvements to drive quality and cost optimization. Privi Speciality has four manufacturing facilities located in
Mahad, Maharashtra and a manufacturing facility located in Jhagadia, Gujarat.

Additional information can be accessed from Privi Speciality’s website www.privi.com.

Transaction Description

At December 31, 2020 the company held 19,046,078 common shares, representing a 48.8% equity interest in Privi
Speciality (December 31, 2019 – 48.8%). Subsequent to the anticipated closing of an open offer being made to public
shareholders of Fairchem Organics as disclosed later in this MD&A under the heading Investment in Fairchem
Organics Limited, the company intends to decrease its equity interest in Privi Speciality to 38.9% from its current
48.8% and increase its equity interest in Fairchem Organics to 66.7% from its current 48.8% through a series of
transactions with Privi’s founders in the first quarter of 2021, subject to applicable regulatory approvals and
customary closing conditions.

At December 31, 2020 the company had appointed one of the eight Privi Speciality board members.

Key Business Drivers, Events and Risks

Privi Speciality’s key business drivers relate to its ability to: (i) develop, manufacture and supply additional (newer)
aroma chemicals to existing customers; (ii) create value added products from the by-products of manufacturing
aroma chemicals; (iii) strengthen margins by increasing vertical integration capacities; and (iv) offer a variety of
aroma chemical products to sustain being recognized as a preferred supplier to the global fragrance market.

At December 31, 2020 Privi Speciality has received partial settlement on their insurance claim of 1,218.0 million
Indian rupees (approximately $17 million at period end exchange rates) in relation to its April 2018 manufacturing
facilities fire. On January 28, 2021 Privi Speciality received the balance on their insurance claim of 150.0 million
Indian rupees (approximately $2 million at exchange rates on that date). Privi has fully reinstated its manufacturing
facilities affected by the fire.

COVID-19 Impact

Privi Speciality was required to temporarily stop operations at the onset of India’s lockdown. Privi Speciality
gradually resumed operations and on April 7, 2020 restarted operations at its last plant. From June 2020 onwards
sales and operations returned to levels prior to COVID-19. Privi Speciality’s management is actively monitoring its
liquidity situation and has no significant, immediate short term liquidity needs.

Valuation and Consolidated Financial Statement Impact

At December 31, 2020 the fair value of the company’s investment in Privi Speciality was $138,413 (December 31,
2019 – $127,413) with the changes in fair value in 2020 and 2019 presented in the tables at the outset of the Indian
Investments section of this MD&A. Privi Speciality’s share price increased by 11.2% to 531.00 Indian rupees per share
at December 31, 2020 from 477.50 Indian rupees per share at December 31, 2019.

In 2020 the consolidated statements of earnings (loss) included dividend income earned from the company’s
investment in Privi Speciality of $385 (2019 – $679).

Investment in Fairchem Organics Limited

Business Overview

Fairchem Organics is a publicly traded specialty chemical manufacturer located in Ahmedabad, India. Fairchem
Organics manufactures oleochemicals used in the paints, inks and adhesives industries, as well as intermediate
neutraceutical and health products. It has developed an in-house technology that uses machinery designed and
manufactured by leading European companies to physically separate and convert waste generated during the
production of soya, sunflower and corn oils into valuable neutraceutical and fatty acids.

Additional information can be accessed from Fairchem Organics’ website www.fairchem.in.

Transaction Description

On August 12, 2020 Fairchem spun off its wholly-owned subsidiary Fairchem Organics in a non-cash transaction that
resulted in Fairfax India receiving one common share of Fairchem Organics for every three Fairchem common shares
held. Upon completion of the Fairchem Reorganization Fairfax India received 6,348,692 common shares of Fairchem
Organics representing 48.8% equity interest with an estimated fair value at that date of $34,895 (approximately
2.6 billion Indian rupees) which was estimated based on the company’s internal market approach valuation model

FAIRFAX INDIA HOLDINGS CORPORATION

which referenced the earnings multiple of a peer group of comparable companies. The distribution of new common
shares of Fairchem Organics to Fairchem shareholders was characterized as a return of capital which resulted in
Fairfax India recording the initial cost of its investment in Fairchem Organics at its fair value at that date.

At December 31, 2020 the company had appointed one of the six Fairchem Organics board members.

Subsequent to December 31, 2020

Key Business Drivers, Events and Risks

Fairchem Organics’ key business drivers relate to the success of its oleochemicals business and vertical integration
into value added products, such as fatty acids and natural vitamin E. As environmental concerns increase, the
demand for sustainable and biodegradable oleochemicals used in lubricants, paper printing, paints and coatings, and
animals feed industries has been experiencing strong growth in recent years.

India is one of the largest consumers of soft oils which provides Fairchem Organics with a competitive advantage by
having easy access to the raw materials that it uses in its manufacturing processes. The close proximity to raw
materials available in Asia (India, Malaysia and Indonesia) has resulted in a shift of oleochemical production away
from the U.S. and Europe. Lower cost of raw materials and efficient manufacturing processes have provided Fairchem
Organics with certain competitive advantages in comparison to its international peers. Fairchem Organics has a
strong market presence for some of its products, with little or no direct competition, and is considered to produce a
superior quality product in comparison to its competitors.

COVID-19 Impact

Fairchem Organics was required to temporarily stop operations at the onset of India’s lockdown, and resumed
operations on May 21, 2020. From June 2020 onwards sales and operations returned to levels prior to COVID-19.
Fairchem Organics’ management is actively monitoring its liquidity situation and has no significant, immediate
short term liquidity needs.

Valuation and Consolidated Financial Statement Impact

At December 31, 2020 the fair value of the company’s investment in Fairchem Organics was $54,566 with the
changes in fair value in 2020 presented in the table at the outset of the Indian Investments section of this MD&A.
Following the listing of shares of Fairchem Organics the share price decreased by 4.8% from 660.00 Indian rupees per
share at December 24, 2020 to 628.00 Indian rupees per share at December 31, 2020.

Investment in 5paisa Capital Limited

Business Overview

Additional information can be accessed from 5paisa’s website www.5paisa.com.

Transaction Description

At December 31, 2020 the company held 6,771,314 common shares of 5paisa representing a 26.6% equity interest
(December 31, 2019 – 26.6%). At December 31, 2020 the company did not have any representation on the board
of 5paisa.

Key Business Drivers, Events and Risks

5paisa’s key business driver relates to its ability to provide a digital method of trading in securities, which is emerging
as a new segment with the potential to achieve critical mass and grow in the near future with the spread of the
Internet, mobile penetration, telecommunication and data services throughout India. 5paisa’s ability to acquire,
service and grow the emerging do-it-yourself customer segment provides its customers with lower costs for various
financial products, enabling investors to invest seamlessly, on their own and from anywhere. 5paisa remains focused
on innovation based on understanding customer behaviour, and constantly strives to achieve technological
superiority through the developments of its robust trading platform, advanced mobile app, its Artificial-Intelligence
powered Robo-Advisory platform, and the paperless account opening process.

In February 2020 5paisa incorporated a wholly-owned subsidiary 5paisa Trading Limited to facilitate e-commerce
activity. In May 2020 5paisa, through its wholly-owned subsidiary, 5paisa P2P Limited (‘‘5paisa P2P’’), launched
5paisa Loans, a digital peer-to-peer lending platform which connects verified creditworthy lenders and individual
borrowers in India. 5paisa P2P is a registered NBFC with the RBI which received its Peer-to-Peer Lending license in
December 2019.

In September 2020 5paisa received approval from its board of directors (and subsequently from shareholders in
October 2020) to raise up to 11.5 billion India rupees in financing, comprised of up to 9 billion Indian rupees
through issuance of equity shares along with warrants or any other security and up to 2.5 billion Indian rupees
through issuance of non-convertible debentures on a private placement basis. 5paisa intends to use proceeds towards
customer acquisition and investments in technology.

At December 31, 2020 the 5paisa mobile application has reached over 6.4 million downloads (December 31, 2019 –
over 3.6 million downloads). The total customer base exceeded 1 million with a rapid pace of client acquisitions
throughout the year.

FAIRFAX INDIA HOLDINGS CORPORATION

COVID-19 Impact

During 2020 5paisa continued to operate as financial services were considered essential services under India’s
lockdown guidelines. 5paisa experienced a significant increase in retail participation and broking activity during this
period due to its largely digital service offerings combined with low costs.

Valuation and Consolidated Financial Statement Impact

At December 31, 2020 the fair value of the company’s investment in 5paisa was $27,788 (December 31, 2019 –
$18,176) with the changes in fair value in 2020 and 2019 presented in the tables at the outset of the Indian
Investments section of this MD&A. 5paisa’s share price increased by 56.5% from 191.60 Indian rupees per share at
December 31, 2019 to 299.85 Indian rupees per share at December 31, 2020.

Investment in Other Public Indian Investments

At December 31, 2020 the fair value of the company’s investment in Other Public Indian Investments was $147,604
(December 31, 2019 – $95,892) and represents less than 1.0% equity interest in each of the public Indian companies.
At December 31, 2020 the company did not have any board representation in Other Public Indian Investments.

The changes in fair value of the company’s investment in Other Public Indian Investments in 2020 and 2019 are
presented in the tables at the outset of the Indian Investments section of this MD&A.

In 2020 the consolidated statements of earnings (loss) included dividend income earned from the investment in
Other Public Indian Investments of $1,712 (2019 – $353).

Private Indian Investments

Cautionary Statement Regarding the Valuation of Private Indian Investments

In the absence of an active market for the company’s Private Indian Investments, fair values for these investments are
determined by management using industry acceptable valuation methodologies after considering the history and
nature of the business, operating results and financial conditions, outlook and prospects, general economic, industry
and market conditions, contractual rights relating to the investment, public market comparables (if available) and,
where applicable, other pertinent considerations. The process of valuing investments for which no active market
exists is inevitably based on inherent uncertainties and the resulting values may differ from values that would have
been used had an active market existed. The amounts at which the company’s Private Indian Investments could be
disposed of may differ from the fair values assigned and those differences may be material.

While the company’s valuation techniques for Private Indian Investments remained primarily unchanged during
2020 the development of unobservable inputs included added uncertainty related to the global economic disruption
caused by the ongoing and developing COVID-19 pandemic. The company has incorporated assumptions related to
the COVID-19 pandemic into the estimates of the amount and timing of future cash flows, and the uncertainty in
those assumptions has been incorporated into the company’s valuations of Private Indian Investments primarily
through higher risk premiums. Additional volatility in the fair values of Private Indian Investments may arise in
future periods if actual results differ materially from the company’s estimates.

Investment in Bangalore International Airport Limited

Business Overview

Bangalore International Airport Limited (‘‘BIAL’’) is a private company located in Bengaluru, India. BIAL, under a
concession agreement with the Government of India until the year 2068, has the exclusive rights to carry out the
development, design, financing, construction, commissioning, maintenance, operation and management of the
Kempegowda International Airport Bengaluru (‘‘KIAB’’) through a public-private partnership (the ‘‘concession
agreement’’). KIAB is the first greenfield airport in India built to the highest level of international standards through
a public-private partnership.

BIAL’s principal lines of business are as follows:

Aeronautical revenue from the airport

Aeronautical revenue is revenue earned from airlines for providing services such as landing, parking and housing fees
(‘‘aeronautical services’’). BIAL’s aeronautical revenues are also primarily driven by user development fees (‘‘UDF’’)
charged to airlines and passengers and determined by the Airports Economic Regulatory Authority of India
(the ‘‘regulator’’) in five-year control periods and are fixed in a manner to generate a 16.0% per annum regulated
return on invested equity (the ‘‘Regulatory Asset Base’’) for the airport operator. Under the current regulatory
approach applicable to BIAL, aviation concessions (which include cargo, ground handling, fuel throughput, and
into-plane services) are treated as aeronautical services. In addition, the regulator also attributes 30.0% of
non-aeronautical revenue (described below) as a part of aeronautical revenue when computing the regulated return.

Non-aeronautical revenue from the airport

All revenue sources from the airport other than aeronautical revenue (which includes aviation concessions, as
described earlier) are treated as non-aeronautical revenue. This includes revenue from activities such as catering
services, vehicle parking, advertising, retail and duty free shops, and food and beverages. BIAL earns its
non-aeronautical revenue from concession arrangements that reflect a percentage of revenue sharing, with a
minimum guaranteed revenue each year. Non-aeronautical revenue is expected to grow substantially due to the
increase in the number of passengers using the airport, the availability of additional space for development and the
increasing propensity of passengers to spend money.

Real estate monetization

The airport is located on 4,000 acres of land and the concession agreement provides for development of 1,000 acres
of this land for commercial purposes such as hotels, retail establishments, offices and industrial or entertainment
parks. This will permit BIAL to monetize approximately 460 acres after providing for the land required to build roads,
utilities, landscaping and other services. Over time, there is potential for significant upside from monetization of this
real estate.

Other non-airport related revenue

Taj Bangalore is a five-star hotel operated under a management contract with Indian Hotels Company Limited. The
hotel is conveniently located next to the airport, includes 154 guest rooms and 13 conference rooms, and is currently
undergoing expansion of 220 additional guest rooms.

Additional information can be accessed from BIAL’s website www.bengaluruairport.com.

Transaction Description

FAIRFAX INDIA HOLDINGS CORPORATION

At December 31, 2020 the company had appointed five of the fifteen BIAL board members.

Key Business Drivers, Events and Risks

KIAB is the busiest airport in South India, the third largest in the country, and was awarded the ‘Best Regional Airport
in India and Central Asia’ during 2020 by Skytrax, a UK-based consultancy who conducts a global airport customer
satisfaction survey. The airport handled approximately 33.7 million passengers in 2019 representing growth in
overall traffic of 4.1% compared to 2018.

On December 6, 2019 BIAL commenced operating a second runway, making the airport the first in India to operate
independent parallel runways, enabling aircraft to land or take-off simultaneously on both runways.

On October 16, 2020 BIAL exercised its right to extend the concession agreement for an additional 30 years until the
year 2068.

Plans to expand the capacity of the airport are underway and include the following projects:

(cid:127) Terminal 2: BIAL has commenced construction of an additional terminal building (‘‘Terminal 2’’) and
expansion of the related infrastructure. Terminal 2 will be constructed in two phases: (i) the first phase will
have the capacity to handle 25 million passengers per annum and is now estimated to be operational by
April 2022; and (ii) the second phase will add capacity for another 20 million passengers per annum and is
now expected to be complete in BIAL’s fiscal year 2029. The combined capacity of the existing terminal and
Terminal 2 will be approximately 73 million passengers per annum.

The total cost of the Terminal 2 expansion is expected to increase as a result of a slowdown in construction
activities during India’s lockdown.

On August 6, 2019 in connection with the construction of Terminal 2 and expansion of the related
infrastructure, BIAL raised approximately $1.4 billion (approximately 102.1 billion Indian rupees) through a
syndicate of banks, including State Bank of India and Axis Bank. Amounts are to be drawn down based on
funding requirements throughout the project and are to be repaid over 10 years, with payments starting one
year subsequent to completion of the project.

(cid:127) Terminal 3: In 2019 BIAL finalized and adopted a strategy to further expand capacity to meet expected
growth in passenger traffic over the next 20 years, including the construction of a third terminal building
(‘‘Terminal 3’’) and related infrastructure (‘‘master plan update’’). BIAL has secured adequate space for this
expansion. Total capacity for Terminal 3 is expected to be greater than 20 million passengers per annum. As a
result of the impacts of the COVID-19 pandemic and related lockdowns, construction of Terminal 3 has been
delayed until BIAL’s fiscal year 2034. The combined capacity of the existing terminal, Terminal 2 and
Terminal 3 is expected to be between 90 million to 100 million passengers per annum.

(cid:127) Real Estate: In 2019 BIAL’s management finalized its plans for the development of its monetizable leasehold
land (‘‘real estate master plan’’) which includes the development of 176 acres of land by 2026, including: (i) a
business hotel comprised of a combination of three-star to four-star hotel rooms (for a total of 775 rooms) on
approximately 5 acres of land; (ii) a retail, dining and entertainment village on approximately 23 acres of land;
(iii) business parks on approximately 132 acres of land; (iv) a multi-purpose concert arena on approximately
6 acres of land; and (v) the remainder to be leased for a convention and exhibition centre (approximately
5 acres) and a five-star hotel (approximately 5 acres). BIAL has entered into an agreement with Phase 1 Events
and Embassy Group to manage and operate the multipurpose concert arena, scheduled to be ready during
2022. BIAL’s real estate development plans will be carried out by a new subsidiary, Bangalore Airport City
Limited (‘‘BACL’’), which was formed in January 2020.

COVID-19 Impact

The airport handled approximately 13.5 million passengers in 2020 representing a decline in overall traffic of 59.9%
compared to 2019.

BIAL has sufficient liquidity in place to continue its operations.

Valuation and Consolidated Financial Statement Impact

Free Cash Flow Forecast Inputs

Current Model Assumptions

FAIRFAX INDIA HOLDINGS CORPORATION

discretionary capital expenditures, an increase in the expected total cost for Terminal 2 and a revised timeline for its
real estate development plans. Additionally, BIAL’s aeronautical revenues are primarily driven by UDFs fixed in a
manner to generate a 16.0% per annum return on invested equity for the airport operator. BIAL is operating in its
second control period until March 31, 2021. As the tariff setting mechanism adjusts for periods of
underperformance, it is expected that underachievement in aeronautical revenues due to the COVID-19 pandemic
in the second control period will be substantially recovered through, among other factors, higher UDFs in the third
control period.

Discount rates were based on the company’s assessment of risk premiums to the appropriate risk-free rate of the
economic environment in which BIAL operates. These risk premiums were reflective of the increased uncertainty of
the revised free cash flow forecasts as a result of the economic and social impacts of the COVID-19 pandemic. Long
term growth rates were based on the expected long term sustainable growth rate of the economic environment and
sectors in which BIAL operates and were not adjusted downward for the short term impacts of COVID-19.

At December 31, 2020 the company’s internal valuation model indicated that the fair value of the company’s
investment in BIAL was $1,396,117 (December 31, 2019 – $1,429,854), which approximates the equity valuation of
BIAL implied by the Anchorage transaction discussed above in the Transaction Description section. The changes in
fair value in 2020 and 2019 are presented in the tables at the outset of the Indian Investments section of this MD&A.

In 2019 net change in unrealized gains of $751,487 was primarily driven by BIAL management’s master plan update
and real estate master plan.

BIAL’s Summarized Financial Information

BIAL’s fiscal year ends on March 31. Summarized below are BIAL’s balance sheets at September 30, 2020 and
March 31, 2020.

Balance Sheets
(unaudited – US$ thousands)

Current assets
Non-current assets
Current liabilities
Non-current liabilities
Shareholders’ equity

September 30, 2020(1) March 31, 2020(1)
147,016
1,055,698
103,396
674,659
424,659

102,684
1,228,598
138,303
805,733
387,246

(1) The net assets of BIAL were translated at September 30, 2020 at $1 U.S. dollar = 73.78 Indian rupees and at March 31, 2020 at $1

U.S. dollar = 75.65 Indian rupees. The exchange rates used were the spot rates prevailing on those respective dates.

Current assets decreased primarily due to decreased cash, cash equivalents, and bank deposits due to decreased
revenues and collections and increased capital expenditures related to Terminal 2. Non-current assets increased
principally as a result ongoing capital expenditures for BIAL’s expansion projects. Current liabilities increased
primarily as a result of increased accounts payable to vendors. Non-current liabilities increased primarily as a result of
additional borrowings for BIAL’s expansion projects.

100

Summarized below are BIAL’s statements of earnings (loss) for the six months ended September 30, 2020 and 2019.

Statements of Earnings (Loss)
(unaudited – US$ thousands)

Revenue
Earnings (loss) before income taxes
Net earnings (loss)

Six months ended
September 30, 2020(1)
22,885
(47,288)
(46,889)

Six months ended
September 30,
2019(1)(2)
109,223
41,439
40,067

(1) Amounts for the six months ended September 30, 2020 and 2019 were translated into US$ using the average exchange rates of $1

U.S. dollar = 75.11 Indian rupees and $1 U.S. dollar = 69.96 Indian rupees prevailing during those periods.
(2) Certain prior period comparative figures have been reclassified to be consistent with current period’s presentation.

The decrease in revenue is primarily a result of the decrease in domestic and international passenger traffic as
described in the Key Business Drivers, Events and Risks section under COVID-19 Impact. Loss before income taxes
and net loss for the six months ended September 30, 2020 compared to earnings before income taxes and net
earnings for the six months ended September 30, 2019 primarily as a result of the decrease in the revenue as noted
above, an increase in employee costs, and an increase in depreciation and interest expense recognized as a result of
the capitalization of the second runway.

Investment in Sanmar Chemicals Group

Business Overview

Sanmar Chemicals Group (‘‘Sanmar’’), a private company located in Chennai, India, is one of the largest suspension
polyvinyl chloride (‘‘PVC’’) manufacturers in India with an operational presence in India and Egypt. Sanmar has an
aggregate installed capacity of over 766,000 metric tons per annum, comprised of approximately 366,000 metric
tons per annum in India and 400,000 metric tons per annum in Egypt. As part of its expansion project in Egypt,
Sanmar commissioned a calcium chloride facility with capacity of approximately 130,000 metric tons per annum.

Sanmar’s principal lines of business are as follows:

Chemplast Sanmar Limited (‘‘Chemplast’’)

Beginning as Chemicals and Plastics India Limited in 1962, Chemplast is currently the largest specialty PVC
manufacturer in India, with the top two players capturing all of India’s domestic manufacturing capacity. A
significant portion of Chemplast’s revenues are derived from integrated operations. Chemplast’s product range falls
into six distinct groups: specialty PVC resins, caustic soda, chloromethanes, refrigerant gases, hydrogen peroxide,
and Chemplast’s Specialty Chemicals (as described below). PVC is primarily used in shoes, flooring and cable
industries. Caustic soda is primarily used in the manufacturing of paper and pulp, textiles, alumina, petroleum
products, soaps and detergents, and is also the basic feedstock for various chemicals. Chloromethanes are primarily
used in pharmaceutical sectors. The majority of Chemplast’s revenues are generated through direct sales to
end customers.

Chemplast’s Specialty Chemicals (‘‘Specialty Chemicals’’)

Chemplast’s Specialty Chemicals business is primarily engaged in the custom manufacturing and marketing of
advanced organic intermediates for the pharmaceutical, agro chemical, flavours and fragrances, and other fine
chemical applications.

Chemplast Cuddalore Vinyls Limited (‘‘CCVL’’)

CCVL is currently the second largest suspension PVC manufacturer in India. Suspension PVC is primarily used in
pipes and fittings, window and door profiles. The majority of CCVL’s revenues are generated through direct sales to
end customers.

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FAIRFAX INDIA HOLDINGS CORPORATION

TCI Sanmar Chemicals S.A.E. (‘‘Sanmar Egypt’’)

Sanmar Egypt is the largest Indian investor in Egypt’s chemical business and the largest caustic soda, calcium
chloride and PVC manufacturer in Egypt. Sanmar invested approximately $1.2 billion during Phase 1 of its Egypt
project and has created world-class manufacturing facilities for caustic soda and PVC in Port Said, Egypt. Phase 1
projects were completed in April 2012 at which time PVC production commenced. In September 2018 Phase 2
expansion projects were completed with Sanmar investing an additional $280 million, for an aggregate investment
of approximately $1.5 billion. A new calcium chloride facility was also commissioned upon completion of the
Phase 2 PVC projects. Calcium chloride granules are used worldwide for dust control, de-icing, drilling operations
and as a food additive. Sanmar Egypt sells directly to end customers and also through distributors. PVC is mainly sold
in key target markets like Egypt, Turkey and parts of western Europe.

Additional information can be accessed from Sanmar’s website www.sanmargroup.com.

Transaction Description

At December 31, 2020 the company had appointed one of the five Sanmar board members.

Key Business Drivers, Events and Risks

India continues to be a PVC deficit market with more than 50% of the demand being met through imports. Egypt
and Turkey, which are manufacturing hubs for exports to Europe, currently have a demand gap for PVC of
approximately 750,000 metric tons per annum which is currently met by imports from the U.S. and Asia. Global PVC
demand is projected to grow at a compound annual growth rate between 2.5% to 3.0% outpacing the growth of
supply over the next 10 years and India is expected to become a bigger market than North America in the next few
years. In addition due to environmental regulations, China has reduced production capacity of PVC thereby
tightening supply and improving prices globally.

Sanmar continues to draw strength from the strong brand equity of Sanmar Group, experienced management,
dominant market position in the chemicals industry and demand outlook for PVC and caustic soda industry in India
and across global markets. Sanmar’s key business drivers relate to the execution of its plan to increase PVC
manufacturing capacity in India to align with the growing demand for PVC, and to improve the overall capacity
utilization at all of its PVC production facilities. The implementation risk associated with its expansion projects at
Sanmar Egypt significantly decreased with the successful implementation and commissioning of the expansion
projects in September 2018.

As part of the Union Budget of India (2019-20) presented on July 5, 2019, import duties for Ethylene Dichloride
(‘‘EDC’’) decreased from 2.0% to nil, resulting in lower costs of imported raw materials. Import duties for PVC
increased from 7.5% to 10.0%. Indian anti-dumping duties on suspension PVC were also renewed for another

102

30 months on imports from the U.S. and China. These changes will continue to positively impact Sanmar’s
profitability.

Sanmar’s profitability during the fiscal years ended March 31, 2020 and 2019 was negatively impacted by lower PVC
margins as a result of unexpected spikes in the price of EDC, a key raw material used in the production of PVC, caused
by an alumina refinery plant shut down in Brazil that significantly decreased the supply of EDC in the international
market. EDC prices reverted back to normal levels in the second half of Sanmar’s fiscal year 2020. In addition, Sanmar
Egypt experienced increased power and energy expenses as a result of new tariffs introduced by the Egyptian
government effective July 2018.

In September 2020, the Egyptian government introduced import duties for PVC at 2.0% and reduced import duties
on EDC from 2.0% to nil.

COVID-19 Impact

As a result of unfavourable macroeconomic conditions created by COVID-19, Sanmar’s management shifted its focus
to deleveraging the company and will focus on capacity expansions planned at Chemplast and at Specialty
Chemicals. Sanmar management is actively monitoring liquidity requirements at Sanmar Egypt, which have been
under some pressure. Sanmar Egypt has applied for relief under the ‘‘Resolution Framework for Covid-19 Related
Stress’’ circular dated August 6, 2020 as released by the RBI in an effort to ease financial pressures caused by the
COVID-19 pandemic primarily through debt restructuring.

Valuation and Consolidated Financial Statement Impact

Free Cash Flow Forecast Inputs

Current Model Assumptions

103

FAIRFAX INDIA HOLDINGS CORPORATION

On December 21, 2019 the Sanmar bonds were fully redeemed as disclosed earlier in the Transaction Description
section. The changes in fair value of the company’s investment in Sanmar bonds in 2019 are presented in the table at
the outset of the Indian Investments section of this MD&A.

Sanmar’s Summarized Financial Information

Sanmar’s fiscal year ends on March 31. Summarized below are Sanmar’s balance sheets at September 30, 2020 and
March 31, 2020.

Balance Sheets
(unaudited – US$ thousands)

Current assets
Non-current assets
Current liabilities
Non-current liabilities
Shareholders’ deficit

September 30, 2020(1) March 31, 2020(1)
183,546
1,800,199
639,949
1,428,863
(85,067)

192,844
1,780,835
635,728
1,487,639
(149,688)

(1) The net assets of Sanmar were translated at September 30, 2020 at $1 U.S. dollar = 73.78 Indian rupees and at March 31, 2020 at $1

U.S. dollar = 75.65 Indian rupees. The exchange rates used were the spot rates prevailing on those respective dates.

Current assets increased primarily due to increased bank balances as a result of the loan moratoriums granted by the
RBI as discussed in the Business Developments section under the heading Operating Environment of this MD&A, as
well as cash generated from operations. Non-current assets decreased primarily as a result of depreciation of property,
plant and equipment. Current liabilities decreased primarily resulting from decreased trade and other payables due
to lower volume of raw material purchases. Non-current liabilities increased primarily as a result of increased interest
accrued on borrowings.

Summarized below are Sanmar’s statements of earnings (loss) for the six months ended September 30, 2020
and 2019.

Statements of Earnings (Loss)
(unaudited – US$ thousands)

Revenue
Loss before income taxes
Net loss

Six months ended
September 30, 2020(1)
307,481
(52,827)
(58,019)

Six months ended
September 30, 2019(1)
355,042
(118,185)
(129,506)

(1) Amounts for the six months ended September 30, 2020 and 2019 were translated into US$ using the average exchange rates of $1

U.S. dollar = 75.11 Indian rupees and $1 U.S. dollar = 69.96 Indian rupees prevailing during those periods.

Revenue decreased primarily due to lower production as a result of COVID-19 lockdowns, which led to a stoppage of
production during the lockdown as well as supply disruptions. Loss before income taxes and net loss decreased
primarily reflecting a full recovery of previously written-off inventory (2,983 million Indian rupees), partially offset
by decreased revenues as noted above, increased depreciation on property, plant and equipment and interest
expense.

104

Investment in Seven Islands Shipping Limited

Business Overview

Additional information can be accessed from Seven Islands’ website www.sishipping.com.

Transaction Description

At December 31, 2020 the company had appointed one of the eight Seven Islands board members.

Key Business Drivers, Events and Risks

Seven Islands’ key business drivers relate to its ability to acquire vessels from reputable vessel owners within the
international market and to quickly deploy those vessels through charter contracts with India’s largest oil
companies. Seven Islands’ business model is susceptible to overall shipping cycles and could be impacted by industry
downturns in terms of lower rates and increased competition. However, Seven Islands operates primarily in the crude
oil and oil products segment wherein India has one of the fastest growing oil consumption rates. The demand for oil
tanker vessels to import and transport crude oil and oil products maintains a positive long term outlook, mitigating
business deployment risk for oil tankers in India in comparison with other countries. In addition, India has
witnessed a decline in the fleet of other shipping companies, due to lower operational efficiencies, forming a gap that
Seven Islands has been able to fill.

Following a contraction in global oil demand in 2020, recovery to pre-pandemic levels in India is forecasted to occur
throughout 2021 and may be impacted by factors such as changes in consumer behaviour, technological efficiencies
and change in energy production policies. The sharp decline in oil prices in March 2020 encouraged countries and
refiners to purchase and stockpile oil globally, leading to a significant spike for the crude oil tanker voyage chartering
market and a highly profitable first half of 2020. Tanker rates settled into lower levels in the second half of 2020 as oil
demand remained subdued and the unwinding of floating storage increased availability. With ongoing efforts to
address the imbalance in the oil market by OPEC and participating non-OPEC countries, the tanker market is
expected to benefit as oil trade trends are stabilized, and as the easing of lockdown measures and roll-out of the
COVID-19 vaccine supports a return of economic activity.

Seven Islands’ revenues are denominated in U.S. dollars, whereas a majority of expenses incurred are denominated in
the Indian rupee. Seven Islands is also exposed to the fluctuations in the Indian rupee to the extent they acquire new
vessels as the asset purchases are negotiated and settled in U.S. dollars.

COVID-19 Impact

During 2020 Seven Islands continued to operate as transportation of goods is considered an essential service under
India’s lockdown guidelines. Although Seven Islands’ customers are primarily Indian oil companies which were
impacted by the decline in oil prices and demand, Seven Islands has reasonable safeguards against loss of business in
the short term since the majority of its revenue contracts are on time charter which range between six months to over
a year.

Seven Islands’ management has been managing its liquidity requirements with sufficient cash on hand.

105

FAIRFAX INDIA HOLDINGS CORPORATION

Subsequent to December 31, 2020

Subsequent to December 31, 2020 Seven Islands completed the sale of one vessel and acquisition of two vessels,
taking the fleet size to 20 vessels and total deadweight capacity to approximately 1.1 million metric tons.

On February 15, 2021 Seven Islands filed a draft red herring prospectus with SEBI in connection with an IPO. The IPO
will mainly consist of a primary issuance of shares by Seven Islands and a secondary sale of shares by existing Seven
Islands shareholders and Fairfax India. Seven Islands may raise up to 4.0 billion Indian rupees (approximately
$55 million) in the IPO by issuing fresh equity shares.

Valuation and Consolidated Financial Statement Impact

Free Cash Flow Forecast Inputs

The primary driver of the free cash flow estimates is the vessel profile composition, including planned vessel
acquisitions and charter rates.

Current Model Assumptions

Investment in National Collateral Management Services Limited

Business Overview

National Collateral Management Services Limited (‘‘NCML’’), a private company located in Gurugram, India, is a
leading agricultural commodities storage company operating for over 15 years in the agriculture value chain and
offering end-to-end solutions in grain procurement, testing, storage and collateral management. NCML was
promoted by a consortium of banks, cooperatives and the National Commodity and Derivatives Exchange Limited
(‘‘NCDEX’’) in 2004 as a warehousing and collateral management company to support commodity trading on
NCDEX and has since evolved into a significant player in India.

NCML’s principal lines of business are as follows:

Commodity Management Solutions and Collateral Management

The commodity management solutions business is primarily comprised of NCML’s warehousing and supply chain
management businesses which were merged in 2020 to enhance efficiency and scalability, alongside adjacent
services such as testing and certification, weather and crop intelligence, and logistics services. NCML’s warehousing
business is a market leader in India and comprised of over 1.4 million metric tons of storage capacity across
approximately 600 warehouses throughout 16 states in India. The supply chain management line of business
provides end-to-end procurement and trading and disposal services, throughout the entire post-harvest agriculture
value chain. NCML’s clients include bulk consumers, large end users, aggregators and farmers. NCML’s collateral
management business manages capacity of over 1.9 million metric tons, has assets under management of
approximately 40 billion Indian rupees (approximately $0.6 billion) and a market share of approximately 20%.

106

Non-banking Financial Company

NCML Finance Private Ltd (‘‘NFin’’), NCML’s wholly-owned subsidiary, is an RBI registered NBFC with a focus on
rural and agri-business financing. NFin provides a seamless facility for NCML’s customers to receive post-harvest
financing.

NFin initially started its operations in 2016 by offering loans secured by warehouse receipts for commodities kept in
the custody of NCML to bulk consumers, farmer producer organizations and aggregators.

Silo Projects

The Food Corporation of India (‘‘FCI’’) is a government agency responsible for procurement and distribution of food
grains throughout India. The majority of commodity storage in India is in facilities owned or leased directly by the
government with only about 10% stored in organized private warehouses owned by companies that provide
warehousing, storage and preservation services similar to NCML. The current storage capacity in India is
approximately 125 million metric tons, of which approximately 75% is government owned. The Government of
India reviewed the process of acquiring, storing and distributing food grains resulting in a new distribution model
focused on a public-private partnership. There are a few large national players (similar to NCML) which own and/or
run high quality infrastructure and provide diverse ancillary services to warehousing customers who have the
potential to benefit from changes in the industry.

In 2016 the FCI called for bids for building 27 additional silos with an estimated combined grain storage capacity of
1.35 million metric tons to be located in the states of Punjab, Haryana, Uttar Pradesh, West Bengal, Bihar and
Gujarat. In February 2017 NCML was awarded a 30 year concession agreement to build 11 of the silos with
550,000 metric tons of capacity, which would require capital expenditures of an estimated $107 million
(approximately 7.5 billion Indian rupees). In 2020, NCML and FCI, mutually agreed to terminate the building of
3 silos due to unavailability of land with the specified requirements. NCML was awarded 2 additional silo locations
with a combined 100,000 metric ton capacity and 3 additional silo locations with a combined 150,000 metric ton
capacity in 2017 and 2018 respectively, bringing total capacity for all 13 silo locations to 650,000 metric tons. The
silo projects, which are expected to be substantially completed throughout 2021 and 2022, will be financed through
debt and common equity.

Additional information can be accessed from NCML’s website www.ncml.com.

Transaction Description

In August 2015 and August 2017 Fairfax India acquired an 89.5% equity interest in NCML for cash consideration of
$174,318 (approximately 11.3 billion Indian rupees).

At December 31, 2020 the company had appointed two of the eight NCML board members.

Key Business Drivers, Events and Risks

NCML’s key business drivers relate to its ability to achieve long term modernization of its grain storage facilities, the
expansion of its commodity management solutions line of businesses with adjacent services, and the successful
construction of the silos under the concession agreement with the FCI.

After achieving an estimated 4% growth in year over year food grain production in the 2019-20 agricultural crop year
(July 2019 to June 2020), the Government of India set a new target to raise food grain production by approximately
1.5% for the 2020-21 crop year, representing a market of approximately 301 million metric tons of food grains.
NCML’s commodity management solutions business currently services approximately 1.5 million metric tons of
food grain volume each year and continuously seeks opportunities to increase its utilization within the sizeable
market by participating in government assignments and securing deposits from multinational corporations in both
the food and non-food grain sector.

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FAIRFAX INDIA HOLDINGS CORPORATION

The silo projects are comprised of 11 silos that will be constructed under a design, build, finance, own and operate
model and 2 silos that will be constructed under a design, build, finance, operate and transfer model, with all 13 silos
being constructed for the exclusive use by the FCI. The silo projects are expected to be substantially completed
throughout 2021 and 2022.

COVID-19 Impact

During 2020 NCML’s commodity management solutions and NBFC businesses operated at reduced capacities as
agri-business and financial services are considered essential services under India’s lockdown guidelines. The reduced
capacities were primarily attributable to an overall decrease in volume of commodity deposits during the period and
restrictions which affected inflows during the key April to June 2020 harvesting season, as well as a conscious effort
to reduce loan exposure during the moratorium period permitted by the RBI. As lockdown restrictions relating to
movement of goods and labour eased, NCML observed a gradual recovery of activity levels across its business lines,
but volume remained below pre-pandemic levels due to decreased funding as a result of the tightened credit
environment. To manage working capital, NCML focused on serving existing clients. Silo construction also
experienced delays due to restrictions on the movement of goods and labour and incremental safety protocols
enforced by NCML management.

NCML has been managing its liquidity requirements through utilization of its current credit lines and prudent
working capital management. Additional capital may also be released through the sale of excess land and the scaling
down of businesses with less favourable risk-reward characteristics.

Valuation and Consolidated Financial Statement Impact

NCML Common Shares

Free Cash Flow Forecast Inputs

The primary drivers of free cash flow estimates are warehouse capacity and future EBITDA growth of NCML’s
commodity management solutions business.

Current Model Assumptions

During the third quarter of 2020, NCML’s NBFC business unit experienced decreased funding from public sector
banks which limited its ability to advance loans, in addition to a decline in the demand for lending as a result of the
continued business disruptions in agri-businesses caused by the COVID-19 pandemic and India’s lockdown. As a
result, NCML’s management commenced a process of scaling down its loan book. Accordingly, the company
determined growth rates would not be relevant and it was more appropriate to value NCML’s NBFC business unit
using an asset-based approach rather than performing a discounted cash flow analysis as it had done previously.

108

NCML Compulsorily Convertible Debentures

NCML’s Summarized Financial Information

NCML’s fiscal year ends on March 31. Summarized below are NCML’s balance sheets at December 31, 2020 and
March 31, 2020.

Balance Sheets
(unaudited – US$ thousands)

Current assets
Non-current assets
Current liabilities
Non-current liabilities
Shareholders’ equity

December 31, 2020(1) March 31, 2020(1)
96,543
119,161
52,549
67,150
96,005

65,157
132,185
38,418
67,313
91,611

(1) The net assets of NCML were translated at December 31, 2020 at $1 U.S. dollar = 73.07 Indian rupees and at March 31, 2020 at $1

U.S. dollar = 75.65 Indian rupees. The exchange rates used were the spot rates prevailing on those respective dates.

Current assets decreased primarily reflecting decreased cash balances due to repayments of loans and borrowings, as
well as decreased advances made by NCML’s NBFC due to a tighter credit environment in India. Non-current assets
increased principally due to continued construction of silo projects, partially offset by losses related to the
withdrawal from three silo projects. Current liabilities decreased primarily due to repayments of short term loans and
borrowings and reduced utilization of credit lines, partially offset by increased interest payable on the NCML CCD.
Non-current liabilities increased modestly primarily due to the strengthening of the Indian rupee against the
U.S. dollar during the nine months ended December 31, 2020, partially offset by repayments of long term loans
and borrowings.

Summarized below are NCML’s statements of earnings for the nine months ended December 31, 2020 and 2019.

Statements of Earnings
(unaudited – US$ thousands)

Revenue
Loss before income taxes
Net loss

Nine months ended
Nine months ended
December 31, 2020(1) December 31, 2019(1)
100,328
(3,424)
(2,160)

52,207
(10,460)
(7,527)

(1) Amounts for the nine months ended December 31, 2020 and 2019 were translated into US$ using the average exchange rates of $1

U.S. dollar = 74.66 Indian rupees and $1 U.S. dollar = 70.38 Indian rupees prevailing during those periods.

Revenue decreased primarily reflecting declines in commodity management solutions and collateral management
businesses, which operated at reduced capacities during the period due to India’s lockdown restrictions, and
encountered challenges in obtaining credit as a result of tightening liquidity in the market. Loss before income taxes
and net loss increased principally as a result of losses incurred in connection with withdrawal from three silo projects
and the decreased revenue noted above, partially offset by decreased borrowing costs as a result of reduced utilization
of credit lines with banks and lower interest rates, and lower operating expenses arising from cost optimization
measures implemented by NCML’s management.

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FAIRFAX INDIA HOLDINGS CORPORATION

Investment in Saurashtra Freight Private Limited

Business Overview

Saurashtra Freight Private Limited (‘‘Saurashtra’’), a private company located in Mumbai, India, operates one of the
largest container freight stations (‘‘CFS’’) at Mundra port (Gujarat). Services provided by Saurashtra’s CFS include
transportation of containers to and from the port, stuffing and destuffing of containers, cargo storage, transportation
of cargo to the end customer, and the storage, maintenance and repair of empty containers. Saurashtra’s subsidiary,
Fairfreight Lines, focuses on services for container shipping, offering integrated logistics solutions to its customers by
providing containers, which are leased by Saurashtra, to importers and exporters to transport cargo.

Additional information can be accessed from Saurashtra’s website www.saurashtrafreight.com.

Transaction Description

In February 2017 Fairfax India acquired a 51.0% equity interest in Saurashtra for cash consideration of $30,018
(approximately 2.0 billion Indian rupees).

At December 31, 2020 the company had appointed one of the three Saurashtra board members.

Key Business Drivers, Events and Risks

Saurashtra has the annual capacity to handle 180,000 standard twenty-foot equivalent units (‘‘TEUs’’) and in 2020
handled 97,155 TEUs, implying a capacity utilization of approximately 54% (2019 – 96,917 TEUs, implying a
capacity utilization of approximately 54%). At December 31, 2020 Saurashtra had the highest market share of
imports at approximately 15% (December 31, 2019 – approximately 15%) and second highest market share in
exports at approximately 13% (December 31, 2019 – approximately 14%) at Mundra port in India. Saurashtra
remains the largest CFS at that port in terms of total throughput achieved with a 14% market share for the quarter
ended December 31, 2020.

The CFS industry is highly fragmented with 14 CFS at Mundra port. Many of these CFS are inefficient and operating
below capacity, providing Saurashtra with the opportunity to benefit from industry consolidation.

In the fourth quarter of 2020, Saurashtra experienced an 8% growth in year-over-year export volumes and an 18%
growth in import volumes year-over-year, reaching record-high monthly shipping volumes over the period.
Saurashtra is continuing to actively pursue additional volume and increase capacity through offering comprehensive
packages to shipping lines and is evaluating expansion projects in their existing businesses and the wider logistics
industry.

Saurashtra has been granted the status of Authorized Economic Operator (‘‘AEO’’) under the World Customs
Organization. As an AEO, Saurashtra is approved by customs as compliant with supply chain security standards and
is eligible for certain benefits such as being a preferred CFS for customs and that bank guarantees are no longer
required for customs.

COVID-19 Impact

During 2020 Saurashtra’s businesses continued to operate as transportation of goods was considered an essential
service under India’s lockdown guidelines. Overall throughput declined during India’s lockdown due to restrictions
on the movement of goods. The impact on earnings was however offset by increased storage income during the
lockdown period and a sharp recovery in throughput during the fourth quarter of 2020 as evidenced by the
record-high shipping volumes in recent months, resulting in overall increase in profitability compared to the
prior year.

At December 31, 2020 Saurashtra had a debt-free balance sheet and sufficient cash on hand to manage its liquidity
needs.

Subsequent to December 31, 2020

In January 2021 Saurashtra entered into an aggregate 185 million Indian rupee term loan and working capital facility
(approximately $2.5 million). Proceeds from borrowings will be used to fund the purchase of tank containers to
expand capacity at Saurashtra’s container carrier business.

110

Valuation and Consolidated Financial Statement Impact

Free Cash Flow Forecast Inputs

The primary drivers of free cash flow estimates are the import and export handling capacity and utilization.

Current Model Assumptions

Investment in National Stock Exchange of India Limited

Business Overview

Additional information can be accessed from NSE’s website www.nseindia.com.

Transaction Description

In the third quarter of 2016 Fairfax India acquired a 1.0% equity interest in NSE for cash consideration of $26,783
(approximately 1.8 billion Indian rupees).

At December 31, 2020 the company did not have any representation on the board of NSE.

Key Business Drivers, Events and Risks

India has two main stock exchanges where the majority of its trading takes place, the BSE and NSE of India. Although
most significant firms in India are listed on both the BSE and NSE of India, NSE enjoys dominant market share
positions including a 94% market share in the equity trading segment, a 100% market share in the equity derivatives
trading segment and a 74% and 67% market share in the foreign exchange futures and options markets, respectively.
NSE of India emerged as the world’s largest exchange in derivatives trading volumes in 2019.

On December 28, 2016 NSE filed a draft prospectus with SEBI in connection with its proposed IPO. In May 2017, SEBI
issued show-cause notices to NSE prompting responses on inquiries over certain broker members having access to
co-location facilities at NSE thereby potentially gaining unfair trading advantages. On April 30, 2019 SEBI directed
NSE to pay approximately $160 million (approximately 11 billion Indian rupees) in penalties and interest after
finding that it had failed to provide equal access to all trading members. In May 2019 NSE filed an appeal with the
Securities Appellate Tribunal (‘‘SAT’’). The hearings were conducted in January 2021 and the SAT order is expected to
be finalized in the first quarter of 2021. As a result, subject to completion of the SAT ruling and regulatory approval
from SEBI, it is estimated that the IPO will be completed sometime in 2021 or 2022. NSE will also seek to file for an
overseas listing subsequent to closing of the IPO. NSE has appointed Citibank, JM Financial, Kotak Mahindra and
Morgan Stanley as lead investment banks to manage the IPO.

111

FAIRFAX INDIA HOLDINGS CORPORATION

COVID-19 Impact

During 2020 NSE continued to operate as financial services are considered essential services under India’s lockdown
guidelines.

Valuation and Consolidated Financial Statement Impact

In 2020 the consolidated statements of earnings (loss) included dividend income earned from the investment in NSE
of $743 (2019 – $1,269).

Investment in India Housing Fund

Business Overview

India Housing Fund (‘‘IH Fund’’) is a closed-ended fund of IIFL Private Equity Fund (the ‘‘Trust’’) registered as a
Category II Alternative Investment Fund (‘‘AIF’’) under SEBI AIF Regulations. IH Fund is a fund incorporated to focus
on investing in India’s real estate sector by investing in equity, debt and equity-linked instruments of real estate and
construction companies involved in projects or ventures with expected growth potential.

At December 31, 2020 IH Fund had invested approximately 10,681 million Indian rupees (approximately
$146 million at period end exchange rates) in 11 real estate sector investments. Subsequent to December 31, 2020, IH
Fund had invested approximately 12,006 million Indian rupees (approximately $164 million at period end exchange
rates) in 12 real estate sector investments.

Transaction Description

At December 31, 2020 Fairfax India had invested aggregate cash consideration of $24,399 (approximately 1.7 billion
Indian rupees) in IH Fund through the following transactions: (i) on January 7, 2019 the company invested 25.0% or
437.0 million Indian rupees ($6,272) of the committed investment amount in IH Fund; (ii) on November 7, 2019 the
company invested an additional 35.0% or 611.8 million Indian rupees ($8,621) of the committed investment
amount in IH Fund; and (iii) on December 24, 2020 the company invested the remaining 40.0% or 699.2 million
Indian rupees ($9,506) of the committed investment amount in IH Fund.

At December 31, 2020 the company had appointed one of the five members of IH Fund’s Investment Committee.

Key Business Drivers, Events and Risks

The Indian real estate industry is a key growth driver of the country’s economy. The industry has been growing
steadily and witnessed growth in both commercial and residential markets, contributing between 5% and 6% to
India’s GDP. It is estimated that the current housing shortage is approximately 60 million housing units, and by 2022
India will need to develop approximately 110 million housing units. Cumulative investment of approximately
140 trillion Indian rupees is required until 2022 to meet this growth.

The Government of India developed a host of initiatives to boost the housing sector and continues to undertake
various reforms to highlight its focus on affordable housing, such as: (i) interest rate subsidy on housing loans;
(ii) 100% deduction in taxable income for qualified developers; (iii) ease of entry and exit for foreign direct
investments; (iv) digitization of land records; and (v) establishment of the Real Estate (Regulation and Development
Act), 2016 which seeks to protect home-buyers as well as help boost investments in the real estate industry.

COVID-19 Impact

The Indian real estate industry has experienced a slowdown as a result of the unavailability of labour for
construction, reduced sales inquiries, tightened liquidity, and delays in project approvals from regulatory authorities
and government offices. While there may be certain real estate project delays within investee companies impacting
cash flows, IH Fund has sufficient capital in place to withstand these pressures.

112

Valuation and Consolidated Financial Statement Impact

In 2020 the consolidated statements of earnings (loss) included dividend income earned from the investment in IH
Fund of $500 (2019 – $116).

Results of Operations

Fairfax India’s consolidated statements of earnings (loss) for the years ended December 31, 2020, 2019 and 2018 are
shown in the following table:

Income

Interest
Dividends
Net realized gains (losses) on investments
Net change in unrealized gains (losses) on investments
Net foreign exchange losses

Expenses

Investment and advisory fees
Performance fee (recovery)
General and administration expenses
Interest expense

Earnings (loss) before income taxes
Provision for income taxes

Net earnings (loss)

Net earnings (loss) per share
Net earnings (loss) per diluted share

2020

2019

2018

6,013
16,449
5,372
(26,618)
(14,188)

4,859
10,141
181,123
530,372
(13,806)

21,659
8,699
(7,985)
178,998
(34,853)

(12,972)

712,689

166,518

33,922
(41,991)
4,233
29,844

27,473
48,514
5,300
38,781

33,908
–
4,079
28,898

26,008

120,068

66,885

(38,980)
2,496

592,621
76,283

99,633
3,201

(41,476)

516,338

96,432

$
$

(0.27) $
(0.27) $

3.38
3.30

$
$

0.63
0.63

Total loss from income of $12,972 in 2020 compared to total income of $712,689 in 2019 was principally due to net
change in unrealized losses on investments (discussed below), decreased net realized gains on investments (primarily
due to realized gains related to the redemption of Sanmar bonds and the IIFL Holdings Reorganization in 2019) and
increased net foreign exchange losses, partially offset by increased interest and dividend income. In 2020, the net
change in unrealized losses on investments of $26,618 was principally comprised of unrealized losses on the
company’s investments in Sanmar common shares ($63,844), NCML common shares ($31,277), IIFL Finance
($30,262), IIFL Wealth ($20,058) and CSB Bank ($9,484), partially offset by unrealized gains on the company’s
investments in Privi Speciality (formerly Fairchem) ($48,732), Fairchem Organics ($18,808), Seven Islands ($16,558),
NSE ($16,493), 5paisa ($9,889) and IIFL Securities ($7,823). In 2019, the net change in unrealized gains on
investments of $530,372 was principally comprised of unrealized gains on the company’s investments in BIAL
($751,487), CSB Bank ($60,901), Fairchem ($33,412), Other Public Indian Investments ($30,182) and Sanmar
common shares ($23,062), partially offset by unrealized losses on the company’s investments in IIFL Finance
($196,040), NCML common shares ($41,594), IIFL Securities ($40,916) and the reversal of prior period unrealized
gains on Sanmar bonds ($107,758). Interest income of $6,013 in 2020 increased from $4,859 in 2019 principally as a
result of increased interest from Government of India bonds and interest income from the NCML CCD, partially
offset by decreased interest income due to the sale of Indian corporate bonds. Dividend income of $16,449 in 2020
related to dividends received from the company’s investments in IIFL Wealth, IIFL Finance, IIFL Securities, NSE, IH

113

FAIRFAX INDIA HOLDINGS CORPORATION

Fund, Privi Speciality (formerly Fairchem) and Other Public Indian Investments compared to dividend income of
$10,141 in 2019 related to dividends received from the company’s investments in IIFL Finance, IIFL Wealth, NSE,
Fairchem, IH Fund and Other Public Indian Investments.

Net gains (losses) on investments and net foreign exchange gains (losses) in 2020 and 2019 were comprised
as follows:

2020

2019

Net
realized
gains

Net
change in
unrealized Net gains
(losses)

Net
realized
gains

Net
change in
unrealized Net gains
(losses)

(losses) gains (losses)

Net gains (losses) on investments:

Short term investments
Bonds
Common stocks
Derivatives

Net foreign exchange gains (losses) on:

Cash and cash equivalents
Investments
Borrowings
Other

–
1,590
3,782(2)

–

–
1,231
(27,849)(2)

–

–
2,821
(24,067)
–

154,919(1)

43,182(2)(3)
(17,049)(2)

–

(107,577)(1)
637,949(2)(3)

–

47,342(1)

681,131
(17,049)

5,372

(26,618)

(21,246)

181,123

530,372

711,495

(514)
–
–
(1,153)

(1,667)

–
–
(12,521)
–

(514)
–
(12,521)
(1,153)

549
(102)
(1,669)(4)
(533)

–
–

(12,051)(4)

–

549
(102)
(13,720)(4)
(533)

(12,521)

(14,188)

(1,755)

(12,051)

(13,806)

(1)

(2) Refer to the Indian Investments section of this MD&A for a summary of changes in the fair value of the company’s Public and Private

Indian Investments during 2020 and 2019.

(4)

Total expenses of $120,068 in 2019 decreased to $26,008 in 2020 primarily related to a net performance fee recovery
of $41,991 recorded by the company in 2020 compared to a performance fee of $48,514 recorded by the company in
2019, and decreased interest expense related to the borrowings, partially offset by increased investment and
advisory fees.

At December 31, 2020 the company determined that a performance fee of $5,217 was payable at December 31, 2020
(December 31, 2019 – accrual of $47,850). In 2020 the performance fee recovery recorded in the consolidated
statements of earnings (loss) was $41,991 representing the reversal of the performance fee accrual at December 31,
2019, net of the performance fee payable at December 31, 2020 (2019 – performance fee of $48,514). Refer to the
Related Party Transactions section of this MD&A for additional discussion on the performance fee payable at
December 31, 2020.

The provision for income taxes of $2,496 in 2020 differed from the recovery of income taxes that would be
determined by applying the company’s Canadian statutory income tax rate of 26.5% to the company’s loss before
income taxes primarily as a result of the change in unrecorded tax benefit of losses and temporary differences, the tax
rate differential on income earned outside of Canada, and foreign exchange fluctuations.

114

The provision for income taxes of $76,283 in 2019 differed from the provision for income taxes that would be
determined by applying the company’s Canadian statutory income tax rate of 26.5% to the company’s earnings
before income taxes primarily as a result of the tax rate differential on income earned outside of Canada (including
the deferred income taxes recorded on BIAL, the IIFL Holdings Reorganization (related to the spin off of IIFL Wealth),
CSB Bank, Saurashtra, and an investment in Other Public Indian Investments), partially offset by the change in
unrecorded tax benefit of losses and temporary differences, and foreign exchange fluctuations.

The company reported a net loss of $41,476 (a net loss of $0.27 per basic and diluted share) in 2020 compared to net
earnings of $516,338 (net earnings of $3.38 per basic share and $3.30 per diluted share) in 2019. The year-over-year
decrease in profitability in 2020 primarily reflected the net change in unrealized losses on investments in 2020
compared to net change in unrealized gains on investments in 2019, decreased net realized gains on investments,
and increased investment and advisory fees, partially offset by a performance recovery, decreased provision for
income taxes and interest expense, and increased interest and dividend income.

Consolidated Balance Sheet Summary

The assets and liabilities reflected on the company’s consolidated balance sheet at December 31, 2020 were primarily
impacted by unrealized foreign currency translation losses and net unrealized losses on investments, resulting in a
recovery of the previously accrued performance fee, net of the performance fee payable at December 31, 2020. In
addition the company had purchases of subordinate voting shares for cancellation, net sales of Government of India
and Indian corporate bonds, and additional investments in IH Fund and Other Public Indian Investments.

115

FAIRFAX INDIA HOLDINGS CORPORATION

Total Assets

Total assets at December 31, 2020 of $3,072,998 (December 31, 2019 – $3,244,937) were principally comprised
as follows:

Total cash and investments decreased from $3,236,960 at December 31, 2019 to $3,066,020 at December 31,
2020. The company’s total cash and investments composition by the issuer’s country of domicile was as follows:

December 31, 2020

December 31, 2019

Cash and cash equivalents

Restricted cash

Bonds:

Government of India

Indian corporate

NCML CCD

Common stocks:

IIFL Finance

IIFL Wealth

IIFL Securities

CSB Bank
Privi Speciality / Fairchem(1)
Fairchem Organics(1)
5paisa

Other

BIAL

Sanmar

Seven Islands

NCML

Saurashtra

NSE

IH Fund

India Canada Other

1,959

16,577

3,521

India Canada Other

40,064

3,300

5,349

–

16,915

267

16,048

20,989

–

14,884

35,873

131,478

166,702

55,603

214,341

138,413

54,566

27,788

147,604

1,396,117

338,621

103,543

86,216

32,812

72,617

25,354

2,991,775

–

Total

22,057

16,315

20,989

–

14,884

88,775

35,364

14,286

35,873

138,425

131,478

166,014

166,702

191,476

55,603

48,796

214,341

229,262

138,413

127,413

54,566

27,788

147,604

–

18,176

95,892

–

– 1,396,117 1,429,854

–

338,621

412,930

103,543

88,800

86,216

32,812

72,617

25,354

120,734

31,204

57,210

15,146

– 2,991,775 3,032,907

Total

48,713

16,915

88,775

35,364

14,286

138,425

166,014

191,476

48,796

229,262

127,413

–

18,176

95,892

–

– 1,429,854

–

412,930

88,800

120,734

31,204

57,210

15,146

– 3,032,907

–

Total cash and investments

3,029,874

32,625

3,521 3,066,020 3,211,396

20,215

5,349 3,236,960

(1) On August 12, 2020 as part of the Fairchem Reorganization, Fairchem spun off Fairchem Organics, whose shares were subsequently
listed on the BSE and NSE of India on December 24, 2020. Concurrent with the spin off transaction, Privi Organics merged with the
remaining Fairchem business and was renamed Privi Speciality Chemicals Limited (‘‘Privi Speciality’’). Common shares of Privi
Speciality continue to trade on the BSE and NSE of India. At December 31, 2019 the fair value of $127,413 represented the fair value of
the company’s investment in Fairchem.

Cash and cash equivalents decreased from $48,713 at December 31, 2019 to $22,057 at December 31, 2020
principally reflecting purchases of subordinate voting shares for cancellation, partially offset by the net sales of
Government of India and Indian corporate bonds, the proceeds of which were partially reinvested in Other Public
Indian Investments and IH Fund, and used to fund the debt service reserve account.

Restricted cash of $16,315 at December 31, 2020 (December 31, 2019 – $16,915) primarily related to requirements
under the borrowings for the company to set aside cash to fund interest payments.

Bonds and Common stocks – The company is actively seeking investment opportunities in India and will
continue to redirect capital from its cash and cash equivalents, and bond portfolio into Indian Investments as and
when those opportunities are identified. For more information about recent Indian Investments, see the Indian
Investments section of this MD&A. For more information on the company’s total cash and investments holdings of
$3,066,020 at December 31, 2020 (December 31, 2019 – $3,236,960) see note 6 (Cash and Investments) to the
consolidated financial statements for the year ended December 31, 2020.

116

Interest and dividends receivable decreased from $3,453 at December 31, 2019 to $1,911 at December 31, 2020
primarily reflecting decreased interest receivable as a result of net sales of Government of India and Indian corporate
bonds, partially offset by increased interest receivable from the investment in NCML CCD and a dividend receivable
from Other Public Indian Investments.

Other assets increased to $2,264 at December 31, 2020 from $1,658 at December 31, 2019 and is primarily
comprised of prepaid interest of $2,027 related to the borrowings.

Total Liabilities

Total liabilities at December 31, 2020 of $626,064 (December 31, 2019 – $667,086) were principally comprised
as follows:

Payable to related parties decreased from $50,519 at December 31, 2019 to $14,428 at December 31, 2020
principally reflecting the reversal of the performance fee accrual of $47,850 at December 31, 2019, net of the
performance fee payable of $5,217 to Fairfax (relating to the second calculation period ending on December 31,
2020), partially offset by increased investment and advisory fees payable. In 2019, investment and advisory fees
payable to Fairfax were partially offset by a recovery resulting from the retroactively revised interpretation of the
Investment Advisory Agreement to clarify that deployed capital should exclude any Indian Investments financed
by debt.

Deferred income taxes decreased from $64,477 at December 31, 2019 to $63,477 at December 31, 2020 primarily
as a result of partial recovery of deferred tax liabilities previously recognized as a result of unrealized losses on IIFL
Wealth, CSB Bank, and BIAL, partially offset by deferred taxes recognized as a result of unrealized gains on Seven
Islands, 5paisa, and Other Public Indian Investments.

Borrowings remained consistent at $547,228 at December 31, 2020 and December 31, 2019 and comprised of the
$550.0 million term loan net of unamortized issuance costs. On June 26, 2020 the company amended the
$550.0 million term loan to extend the maturity to June 28, 2021 while maintaining the option to extend for an
additional year. The $550.0 million term loan now bears interest at a rate of LIBOR plus 400 basis points. Refer to
note 7 (Borrowings) to the consolidated financial statements for the year ended December 31, 2020.

Comparison of 2019 to 2018 – Total assets of $2,707,057 at December 31, 2018 increased to $3,244,937 at
December 31, 2019 primarily due to net unrealized gains on investments, partially offset by unrealized foreign
currency translation losses and the redemption of Sanmar bonds, the net proceeds of which were partially used to
fund the company’s investment in Sanmar common shares and to repay the company’s Revolving Credit Facility.
Refer to note 5 (Indian Investments) to the consolidated financial statements for the year ended December 31, 2020
for details on the Indian Investments acquired during 2019.

Financial Risk Management

The primary goals of the company’s financial risk management program are to ensure that the outcomes of activities
involving elements of risk are consistent with the company’s objectives and risk tolerance, while maintaining an
appropriate balance between risk and reward and protecting the company’s consolidated balance sheets from events
that have the potential to materially impair its financial strength. There were no significant changes in the types of
the company’s risk exposures or the process used by the company for managing those risk exposures at December 31,
2020 compared to those identified at December 31, 2019, other than as outlined in note 11 (Financial Risk
Management) to the consolidated financial statements for the year ended December 31, 2020.

Capital Resources and Management

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FAIRFAX INDIA HOLDINGS CORPORATION

Common shareholders’ equity decreased from $2,577,851 at December 31, 2019 to $2,446,934 at December 31, 2020
primarily reflecting a net loss of $41,476, unrealized foreign currency translation losses of $60,606, and purchases of
subordinate voting shares for cancellation of $28,905 during 2020.

On February 19, 2021 the company was assigned an issuer credit rating of BBB (low) by DBRS Morningstar. On
February 26, 2021 the company completed an offering of $500.0 million principal amount of 5.0% unsecured senior
notes due February 26, 2028 at par for net proceeds after commissions and expenses of $496,350. The company used
the net proceeds from the offering and cash to repay $500,000 of its $550.0 million term loan.

Book Value per Share

Common shareholders’ equity at December 31, 2020 was $2,446,934 (December 31, 2019 – $2,577,851). The book
value per share at December 31, 2020 was $16.37 compared to $16.89 at December 31, 2019 representing a decrease
in 2020 of 3.1%, primarily reflecting a net loss of $41,476 (primarily related to investment and advisory fees, interest
expense, net change in unrealized losses on investments, and net foreign exchange losses, partially offset by a
performance fee recovery, dividend and interest income) and unrealized foreign currency translation losses
of $60,606.

The table below presents the book value per share before and after performance fees, if any, for the period from the
company’s IPO date of January 30, 2015 to December 31, 2020, and the annual growth rate and the compound
annual growth rate in book value per share before and after performance fees.

January 30, 2015(1)
December 31, 2015

December 31, 2016

December 31, 2017

December 31, 2018

December 31, 2019

December 31, 2020

Compound annual growth in book value per

share(2)

Book value per
share after
Performance
Fees

Annual growth
in book value
per share after
Performance
Fees

Book value per
share before
Performance
Fees

Annual growth
in book value
per share
before
Performance
Fees

$10.00

$ 9.50

$10.25

$14.46

$13.86

$16.89

$16.37

–

(5.0)%

7.9%

41.1%

(4.1)%

21.9%

(3.1)%

8.7%

$10.00

$ 9.50

$10.25

$15.24

$14.59

$18.11

$17.29

–

(5.0)%

7.9%

48.7%

(4.3)%

24.1%

(4.5)%

9.7%

(1) On January 30, 2015 Fairfax India completed its IPO at an offering price of $10.00 per share.

(2) The company’s book value per share of $16.37 at December 31, 2020 represented a compound annual growth rate from the IPO price of

$10.00 per share of 8.7% (a growth of 9.7% prior to accounting for performance fees).

The company has had strong performance during the period from the closing of its IPO in January 2015 to
December 31, 2020. As a result of that strong performance, the company’s book value per share of $16.37 at
December 31, 2020 represented a compound annual growth rate during that period of 8.7% (9.7% prior to the
performance fees described in the Related Party Transactions section of this MD&A) from the IPO price of $10.00 per
share, outperforming the compound annual growth rate of the S&P USD BSE Sensex Index of 5.7% during the
same period.

During 2020 and 2019 the total number of shares effectively outstanding decreased as a result of purchases of
3,160,910 and 230,053 subordinate voting shares for cancellation under the normal course issuer bid. At
December 31, 2020 there were 149,470,571 common shares effectively outstanding.

118

The company has issued and purchased common shares since it was federally incorporated on November 25, 2014
as follows:

Date

2014 – issuance of shares

2015 – issuance of shares

2016 – purchase of shares

2017 – issuance of shares

2017 – purchase of shares
2018 – issuance of shares(2)
2018 – purchase of shares

2019 – purchase of shares

2020 – purchase of shares

2021 – purchase of shares
2021 – issuance of shares(3)

Number of
subordinate
voting
shares

Number of
multiple
voting
shares(1)

Total number
of shares

Average issue/
purchase
price per
share

–

76,678,879

29,999,999

106,678,878

(1,797,848)

42,553,500

(1,900)

7,663,685

(2,234,782)

(230,053)

(3,160,910)

–

(1,797,848)

42,553,500

(1,900)

7,663,685

(2,234,782)

(230,053)

(3,160,910)

119,470,571

30,000,000

149,470,571

(375,337)

546,263

–

(375,337)

546,263

119,641,497

30,000,000

149,641,497

$10.00

$ 9.62

$11.78

$11.60

$14.21

$14.93

$14.42

$13.03

$ 9.14

$10.94

$ 9.55

Net proceeds/
(purchase
cost)

–

1,025,825

(21,178)

493,504

(27)

114,437

(32,218)

(2,998)

(28,905)

(4,106)

5,217

(1) Multiple voting shares that may only be issued to Fairfax or its affiliates and are not publicly traded.

(2)

(3)

Subordinate voting shares issued to Fairfax on March 9, 2018 for settlement of the performance fee accrued at December 31, 2017 of
$114,437. Issuance of the subordinate voting shares was a non-cash transaction and were issued at the VWAP of $14.93 in accordance
with the Investment Advisory Agreement.

Subordinate voting shares issued to Fairfax on March 5, 2021 for settlement of the performance fee accrued at December 31, 2020 of
$5,217. Issuance of the subordinate voting shares was a non-cash transaction and were issued at the VWAP of $9.55 in accordance with
the Investment Advisory Agreement.

On September 26, 2019 the company announced that the TSX accepted its intention to commence a normal course
issuer bid to purchase up to 3,500,000 subordinate voting shares, representing approximately 4.5% of the public float
of its subordinate voting shares, over a twelve month period from September 30, 2019 to September 29, 2020. On
September 28, 2020 the company announced that the TSX accepted its intention to commence a normal course
issuer bid to purchase up to 3,500,000 subordinate voting shares, representing approximately 4.7% of the public float
of its subordinate voting shares, over a twelve month period from September 30, 2020 to September 29, 2021.
Decisions regarding any future purchases will be based on market conditions, share price and other factors including
opportunities to invest capital for growth. The Notice of Intention to Make a Normal Course Issuer Bid is available,
without charge, by contacting the Corporate Secretary of the company.

During 2020, under the terms of the normal course issuer bid, the company purchased for cancellation
3,160,910 subordinate voting shares (2019 – 230,053) for a net cost of $28,905 (2019 – $2,998), of which $4,366 was
recorded as a benefit in retained earnings (2019 – $577 was charged to retained earnings).

Subsequent to December 31, 2020, under the terms of the normal course issuer bid, the company purchased for
cancellation 375,337 subordinate voting shares for a net cost of $4,106.

Liquidity

The undeployed cash and investments at December 31, 2020 provide adequate liquidity to meet the company’s
known significant commitments over the next twelve months, which are principally comprised of interest expense,
investment and advisory fees, and general and administration expenses. At December 31, 2020 the company had a
principal repayment on the $550.0 million term loan coming due in June 2021 that can be extended for an
additional year. On February 26, 2021 the company completed an offering of $500.0 million principal amount of
5.0% unsecured senior notes due February 26, 2028 at par for net proceeds after commissions and expenses of
$496,350. The company used the net proceeds from the offering and cash to repay $500,000 of its $550.0 million
term loan.

119

FAIRFAX INDIA HOLDINGS CORPORATION

its Private Indian Investments. The fair values of cash and investments at December 31, 2020, including selling
restrictions and financial risks related to the investments, are disclosed in note 6 (Cash and Investments) and note 11
(Financial Risk Management) to the consolidated financial statements for the year ended December 31, 2020. At
December 31, 2020 the company held common shares of Public Indian Investments which carry no selling
restrictions with a fair value of $772,564 and Government of India bonds with a fair value of $20,989. The company
expects to continue to receive investment income on its holdings of fixed income securities and dividends from its
equity investments to supplement its cash and cash equivalents. Accordingly, the company has adequate working
capital to support its operations.

At December 31, 2020 the company did not have long term commitments other than the recurring nature of
expenses described above.

Highlights in 2020 (with comparisons to 2019) of major components of the statements of cash flows are presented in
the following table:

Operating activities

Cash used in operating activities excluding the impact of changes in restricted cash and net sales

(purchases) of investments

Net decrease (increase) in restricted cash in support of borrowings

Net purchases of short term investments

Purchases of investments

Sales of investments

Cash provided by operating activities

Financing activities

Borrowings:

Proceeds

Issuance costs

Repayments

Purchases of subordinate voting shares for cancellation

Cash used in financing activities

Increase (decrease) in cash and cash equivalents during the year

2020

2019

(34,991)

(62,745)

600

–

(3,082)

(30)

(185,911)

(563,952)

231,193

666,407

10,891

36,598

–

(5,545)

–

(28,905)

50,000

(5,545)

(50,000)

(2,998)

(34,450)

(8,543)

(23,559)

28,055

‘‘Cash used in operating activities excluding the impact of changes in restricted cash and net sales (purchases) of
investments’’ provides a measure of the cash generated by (used in) the company’s head office operations, primarily
comprised of cash inflows (outflows) from interest and dividend income, interest expense, investment and advisory
fees, current income taxes and general and administration expenses, and excludes the impact of changes to restricted
cash and purchases and sales of investments. Cash used in operating activities excluding the impact of changes in
restricted cash and net sales (purchases) of investments of $34,991 in 2020 decreased from $62,745 in 2019, with the
change principally reflecting decreased cash used in interest expense, investment and advisory fees (primarily
resulting from the recovery of investment and advisory fees in 2019 resulting in less fees paid in 2020), current
income taxes, general and administration expenses, and increased cash provided by interest and dividend income.

Net decrease in restricted cash in support of borrowings of $600 in 2020 and net increase of $3,082 in 2019 primarily
related to the changes in the restricted cash accounts required to be maintained to fund interest payments on
borrowings. Refer to note 7 (Borrowings) to the consolidated financial statements for the year ended December 31,
2020 for additional details. Purchases of investments of $185,911 in 2020 primarily related to the company’s
investments in Other Public Indian Investments, IH Fund and purchases of Government of India and Indian
corporate bonds. Purchases of investments of $563,952 in 2019 primarily related to the company’s investments in
Sanmar common shares, Seven Islands, CSB Bank, IH Fund, NCML CCD, 5paisa and purchases of Government of
India and Indian corporate bonds. Sales of investments of $231,193 and $666,407 in 2020 and 2019 related to the
sales of Government of India and Indian corporate bonds, and partial sales of Other Public Indian Investments to
partially finance the acquisitions of the Indian Investments and to fund the debt service reserve account, and in 2019
also included the redemption of Sanmar bonds. Refer to note 15 (Supplementary Cash Flow Information) to the

120

consolidated financial statements for the year ended December 31, 2020 for details of purchases and sales
of investments.

Issuance costs of $5,545 in 2020 related to issuance costs on the amended $550.0 million term loan on June 26, 2020.
Proceeds from borrowings of $50,000 and issuance costs of $5,545 in 2019 related to the proceeds received from the
funds borrowed from a revolving credit facility and issuance costs on the amended $550.0 million term loan on
June 28, 2019. Repayment of borrowings of $50,000 related to the full repayment of a revolving credit facility on
December 31, 2019 with a portion of the net proceeds received from the redemption of Sanmar bonds. Purchases of
subordinate voting shares for cancellation of $28,905 in 2020 (2019 – $2,998) related to the company’s purchases of
3,160,910 subordinate voting shares (2019 – 230,053) under the terms of the normal course issuer bids. Refer to
note 8 (Common Shareholders’ Equity) to the consolidated financial statements for the year ended December 31,
2020 for additional details.

Contractual Obligations

On December 24, 2020 as part of the Fairchem Open Offer the company announced an open offer for the acquisition
of up to 3,377,953 common shares of Fairchem Organics, representing the entire public float or 25.9% of the issued
and outstanding shares, at a price of 575.53 Indian rupee per common share. The potential obligation is
approximately 1.9 billion Indian rupees ($26,607 at period end exchange rates). In support of the Fairchem Open
Offer, the company was required to place on deposit, cash of approximately 19.5 million Indian rupees ($267 at
period end exchange rates) and a bank guarantee for approximately 486.1 million Indian rupees ($6,652 at period
end exchange rates), representing 1.0% and 25.0% of the potential obligation, respectively. The cash deposit was
recorded in restricted cash within the consolidated balance sheet at December 31, 2020. The Fairchem Open Offer is
subject to regulatory approvals and customary closing conditions, and is expected to close in the first quarter
of 2021.

Under the terms of the Investment Advisory Agreement (defined in note 12 (Related Party Transactions) to the
consolidated financial statements for the year ended December 31, 2020), the company and its subsidiaries are
contractually obligated to pay Fairfax an investment and advisory fee and, if applicable, a performance fee. These fees
will vary based on the company’s common shareholders’ equity and book value per share.

The investment and advisory fees recorded in the consolidated statements of earnings (loss) for 2020 were $33,922
(2019 – $27,473).

The company determined that a performance fee of $5,217 was payable at December 31, 2020 (December 31, 2019 –
accrual of $47,850). Refer to the Related Party Transactions section of this MD&A that follows for a discussion on the
performance fee payable determined at December 31, 2020 (related to the second calculation period) and settled on
March 5, 2021.

Related Party Transactions

Investment Advisory Agreement

121

FAIRFAX INDIA HOLDINGS CORPORATION

Performance Fee

Second Calculation Period

The period from January 1, 2018 to December 31, 2020 (the ‘‘second calculation period’’) was the next consecutive
three-year period after December 31, 2017 for which a performance fee was accrued. The calculation of the
performance fee was reassessed and adjusted during 2019 to appropriately account for performance fees settled in
prior calculation periods, and is calculated on a cumulative basis as 20% of any increase in the book value per share
(before factoring in the impact of the performance fee for the second calculation period) above a 5% per annum
increase less the performance fee previously settled in the first calculation period. Under the Investment Advisory
Agreement, the performance fee shall be paid within 30 days after the company issues its annual audited
consolidated financial statements for the year ended December 31, 2020, in subordinate voting shares of the
company unless the market prices per share of those shares is more than two times the then book value per share, in
which event Fairfax may elect to receive that fee in cash. The number of subordinate voting shares to be issued will be
calculated based on the VWAP in respect of which the performance fee is paid.

Subsequent to December 31, 2020

On March 5, 2021 the company issued 546,263 subordinate voting shares to Fairfax to settle the performance fee
payable of $5,217 for the second calculation period. Under the terms of the Investment Advisory Agreement,
settlement of the performance fee was through the issuance of subordinate voting shares of the company as the
market price per share was less than two times the then book value per share. The number of subordinate voting
shares issued was calculated as the performance fee payable at December 31, 2020 of $5,217 divided by the VWAP of
$9.55. The issuance of these subordinate voting shares, along with the purchases of subordinate voting shares for
cancellation subsequent to December 31, 2020, increased Fairfax’s equity interest in Fairfax India from 28.0% at
December 31, 2020 to 28.4% at March 5, 2021.

Investment and Advisory Fees

Fairfax’s Voting Rights and Equity Interest

For additional details on the company’s related party transactions, see note 12 (Related Party Transactions) to the
consolidated financial statements for the year ended December 31, 2020.

122

Accounting and Disclosure Matters

Management’s Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of the company’s management, including the company’s CEO and
CFO, the company conducted an evaluation of the effectiveness of its disclosure controls and procedures as of
December 31, 2020, as required by Canadian securities legislation. Disclosure controls and procedures are designed
to ensure that the information required to be disclosed by the company in the reports it files or submits under
securities legislation is recorded, processed, summarized and reported on a timely basis and that such information is
accumulated and reported to management, including the company’s CEO and CFO, as appropriate, to allow required
disclosures to be made in a timely fashion. Based on their evaluation, the CEO and CFO have concluded that as of
December 31, 2020, the company’s disclosure controls and procedures were effective.

Management’s Report on Internal Control Over Financial Reporting

The company’s management is responsible for establishing and maintaining adequate internal control over financial
reporting (as defined under National Instrument 52-109). The company’s internal control over financial reporting is
a process designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with International Financial Reporting
Standards (‘‘IFRS’’) as issued by the International Accounting Standards Board (‘‘IASB’’). A company’s internal control
over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with IFRS as issued by the IASB, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

The company’s management assessed the effectiveness of the company’s internal control over financial reporting as
of December 31, 2020. In making this assessment, the company’s management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (‘‘COSO’’) in Internal Control – Integrated
Framework (2013). Based on this assessment, the company’s management, including the CEO and CFO, concluded
that, as of December 31, 2020, the company’s internal control over financial reporting was effective based on the
criteria in Internal Control – Integrated Framework (2013) issued by COSO.

Critical Accounting Estimates and Judgments

Please refer to note 4 (Critical Accounting Estimates and Judgments) to the consolidated financial statements for the
year ended December 31, 2020.

Significant Accounting Policy Changes

There were no significant accounting policy changes during 2020. Please refer to note 3 (Summary of Significant
Accounting Policies) to the consolidated financial statements for the year ended December 31, 2020 for a detailed
discussion of the company’s accounting policies.

Future Accounting Changes

Certain new IFRS may have a significant impact on the company’s consolidated financial reporting in the future.
Each of those standards will require a moderate degree of implementation effort. The company does not expect to
adopt any of these new standards in advance of their respective effective dates. New standards and amendments that
have been issued but are not yet effective are described in note 3 (Summary of Significant Accounting Policies) to the
consolidated financial statements for the year ended December 31, 2020.

123

FAIRFAX INDIA HOLDINGS CORPORATION

Risk Management

Overview

Risks

The following risks, among others, should be considered in evaluating the outlook for the company. Additional risks
not currently known to the company or that are currently deemed immaterial may also impair business operations.
The company, its consolidated subsidiaries, Fairfax and the Portfolio Advisor monitor these risks on an on-going
basis and take actions as needed to mitigate their impact. For further detail about the risks relating to the company,
please see Risk Factors in Fairfax India’s most recent annual information form, which is available on SEDAR at
www.sedar.com.

The COVID-19 Pandemic

Oil Price Risk

India imports a majority of its requirements of petroleum oil and petroleum products. The Government of India has
deregulated prices and has been reducing the subsidy in respect of certain oil products, resulting in international
crude prices having a greater effect on domestic oil prices. Global oil prices continue to be volatile, any increase or
volatility in oil prices, as well as the impact of Indian rupee depreciation, which makes imports more expensive, and
the pass-through of such increases to Indian consumers could have a material adverse impact on the Indian
economy, including a rise in inflation and market interest rates resulting in a significant impact on the profitability
of certain Indian Investments.

Geographic Concentration of Investments

Substantially all of the company’s investments will be made in India and in Indian businesses or other businesses
with customers, suppliers or business primarily conducted in, or dependent on, India. As a result, the company’s
performance is particularly sensitive to economic changes in India. The market value of the company’s investments,
the income generated by the company and the company’s performance is particularly sensitive to changes in the
economic condition and regulatory environment in India. Adverse changes in the economic condition or regulatory
environment of India may have a material adverse effect on the company’s business, cash flows, financial condition
and net earnings.

124

Foreign Currency Fluctuation

All of the company’s portfolio investments have been and will be made in India and Indian businesses or other
businesses with customers, suppliers or business primarily conducted in, or dependent on, India, and the financial
position and results for these investments have been and are expected to be principally denominated in Indian
rupees. The functional currency of the company and its consolidated subsidiaries is the Indian rupee and the
company’s presentation currency is the U.S. dollar.

The company presents its consolidated financial statements in U.S. dollars to provide comparability with other
North American investment entities.

Accordingly, the income and expenses are translated at the average rates of exchange in effect during the applicable
reporting period. Assets and liabilities are translated at the exchange rates in effect at the balance sheet date. As a
result, the company’s consolidated financial position is subject to foreign currency fluctuation risk, which could
materially adversely impact its operating results and cash flows. Although the company may enter into currency
hedging arrangements in respect of its foreign currency cash flows, there can be no assurance that the company will
do so or, if it does, that the full amount of the foreign currency exposure will be hedged at any time.

Volatility of the Indian Securities Markets

Stock exchanges in India have, in the past, experienced substantial fluctuations in the prices of listed securities. The
stock exchanges in India have also experienced temporary exchange closures, broker defaults, settlement delays and
strikes by brokerage firm employees. In addition, the governing bodies of the stock exchanges in India have, from
time to time, imposed restrictions on trading in certain securities, limitations on price movements and margin
requirements. Furthermore, from time to time, disputes have occurred between listed businesses and stock
exchanges and other regulatory bodies, which in some cases may have had a negative effect on market sentiment.
Such volatility in the trading performance may negatively affect the company’s future income and earnings.

Investments May Be Made In Foreign Private Businesses Where Information Is Unreliable
or Unavailable

In pursuing the company’s investment strategy, the company may seek to make investments in privately-held
businesses as disclosed in note 5 (Indian Investments) to the consolidated financial statements for the year ended
December 31, 2020. As minimal public information exists about private businesses, the company could be required
to make investment decisions on whether to pursue a potential investment in a private business on the basis of
limited information, which may result in an investment in a business that is not as profitable as the company
initially suspected, if at all. Investments in private businesses pose certain incremental risks as compared to
investments in public businesses, including that they:

(cid:127) have reduced access to the capital markets, resulting in diminished capital resources and ability to withstand

financial distress;

(cid:127) may have limited financial resources and may be unable to meet their obligations under their debt securities
that the company may hold, which may be accompanied by a deterioration in the value of any collateral and a
reduction in the likelihood of the company realizing any guarantees that it may have obtained in connection
with its investment;

(cid:127) may have shorter operating histories, narrower product lines and smaller market shares than larger businesses,
which tend to render them more vulnerable to competitors’ actions and changing market conditions, as well
as general economic downturns;

(cid:127) are more likely to depend on the management talents and efforts of a small group of persons; therefore, the
death, disability, resignation or termination of one or more of these persons could have a material adverse
impact on an investment and, as a result, the company; and

(cid:127) generally have less predictable operating results, may from time to time be parties to litigation, may be
engaged in rapidly changing businesses with products subject to a substantial risk of obsolescence, and may
require substantial additional capital to support their operations, finance expansion or maintain their
competitive position.

125

FAIRFAX INDIA HOLDINGS CORPORATION

Valuation Methodologies Involve Subjective Judgments

The company’s financial assets and liabilities are valued in accordance with IFRS. Accordingly, the company is
required to follow a specific framework for measuring the fair value of its investments and, in its audited
consolidated financial statements, to provide certain disclosures regarding the use of fair value measurements.

The fair value measurement accounting guidance establishes a hierarchal disclosure framework that ranks the
observability of market inputs used in measuring financial instruments at fair value. The observability of inputs
depends on a number of factors, including the type of financial instrument, the characteristics specific to the
financial instrument and the state of the marketplace, including the existence and transparency of transactions
between market participants. Financial instruments with readily quoted prices, or for which fair value can be
measured from quoted prices in active markets, generally will have a high degree of market price observability and
less judgment applied in determining fair value.

A portion of the company’s portfolio investments may be in the form of securities that are not publicly traded and
thus have no readily ascertainable market prices. The fair value of securities and other investments that are not
publicly traded may not be readily determinable. The company will value these securities quarterly at fair value as
determined in good faith by the company and in accordance with the valuation policies and procedures under IFRS.
The company may utilize the services of an independent valuation firm to aid it in determining the fair value of these
securities. The types of factors that may be considered in fair value pricing of the company’s investments include the
nature and realizable value of any collateral, the portfolio business’ ability to make payments and its earnings, the
markets in which the portfolio investment does business, comparisons to publicly traded companies, discounted
cash flows and other relevant factors. Because such valuations, and particularly valuations of private securities and
private companies, are inherently uncertain, such valuations may fluctuate over short periods of time and may be
based on estimates. Thus, the company’s determinations of fair value may differ materially from the prices that
would have been obtained if a ready market for these securities existed. The value of the company’s total assets could
be materially adversely affected if the company’s determinations regarding the fair value of its investments were
materially higher than the values that it ultimately realizes upon the disposition of such securities.

The value of the company’s investment portfolio may also be affected by changes in accounting standards, policies or
practices. From time to time, the company will be required to adopt new or revised accounting standards or
guidance. It is possible that future accounting standards that the company is required to adopt could change the
valuation of the company’s investments.

Due to a wide variety of market factors and the nature of certain securities to be held by the company, there is no
guarantee that the fair value determined by the company or any third party valuation agents will represent the value
that will be realized by the company on the eventual disposition of the investment or that would, in fact, be realized
upon an immediate disposition of the investment. Moreover, the valuations to be performed by the company or any
third party valuation agents are inherently different from the valuation of the company’s securities that would be
performed if the company were forced to liquidate all or a significant portion of its securities, as liquidation valuation
could be materially lower.

In addition, the values of the company’s investments are subject to significant volatility, including due to a number
of factors beyond the company’s control. These include actual or anticipated fluctuations in the quarterly and
annual results of these companies or companies in their industries, market perceptions concerning the availability of
additional securities for sale, general economic, social or political developments, changes in industry conditions or
government regulations, changes in management or capital structure and significant acquisitions or dispositions. In
addition, because the company often holds substantial positions in its investees, the disposition of these securities
often is delayed for, or takes place over, long periods of time, which can further expose the company to volatility risk.
Even if the company holds an investment that may be difficult to liquidate in a single transaction, the company may
not discount the market price of the security sufficiently for purposes of its valuations. If the company realizes value
on an investment that is significantly lower that the value at which it was recorded in its balance sheet, the company
would recognize investment losses.

Financial Market Fluctuations

The company invests in both private businesses and publicly traded businesses. With respect to publicly traded
businesses, as disclosed in note 5 (Indian Investments) to the consolidated financial statements for the year ended
December 31, 2020, fluctuations in the market prices of such securities may negatively affect the value of such

126

investments. In addition, general instability in the public debt market and other securities markets may impede the
ability of businesses to refinance their debt through selling new securities, thereby limiting the company’s
investment options with regard to a particular portfolio investment.

Global capital markets have experienced extreme volatility and disruption in recent years as evidenced by the failure
of major financial institutions, significant write-offs suffered by the financial services sector, the re-pricing of credit
risk, the unavailability of credit or the downgrading and the possibility of default by sovereign issuers, forced exit or
voluntary withdrawal of countries from a common currency and/or devaluation. Despite actions of government
authorities, these events have contributed to a worsening of general economic conditions, high levels of
unemployment in certain Western economies and the introduction of austerity measures by certain governments.

Such worsening of financial market and economic conditions may have a negative effect on the valuations of, and
the ability of the company to exit or partially divest from, investment positions. Adverse economic conditions may
also decrease the value of collateral securing some of its positions, and could require the company to contribute
additional collateral.

Depending on market conditions, the company may incur substantial realized and unrealized losses in future
periods, all of which may materially adversely affect its results of operations and the value of any investment in
the company.

Pace of Completing Investments

The company’s business is to identify, with the assistance of the Portfolio Advisor, suitable investment opportunities,
pursuing such opportunities and consummating such investment opportunities. If the company is unable to source
and manage its investments effectively, it would adversely impact the company’s financial position and net earnings.
There can be no assurance as to the pace of finding and implementing investment opportunities. Conversely, there
may only be a limited number of suitable investment opportunities at any given time. This may cause the company,
while it deploys cash proceeds not yet invested, to hold significant levels of cash, cash equivalents, short term
U.S. treasury bills or Government of India or Indian corporate bonds. A lengthy period prior to which capital is
deployed may adversely affect the company’s overall performance.

Minority Investments

The company may make minority equity investments in which the company does not participate in the
management or otherwise influence the business or affairs of such businesses. The company will monitor the
performance of each investment and maintain an ongoing dialogue with each business’ management team.
However, day-to-day operations will primarily be the responsibility of each business’ management team and the
company may not have the right to influence such operations.

Reliance on Key Personnel and Risks Associated with the Investment Advisory Agreement

The management and governance of the company depends on the services of certain key personnel, including the
Portfolio Advisor, Fairfax, as administrator, and certain executive officers of the company. The loss of the services of
any key personnel, particularly V. Prem Watsa and Chandran Ratnaswami, could have a material adverse effect on
the company and materially adversely affect the company’s financial condition and net earnings.

The company relies on the Portfolio Advisor and any of its sub-advisors, from time to time, including Fairbridge, with
respect to the sourcing and advising with respect to their investments. Consequently, the company’s ability to
achieve its investment objectives depends in large part on the Portfolio Advisor and its ability to identify and advise
the company on attractive investment opportunities. This means that the company’s investments are dependent
upon the Portfolio Advisor’s business contacts, its ability to successfully hire, train, supervise and manage its
personnel and its ability to maintain its operating systems. If the company were to lose the services provided by the
Portfolio Advisor or its key personnel or if the Portfolio Advisor fails to satisfactorily perform its obligations under the
Investment Advisory Agreement, the company’s investments and growth prospects may decline.

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FAIRFAX INDIA HOLDINGS CORPORATION

The company may be unable to duplicate the quality and depth of management from the Portfolio Advisor if the
company were to source and manage its own investments or if it were to hire another investment advisor. If the
Portfolio Advisor should cease for whatever reason to be the investment advisor of the company or if Fairfax should
cease to provide investment administration services to the company, the cost of obtaining substitute services may be
greater than the fees the company will pay the Portfolio Advisor and Fairfax under the Investment Advisory
Agreement, and this may adversely affect the company’s ability to meet its objectives and execute its strategy which
could materially and adversely affect the company’s cash flows, net earnings and financial condition.

Lawsuits

The company may, from time to time, become party to a variety of legal claims and regulatory proceedings in
Canada, India, Mauritius or elsewhere. The existence of such claims against the company or its affiliates, directors or
officers could have various adverse effects, including the incurrence of significant legal expenses defending such
claims, even those claims without merit. The company and its consolidated subsidiaries manage day-to-day
regulatory and legal risk primarily by implementing appropriate policies, procedures and controls. Internal and
external legal counsel also work closely with the company and its consolidated subsidiaries to identify and mitigate
areas of potential regulatory and legal risk. The company’s results of operations, financial condition and liquidity
could be materially adversely affected by any such legal risks.

Use of Leverage

The company may rely on the use of leverage when making its investments. As such, the ability to achieve attractive
rates of return on such investments will significantly depend on the company’s continued ability to access sources of
debt financing on attractive terms. An increase in either market interest rates or in the risk spreads demanded by
lenders would make it more expensive for the company to finance its investments and, in turn, would reduce net
returns therein. Increases in interest rates could also make it more difficult for the company to locate and
consummate investments because other potential buyers, including operating companies acting as strategic buyers,
may be able to bid for an asset at a higher price due to a lower overall cost of capital. Availability of capital from debt
capital markets is subject to significant volatility and the company may not be able to access those markets on
attractive terms, or at all, when completing an investment. In addition, we are subject to a leverage covenant under
the terms of the unsecured senior notes. Any of the foregoing circumstances could have a material adverse effect on
the financial condition and results of operations of the company.

Significant Ownership by Fairfax May Adversely Affect the Market Price of the Subordinate
Voting Shares

At December 31, 2020 Fairfax, through its subsidiaries, owned 30,000,000 multiple voting shares (December 31,
2019 – 30,000,000) and 11,915,978 subordinate voting shares (December 31, 2019 — 21,558,422) of Fairfax India. At
December 31, 2020 Fairfax’s holdings of multiple and subordinate voting shares represented 93.4% of the voting
rights and 28.0% of the equity interest in Fairfax India (December 31, 2019 — 93.8% and 33.8%). In accordance with
the Investment Advisory Agreement, the performance fee payable of $5,217 to Fairfax for the second calculation
period (ending on December 31, 2020) was settled on March 5, 2021 by the company issuing 546,263 subordinate
voting shares to Fairfax. The issuance of these subordinate voting shares, along with the purchases of subordinate
voting shares for cancellation subsequent to December 31, 2020, increased Fairfax’s equity interest in Fairfax India
28.0% at December 31, 2020 to 28.4% at March 5, 2021 (see note 12 (Related Party Transactions) to the consolidated
financial statements for the year ended December 31, 2020).

As of March 5, 2021, Fairfax and its affiliates hold 93.4% and 28.4% voting and equity interests respectively, in the
company through ownership of all of the 30,000,000 multiple voting shares and 12,462,241 subordinate
voting shares.

For so long as Fairfax, either directly or through one or more subsidiaries, maintains a significant voting interest in
the company, Fairfax will have the ability to exercise substantial influence with respect to the company’s affairs and
significantly affect the outcome of shareholder votes, and may have the ability to prevent certain fundamental
transactions.

Accordingly, the subordinate voting shares may be less liquid and trade at a relative discount compared to such
subordinate voting shares in circumstances where Fairfax did not have the ability to significantly influence or
determine matters affecting the company. Additionally, Fairfax’s significant voting interest in the company may

128

discourage transactions involving a change of control of the company, including transactions in which an investor,
as a holder of subordinate voting shares, might otherwise receive a premium for its subordinate voting shares over
the then-current market price.

Weather Risk

Certain Indian Investments are operating in industries exposed to weather risk. The revenues of these portfolio
companies may be adversely affected during a period of severe weather conditions in India. Because weather events
are unpredictable by nature, historical results of operations of certain Indian Investments may not be indicative of
their future results of operations. As a result of the occurrence of one or more major weather catastrophes in any
given period, the expected returns from Indian Investments impacted by weather risk may fall short of the
company’s expectations.

Taxation Risks

The company structures its business according to prevailing taxation law and practice in Canada, Mauritius and
India. Any change in tax policy, tax legislation (including in relation to taxation rates), the interpretation of tax
policy or legislation or practice could adversely affect the company’s return earned on investments and on the capital
available to be invested. Further, taxes and other constraints that would apply to the company and its consolidated
subsidiaries in such jurisdictions may not apply to other parties, and such parties may therefore have a significantly
lower effective cost of capital and a corresponding competitive advantage in pursuing investments. A number of
other factors may increase the effective tax rates, which would have a negative impact on net earnings. These
include, but are not limited to, changes in the valuation of our deferred tax assets and liabilities, and any
reassessment of taxes by a taxation authority.

The company utilizes Fairfax’s tax specialist personnel for assessing the income tax consequences of planned
transactions and events and undertaking the appropriate tax planning. The company also consults with external tax
professionals as needed. Tax legislation of each jurisdiction in which the company operates is interpreted to
determine income taxes and expected timing of the reversal of deferred income tax assets and liabilities.

Any amendments to the capital gains and permanent establishment articles in the India-Mauritius Double Taxation
Avoidance Agreement may result in capital gains derived from the company or its investments in India becoming
subject to tax in India, which could have a material adverse effect on the company’s business, financial condition
and net earnings. During the second quarter of 2016, India and Mauritius amended their India-Mauritius tax treaty.
As a result, capital gains realized by Mauritius residents on dispositions of shares of Indian companies acquired on or
after April 1, 2017 and disposed of on or before March 31, 2019 will be subject to tax in India at half of the India
domestic tax rate. Capital gains realized by Mauritius residents on dispositions of shares of Indian companies
acquired on or after April 1, 2017 and disposed of after March 31, 2019 will be subject to tax in India at the full India
domestic tax rate. Capital gains realized by Mauritius residents on dispositions of shares of Indian companies
acquired prior to April 1, 2017 remain exempt from capital gains tax in India.

On March 29, 2018 India enacted the Finance Act 2018 which repealed, with effect from April 1, 2018, the long term
capital gains tax exemption which was available in respect of transfers of equity shares of Indian companies on
which Securities Transaction Tax was paid at the time of acquisition and transfer of such shares. As a result, long term
capital gains realized on such transfers will generally be taxed at a rate of 10.0%. However, grandfathering of the long
term capital gains exemption in respect of any accrued gain on such shares held as of January 31, 2018 will generally
be available to the extent of the accrued gain as of January 31, 2018. Capital gains realized by a tax resident of
Mauritius on a transfer of equity shares of an Indian company which were acquired prior to April 1, 2017 will
continue to be exempt from capital gains tax in India by virtue of the India-Mauritius tax treaty, notwithstanding the
repeal of the long term capital gains tax exemption under Indian domestic law. In addition, a long term capital gain
realized by a Mauritius tax resident on shares acquired on or after April 1, 2017, and sold prior to March 31, 2019, will
continue to be taxed at a rate of 50.0% of the prevailing domestic Indian capital gains tax rate by virtue of the India-
Mauritius tax treaty.

At December 31, 2020 the company evaluated the potential impact of the application of capital gains tax in India on
any future dispositions of investments in equity shares held by FIH Mauritius and FIH Private. and recorded deferred
income taxes primarily related to unrealized gains on the company’s investment in equity shares acquired
subsequent to April 1, 2017 (see note 10 (Income Taxes) to the consolidated financial statements for the year ended

129

FAIRFAX INDIA HOLDINGS CORPORATION

December 31, 2020). The company will continue to evaluate the potential impact of the Indian capital gains tax as it
relates to any future dispositions of investments in equity shares of its Indian Investments.

On July 31, 2018 Mauritius enacted the Finance (Miscellaneous Provision) Act (the ‘‘Mauritius Finance Act’’) which
abolishes, with effect from January 1, 2019, the deemed Foreign Tax Credit (‘‘FTC’’) regime available to Global
Business License companies. For entities holding a Category 1 Global Business License issued before October 16, 2017
(held by both FIH Mauritius and FIH Private) the deemed FTC regime will continue to apply until June 30, 2021. In
place of the deemed FTC, the Mauritius Finance Act introduces an 80% exemption regime on foreign source income
including certain foreign dividends and foreign source interest. The 80% exemption is available upon meeting
predefined substance requirements issued by the Financial Services Commission. The company evaluated the
potential impact of the Mauritius Finance Act and concluded that it will not have a material impact to the company.

Emerging Markets

The company’s investment objective is to achieve long term capital appreciation, while preserving capital, by
investing in Indian Investments. Foreign investment risk is particularly high given that the company invests in
securities of issuers based in or doing business in an emerging market country.

The economies of emerging market countries have been and may continue to be adversely affected by economic
conditions in the countries with which they trade. The economies of emerging market countries may also be
predominantly based on only a few industries or dependent on revenues from particular commodities. In addition,
custodial services and other investment-related costs may be more expensive in emerging markets than in developed
markets, which could reduce the company’s income from securities or debt instruments of emerging market country
issuers.

There is a heightened possibility of imposition of withholding taxes on interest or dividend income generated from
emerging market securities. Governments of emerging market countries may engage in confiscatory taxation or
expropriation of income and/or assets to raise revenues or to pursue a domestic political agenda. In the past,
emerging market countries have nationalized assets, companies and even entire sectors, including the assets of
foreign investors, with inadequate or no compensation to the prior owners. There can be no assurance that the
company will not suffer a loss of any or all of its investments or, interest or dividends thereon, due to adverse fiscal or
other policy changes in emerging market countries.

Governments of many emerging market countries have exercised and continue to exercise substantial influence over
many aspects of the private sector. In some cases, the government owns or controls many companies, including
some of the largest in the country. Accordingly, government actions could have a significant effect on economic
conditions in an emerging country and on market conditions, prices and yields of securities in the company’s
portfolio.

Bankruptcy law and creditor reorganization processes may differ substantially from those in Canada, resulting in
greater uncertainty as to the rights of creditors, the enforceability of such rights, reorganization timing and the
classification, seniority and treatment of claims. In certain emerging market countries, although bankruptcy laws
have been enacted, the process for reorganization remains highly uncertain. In addition, it may be impossible to seek
legal redress against an issuer that is a sovereign state.

Also, because publicly traded debt instruments of emerging market issuers represent a relatively recent innovation in
the world debt markets, there is little historical data or related market experience concerning the attributes of such
instruments under all economic, market and political conditions.

Other heightened risks associated with emerging markets investments include without limitation: (i) risks due to less
social, political and economic stability, including the risk of war, terrorism, nationalization, limitations on the
removal of funds or other assets, or diplomatic developments that affect investments in these countries; (ii) the
smaller size of the market for such securities and a lower volume of trading, resulting in a lack of liquidity and in price
volatility; (iii) certain national policies which may restrict the company’s investment opportunities, including
restrictions on investing in issuers or industries deemed sensitive to relevant national interests and requirements that

130

government approval be obtained prior to investment by foreign persons; (iv) certain national policies that may
restrict the company’s repatriation of investment income, capital or the proceeds of sales of securities, including
temporary restrictions on foreign capital remittances; (v) the lack of uniform accounting and auditing standards
and/or standards that may be significantly different from the standards required in Canada; (vi) less publicly
available financial and other information regarding issuers; (vii) potential difficulties in enforcing contractual
obligations; and (viii) higher rates of inflation, higher interest rates and other economic concerns. The company may
invest to a substantial extent in emerging market securities that are denominated in Indian rupees, subjecting the
company to a greater degree of foreign currency risk. Also, investing in emerging market countries may entail
purchases of securities of issuers that are insolvent, bankrupt or otherwise of questionable ability to satisfy their
payment obligations as they become due, subjecting the company to a greater amount of credit risk and/or high yield
risk. Additionally, the demand for securities of the company may be more volatile due to general market volatility in
demand for investments in emerging markets.

As reflected in the above discussion, investments in emerging market securities involve a greater degree of risk than,
and special risks in addition to the risks associated with, investments in domestic securities or in securities of foreign
developed countries.

MLI

Under a mandate given by G20 nations to address global tax avoidance, in 2015, the Organization for Economic
Co-operation and Development (‘‘OECD’’) developed 15 action plans aimed at tackling Base Erosion and Profits
Shifting (‘‘BEPS’’) strategies. Action Plan 15 of the BEPS project envisaged a multilateral instrument (‘‘MLI’’) for
modifying the global tax treaty network in a timely and synchronized manner.

On June 2017, India proposed to modify its existing 93 comprehensive tax treaties when it joined 66 other countries
(including Canada and Mauritius) in signing the MLI. On June 25, 2019, the Government of India deposited its
instrument of ratification of the MLI with the OECD. Mauritius deposited its instrument of ratification of the MLI
with the OECD on October 18, 2019, but has excluded India from its covered tax agreements. Accordingly, the MLI
currently does not apply in respect of the India-Mauritius tax treaty. This position could, however, change in the
future based on inter-government negotiations. If Mauritius includes India as one of its covered tax agreements, the
effect of the inclusion would need to be assessed. A loss of treaty benefits could have a material adverse effect on the
company’s business and financial conditions and results of operations.

Economic Risk

The Indian economy has grown rapidly during the past several years and there is no assurance that this growth rate
will be maintained. India may experience substantial (and, in some cases, extremely high) rates of inflation or
economic recessions causing a negative effect on the Indian economy. India may also impose restrictions on the
exchange or export of currency, institute adverse currency exchange rates or experience a lack of available currency
hedging instruments. Any of these events could have a material adverse effect on the Indian economy.

Trading Price of Subordinate Voting Shares Relative to Book Value per Share

The company is neither a mutual fund nor an investment fund, and due to the nature of its business and investment
strategy, and the composition of its investment portfolio, the market price of the subordinate voting shares, at any
time, may vary significantly from its book value per share. This risk is separate and distinct from the risk that the
market price of the subordinate voting shares may decrease.

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FAIRFAX INDIA HOLDINGS CORPORATION

Other

Quarterly Data (unaudited)

Years ended December 31

US$ thousands, except per share amounts

2020

Income (loss)
Expenses
Provision for (recovery of) income taxes
Net earnings (loss)
Net earnings (loss) per share
Net earnings (loss) per diluted share

2019

Income (loss)
Expenses
Provision for income taxes
Net earnings (loss)
Net earnings (loss) per share
Net earnings (loss) per diluted share

Years ended December 31

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Full Year

(295,364)
(29,368)
(12,187)
(253,809)
(1.67)
(1.67)

$
$

72,723
16,181
4,158
52,384
0.35
0.35

$
$

99,448
16,643
5,153
77,652
0.52
0.52

$
$

(28,487)
19,767
4,331
(52,585)
(0.34)
(0.34)

$
$

(5,480)
19,064
30,940
(55,484)
(0.36)
(0.36)

$
$

112,788
19,038
4,567
89,183
0.58
0.58

$
$

110,221
22,552
5,372
82,297
0.55
0.55

$
$

633,868
62,199
36,445
535,224
3.51
3.42

$
$

(12,972)
26,008
2,496
(41,476)
(0.27)
(0.27)

$
$

712,689
120,068
76,283
516,338
3.38
3.30

$
$

Indian rupees and in millions, except per share amounts(1)

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Full Year

2020

Income (loss)
Expenses
Provision for (recovery of) income taxes
Net earnings (loss)
Net earnings (loss) per share
Net earnings (loss) per diluted share

2019

Income (loss)
Expenses
Provision for income taxes
Net earnings (loss)
Net earnings (loss) per share
Net earnings (loss) per diluted share

(1) Presented in the company’s functional currency.

(21,403)
(2,128)
(883)
(18,392)
(120.71)
(120.71)

(2,007)
1,393
305
(3,705)
(24.27)
(24.27)

4,894
1,150
288
3,456
22.84
22.84

(370)
1,325
2,164
(3,859)
(25.29)
(25.29)

7,364
1,234
382
5,748
38.21
38.21

7,905
1,340
324
6,241
40.89
40.89

8,183
1,671
398
6,114
40.79
40.64

44,646
4,395
2,577
37,674
246.84
240.92

(962)
1,927
185
(3,074)
(20.36)
(20.28)

50,174
8,453
5,370
36,351
238.12
232.41

Income of $110,221 in the fourth quarter of 2020 decreased from $633,868 in the fourth quarter of 2019 primarily as
a result of decreased net change in unrealized gains on investments. Net change in unrealized gains on investments
of $102,670 in the fourth quarter 2020 primarily included net unrealized gains on common stocks of $102,366
(principally related to unrealized gains on IIFL Finance, Other Public Indian Investments, Fairchem Organics, IIFL
Securities, Seven Islands and IIFL Wealth, partially offset by unrealized losses on CSB Bank, NCML and Privi
Speciality (formerly Fairchem). Net change in unrealized gains on investments of $495,582 in the fourth quarter of
2019 included net unrealized gains on common stocks of $640,088 (principally related to unrealized gains on BIAL,
CSB Bank, Sanmar, IIFL Finance, IIFL Securities and Other Public Indian Investments, partially offset by unrealized
losses on IIFL Wealth, Fairchem and NCML) and net unrealized losses on bonds of $144,506 (principally related to
the reversal of prior period unrealized gains recorded on Sanmar bonds).

In addition, income decreased in the fourth quarter of 2020 compared to the fourth quarter of 2019 as a result of
decreased net realized gains on investments (primarily due to the redemption of Sanmar bonds in the fourth quarter
of 2019) and decreased dividend income (primarily due to the timing of dividend income from IIFL Wealth received
earlier in the year), partially offset by net foreign exchange gains in the fourth quarter of 2020 compared to net
foreign exchange losses in the fourth quarter of 2019 (principally as a result of the strengthening of the Indian rupee
relative to the U.S. dollar in the fourth quarter of 2020).

132

Expenses of $62,199 in the fourth quarter of 2019 decreased to $22,552 in the fourth quarter of 2020 primarily as a
result of $5,143 in performance fees recorded in the fourth quarter of 2020 (fourth quarter of 2019 — $48,514) and
decreased interest expense, partially offset by increased investment and advisory fees. For additional details, see
note 12 (Related Party Transactions) to the consolidated financial statements for the year ended December 31, 2020.

The company reported net earnings of $82,297 (net earnings of $0.55 per basic and diluted share) in the fourth
quarter of 2020 compared to net earnings of $535,224 (net earnings of $3.51 per basic share and $3.42 per diluted
share) in the fourth quarter of 2019. The decrease in profitability in the fourth quarter of 2020 primarily reflected
decreased net unrealized gains on investments and net realized gains on investments, partially offset by decreased
performance fee and provision for income taxes recorded in the fourth quarter of 2020.

Individual quarterly results have been (and are expected to continue to be) significantly impacted by net unrealized
gains (losses) on the company’s Indian Investments and net foreign exchange gains (losses), the timing of which is
not predictable. Individual quarterly results have been (and may in the future be) affected by increased expenses
impacted by the change in fair value of the company’s Indian Investments which would result in a higher
performance fee, if applicable, and investment and advisory fees.

Stock Prices and Share Information

At March 5, 2021 the company had 119,641,497 subordinate voting shares and 30,000,000 multiple voting shares
outstanding (an aggregate of 149,641,497 common shares effectively outstanding). Each subordinate voting share
carries one vote per share at all meetings of shareholders except for separate meetings of holders of another class of
shares. Each multiple voting share carries fifty votes per share at all meetings of shareholders except for separate
meetings of holders of another class of shares. Fairfax, through its subsidiaries, owns all the issued and outstanding
multiple voting shares, which are not publicly traded.

The table that follows presents the TSX high, low and closing U.S. dollar prices of the subordinate voting shares of
Fairfax India, trading under the symbol FIH.U, for each quarter of 2020 and 2019.

First

Second

Fourth
Quarter Quarter Quarter Quarter
(US$)

Third

2020

High
Low
Close

2019

High
Low
Close

13.86
5.28
6.55

14.26
12.67
14.00

9.35
5.60
8.40

14.48
12.56
12.70

9.49
6.80
6.84

13.80
11.01
12.00

10.97
6.84
9.60

13.89
11.05
12.80

Compliance with Corporate Governance Rules

Fairfax India is a Canadian reporting issuer with securities listed on the TSX and trading in U.S. dollars under the
symbol FIH.U. It has in place corporate governance practices that comply with all applicable rules and substantially
comply with all applicable guidelines and policies of the Canadian Securities Administrators and the practices set
out therein.

The company’s Board of Directors has adopted a set of Corporate Governance Guidelines (which include a written
mandate of the Board), established an Audit Committee and Governance, Compensation and Nominating
Committee, approved written charters for all of its committees, approved a Code of Business Conduct and Ethics
applicable to all directors, officers and employees of the company and established, in conjunction with the Audit
Committee, a Whistleblower Policy. The company continues to monitor developments in the area of corporate
governance as well as its own procedures.

133

FAIRFAX INDIA HOLDINGS CORPORATION

Forward-Looking Statements

This annual report may contain forward-looking statements within the meaning of applicable securities legislation.
Forward-looking statements may relate to the company’s or an Indian Investment’s future outlook and anticipated
events or results and may include statements regarding the financial position, business strategy, growth strategy,
budgets, operations, financial results, taxes, dividends, plans and objectives of the company. Particularly, statements
regarding future results, performance, achievements, prospects or opportunities of the company, an Indian
Investment, or the Indian market are forward-looking statements. In some cases, forward-looking statements can be
identified by the use of forward-looking terminology such as ‘‘plans’’, ‘‘expects’’ or ‘‘does not expect’’, ‘‘is expected’’,
‘‘budget’’, ‘‘scheduled’’, ‘‘estimates’’, ‘‘forecasts’’, ‘‘intends’’, ‘‘anticipates’’ or ‘‘does not anticipate’’ or ‘‘believes’’, or
variations of such words and phrases or state that certain actions, events or results ‘‘may’’, ‘‘could’’, ‘‘would’’,
‘‘might’’, ‘‘will’’ or ‘‘will be taken’’, ‘‘occur’’ or ‘‘be achieved’’.

Forward-looking statements are based on our opinions and estimates as of the date of this annual report and they are
subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results,
level of activity, performance or achievements to be materially different from those expressed or implied by such
forward-looking statements, including but not limited to the following factors that are described in greater detail
elsewhere in this annual report: the COVID-19 pandemic; oil price risk; geographic concentration of investments;
foreign currency fluctuation; volatility of the Indian securities markets; investments may be made in foreign private
businesses where information is unreliable or unavailable; valuation methodologies involve subjective judgments;
financial market fluctuations; pace of completing investments; minority investments; reliance on key personnel and
risks associated with the Investment Advisory Agreement; lawsuits; use of leverage; significant ownership by Fairfax
may adversely affect the market price of the subordinate voting shares; weather risk; taxation risks; emerging
markets; MLI; economic risk; and trading price of subordinate voting shares relative to book value per share risk.
Additional risks and uncertainties are described in the company’s annual information form which is available on
SEDAR at www.sedar.com and on the company’s website at www.fairfaxindia.ca. These factors and assumptions are
not intended to represent a complete list of the factors and assumptions that could affect the company. These factors
and assumptions, however, should be considered carefully.

Although the company has attempted to identify important factors that could cause actual results to differ materially
from those contained in forward-looking statements, there may be other factors that cause results not to be as
anticipated, estimated or intended. There can be no assurance that such statements will prove to be accurate, as
actual results and future events could differ materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking statements. The company does not undertake to update
any forward-looking statements contained herein, except as required by applicable securities laws.

134

Directors of the Company

Officers of the Company

Anthony F. Griffiths
Corporate Director

Christopher D. Hodgson
President
Ontario Mining Association

Alan D. Horn
President and Chief Executive Officer
Rogers Telecommunications Limited

Sumit Maheshwari
Managing Director and Chief Executive Officer
Fairbridge Capital Private Limited

Deepak Parekh
Chairman
Housing Development Finance Corporation Limited

Chandran Ratnaswami
Chief Executive Officer of the Company

Gopalakrishnan Soundarajan
Managing Director, India
Hamblin Watsa Investment Counsel Ltd.

Lauren C. Templeton
President
Templeton and Phillips Capital Management, LLC

V. Prem Watsa
Chairman of the Company

Operating Management

Jennifer Allen
Vice President

Keir Hunt
General Counsel and Corporate Secretary

Chandran Ratnaswami
Chief Executive Officer

Amy Sherk
Chief Financial Officer

John Varnell
Vice President, Corporate Affairs

V. Prem Watsa
Chairman

Head Office

95 Wellington Street West
Suite 800
Toronto, Ontario, Canada M5J 2N7
Telephone: (416) 367-4755
Website: www.fairfaxindia.ca

Auditor

PricewaterhouseCoopers LLP

Transfer Agent and Registrar

Computershare Trust Company of Canada, Toronto

FIH Mauritius Investments Ltd.

Share Listing

Amy Tan
Chief Executive Officer

Toronto Stock Exchange
Stock Symbol: FIH.U

Annual Meeting

The annual meeting of the shareholders of
Fairfax India Holdings Corporation will be
held on Thursday, April 15, 2021 at 2:00 p.m.
(Toronto time) as a virtual conference call

135