Fairfax India Holdings Corporation Annual Report 2021

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FY2021 Annual Report · Fairfax India Holdings Corporation

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HOLDINGS CORPORATION

2021 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Appendix to the Letter to Shareholders

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

122

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

123

2021 Annual Report

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

Fairfax India Corporate Performance

As at and for the years ended December 31
Initial public offering
2015
2016
2017
2018
2019
2020
2021

Book
value
per
share(2)

10.00
9.50
10.25
14.46
13.86
16.89
16.37
19.65

Closing
share
price Income

Net
earnings
(loss)

Total
assets

Investments

Common
share-
holders’
equity

Shares
out-
standing(1)

Earnings
(loss)
per
share

10.00(3)
10.10
11.55
15.00
13.13
12.80
9.60
12.61

65,251
128,604
609,670
166,518
712,689
(12,972)
693,539

40,939 1,025,421
107,825 1,303,497
452,509 2,672,221
96,432 2,707,057
516,338 3,244,937
(41,476) 3,072,998
494,514 3,584,346

978,569 1,013,329
1,095,569 1,075,446
2,635,726 2,132,464
2,661,347 2,117,945
3,171,332 2,577,851
3,027,648 2,446,934
3,546,332 2,774,792

106.7
104.9
147.4
152.9
152.6
149.5
141.2

0.42
1.01
2.94
0.63
3.30
(0.27)
3.22

Compound annual growth

10.3%(4)

3.4%

(1)

(2)

(3)

(4)

All share references are to common shares; Closing share price and per share amounts are in U.S. dollars; Shares outstanding are in millions. Certain
of the performance measures presented do not have a prescribed meaning under IFRS and may not be comparable to similar measures presented by
other companies. See the Glossary of Non-GAAP and Other Financial Measures in the MD&A for details.

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

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.

The company’s book value per share of $19.65 at December 31, 2021 represented a compound annual growth rate from the initial public offering
price of $10.00 per share at January 30, 2015 of 10.3%.

FAIRFAX INDIA HOLDINGS CORPORATION

Corporate Profile

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”).

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 retail-focused 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, 2021 were $519 million. At year end, IIFL Finance
had shareholders’ equity of $842 million and there were approximately 25,900 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 and asset management, located in Mumbai, India. The wealth management business
serves the 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, 2021 were $186 million. At year end, IIFL Wealth had
shareholders’ equity of $380 million and there were approximately 890 employees. Additional information can be
accessed from IIFL Wealth’s website www.iiflwealth.com.

IIFL Securities Limited (“IIFL Securities”) is a publicly traded independent full-service retail and institutional
brokerage, along with being a 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, 2021 were $164 million. At year end, IIFL Securities had shareholders’ equity
of $161 million and there were approximately 2,500 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 559 branches and 410 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, 2021 were $195 million. At year end, CSB Bank had shareholders’ equity of
$345 million and there were approximately 4,800 employees. Additional information can be accessed from CSB
Bank’s website www.csb.co.in.

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, 2021 were $85 million. At year end, Fairchem Organics had
shareholders’ equity of $30 million and there were approximately 210 employees. Additional information can be
accessed from Fairchem Organics’ website www.fairchem.in.

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, 2021 were $35 million. At year end, 5paisa had shareholders’ equity of $50 million and there were
approximately 730 employees. Additional information can be accessed from 5paisa’s website www.5paisa.com.

(1) All of the Indian Investments’ figures are unaudited and based on Indian Accounting Standards (Ind AS) unless

otherwise stated. See the Glossary of Non-GAAP and Other Financial Measures in the MD&A for details.

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, 2021 were $105 million. At year end, BIAL had shareholders’ equity of
$305 million and there were approximately 1,200 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 IFRS figures, Sanmar’s revenues for the twelve months ended December 31, 2021
were $1.3 billion. At year end, Sanmar had shareholders’ equity of $239 million and there were approximately
1,900 employees. Additional information can be accessed from Sanmar’s website www.sanmargroup.com.

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 and gas cargo along the Indian coast
as well as in international waters. At December 31, 2021 Seven Islands owned 23 vessels, including 2 gas carriers,
with a total deadweight capacity of approximately 1.3 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,
2021 were $93 million. At year end, Seven Islands had shareholders’ equity of $132 million and there were
approximately 100 employees. Additional
information can be accessed from Seven Islands’ website
www.sishipping.com.

National Commodities 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 commodity 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, 2021 were $44 million. At year end, NCML had shareholders’ equity of $79 million and there
information can be accessed from NCML’s website
were approximately 1,200 employees. Additional
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, 2021 were $36 million. At year
end, Saurashtra had shareholders’ equity of $40 million and there were approximately 160 employees. Additional
information can be accessed from Saurashtra’s website www.saurashtrafreight.com.

Maxop Engineering Company Private Limited (“Maxop”), a private company located in New Delhi, India, is a
precision aluminum die casting and machining solution provider for customers in the automotive and industrial
sectors. Maxop’s revenues for the twelve months ended December 31, 2021 were $65 million. At year end, Maxop
had shareholders’ equity of $28 million and there were approximately 2,600 employees. Additional information
can be accessed from Maxop’s website www.maxop.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, 2021 were $1.1 billion. At year end,
NSE had shareholders’ equity of $1.9 billion. Additional information can be accessed from NSE’s website
www.nseindia.com.

FAIRFAX INDIA HOLDINGS CORPORATION

To Our Shareholders,

Fairfax India’s book value per share (BVPS), our key performance measure, grew again this year at a healthy rate.
After declining by 3.1% in 2020 to $16.37*, it bounced back, growing by 20.0% in 2021 to $19.65, a performance
slightly better than the performance of Indian equity indices, and even better than it looks as it was adversely
affected by the 1.7% decline in the Indian rupee against the U.S dollar during 2021. The value of the publicly listed
companies in the portfolio was up 53.8%** compared to the US$ S&P BSE Sensex 30 index which was up 19.6%.
Common shareholders’ equity increased by 13.4% after declining by 5.1% the previous year.

Here is a snapshot of Fairfax India’s performance since it began ($ millions except per share amounts):

Book value per share

$ 19.65

$ 16.37

$ 16.89

$ 13.86

$ 14.46

$ 10.25

$ 9.50

10.3%

2021

2020

2019

2018

2017

2016

2015

CAGR(1)

Income

Net earnings (loss)

Return on equity

Total assets

Investments

693.5

494.5

(13.0)

(41.5)

18.9%

(1.7)%

712.7

516.3

22.0%

166.5

96.4

4.5%

609.7

452.5

28.2%

128.6

107.8

10.3%

65.3

40.9
4.0% 12.3%(2)

3,584.3

3,073.0

3,244.9

2,707.1

2,672.2

1,303.5

1,025.5

19.8%

3,546.3

3,027.6

3,171.3

2,661.3

2,635.7

1,095.6

978.6

20.5%

Common shareholders’ equity

2,774.8

2,446.9

2,577.9

2,117.9

2,132.5

1,075.4

1,013.3

15.7%

Shares outstanding (millions)

141.2

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 10.9% annually.

(2)

Simple average of the return on equity for each of the seven years.

Asian emerging markets’ performance was mixed in 2021, as in 2020. You will see from the table below (based on
the leading US$ equity index in each country named) that India’s 19.6% equity index growth was outperformed
only by Sri Lanka’s and Vietnam’s equity indices:

Sri Lanka
Vietnam
India
Singapore
Thailand
China
Malaysia
Hong Kong

65.1%
37.3%
19.6%
7.7%
2.8%
(2.6)%
(6.8)%
(14.6)%

And here is a comparison of Fairfax India’s change in BVPS in 2021 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

20.0%
19.6%
27.6%
36.5%
21.7%

We are pleased that our BVPS has kept up with the torrid pace at which the Indian markets have grown in 2021.

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 $ millions except as otherwise indicated. Certain of the performance measures in this letter do not have
a prescribed meaning under IFRS and may not be comparable to similar measures presented by other companies.
See the Glossary of Non-GAAP and Other Financial Measures in the MD&A and the Appendix to the Letter to
Shareholders for details.

Adjusted for the impact of purchases and sales during the year.

Last year we mentioned that at the levels then, the Indian markets were trading at extremely elevated valuations,
but as you can see from the table below, valuations are even more stretched today:

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

Year-end 2020

Year-end 2021

10-year average

26.0
2.8
1.3%
97%

30.2
3.5
0.9%
114%

22.1
2.9
1.4%
77%

It is interesting to note that the U.S. S&P 500 index grew 26.9% in 2021 with valuations that are similarly rich (Price
to earnings ratio of 24.2; Price to book value ratio of 4.8; Dividend yield of 1.3% and Market cap to GDP ratio of
198%). The valuations of our listed portfolio companies, with a price to earnings ratio of 11.7, price to book value
ratio of 2.2 and dividend yield of 1.9%, are certainly not as rich.

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

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

+10.3%
+7.6%

(1) Fairfax India’s 7-year annualized growth in BVPS is calculated based on its January 30, 2015 IPO price of $10 per

share.

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 is of course based entirely on publicly traded market values.

Fairfax India’s net earnings in 2021 was $494.5 million versus a loss of $41.5 million in 2020, largely as the result
of net unrealized gains on investments of $438.9 million compared to net unrealized losses of $26.6 million in
2020. Earnings also reflect dividend and interest income of $33.0 million and net foreign exchange losses of
$5.6 million. Fully diluted earnings per share was $3.22 in 2021 versus a loss per share of $0.27 in 2020.

The significant contributors to the changes in BVPS recorded in 2021 were:

IIFL Finance
Fairchem Organics
Sanmar
IIFL Wealth
IIFL Securities
NSE

$190.0
124.6
88.8
66.6
48.8
40.1

Since we began, Fairfax India has completed investments in eleven companies and exited one (13 currently, as one
has split into four listed entities), all sourced and reviewed by Fairbridge, Fairfax India’s parent Fairfax Financial
Holdings’ (Fairfax Financial) 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:

NCML

IIFL Finance*

IIFL Wealth*

IIFL Securities*

5paisa*
Fairchem Organics(2)

Sanmar Chemicals Group

National Stock Exchange of India

Saurashtra Freight

Bangalore International Airport

CSB Bank

Seven Islands Shipping

Maxop Engineering

Other Indian Investments

Total

Date of Initial
Investment

Ownership

Amount
Invested

Fair Value at
December 31, 2021

Compounded
Annualized
Return(1)

August 2015

89.5% $ 188.3

84.2

(13.2)%

December 2015

February 2016

April 2016

July 2016

February 2017

March 2017

October 2018

March 2019

November 2021

22.3%

13.6%

27.9%

26.1%

52.8%

42.9%

1.0%

51.0%

54.0%

49.7%

48.5%

51.0%

–

191.5

91.3

29.7

199.0

26.8

30.0

653.0

169.5

83.8

29.5

72.4

$1,794.5

$ 312.5

318.1

230.1

103.2

41.2

155.0

421.2

111.2

47.2

1,372.2

227.6

105.9

29.8

100.9

$3,347.8

$ 692.6

45.9%

17.7%

33.4%

10.3%

17.7%

11.0%

9.1%

0.0%

24.9%

17.0%

19.3%

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

(1) Calculated using the internal rate of return

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

While the BVPS of Fairfax India is $19.65, we believe that the underlying intrinsic value is much higher. We have
taken the opportunity over the last four years to buy back 14.4 million shares for $191.0 million or an average price
of $13.26 per share, including the 7.0 million shares we bought in 2021 through a substantial issuer bid for
$105.0 million or an average price of $14.90 per share. We have continued to buy back shares in 2022 and to date,
we have bought back 1.9 million shares for $24.0 million or an average price of $12.65.

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 Bangalore International
Airport (BIAL) will eventually be transferred to Anchorage.

In September 2021, Fairfax India, as previously agreed, transferred 43.6% out of the 54% that it owns in BIAL to
Anchorage and OMERS (the pension plan for municipal employees in the province of Ontario, Canada) invested
$129.2 million to acquire from Fairfax India an 11.5% interest on a fully diluted basis in Anchorage. This resulted
in OMERS indirectly owning approximately 5% of BIAL. This transaction values 100% of BIAL at $2.6 billion.

Fairfax India intends to complete an IPO of Anchorage that values 100% of the underlying shares of BIAL at a
valuation of at least $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 $1.2 billion, OMERS will receive
incremental shares of Anchorage to compensate for the difference between the actual IPO valuation and
$1.2 billion.

BIAL is a highly profitable airport in Bangalore, India and is a 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 privatisations of airport assets in India. A public listing of Anchorage
will help in bringing to light 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 publicly listed investments in Fairfax India will increase from the
current 42.5% to 83.5% of the overall portfolio.

Last year we had cited our portfolio company IIFL Securities as an example of companies in our portfolio that were
undervalued as demonstrated in the table below:

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.

We are pleased to report that IIFL Securities is now trading at a price 89% higher than last year – more in line with
its intrinsic value. We believe there are several other investments in the Fairfax India portfolio with the potential for
a significant upside like IIFL Securities.

In addition to the Anchorage transaction described above, Fairfax India achieved two major milestones in 2021.

First, it completed the sale of its investment in Privi Speciality Chemicals to its founder, Mahesh Babani, for
proceeds of $164.8 million, realizing a gain of $132.3 million and an internal rate of return of 27.1% over the life
of the investment. Mahesh has built a wonderful business and we wish him the very best.

Second, Fairfax India obtained an investment grade rating of BBB (low) from DBRS and completed its inaugural
bond issue, selling $500 million of seven-year unsecured senior notes with a coupon of 5%. The net proceeds of the
issue were used in repaying its $550 million term loan. Fairfax India further enhanced its financial flexibility by
obtaining a $175 million unsecured revolving credit facility with a three-year term with a syndicate of lenders.

Financial Position

At December 31, 2021, the financial position of Fairfax India was as follows:

Undeployed cash and investments(1)
Unsecured senior notes maturing in February 2028
Common shareholders’ equity
Total debt to equity

$ 298.5
500.0
2,774.8
18.0%

(1)

Includes passive investments in publicly traded Indian companies

Performance Fee

You will recall that under the investment advisory agreement with Fairfax Financial, Fairfax India’s sponsor and
controlling shareholder, and Fairfax Financial’s investment counsel subsidiary Hamblin Watsa, Fairfax Financial is
entitled to a performance fee of 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 is calculated at
the end of each three-year period since inception, and the amount payable as at the end of any three-year period
is the total amount calculated minus the aggregate of the performance fees paid in respect of all prior three-year
periods. The performance fee has been calculated on this basis for the first two three-year periods.

The original language of the investment advisory agreement, which had inadvertently failed to fully recognize
performance fees already paid and would have provided for the accrual of a higher performance fee, has now been
amended to make this correction.

FAIRFAX INDIA HOLDINGS CORPORATION

At the end of 2021, the first year of the current third three-year period, a performance fee of $84.7 million has been
accrued but will only be finalized and paid as at the end of the three-year period ending 2023, based on
performance at that time.

Indian Investments(1)

Bangalore International Airport (BIAL)

BIAL is Fairfax India’s largest investment and a very important one that accounts for 42.3% of the market value of
its investments.

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. Bangalore, considered India’s Silicon Valley, is the third
largest and fastest growing city in India.

After a difficult year in 2020 caused by the COVID-19 pandemic, we were optimistic when 2021 started that the
worst of the impact of the pandemic was behind BIAL and that there was a good chance that 2021 would augur
well for domestic and international air travel and normalcy would return to the industry by the end of the year. We
were in for a rude surprise.

As hoped, by February 2021 domestic passenger traffic recovered to about 61% of pre-pandemic levels and
appeared to be headed to normal levels. That is when the virulent second wave of the pandemic struck India and
by April 2021 daily cases had skyrocketed to about 400,000 cases (previous highs were about 100,000). Again,
governments implemented stringent lockdowns and by May 2021 passenger levels collapsed back to about 14% of
pre-pandemic levels. Fortunately, by November 2021 daily cases were down to below 10,000 and by the middle of
December 2021 traffic had recovered to about 80% of pre-pandemic levels. BIAL is now bracing for the impact of
the Omicron variant which has already dropped domestic traffic back to 43% of pre-pandemic levels in
January 2022.

In addition to the unpredictable traffic situation, this was the year BIAL dealt with the periodic tariff determination
process that occurs every five years.

• Aero revenue and tariff order for third control period

Aero revenue 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 reasonable return on equity deployed in the Regulatory Asset Base (RAB). AERA treats 30% of non-aero revenue
(described below) 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 intended completion of capital projects during the third control period (from April 2021 to March 2026), UDFs
were 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 was expected to return to normal levels at some
point during the fiscal year ending March 2023.

However, AERA, taking into consideration the pandemic-related hardships faced by the airline industry, was highly
motivated to keep UDFs low. In the final tariff order for the third control period, BIAL’s well justified revenue
request for $1.2 billion was arbitrarily cut back by around $125 million and this sum was moved to the fourth
control period. To our knowledge there is no precedent for this kind of action. The tariff order for the third control
period went into effect in October 2021. Since the lost revenue will be recouped, with interest, in the fourth control
period, there is no impact on the valuation of BIAL. However, the short term impact of the reduced cash flow will
cause BIAL to rebalance its capital expenditure and capacity expansion plans (described below) and to refinance
some of its debt. As a result, about $130 million of existing bank debt has already been refinanced with longer term
non-convertible debentures (NCDs) and BIAL is in the process of negotiating existing loan covenants with banks

(1) All of the Indian Investments’ figures are unaudited and based on Indian Accounting Standards (Ind AS) unless

otherwise stated.

to ensure compliance. Some non-essential construction projects have been postponed to future control periods.
BIAL is in the process of challenging this tariff order with the appellate authority.

• Growth plans

You may recall that 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 (now completed), building a second runway, and building phase 1 of a
second terminal (T2) 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 T2, 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 T2 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 $0.7 billion, taking the
capacity of the airport beyond 90 million passengers by 2033.The total investment of about $1.9 billion required to
complete the above expansions is expected to be funded through internally generated funds and debt.

• Non-aero revenue

Non-aero revenue is all revenue other than aero revenue, such as revenue from food and beverage sales and
duty-free shops. Non-aero revenue had grown at a CAGR of 17% from 2009 to 2020 and is 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.

To accelerate non-aero revenue growth, BIAL has undertaken many innovative projects that engage passengers
and enhance their experience at the airport. 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. Remarkably,
through a combination of the rollout of new concepts, digital initiatives and loyalty programs, BIAL achieved per
passenger non-aero sales levels that are higher than pre-pandemic levels. The process to improve lounge experience
and increase lounge capacity in the existing terminal and the new terminal are well underway. BIAL is also seeing
an overwhelming interest from global bidders for non-aero space in T2. These achievements lay the foundation for
BIAL’s plans to grow non-aero revenue by five times over the next decade.

• Cargo business

The cargo operation of BIAL has been a beacon of strength through the entire pandemic because it was not
affected by the pandemic-related shutdowns. In 2021 BIAL recorded its all-time high cargo volume since the
opening of the airport, including India’s highest (31% of total) export shipments of perishable goods. Many
initiatives are underway in the cargo business, including increasing capacity to 980,000 metric tons, building
India’s largest express cargo facility, building a dedicated truck management facility, implementing a system for
paperless cargo processing and putting in place new concession agreements with operators at significantly better
terms for BIAL.

• Real estate monetization

Plans for real estate monetization, which is another major source of future revenue for BIAL, have been delayed by
about 18 months as a result of the pandemic. 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.

A 100% owned SPV (special purpose vehicle) 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 it moves forward. Plans to develop the first 176 acres of land have been advanced and several
deals are being negotiated. Infrastructure planning and detailed design for this parcel have been completed.
Anchored on the principles of a smart city, BACL will focus on four asset classes – business parks; a retail, dining
and entertainment (RDE) village; hospitality; and convention and exhibition centres. Despite potential partners’
and investors’ inability to visit the site because of the pandemic, some progress has been made in project plans:

FAIRFAX INDIA HOLDINGS CORPORATION

• A letter of intent for a business hotel of 775 rooms under the brands of Vivanta and Ginger (Taj Group) was agreed

with developers from Dubai.

• An agreement was signed with a premier airline services company to build a large central kitchen.

• A 3D technology printing facility is under construction and expected to be completed this year.

• Architects and planners have been appointed for the design of the RDE village.

Despite the extraordinary circumstances, under the exceptional leadership of Managing Director and CEO Hari
Marar and his executive team, BIAL has had a commendable year.

Given the impact of the pandemic on the travel industry across the world, BIAL’s financial performance in 2021 did
not come as a surprise. Passenger traffic grew 18.9% over the previous year to 16.1 million but was still only about
50% of pre-pandemic levels. Based on IFRS, BIAL’s revenue increased by 26% over the previous year to
$105.4 million but was still only about 50% of pre-pandemic levels. EBITDA increased by 72% over the previous
year to $40.8 million but was only 33% of pre-pandemic levels. Loss after tax reduced to $61.5 million from
$66.8 million but was down from a profit of $54 million in 2019. This is only temporary!

Despite the unprecedented events that impacted operations and financial performance in 2020 and 2021, we
estimate that BIAL will generate a total ROE of 13.7% for the second control period and an ROE of 16.3% for the
combined first and second control periods.

The valuation (including foreign currency translation) of Fairfax India’s interest in BIAL remained at $1.4 billion in
2021, the same as in 2020, 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 and real estate monetization plans
described above.

Despite being tumultuous, 2021 featured the following significant achievements by BIAL:

• While implementation has been delayed, three important new direct international routes were established to San

Francisco, Seattle and Tokyo.

• It again won the award for the world’s best airport experience in arrivals.

• Despite the disruptions in the availability of labour and materials caused by the pandemic, all projects, including
completion of the second runway; refurbishment of the existing runway; building a new terminal; and constructing
utilities, transportation and road infrastructure for the planned growth have made good progress and are expected
to be completed by the target dates.

• BIAL’s digital transformation is continuing to make excellent progress. A new global service provider has been

engaged on a ten-year turnkey project implementation contract.

• BIAL maintained its credit ratings of AA+ with India Rating and AA with CRISIL Rating.

• BIAL has been at the forefront in designing and implementing its sustainability goals and touching the lives of its

community. Some recent successes in achieving BIAL’s sustainability goals are the following:

• BIAL is a net contributor to the ground water by generating more water from its rainwater harvesting and

waste-water treatment than it uses.

• Renewable energy sources were utilized for 100% of the airport’s energy needs.

• BIAL actively promotes the use of recyclable material and will achieve zero landfills by the end of 2022.

Anchorage Infrastructure Investments Holdings (Anchorage)

In September 2021, Fairfax India closed the transaction whereby it transferred 43.6% out of the 54% that it owned
in BIAL to Anchorage and sold 11.5%, on a fully diluted basis, of Anchorage to OMERS for cash consideration of
$129.2 million. The transaction valued 100% of BIAL at $2.6 billion and resulted in OMERS indirectly owning
approximately 5% of BIAL.

The closing of this transaction took much longer than we expected, and in the process we learned that government
approvals in India can take much longer than we anticipated, 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
in 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)

Overall, 2021 was an outstanding year for Sanmar.

Based on IFRS, for the year ended December 31, 2021, Sanmar’s revenue grew by 88% over the previous year to
$1.3 billion, EBITDA grew by 123% to $276 million and profit before tax (PBT) turned around from a loss of
$150.7 million to a profit of $92.1 million (current year EBITDA and PBT exclude an accounting debt restructuring
gain of $67.6 million).

These extraordinary results were, among other factors, driven by:

• high capacity utilization and excellent operating performance across all divisions

• strong PVC demand and record prices for PVC in India

• overall global tightness in PVC and caustic soda supplies due to the lack of new capacity coming on stream, and

• reduced interest costs as a result of balance sheet restructuring.

In 2016, Fairfax India lent Sanmar the rupee equivalent of $300.0 million by way of 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, the deputy chairman, have grown the group into
a large private conglomerate with sales well over $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 (CSL) and Chemplast Cuddalore Vinyls (CCVL) – and one in Egypt – TCI Sanmar (TCI).

• CSL is the largest manufacturer of paste polyvinyl chloride (PVC) in India. It also manufactures caustic soda,
chloromethanes, hydrogen peroxide, EDC (ethylene dichloride) and VCM (vinyl chloride monomer) 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.

• CCVL is the second largest suspension PVC player in India.

• 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, calcium chloride and caustic soda.

The group is renowned for its high integrity and the highest levels of corporate governance and environmental and
social responsibility. Long before ESG investing became the clarion call for investors, it was ingrained in Sanmar’s
DNA.

In 2020, the biggest impact of the pandemic on all the Sanmar companies was the squeeze on their liquidity
position. To rectify this and to reduce the overall debt of the company, Sanmar committed to actively pursue
opportunities to raise additional equity capital to repay and restructure debt. It also decided to postpone
investments in projects that exploit excellent growth and cost saving opportunities until after its balance sheet was
deleveraged. We are pleased that, in addition to its stellar operating performance, Sanmar has also made significant
progress in deleveraging its balance sheet.

• CSL

In 2021, CCVL was made a 100% subsidiary of CSL, thereby consolidating all of Sanmar’s Indian chemical businesses
under CSL. Sanmar then listed CSL on the Indian stock exchanges through an IPO raising $519 million, comprised
of a primary issuance of equity shares of $175 million and a secondary sale of equity shares by the holding
company, in which Fairfax India has its 43% ownership, of $344 million. Following the IPO, which valued 100% of
CSL at $1.15 billion, the holding company’s ownership of CSL is 55.0%, so Fairfax India’s indirect ownership is
23.6%. The net proceeds were used largely to repay debt of about $165 million in CSL and about $300 million in the
holding company. As a result, debt at CSL and the holding company has been fully paid.

The former CSL business which comprised the higher margin paste PVC and specialty chemicals businesses had an
excellent year in 2021. Revenue grew by 47% over the previous year to $239.6 million, EBITDA grew by 85% to

FAIRFAX INDIA HOLDINGS CORPORATION

$82.6 million and PBT turned around from a loss of $2.2 million to a profit of $44.5 million. This impressive
performance was the result of strong demand for paste PVC and record prices and margins as a result of the global
tightness in the supply of this product, especially from China as a result of energy shortages there.

CSL continues to anticipate a very bullish future for paste PVC because there were permanent plant closures in
South Korea, China, Germany, the U.S. and the United Kingdom due to environmental and other concerns and
there is no new large 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 in India of
7% over the last 10 years. Given that CSL is debt free, it is again considering a capital project to increase its paste
PVC capacity from 66 ktpa to 101 ktpa. Industry experts also anticipate that over the medium term, demand for
caustic soda will exceed supply, strengthening the price for this commodity.

• CCVL

CCVL (now a 100% subsidiary of CSL), which manufactures the more commoditized, high volume and lower
margin suspension PVC, also had outstanding results in 2021. Revenue grew by 81% to $493.9 million over the
previous year, EBITDA grew by 122% to $86.6 million and PBT grew 6-fold to $54.9 million. Again, as in the case
of paste PVC, strong demand in India and global supply constraints that drove price levels up sharply compared to
earlier in the year resulted in the strong performance. Lower debt levels and reduced interest rates on the remaining
debt resulted in lower interest costs, resulting in higher PBT.

CCVL’s plant has been running at almost 100% 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. 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 about
8% over the next several years, demand is expected to grow significantly, resulting in a large deficit, which will
need to be imported. Because CCVL has the logistic advantage of supplying the South Indian market and the
further advantages of an existing plant, land and infrastructure; long term strategic relationships with feedstock
suppliers; strong customer relationships; and significantly lowered debt levels, it will resume evaluating its plan to
expand its capacity from 300 to 600 ktpa. CCVL already has environmental approvals to proceed with this
expansion.

• TCI

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, added a 130 ktpa
calcium chloride plant and a 75 ktpa caustic soda by-product line. In 2021 it was able to fully operationalize these
assets and reached about 90% capacity utilization. With the 100% capacity utilization and certain expected process
refinements expected in 2022, Sanmar will be able to take advantage of its significant investment in Egypt.

In 2021 TCI completed the restructuring of its balance sheet by dealing with its term debt of $785.4 million as
follows:

• converting $117.8 million of debt to 13.9% of its equity: this transaction implies a post-money valuation of

$848 million for 100% of TCI

• restructuring $117.8 million of debt as NCDs with an interest rate of 0.01% per annum with no principal repayments

until 2036

• extending the maturity of the remaining $549.8 million of debt by two years with back-ended principal repayments.

TCI also had excellent operating results in 2021. Revenue grew by 120% over the previous year to $565.0 million,
EBITDA grew from $3.5 million to $110.4 million, and PBT turned around from a loss of $106.6 million to a profit
of $19.3 million (current year EBITDA and PBT exclude an accounting debt restructuring gain of $67.6 million).
This performance was driven by the favourable global demand supply dynamics for PVC and caustic soda described
above, improved capacity utilization, reduced interest costs due to the balance sheet restructuring described above,
and changes in trade regulations such as the introduction of anti-dumping and import duties on PVC, the removal
of import duties on a key raw material and the introduction of export incentives. While impressive progress has
been made on many fronts, TCI continues to look for further improvements to its balance sheet through an
external capital raise and longer-term solutions to its problems of high-cost energy and raw materials.

Altogether, the future is very promising for Sanmar.

IIFL Finance (IIFL FIN)

Based on total revenue, IIFL FIN, which is non-deposit taking, is one of the larger non-bank finance companies
(NBFC) in India.

2021 was the year IIFL FIN emerged from the malaise that afflicted most NBFCs in India from 2018 when their
access to long term debt funding was severely constrained as confidence in NBFCs eroded as a result of the
continuation of the credit market turmoil caused by the high-profile default that year by a quasi-government
lender, IL & FS (Infrastructure Leasing and Financial Services). Since then, most NBFCs faced restricted access to
longer term funding which they needed as they had significantly reduced their dependence on short term
commercial paper financing. IIFL FIN capitalized on the changing sentiment and built up all-time high cash and
undrawn bank lines totaling $1.2 billion, sufficient both to meet short term liabilities and to fund the growth
momentum described below. In reaching this position, IIFL FIN raised $292 million in 2021 through debentures
sold to retail investors.

Under the able leadership of CEO Nirmal Jain, who is also the founder and a significant shareholder of all the IIFL
Holdings group companies, IIFL FIN invested aggressively to prepare for the lending growth it intends to drive in
the immediate future. It added over 650 new branches to its existing 2,400 and over 7,800 new employees to its
existing 18,000 and is moving forward aggressively to consolidate its position as one of the major NBFCs in India,
serving about 7 million customers. IIFL FIN is also investing heavily in brand building and in technology to
support its growth in physical infrastructure. It has implemented industry leading fintech innovations, like
“WhatsApp” loans, which are seeing high customer acceptance.

With the resolution of many of the challenges it faced due to the pandemic, including obtaining better clarity on
the non-performing status of loans that were affected by the government, the cessation of Reserve Bank of India
(RBI) and court-mandated moratoriums and the resumption of in-person collection activity, IIFL FIN had excellent
results in 2021. Its assets under management (AUM), which have grown at a CAGR of 17% over the last 5 years,
grew by 11% over the previous year to $6.3 billion in 2021. In 2021, IIFL FIN’s revenue increased by 22% to
$519.3 million and profit after tax increased by 95% to $150.9 million, generating an ROE of 18%. Asset quality
continues to be amongst the best in the peer group, with gross non-performing assets (NPA) and net NPAs at 2.8%
and 1.5% respectively, compared to 1.6% and 0.8% respectively in the previous year due to the impact of the recent
RBI circular on NPA classification norms. The provision coverage ratio was 133% versus 170% the previous year.

Loan to value is very conservative, at 72% for home loans, 73% for gold loans, 47% for business loans and 42% for
construction and real estate loans. With a well-diversified asset portfolio of which 92% is retail in nature, a total
capital adequacy ratio (CAR) of 25.4% and net interest margins at 7.0%, then even though the cost to income ratio
increased from 33% to 39% (due to the growth in the number of branches and employees), IIFL FIN is well
positioned to take advantage of the post-pandemic economic recovery expected from 2022.

The stock market has recognized the strong performance of IIFL FIN and its growth prospects, with the stock price
more than doubling from its deeply discounted levels at the same time last year. Despite the move in the stock
price, IIFL FIN, at a valuation of only 9.2 times price to estimated March 2022 earnings and price to estimated
March 2022 BVPS of 1.6 times, is still trading at a discount to its peers.

We believe there is potential for further significant upside in the value of this investment.

IIFL Wealth Management (IIFL Wealth)

Founded in 2008 by Karan Bhagat and Yatin Shah, with the leadership of 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. In September 2019 with the demerger of IIFL Holdings, the original company that Fairfax
India had invested in, into four 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.

IIFL Wealth’s strong client franchise in the Indian ultra-high net-worth individual (UHNI) segment, its innovative
and diversified product offering and its 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 consolidated AUM of
$35.4 billion, 27 offices in India and abroad, over 850 employees and 59 teams consisting of over 240 relationship
managers serving over 10,700 families.

IIFL Wealth has two businesses – wealth management (the larger one) and asset management. The wealth
management business, because of a major change in regulation (described below), had to transform from a
transactional upfront commission-driven business model to a client fee and distribution services based recurring
revenue model.

FAIRFAX INDIA HOLDINGS CORPORATION

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. This
change has resulted in commissions being paid over the life of the investment, reducing upfront revenue but
creating a stream of recurring revenue in the future.

We are pleased to report that IIFL Wealth has made this transformation seamlessly and has resumed its fast growth,
achieving excellent financial results in 2021. Consolidated AUM, including custody assets, grew by 41% to
$44.2 billion, total revenue increased by 46% to $185.8 million, profit after tax increased by 96% to $69.6 million
and ROE increased from 9% to 18%.

IIFL Wealth made this transition by growing AUM generating annual recurring revenues (ARR AUM) by 54% over
the previous year to $18.7 billion. ARR AUM now accounts for 53% of AUM, up from 41% in 2019. Revenue from
ARR AUM grew by 45% to $111.0 million. Revenue from distribution transactions and brokerage also grew over the
previous year, but at a lower rate of 23%, to $56.9 million. The wealth management business has embedded in it an
NBFC which makes loans to its clients secured by their assets held by IIFL Wealth.

The smaller asset management business is India’s leading manager of alternate investment funds (AIF). AUM for
this business grew by 73% in 2021 to $7.5 billion while revenue grew by 75% to $42.7 million. This business was
strengthened by the addition, under the supervision of chief investment officer Anup Maheshwari, of strong fund
managers specializing in areas such as private equity, credit, real estate and long/short portfolios.

These outstanding results are due to IIFL Wealth’s relentlessly focusing on its core drivers of growing business that
provides recurring revenue, enhancing client experience by providing state-of-the-art digital tools and engaging
with clients on a regular basis through seminars and special events. Despite facing considerable competition from
private equity fund-backed new entrants and established banks and brokers trying to enter the UHNI niche of
wealth management, IIFL Wealth has maintained its lead by capitalizing on the positive investment sentiment of
domestic clients. It believes that it can maintain its growth levels by taking advantage of new regulations such as
the concept of “accredited investors”, introduced for the first time in India, a segment into which it has superior
access.

Over the last five years, IIFL Wealth has grown its shareholders’ equity at a CAGR of about 15%, so that it is now
relatively overcapitalized for its level of earnings. To address this, in addition to its policy of paying out about 70%
of its earnings in dividends, IIFL Wealth has paid regular and special dividends totaling 135 rupees per share in
2020 and 2021, resulting in an ROE of 18%, and it will continue to look for avenues to maintain its ROE 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.

CSB Bank (CSB)(1)

Under the leadership of C.V.R. Rajendran, who has been the CEO of CSB for the last five years, CSB continues to
make excellent progress on its transformative journey that began with the recapitalization of the bank that was
enabled by our investment. 2021 was the best year ever for CSB.

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,
which 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 invested into CSB as primary capital, thereby increasing its CAR to 23%
at the end of 2019. The improved CAR enabled the bank to make adequate provisions for loan losses, invest in
more branch openings, invest in people and technology and grow its loan book with well underwritten loans.

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 and consisted largely of
existing shareholders (but not Fairfax India) selling to new ones.

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 559 branches (up
from 454 last year) and 410 ATMs (up from 319 last year) across India. With its branches primarily located in south

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

stated.

India, it focuses on retail, gold and small and medium enterprise (SME) loans, which together comprise about 75%
of total advances. CSB also owns 35 residential and commercial properties and land banks, some purchased
several years ago, and others acquired by enforcement of security.

Despite the pandemic-driven volatility in business sentiment and activity and high levels of system liquidity which
constrained opportunities for lending, CSB made excellent progress in its key performance measures in 2021, with
loan advances growth of 11% and deposits growth of 7% (including lower cost current and savings accounts
(CASA) growth of 22%). Net interest income grew by 37% and the credit to deposit ratio improved from 74% to
77%. In addition, the yield on loans improved to 11.2% from 10.9%, CASA improved to 34.6% from 30.4% of total
deposits, net interest margin (NIM) improved to an industry leading 5.3% from 4.4% and the cost of deposits
reduced to 4.4% from 5.4%. It is likely that NIM will moderate to around the 4% level.

In spite of these improvements, gross NPAs increased to 2.6% from 1.8%, net NPAs increased to 1.4% from 0.7%
and the provision coverage ratio decreased from 91.0% in December 2020 to 83.0% in December 2021. Based on
IFRS, CSB’s revenue for 2021 increased by 22% to $195.1 million from $158.9 million in 2020, net income increased
by 63% to $65.8 million from $40.2 million in 2020 and its CAR was 20.6%.

These exceptional results are the result of Mr. Rajendran’s relentless pursuit of his objective of transforming CSB by
focusing on profitability, productivity, efficiency and asset quality. He has accomplished this by implementing
changes that include:

• performance and productivity-oriented human resource policies

• rounding out his management team by filling all the key senior management positions

• appointing Pralay Mondal, a very senior banker, as the President of the bank

• reorganizing of the operations of the bank into three verticals:

• retail banking (comprised of branch banking, gold loans, two-wheeler loans, micro, small and medium

enterprise (MSME) loans, microfinance under financial inclusion loans and agricultural loans);

• SME banking; and

• wholesale banking.

CSB 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.

The success that CSB has achieved is demonstrated in the table below. On virtually every metric, CSB is right at the
top when compared to banks of comparable size (peer group) and all banks.

Position at the year ended 30 September 2021 (all numbers are %s)(1)

Growth in Net Interest Income

Growth in Advances

Growth in Deposits

Credit Deposit Ratio

Return on Equity

Return on Total Assets

Net Interest Margin

Efficiency (Cost to Income) Ratio

Gross Non-Performing Advances

(1)

Source: Capital IQ

CSB

Peer Group

All Banks

47.5

12.2

9.1

73.8

11.7

1.2

4.6

53.3

4.2

5.1

3.4

8.6

73.7

5.5

0.5

3.1

54.6

5.7

12.3

7.2

9.2

70.3

8.1

0.7

2.8

55.4

7.4

For health reasons, Mr. Rajendran is retiring in March 2022. We wish him and his family well in his retirement. We
owe him a huge debt of gratitude. Pralay Mondal is now the Deputy Managing Director of CSB and will take charge
as the interim CEO. We are very excited about the long term prospects of CSB.

Fairchem Organics (Fairchem)

Fairchem, led by its founder Nahoosh Jariwala, is an oleochemicals company. 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

FAIRFAX INDIA HOLDINGS CORPORATION

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 designed 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 24% per year, and the average annual ROE
was around 24%.

In 2021 Fairchem had its best year ever! Based on IFRS, for the year ended December 31, 2021, its revenue grew
by 92% to $84.6 million, net earnings grew by 108% to $9.9 million and shareholders’ equity grew by 45% to
$29.7 million, generating an ROE of 33%.

These strong results were due to the concerted effort Fairchem has made over the last three years to expand its
production capacity in a very cost-effective manner, funded entirely by cash generated from the business. It has
taken its raw material throughput capacity from 72,000 metric tons per annum to 90,000 and expects to take it up
to 120,000 by March 2022. Fairchem has also built a plant to manufacture two new products that will be launched
later in 2022 and is also working on a forward integration project to achieve value addition and to manufacture
bio-fuels.

After Fairchem’s demerger from Privi Speciality Chemicals, Fairfax India owned a 67% stake in Fairchem for an
investment since inception of $37.5 million. In November 2021, Fairfax India sold 14% of Fairchem for $45.6 million,
recouping more than its entire investment while still owning 53% of Fairchem, valued at $155.0 million on
December 31, 2021.

We believe that Fairchem is poised to have another record-breaking year 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 93% 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. In 2021, NSE’s revenue grew by 61% to
$1.1 billion, net income grew by 11% to $541.1 million and shareholders’ equity grew by 24% to $1.9 billion,
generating an ROE of 29%. The planned initial public offering of NSE has been delayed and is now expected
sometime in 2022 or 2023. Fairfax India’s investment in NSE is currently valued at $111.2 million.

Seven Islands Shipping (SISL)

Founded in 2002 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 its
total ownership interest to 48.5%. In December 2021, this investment is valued at $105.9 million.

At the time of Fairfax India’s initial transaction, SISL owned 14 vessels with a total deadweight capacity of 0.9 million
metric tons. Today SISL owns 22 vessels with a capacity of about 1.3 million metric tons. All SISL’s vessels are
registered in India and operate as Indian-owned and flagged vessels.

Historically, SISL bought vessels that were 20-21 years old and operated them till they reached about 29-30 years
of age. 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 charter
rates as those of the younger ships. The operating and maintenance costs for its fleet are not significantly different
from those of the younger ships. In keeping with its stated objective of reducing the average age of its fleet from
about 19 to 15 years over the next few years, SISL sold two older ships and acquired four younger ships. Over the
next five years, SISL is aiming to grow its fleet from the current 22 to about 28 ships.

Until recently, SISL had only owned and operated tankers that transported liquid cargo. In 2021 it made a significant
change in its strategy and entered the gas carrier container ship segment of the market. Based on current ship
prices and charter rates, it is seeing potential for better returns from gas carrier containers. SISL purchased one
Very Large Gas Carrier and one Medium Gas Carrier in 2021.

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 (because of its lower cost base) 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 benefitted from the
general rate arbitrage in domestic versus international deployment.

SISL has a small and efficient operations team consisting of about 100 core employees at the head office who
manage the entire business. It has significantly strengthened its organization with the addition of several senior
resources from the industry. It has also completely revamped its information technology system in order to enable
it to implement robust operational, safety, security and financial procedures.

You may recall that in 2020 SISL had its best results ever, with revenues and net income growing over the prior year
by 57% and 87% respectively and SISL generating an ROE of 17%. This extraordinary performance was made
possible by very high freight rates and favourable foreign currency movements. In 2021, freight rates returned to
normal levels, and with it SISL’s performance. In 2021, SISL’s revenue decreased by 24% to $93.3 million, net
income decreased by 63% to $8.0 million and shareholders’ equity grew by 6% to $131.7 million, generating an
ROE of 6%. Despite this volatility SISL has mostly demonstrated stable and consistent revenue and EBITDA CAGR
of over 25% in the last 10 years. Since the time we acquired our interest in SISL, it has generated free cash flow of
$78 million (our share $38 million).

SISL’s plans to get listed on the Indian stock exchanges in 2021 through an IPO were deferred because of muted
investor interest then in investing in the shipping sector in India.

IIFL Securities (IIFL SEC)

IIFL SEC, one of the major capital market players in Indian financial services, offers advisory and broking services
(both retail and institutional), financial products distribution, institutional research and investment banking services.

It had an outstanding year in 2021. Its revenue increased by 47% to $163.8 million and profit before tax increased
by 59% to $52.5 million, generating an ROE of 25%. These results were driven by the strong performance of the
retail broking and investment banking divisions that benefitted from the buoyant equity and IPO markets in India
in 2021.

The growth in the financial markets has attracted a great deal of competition too. Several established full-service
brokers have recently launched their own discount brokerages and the growth in fintech innovations has resulted
in a plethora of new products, like algo trading, which are based on investment strategies using new technologies
like artificial intelligence.

IIFL SEC has done a commendable job in protecting and growing its long established traditional “legacy” businesses
comprised of retail broking and financial products distribution while also growing in the newer areas. It has
achieved this by focusing on low-cost new customer acquisition strategies, investing heavily in technology and
making entries into new areas like discount broking and algo trading.

IIFL SEC operates in over 2,500 locations across India, comprised of a wide branch and sub-broker network
providing unparalleled research coverage on over 250 companies. It serves about 1.7 million customers and has a
strong online presence, and mobile trading has significantly aided in increasing the number of customers: online
trading clients in 2021 accounted for 70% of trading.

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

• Retail broking and financial products distribution (68% 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 SEC’s mobile trading app, IIFL Markets, targeting
retail clients continues to be the highest rated amongst peers with over 8.6 million downloads. Mobile brokerage
constituted about 46% of total broking revenue. In financial products distribution, it offers retail clients a wide
range of products including mutual funds, insurance, IPOs and debt instruments.

FAIRFAX INDIA HOLDINGS CORPORATION

• Institutional broking (13% 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 250 Indian
companies accounting for about 80% of India’s market capitalization. It is a market leader in block sales
placements, placing over $13 billion in blocks over the past five years. It has more than 770 domestic and foreign
clients and has developed trusted long term relationships with them through sustained high-quality performance.

• Investment banking (10% of revenue) – it is a highly regarded category 1 merchant banker in India and despite
volatile markets, completed 41 transactions in 2021, including 23 IPOs. It continues to have a substantial pipeline
of transactions which are at various stages of execution.

The stock market appears to have recognized the strong performance of IIFL SEC, as its stock price has almost
doubled from its deeply discounted levels at the same time last year. Despite the move in the stock price, IIFL SEC,
at a valuation of only 9.1 times price to estimated March 2022 earnings and price to estimated March 2022 BVPS of
2.2 times, is still trading at a discount to its peers.

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

National Commodities Management Services (NCML)

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 1.9 million metric tons of storage
capacity (up 39% over last year) in over 700 warehouses in 16 states in India. It has a network of 21 regional
offices, more than 330 touch points at agricultural produce markets and thousands of farmers and traders to
facilitate procurement of commodities. Beyond its major business segments, NCML offers a commodity and weather
intelligence service, financing and an online commerce portal (NCML MktYard).

In 2016 and 2017, NCML won 16 concessions from Food Corporation of India (FCI) 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. Of these, two locations have been completed and commissioned and five others are expected
to be completed in 2022. FCI has publicly applauded NCML for its successful completion of silos. Silo projects have
been delayed due to pandemic-related construction delays, farmer protests, land acquisition challenges and
difficulty in obtaining long term project financing. NCML surrendered projects at 3 locations that were unviable.

Three years ago, NCML decided to reorient its business and redirect capital into businesses with a better risk
reward profile. Siraj Chaudhry, the new CEO appointed in 2019, and his management team have been working
diligently to turn the business around by:

• restructuring and right-sizing NCML’s balance sheet

• focusing on completion of silo construction

• redirecting capital to businesses with better return potential

• downsizing businesses with poor risk/reward characteristics, and

• reducing overheads to better align with the size of the business.

In 2021, while the storage and preservation segment (the most important segment of the business) stabilized and
performed well, management
intentionally shrunk two formerly large business segments – supply chain
management and collateral management – to align risks and rewards. Despite the drag from these two segments,
NCML reported lower operating losses compared to the previous year.

As a result, 2021 was another difficult year and revenue declined by 42% to $44.2 million and net loss increased to
$10.6 million (including a one-time provision of $4.7 million) from a loss of $9.4 million in 2020. NCML proactively
made provisions for losses from contracts signed in previous years to strengthen its balance sheet.

NCML continues to work on business strategies to achieve good profitability.

5paisa Capital (5paisa)

5paisa, which literally means “5 cents”, is one of India’s fast-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, gold investments, commodity trading, research and distribution of
mutual funds and other financial products, 5paisa successfully fulfils its customers’ diverse needs. 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 2.4 million in
2021, more than double the level a year ago. The 5paisa mobile app has been hugely popular, in 2021 recording
over 10 million downloads and sustaining a rating of 4.2 on Playstore.

While it had its best year ever in 2021 – total revenue grew by 44% to $35.1 million and it made a small profit after
tax of $2.1 million – because of the intense competition from established and new discount brokers, its market
share in retail cash broking fell from 5.6% to 3.1% despite adding customers at an average rate of 100,000 per
month, up from about 60,000 a year ago. To combat this intense competitive pressure, 5paisa is deemphasizing
profit in the short term and investing heavily in advertising to drive customer acquisition, state of the art technology
and acquisition and retention of technical and business talent.

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

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, effectively working as an extension of a port. CFS provide a
facility outside of congested ports for temporary storage of goods pending customs clearance and further
distribution.

Launched in 2005, Saurashtra is located five kilometers from Mundra port. With 24/7 operations, Saurashtra has
the capacity to handle about 190,000 TEU (twenty-foot equivalent unit shipping containers) per annum and handled
about 120,000 TEU in 2021, implying capacity utilization of about 63%. It has achieved a market share of about 15%
at Mundra port, the highest among all CFS there.

Under the able leadership of Raghav Agarwalla, Saurashtra produced excellent financial results in 2021. Volume of
containers handled increased by 23% to about 120,000 TEU, revenue increased by 46% to $36.2 million and net
profit grew by 41% to $6.6 million, generating an ROE of 17% versus 13% the previous year. Saurashtra generated
$8.2 million of free cash in 2021, and at year end had a cash balance of $25.4 million and debt of $6.0 million.

Fairfreight Lines, the NVOCC (non-vessel operating common carrier) business that Saurashtra launched in 2017,
made excellent progress in 2021. It added an eight-person office in Singapore to help drive this business and has
plans to expand operations to Dubai. While its dry box inventory has remained relatively flat around 1,200, its tank
inventory has grown more than three-fold from about 365 to over 1,320 tanks. As a result, in 2021 this business
accounted for 41% of Saurashtra’s revenue and 30% of its net profit, up from 25% and 15% respectively in 2020.

In 2017 Fairfax India invested $30.0 million to acquire a 51% interest in Saurashtra. At the end of 2021, this
investment was valued at $47.2 million.

Maxop Engineering Company (Maxop)

In 2003, a young Shailesh Arora, the founder and owner of Maxop, was looking to start a new business. He
remembers that while driving to his job every day, he passed a busy factory on the highway and asked some of its
employees what business the company was in, and they told him it was an aluminum diecasting business. He then
called a few diecasting equipment suppliers to find out more. The local sales distributor for a Taiwanese diecasting
machine manufacturer showed interest and came to meet with him. When they asked him about the specifications
of the machine he was looking to buy, he told them he knew nothing about the business or products. Yet he not
only convinced them to sell him a machine, they also pointed him to his first diecasting customer – General
Electric. And thus, Maxop came into being!

Maxop is a precision aluminum diecasting and machining solution provider for aluminum die cast components
used by the automotive and industrial sectors, with customers in India, Asia, North America and Europe. Based in
New Delhi, it operates four plants in Manesar and two plants in Jaipur.

In Fairfax India’s first significant acquisition since the start of the pandemic, it agreed to acquire a 67% equity
interest in Maxop from Shailesh for a potential maximum consideration of $66 million. It completed the first step
of this transaction in November 2021 by acquiring a 51% stake for a payment of approximately $30 million. The
second step, the purchase of an additional 16%, will be completed in September 2022 for a further payment of
between $9 and $36 million, depending on the EBITDA, net earnings, free cash flow and financial leverage Maxop
achieves in its fiscal year ending March 31, 2022.

FAIRFAX INDIA HOLDINGS CORPORATION

Shailesh, who is a passionate first-generation entrepreneur and hands-on operator, chose to enter into this
transaction because he recognized Fairfax India as a long term partner with an excellent reputation which would
let him run the business independently, allowing him to take advantage of the long runway for growth that lies
ahead for this business, especially with customers in North America and Europe.

Shailesh has a strong customer orientation and has crafted Maxop as a single source supplier to most of its
customers for the products it sells to them. He has focused on growing customer wallet share by adding one new
part to a customer bouquet each year. He has built a strong organization catering to a wide array of customers
around the world and is poised, with Fairfax India’s support, to build Maxop into a world class leader in the
precision engineered components manufacturing industry.

Jaynix Engineering ( Jaynix)

In February 2022 Fairfax India acquired 70% of Jaynix Engineering for $32.5 million. Jaynix is a manufacturer of
non-ferrous (primarily aluminum) electrical neutral bars, lugs, connectors and assemblies and is a Tier 1 supplier
to major electrical original equipment manufacturers such as Schneider, Eaton and Siemens in North America and
Europe.

Jaynix was founded in 2008 by two brothers and engineering graduates, Nikhil Diwakar and Ninad Diwakar, in
Nashik, Maharashtra. Jaynix is now headquartered in Vadodara, Gujarat and operates with three manufacturing
plants (one in Vadodara and two in Nashik).

Nikhil and Ninad are passionate hands-on operators, with Nikhil focused on commercial business development
efforts and Nikhil on engineering and production. They will continue to drive the business and stay invested with
a significant minority stake.

Developments in India

Like the rest of the world, India is facing the challenges of Omicron and its expected impact on the country’s
economy. India has made impressive progress in its vaccination drive, with over 1.7 billion total doses given and
over 75% of the adult population fully vaccinated. India’s vaccination program is the largest in the world with a
goal of attaining 80-90% coverage. Despite a fluid global economic environment, India has had notable successes
in the past year and continues to be an attractive investment destination. In 2021, foreign direct investment (FDI)
inflow was $73.8 billion. As well, India has rapidly emerged as a top ranked start-up location, next only to the U.S.
and China in the creation of unicorns. It was a banner year, with over 40 start-ups achieving billion-dollar valuations.
This is part of a transformation in which the emergence of fintech has been conspicuous, and the use of digital
products and services is forecast to increase significantly in the coming years. As well, the expansion of
technological platforms such as the UPI (Unified Payments Interface), and the rapid ascent in internet users, now
over 825 million, are contributing factors in the rise of “Digital India”. Important initiatives were also implemented
at the bottom of the pyramid, with over 400 million bank accounts opened as part of the government’s financial
inclusion drive and 8 million cooking gas connections distributed last year.

The Indian economy is displaying significant strength. The Indian residential real estate sector is showing signs of
a turnaround with increased housing activity both in the established urban centers and in emerging cities. The
manufacturing sector has been a driver in the rise of exports and the auto industry is improving. The Indian
corporate earnings estimates are increasingly positive and while there is a broad sectoral improvement, the financial
sector is expected to play a significant role in the earnings growth.

The agricultural sector has displayed resilience throughout the pandemic and successively good monsoons have
resulted in record levels of grain production. The annualized growth rate in this sector is 3.9%. Towards the end of
2021, in a surprising move, the government repealed its three farm laws, delaying indefinitely the needed reforms.
These new laws were initially passed in the Indian parliament in September 2020 seeking to reduce the role of
government subsidies and to increase the scope for private investment. The market-friendly thrust of these new
laws received sustained opposition over the course of the year, particularly in northern India, and with impending
state elections, the Modi government withdrew these laws. These laws might be reinstated in a more benign
political environment.

While inflationary pressures exist, the RBI reaffirmed its commitment to maintaining its inflationary targets, 2% on
the lower end and 6% on the higher end. While India has experienced economic recovery in 2021 and GDP growth
projections range between 8-9% for this year, the evolving nature of the pandemic is a key variable in any such
forecasts.

The Indian budget of 2021 and other reforms during the year included privatization initiatives, an increased FDI
limit of 74% in the insurance sector, the formation of a “bad bank”, the removal of the “retrospective” tax and the
phasing-in of the PLI (Production-Linked Incentive) to attract investment across multiple sectors. The buoyancy in
tax revenues has helped maintain the country’s fiscal deficit situation, with GST collections increasing by 30.2%
from the previous year and an improvement in the finances at the state level as well. Overall gross tax revenues are
projected to rise for the 2022-23 fiscal year and the next one.

In its most recently tabled budget on February 1, 2022, amongst the notable initiatives is the 35% increase from the
previous year for public capital investment. The commitment to physical infrastructure extends to roads, railways,
airports, ports, mass transport, waterways and logistics. In the case of highways, the budget states that the national
network will be expanded by 25,000 kilometres in the upcoming fiscal year. As well, other initiatives included the
upcoming disinvestment of LIC (Life Insurance Corporation), facilitating 5G rollout in the telecom sector and plans
to introduce a Central Bank Digital Currency (the “digital rupee”) through the RBI. There is also an undertaking to
provide a more stable tax regime, ease the tax filing process and streamline the process for tax disputes.

India will be one of Asia’s main leaders in the ongoing global economic recovery. The strength of the Indian
economy is multi-pronged, with key indicators pointing to sustained growth. A confluence of forces is in play:
emergence of a strong housing cycle, increase in export earnings, rise in corporate profitability, continued
ascendance in FDI, improving manufacturing activity, a dynamic technology sector and a healthier state of
government finances. In addition, India has substantial foreign exchange reserves which now exceed $600 billion.
India’s current level of foreign exchange reserves will allow the RBI to stabilize potential currency fluctuations.

There are state level elections in seven jurisdictions in 2022, including India’s most populous state of Uttar Pradesh.
The outcome of these elections will have national implications and affect the pace of policy reforms. Still, with
national elections two years away, Prime Minister Modi is in a commanding position to retain his parliamentary
majority.

As we end our first seven years of operations, we would like to acknowledge the strong leadership provided by
Amy Sherk, Chief Financial Officer, Jennifer Pankratz, General Counsel and Corporate Secretary, Gopalakrishnan
Soundarajan, Chief Operating Officer, John Varnell, Vice President of Corporate Affairs, and Jennifer Allen, Vice
President. Fairfax India is supported by a very small head office in Toronto, and we are grateful for the contributions
of Antony Lai, Jennifer Li, Jung Lee, Victor Ma and Brad Van Hoffen. We would also like to thank our independent
directors – Tony Griffiths, Chris Hodgson, Alan Horn, Deepak Parekh, Satish Rai and Lauren Templeton – for their
wise advice, support and encouragement.

We are looking forward to connecting with you at our in-person and virtual annual meeting at 2:00 p.m. (Eastern
time) on April 21, 2022.

March 4, 2022

Chandran Ratnaswami
Chief Executive Officer

V. Prem Watsa
Chairman

FAIRFAX INDIA HOLDINGS CORPORATION

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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 4, 2022

Chandran Ratnaswami
Chief Executive Officer

Amy Sherk
Chief Financial Officer

FAIRFAX INDIA HOLDINGS CORPORATION

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, 2021 and 2020, 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:

• the consolidated balance sheets as at December 31, 2021 and 2020;

• the consolidated statements of earnings (loss) for the years then ended;

• the consolidated statements of comprehensive income (loss) for the years then ended;

• the consolidated statements of changes in equity for the years then ended;

• the consolidated statements of cash flows for the years then ended; and

• 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, 2021. 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.

Key audit matter

Valuation of certain 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 investments measured at
fair value of
$2,202.7 million as at December 31, 2021.

Included in Private Indian investments is $2,016.0 million
of Private Indian common stocks that are valued by
management using discounted cash flow analyses that use
significant unobservable inputs. Management applies
significant judgment to determine the assumptions relating
to significant unobservable inputs such as multi-year free
cash flow forecasts prepared by investees’ management,
after-tax discount rates and long term growth rates.

We considered this a key audit matter due to (i) the
significance of the Private Indian common stocks valued
by management using discounted cash flow analyses and
(ii) the significant judgment required by management when
determining the fair value estimate of these Private Indian
common stocks, including the assumptions relating to
significant unobservable inputs. This has resulted in a high
degree of subjectivity and audit effort
in performing
procedures relating to the valuation of these investments.
Professionals with specialized skills and knowledge in the
field of valuation assisted us in performing our procedures.

How our audit addressed the key audit matter

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

• Evaluated how management determined the fair values
of the Private Indian common stocks valued using
discounted cash flow analyses, which included the
following:

• Evaluated the appropriateness of the methodology
used by management in the discounted cash flow
analyses, and tested the mathematical accuracy
thereof.

• Tested the reasonableness of the multi-year free cash
flow forecasts prepared by investees’ management by
considering consistency with, as applicable:

–

current and past performance of the particular
investment; and

relevant external market and industry data.

• Professionals with specialized skills and knowledge in

the field of valuation assisted us in:

–

assessing the reasonableness of the methodology
used in management’s discounted cash flow
analyses;

assessing the reasonableness of
the after-tax
discount rates and long term growth rates used in
management’s discounted cash flow analyses;

testing the underlying data used in management’s
discounted cash flow analyses; and

developing an independent point estimate of the
valuation of a portion of one investment, which
included the following:

• using

a market

comparable

approach,
developing independent assumptions related to
market comparables by considering relevant
market and industry data; and

• comparing the independent point estimate to
management’s
the
estimate
reasonableness of management’s estimate.

evaluate

• Evaluated the disclosures made in the consolidated
financial statements, particularly on the sensitivity of
significant unobservable inputs used.

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 Management’s Discussion and Analysis of Financial Condition and Results of Operations and 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.

FAIRFAX INDIA HOLDINGS CORPORATION

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:

• 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.

• 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.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and

related disclosures made by management.

• 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.

• 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.

• 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 Catriona Read.

Chartered Professional Accountants, Licensed Public Accountants

Toronto, Ontario
March 4, 2022

FAIRFAX INDIA HOLDINGS CORPORATION

Consolidated Financial Statements

Consolidated Balance Sheets
as at December 31, 2021 and December 31, 2020
(US$ thousands)

Notes

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

7, 12
12
10
7,12

December 31,
2021

December 31,
2020

30,376
–
6,151
214,468
3,325,713

22,057
16,315
–
35,873
2,991,775

3,576,708

3,066,020

5,339
1,056
1,243

1,911
2,803
2,264

3,584,346

3,072,998

866
8,611
95,002
80,648
496,785

681,912

931
–
14,428
63,477
547,228

626,064

2,774,792
127,642

2,902,434

3,584,346

2,446,934
–

2,446,934

3,072,998

Assets
Cash and cash equivalents
Restricted cash
Short term investments
Bonds
Common stocks

Total cash and investments

Interest and dividends receivable
Income taxes refundable
Other assets

Total assets

Liabilities
Accounts payable and accrued liabilities
Accrued interest expense
Payable to related parties
Deferred income taxes
Borrowings

Total liabilities

Equity
Common shareholders’ equity
Non-controlling interests

Total equity

See accompanying notes.

Signed on behalf of the Board

Director

Consolidated Statements of Earnings (Loss)
for the years ended December 31, 2021 and 2020
(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)

Attributable to:
Shareholders of Fairfax India
Non-controlling interests

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

See accompanying notes.

Notes

2021

2020

6
6
6
6
6

12
12
14
7

5,500
27,468
227,193
438,935
(5,557)

693,539

40,775
85,193
5,526
28,515

160,009

533,530
39,030

494,500

494,514
(14)

494,500

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)

(41,476)
–

(41,476)

9
9
9

$
$

3.38
3.22
146,379,346

$
$

(0.27)
(0.27)
151,001,909

FAIRFAX INDIA HOLDINGS CORPORATION

Consolidated Statements of Comprehensive Income (Loss)
for the years ended December 31, 2021 and 2020
(US$ thousands)

Net earnings (loss)

2021

2020

494,500

(41,476)

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 (2020 – nil)

(46,262)

(60,606)

Other comprehensive loss, net of income taxes

Comprehensive income (loss)

Attributable to:
Shareholders of Fairfax India
Non-controlling interests

See accompanying notes.

(46,262)

(60,606)

448,238

(102,082)

449,672
(1,434)

(102,082)
–

448,238

(102,082)

Consolidated Statements of Changes in Equity
for the years ended December 31, 2021 and 2020
(US$ thousands)

Balance as of January 1, 2021
Net earnings (loss) for the year
Other comprehensive loss:

Unrealized foreign currency

translation losses
Issuance of shares (note 8)
Sale of subsidiary shares to

Subordinate
voting
shares

Multiple
voting
shares
1,261,734 300,000
–
–

Share-
based
Retained
payments,
earnings
net
(12) 1,163,493
494,514

–

Accumulated
other
comprehensive
loss
(278,281)
–

Common
shareholders’
equity
2,446,934
494,514

Non-
controlling
interests

Total
equity
– 2,446,934
494,500

(14)

–
5,217

–
–

(44,842)
–

(44,842)
5,217

(1,420)
–

(46,262)
5,217

non-controlling interests (note 8)
Purchases for cancellation (note 8)
Purchases and amortization
Balance as of December 31, 2021

–
–
–
(92,393)
–
–
1,174,558 300,000

145
–
(34,476)
–
–
(307)
(319) 1,623,676

–
–
–
(323,123)

145
(126,869)
(307)
2,774,792

129,076
–
–

129,221
(126,869)
(307)
127,642 2,902,434

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
Balance as of December 31, 2020

See accompanying notes.

1,295,005 300,000
–
–

(82) 1,200,603
(41,476)

–

(217,675)
–

2,577,851
(41,476)

– 2,577,851
(41,476)
–

–
–
–
(33,271)
–
–
1,261,734 300,000

–
–
4,366
–
70
–
(12) 1,163,493

(60,606)
–
–
(278,281)

(60,606)
(28,905)
70
2,446,934

(60,606)
–
(28,905)
–
–
70
– 2,446,934

Notes

2021

2020

12
10

6
6
6

15
15

7
7
7

494,500

(41,476)

2,003
85,193
18,356
12
(227,193)
(438,935)
5,557
16,051
264
(6,283)
(316,753)
414,477

937
(41,991)
484
70
(5,372)
26,618
14,188
867
(267)
–
(185,911)
231,193

(3,480)
1,709
8,659
1,299
–
5,653

1,441
–
–
7,586
(3,556)
6,080

61,089

10,891

500,000
(3,650)
(550,000)

–
(5,545)
–

(126,869)

(28,905)

129,221

–

(51,298)

(34,450)

9,791
22,057
(1,472)

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

30,376

22,057

FAIRFAX INDIA HOLDINGS CORPORATION

Consolidated Statements of Cash Flows
for the years ended December 31, 2021 and 2020
(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

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

Interest and dividends receivable
Income taxes refundable
Accrued interest expense
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

Subsidiary shares:

Sales to non-controlling interests

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.

Index to Notes to Consolidated Financial Statements

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

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

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

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

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

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

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

Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

10.

11.

12.

13.

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

Financial Risk Management

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

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

Segment Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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

15.

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

FAIRFAX INDIA HOLDINGS CORPORATION

Notes to Consolidated Financial Statements
for the years ended December 31, 2021 and 2020
(in US$ and thousands except share and per share amounts and as otherwise indicated)

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 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.

Basis of Presentation

The company’s consolidated financial statements for the year ended December 31, 2021 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, deferred income taxes, borrowings, and the performance fee accrual within payable to related parties (see
note 12 for further details on the performance fee accrual), 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 4,
2022.

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 investment-related services to the company and are
not investment entities themselves).

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, FIH Private and Anchorage 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 (Fairchem Organics Limited (“Fairchem Organics”), National
Commodities Management Services Limited (“NCML”, formerly National Collateral Management Services Limited),
and Saurashtra Freight Private Limited (“Saurashtra”)) at FVTPL in accordance with IFRS 9 Financial Instruments
(“IFRS 9”) rather than by consolidation.

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

Non-controlling interests – Subsequent to initial recognition, the carrying value of non-controlling interests is
adjusted for the non-controlling interest’s share of changes in the subsidiary’s net earnings (loss) and capital.
Effects of transactions with non-controlling interests are recorded in common shareholders’ equity if there is no
change in control.

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”), Seven Islands
Shipping Limited (“Seven Islands”) and Maxop Engineering Company Private Limited (“Maxop”)) 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:

• assets and liabilities are translated using exchange rates at the balance sheet dates;

• income and expenses are translated at average exchange rates for the periods presented; and

FAIRFAX INDIA HOLDINGS CORPORATION

• net unrealized gains or losses resulting from this translation are recognized in accumulated other

comprehensive income (loss).

Upon loss of control of FIH Mauritius, FIH Private or Anchorage, 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 deconsolidation 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 total equity during a reporting 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, derivative
assets, 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 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. 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

FAIRFAX INDIA HOLDINGS CORPORATION

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.

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 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 and employees 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 2021

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, 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. Retrospective adoption of these amendments on January 1, 2021 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, 2021. The company does not expect to adopt any of them in advance of their
respective effective dates.

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 when 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 time of adoption.
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 are considered when
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. The amendments are to be applied retrospectively to annual
periods beginning on or after January 1, 2023. The company is currently evaluating the expected impact of the
amendments on its consolidated financial statements.

Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)

On May 7, 2021 the IASB issued amendments to IAS 12 Income Taxes to clarify how companies account for
deferred tax on transactions that give rise to equal taxable and deductible temporary differences. The amendments
preclude the use of the initial recognition exemption on such transactions and are effective for annual periods

FAIRFAX INDIA HOLDINGS CORPORATION

beginning on or after January 1, 2023 with early application permitted. The amendments are not expected to have
a significant impact on the company’s consolidated financial statements.

Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)

On February 12, 2021 the IASB issued amendments to IAS 1 Presentation of Financial Statements and IFRS
Practice Statement 2 Making Materiality Judgements to help entities decide which accounting policies to disclose
in their financial statements. The amendments are applied prospectively on or after January 1, 2023 and are not
expected to have a significant impact on the company’s consolidated financial statements.

Definition of Accounting Estimates (Amendments to IAS 8)

On February 12, 2021 the IASB issued amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates
and Errors to help entities distinguish between accounting policies and accounting estimates. The amendments
are applied prospectively to changes in accounting estimates and changes in accounting policies occurring on or
after January 1, 2023 and are not expected to have a significant impact on the company’s consolidated financial
statements.

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 2021. 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 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 valuations 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
prepared by investees’ management, 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 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. In particular,
these restrictions include the lockdown imposed by the Indian government on March 25, 2020 which was later
extended to May 31, 2020. Certain restrictions remain in place for containment zones until March 31, 2022 (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 assessed the assumptions
related to the COVID-19 pandemic which were included in the estimates of the amount and timing of future cash
flows prepared by investees’ management, and the uncertainty in those assumptions has been considered in the
determination of risk premiums incorporated in the company’s valuations of Private Indian Investments. 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, 2021.

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 receives specialized tax advice for assessing the income tax consequences of planned
transactions and events, and undertaking the appropriate tax planning from Fairfax tax personnel.

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.

Consolidation of Anchorage

During 2021, the company transferred 43.6% out of its 54.0% equity interest in BIAL such that it is held through
Anchorage, and subsequently completed the sale of 11.5% of its equity interest in Anchorage to Ontario Municipal
Employees Retirement System (“OMERS”). The company exercised significant judgment in determining that
Anchorage will continue to provide investment related services to the company on current and potential
investments in the infrastructure sector in India and not meet the definition of an investment entity based on the
facts and circumstances known or knowable at this time. As a result, the company will continue to consolidate
Anchorage. The company’s assessment of this position requires an ongoing analysis of Anchorage’s strategic
objectives and business activities. Accordingly, Anchorage’s status in relation to the company as a consolidated
subsidiary may change in future reporting periods based on the facts and circumstances at that time.

Indian Investments

Throughout the company’s consolidated financial statements for the year ended December 31, 2021, the term
“Indian Investments” refers to deployed capital invested in Public and Private Indian Investments as disclosed
within this note.

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 2021 is as
follows:

Balance
as of
January 1

Purchases

Sales

Amortization

2021

Net
realized
gains
(losses) on
investments

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

Net
unrealized
foreign
currency
translation
gains
(losses)

Balance
as of
December 31

Public Indian Investments:

Common stocks:

IIFL Finance

IIFL Wealth

IIFL Securities

CSB Bank

Privi Speciality(2)

Fairchem Organics(3)(4)

5paisa(5)

Other

Derivatives – Fairchem Organics
forward purchase derivative(3)

131,478

166,702

55,603

214,341

138,413

54,566

27,788

147,604

–

(164,812)

22,919

(45,560)

6,141

–

(122,013)

(4,800)

Total Public Indian Investments

936,495

29,060

(337,185)

Private Indian Investments:

Common stocks:

BIAL

Sanmar

Seven Islands

NCML

Saurashtra

Maxop

NSE

IH Fund

Other Indian Fixed Income

1,396,117

338,621

103,543

86,216

32,812

–

29,520

72,617

25,354

14,884

–

7,395

–

(2,535)

Total Private Indian Investments

2,070,164

36,915

(2,535)

Total Indian Investments

3,006,659

65,975

(339,720)

–

33,558

(2,587)

58,944

4,847

227,065

–

189,963

66,625

48,836

17,060

132,303

(105,026)

(3,305)

(3,216)

(1,222)

(3,752)

(799)

(1,498)

(587)

91,035

10,477

(12,785)

(2,138)

318,136

230,111

103,217

227,649

155,020

41,232

69,612

–

(47)

–

306,185

(16,564)

1,145,056

(130)

(23,817)

1,372,170

88,806

4,173

(15,253)

14,988

–

40,062

1,218

–

(6,274)

(1,790)

(1,385)

(643)

324

421,153

105,926

69,578

47,157

29,844

(1,463)

111,216

(424)

(250)

23,613

22,083

133,864

(35,722)

2,202,740

227,065

440,049

(52,286)

3,347,796

(1)

(2)

(3)

(4)

(5)

All Private Indian Investments and certain common shares of CSB Bank and 5paisa (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.

On April 29, 2021 the company completed the sale of its 48.8% equity interest in Privi Speciality for proceeds of $164,812 resulting in a realized gain since
inception of $132,303. Net change in unrealized gains (losses) on investments includes a reversal of prior period unrealized gains on Privi Speciality.

On April 29, 2021 the company acquired additional Fairchem Organics common shares for cash consideration of $18,117. As a result the company derecognized
the Fairchem Organics forward purchase derivative asset with a carrying value of $4,800, recorded a realized gain of $4,847 and recorded its investment in
Fairchem Organics common shares at a fair value at that date of $22,917.

In November 2021 the company sold 1,800,000 common shares of Fairchem Organics for proceeds of $45,560 resulting in a realized gain since inception of
$33,558. Net change in unrealized gains on investments includes a reversal of prior period unrealized gains on Fairchem Organics of $5,346.

On May 19, 2021 the company acquired additional 5paisa common shares for cash consideration of $6,141 pursuant to a preferential share rights offering. The
newly issued 5paisa common shares had a fair value of $3,554 at that date based on bid price less a discount for lack of marketability due to certain selling
restrictions, and as a result the company recorded a realized loss of $2,587.

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

Balance
as of
January 1

Purchases

Fairchem
Reorganization

Sales

2020

Net
realized
gains on
investments

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

Net
unrealized
foreign
currency
translation
gains
(losses)

Balance
as of
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

Total Public Indian Investments

Private Indian Investments:

Common stocks:

BIAL

Sanmar

Seven Islands

NCML

Saurashtra

NSE

IH Fund

Other Indian Fixed Income

166,014

191,476

48,796

229,262

127,413

–

18,176

95,892

877,029

1,429,854

412,930

88,800

120,734

31,204

57,210

15,146

14,286

–

84,672

–

9,506

–

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

(30,262)

(20,058)

7,823

(9,484)

48,732

18,808

9,889

5,896

(4,274)

(4,716)

(1,016)

(5,437)

131,478

166,702

55,603

214,341

(2,837)

138,413

863

(277)

(725)

54,566

27,788

147,604

936,495

31,344

(18,419)

–

(277)

–

(277)

–

(669)

(33,068)

1,396,117

(63,844)

(10,465)

16,558

(31,277)

2,297

16,493

1,249

915

(1,815)

(3,241)

(689)

(1,086)

(270)

(317)

338,621

103,543

86,216

32,812

72,617

25,354

14,884

(58,278)

(50,951)

2,070,164

(42,190)

3,782

(26,934)

(69,370)

3,006,659

(1)

(2)

All Private Indian Investments and certain common shares of CSB Bank (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.

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.

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 common shares of CSB Bank and 5paisa subject to selling restrictions.

Investment in IIFL Finance Limited

In December 2015 and February 2017 the company acquired 84,641,445 common shares of IIFL Holdings Limited
(“IIFL Holdings”) (representing a 26.9% equity interest) for aggregate cash consideration of $276,734
(approximately 18.5 billion Indian rupees).

In October 2017 and May 2019 IIFL Holdings spun-off its subsidiaries 5paisa, IIFL Wealth and IIFL Securities in
non-cash transactions. In aggregate, the transactions resulted in a return of capital which exceeded Fairfax India’s
cost basis in IIFL Holdings based on the estimated fair values of the spun off subsidiaries at the date of the

FAIRFAX INDIA HOLDINGS CORPORATION

transactions. Upon completion of the spin off of IIFL Wealth and IIFL Securities in May 2019, IIFL Holdings Limited
was renamed IIFL Finance Limited and continued to trade on the BSE and NSE of India.

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 was decreased to 22.4% at
March 30, 2020.

At December 31, 2021 the fair value of the company’s investment in IIFL Finance was $318,136 (December 31,
2020 – $131,478) comprised of 84,641,445 common shares representing a 22.3% equity interest (December 31,
2020 – 22.4%) with the changes in fair value in 2021 and 2020 presented in the tables disclosed earlier in note 5.

Investment in IIFL Wealth Management Limited

In May 2019 the company received 12,091,635 common shares of IIFL Wealth, representing a 14.2% equity interest
with an estimated fair value on the date of the transaction of $191,443 (approximately 13.3 billion Indian rupees),
pursuant to a non-cash spin off transaction from the former IIFL Holdings. The common shares of IIFL Wealth were
listed on the BSE and NSE of India on September 19, 2019.

At December 31, 2021 the fair value of the company’s investment in IIFL Wealth was $230,111 (December 31,
2020 – $166,702) comprised of 12,091,635 common shares representing a 13.6% equity interest (December 31,
2020 – 13.8%) with the changes in fair value in 2021 and 2020 presented in the tables disclosed earlier in note 5.

Investment in IIFL Securities Limited

In May 2019 the company received 84,641,445 common shares of IIFL Securities representing a 26.5% equity
interest with an estimated fair value on the date of the transaction of $91,310 (approximately 6.4 billion Indian
rupees), pursuant to a non-cash spin off transaction from the former IIFL Holdings. The common shares of IIFL
Securities were listed on the BSE and NSE of India on September 20, 2019.

At December 31, 2021 the fair value of the company’s investment in IIFL Securities was $103,217 (December 31,
2020 – $55,603) comprised of 84,641,445 common shares representing a 27.9% equity interest (December 31,
2020 – 26.5%) with the changes in fair value in 2021 and 2020 presented in the tables disclosed earlier in note 5.
The increase in the company’s equity interest in IIFL Securities during the year was primarily due to IIFL Securities’
purchase and cancellation of its own shares.

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, which decreased in 2019 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”). At December 31, 2021 the company held 69,394,331 common shares of CSB Bank that continue to be
restricted until August 7, 2024.

At December 31, 2021 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 20.5% on the common shares subject to selling restrictions (December 31,
2020 – 20.9%). At December 31, 2021 the fair value of the company’s investment in CSB Bank was $227,649
(December 31, 2020 – $214,341) comprised of 86,262,976 common shares representing a 49.7% equity interest
(December 31, 2020 – 49.7%) with the changes in fair value in 2021 and 2020 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 manufactured oleochemicals used in the paints, inks and adhesives industries, as well
as intermediate neutraceutical and health products. Privi Organics Limited (“Privi”), previously a wholly-owned
subsidiary of Fairchem located in Mumbai was a supplier of aroma chemicals to the fragrance industry.

In February 2016 Fairfax India acquired a 44.7% equity interest in Fairchem for cash consideration of $19,409
(approximately 1.3 billion Indian rupees) and in August 2016 acquired a 50.8% equity interest in Privi for cash
consideration of $54,975 (approximately 3.7 billion Indian rupees). On March 14, 2017 Fairchem and Privi were
merged with the surviving entity continuing as Fairchem (the “Merger”) and with no changes to management of
the underlying companies. Upon completion of the Merger, Fairfax India had acquired a 48.8% equity interest in
the merged company 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 (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 was 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

On April 29, 2021 the company completed the sale of its 48.8% equity interest in Privi Speciality for cash
consideration of $164,812 (approximately 12.2 billion Indian rupees).

At December 31, 2021 the fair value of the company’s investment in Privi Speciality was $79 (December 31,
2020 – $138,413) comprised of 3,250 common shares representing less than 1% equity interest (December 31,
2020 – 19,046,078 common shares representing a 48.8% equity interest) with the changes in fair value in 2021 and
2020 presented in the tables disclosed earlier in note 5.

On November 10, 2021 the company invested $7,395 (550.0 million Indian rupees) in non-convertible debentures,
due February 10, 2025, with an effective yield of 10.0% compounded annually issued by an entity affiliated with
Mahesh P Babani, chairman and managing director of Privi Speciality. At December 31, 2021 the fair value of the
company’s investment in the non-convertible debentures was $7,453 with the changes in fair value in 2021
presented within Other Indian Fixed Income in the table disclosed earlier in note 5.

Subsequent to December 31, 2021

On February 16, 2022 the company sold its remaining equity interest in Privi Speciality for cash consideration of
$83 (approximately 6.3 million Indian rupees).

Investment in Fairchem Organics Limited

FAIRFAX INDIA HOLDINGS CORPORATION

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). The distribution of new common shares of Fairchem Organics to Fairchem shareholders
was characterized as a return of capital.

The common shares of Fairchem Organics were listed on the BSE and NSE of India on December 24, 2020. 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”). In support of the Fairchem Open Offer, the company was required to
place on deposit, cash of $267 (approximately 19.5 million Indian rupees) and a bank guarantee for $6,648
(approximately 486.1 million Indian rupees) which expired in April 2021. The cash deposit was recorded in
restricted cash within the consolidated balance sheet at December 31, 2020.

On March 2, 2021 the company completed the settlement of 290 common shares of Fairchem Organics tendered
for $2 and the remaining cash deposit of $264 was returned.

On April 29, 2021 the company completed the purchase of an additional 17.9% equity interest in Fairchem Organics
for cash consideration of $18,117 (approximately 1.3 billion Indian rupees). Upon closing of the transaction the
company settled a forward purchase derivative asset at a fair value of $4,800 (approximately 355 million Indian
rupees), which was a result of the transaction date fair value exceeding the agreed upon transaction price for
Fairchem Organics common shares. The company recorded its additional investment in Fairchem Organics at a fair
value of $22,917 (approximately 1.7 billion Indian rupees).

On November 9, 2021 and November 10, 2021 the company sold an aggregate of 1,800,000 common shares of
Fairchem Organics for proceeds of $45,560 (approximately 3.4 billion Indian rupees) and recorded a realized gain
since inception of $33,558.

At December 31, 2021 the fair value of the company’s investment in Fairchem Organics was $155,020 (December 31,
2020 – $54,566) comprised of 6,879,739 common shares representing a 52.8% equity interest (December 31,
2020 – 6,348,692 common shares representing a 48.8% equity interest) with the changes in fair value in 2021 and
2020 presented in the tables disclosed earlier in note 5.

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 the company received 3,385,657 common shares of 5paisa representing a 26.6% equity interest
with a fair value on the date of the transaction of $19,758, pursuant to a non-cash spin off transaction from the
former IIFL Holdings. In August 2019 the company participated in a rights offer to existing shareholders of 5paisa
and acquired an additional 3,385,657 common shares of 5paisa for cash consideration of $3,777, maintaining an
equity interest of 26.6%.

On May 19, 2021 the company participated in a rights offer to existing shareholders of 5paisa (“5paisa Preferential
Share Rights Offer”) and acquired 898,816 equity shares of 5paisa on a preferential basis for cash consideration of
$6,141 (449.4 million Indian rupees). The company is restricted from selling these common shares until May 28,
2022 due to restrictions imposed by SEBI. As a result, the company recorded its investment in the newly issued
5paisa common shares at a fair value of $3,554 (260.1 million Indian rupees) based on bid price less a discount for
lack of marketability of 22.2% resulting in the company recording a realized loss of $2,587 on the date of
acquisition. As a result of the 5paisa Preferential Share Rights Offer and common shares issued by 5paisa under an
employee stock option plan during the period, the company’s ownership interest in 5paisa decreased from 26.6%
to 26.1%.

At December 31, 2021 the company estimated the fair value of its investment in 5paisa based on the bid price less
a discount for lack of marketability of 9.8% for the 5paisa common shares acquired through the 5paisa Preferential
Share Rights Offer. At December 31, 2021 the fair value of the company’s investment in 5paisa was $41,232
(December 31, 2020 – $27,788) comprised of 7,670,130 common shares representing a 26.1% equity interest
(December 31, 2020 – 6,771,314 common shares representing a 26.6% equity interest) with the changes in fair
value in 2021 and 2020 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.

In 2021 the company sold investments in Other Public Indian Investments for total net proceeds of $122,013,
resulting in realized gains of $58,944.

At December 31, 2021 the fair value of the company’s investment in Other Public Indian Investments was $69,612
(December 31, 2020 – $147,604) 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 2021 and
2020 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) for a 54.0% equity interest in BIAL.

On September 16, 2021 the company transferred 43.6% out of its 54.0% equity interest in BIAL such that it is held
through Anchorage and subsequently sold 11.5% (on a fully-diluted basis) of its interest in Anchorage to OMERS
for gross proceeds of $129,221 (9.5 billion Indian rupees). Upon closing of the transaction, the company’s effective
ownership interest in BIAL decreased to approximately 49.0% on a fully-diluted basis, while its actual ownership
remained unchanged. Refer to note 8 (Total Equity, under the heading Non-controlling interests) for further
discussion on Anchorage.

The COVID-19 pandemic has significantly impacted BIAL’s airport business 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 further notice with the exception of certain countries with
which India has established air bubble arrangements. 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 and international passenger traffic by BIAL’s fiscal year 2024 to levels witnessed before the pandemic.

At December 31, 2021 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 12.1% to 16.0% and a long term growth rate of 3.5% (December 31, 2020 – 12.8% to 15.0%, and
3.5%, respectively). At December 31, 2021 free cash flow forecasts were based on EBITDA estimates derived from
financial information for BIAL’s three business units prepared in the third quarter of 2021 (December 31,
2020 – fourth quarter of 2020) by BIAL’s management and adjusted for lower airport tariffs for the third control
period commencing in BIAL’s fiscal year 2022 and the ongoing impact of the COVID-19 pandemic on airport
operations.

FAIRFAX INDIA HOLDINGS CORPORATION

Free Cash Flow Forecast Inputs

The primary drivers of 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 2021 to primarily reflect (i) a temporary reduction 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) lower airport tariff rates for the third control period commencing in
BIAL’s fiscal year 2022; 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 in 2021 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 resurgence of COVID-19 cases in India during the second wave, BIAL’s
forecast reflected reduced domestic and international passenger traffic forecasts for its fiscal year 2022, 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 (“AERA”) 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. 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, which ended on March 31, 2021, will be substantially recovered through, among
other factors, higher UDFs in future control periods. It should be noted that UDFs set by AERA for the third control
period are not sufficient to recover losses sustained in the second control period due to India’s lockdown.

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.

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. 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, 2021 the company’s internal valuation model indicated that the fair value of the company’s
investment in BIAL was $1,372,170 (December 31, 2020 – $1,396,117) 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 2021 and 2020 are presented in the tables disclosed earlier in note 5.

Investment in Sanmar Chemicals Group

During 2016 and 2019 Fairfax India invested aggregate cash consideration of $199,039 (approximately 14.2 billion
Indian rupees) for a 42.9% equity interest in Sanmar.

On August 24, 2021 Chemplast Sanmar Limited (“Chemplast”), a subsidiary of the Sanmar group completed an
IPO, issuing 24,029,574 common shares to the public for proceeds of approximately $175 million (13.0 billion
Indian rupees). The IPO also included a secondary offering, whereby Sanmar sold 47,134,935 common shares of
Chemplast to the public for proceeds of approximately $344 million (25.5 billion Indian rupees). As a result of the

IPO, Sanmar’s ownership interest in Chemplast was diluted from 100.0% to 55.0%. The proceeds from the IPO
were used to repay Chemplast’s debt and Sanmar’s holding company debt. Chemplast is engaged in specialty PVC
manufacturing, suspension PVC manufacturing and the production of specialty chemicals for pharmaceutical,
agro-chemical and fine chemical sectors, in India. Chemplast is listed on both the BSE and NSE of India.

At December 31, 2021 the company estimated the fair value of its investment in Sanmar common shares using: (i) a
discounted cash flow analysis for Sanmar Egypt, based on multi-year free cash flow forecasts with an assumed
after-tax discount rate of 14.6% and a long term growth rate of 3.0%; and (ii) the unadjusted bid price of Chemplast’s
common shares. At December 31, 2021 free cash flow forecasts were based on EBITDA estimates derived from
financial information for Sanmar Egypt prepared in the fourth quarter of 2021 by Sanmar’s management.

At December 31, 2020 the company estimated the fair value of its investment in Sanmar common shares using a
discounted cash flow analysis for Sanmar Egypt and Chemplast, 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%. At December 31, 2020 free cash flow forecasts were based on EBITDA estimates derived from financial
information for Sanmar Egypt and Chemplast prepared in the fourth quarter of 2020 by Sanmar’s management.

The company changed its valuation technique as a result of Chemplast completing its IPO during the third quarter
of 2021 as explained above.

Free Cash Flow Forecast Inputs

The primary driver of 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

Free cash flow forecasts for Sanmar Egypt were revised by Sanmar’s management in 2021 primarily to reflect lower
sales volume for certain product lines, higher input costs due to supply shortages and higher power costs, resulting
in lower forecasted margins. The revised forecasts negatively impacted the valuation of Sanmar which was more
than offset by a decrease in Sanmar Egypt’s after-tax discount rate and a reduction in net debt as a result of its debt
restructuring, discussed below.

During the second quarter of 2021 Sanmar Egypt received approval from its lenders to restructure $785.4 million
of its borrowings. The restructuring plan resulted in an extended tenor, reduced borrowing rates and the conversion
of a portion of term loans to a 13.9% equity interest in Sanmar Egypt. Certain implementation steps of the
restructuring plan are subject to regulatory approval. The debt restructuring implied a decrease in Sanmar Egypt’s
after-tax cost of borrowing and a decrease in Sanmar’s net debt, which increased the equity valuation.

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 and reflected a reduced cost of debt at Sanmar Egypt due to its
debt restructuring. 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.

Investment in Seven Islands Shipping Limited

During 2019 Fairfax India invested aggregate cash consideration of $83,846 (approximately 5.8 billion Indian
rupees) for a 48.5% equity interest in Seven Islands.

At December 31, 2021 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 11.0%
and a long term growth rate of 3.0% (December 31, 2020 – 13.5% and 3.0%, respectively). At December 31, 2021
free cash flow forecasts were based on EBITDA estimates derived from financial information for Seven Islands
prepared in the fourth quarter of 2021 (December 31, 2020 – fourth quarter of 2020) by Seven Islands’ management.

FAIRFAX INDIA HOLDINGS CORPORATION

Free Cash Flow Forecast Inputs

The primary driver of 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 in the fourth quarter of 2021 primarily to reflect
market conditions of the shipping industry in the near term, including the timing and composition of its planned
vessel acquisitions and a shift to more revenues earned on time charters relative to voyage charters in the near
term, based on expected shipping demand. 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. The
after-tax discount rate decreased in 2021 to reflect the reduced level of uncertainty associated with overall lower
free cash flow forecasts. 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.

Investment in National Commodities Management Services Limited

National Commodities Management Services Limited (“NCML”) (formerly National Collateral Management Services
Limited), a private company located in Gurugram, India, offers end-to-end solutions in grain procurement, storage
and preservation, testing and certification, collateral management, and commodity and weather intelligence. NCML’s
wholly-owned subsidiary, NCML Finance Private Ltd, focuses on rural and agri-business finance.

NCML Common Shares

During 2015 and 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, 2021 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 11.0% to 11.7% and long term growth rates ranging from 2.4% to 6.0% for two business units, and an
adjusted net book value approach for its NBFC business unit (December 31, 2020 – 11.3% to 11.7%, 2.4% to 6.0%,
respectively and an adjusted net book value approach for its NBFC business unit). At December 31, 2021 free cash
flow forecasts were based on EBITDA estimates derived from financial information for two business units prepared
in the third quarter of 2021 (December 31, 2020 – fourth quarter of 2020) 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

Free cash flow forecasts were revised by NCML’s management in the third quarter of 2021 primarily to reflect
changes to its composition of owned, leased and franchisee warehouse capacity, and to adjust EBITDA growth
based on expected business volumes more towards franchisee warehouse capacity and away from leased capacity.
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. 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.

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.

NCML Compulsorily Convertible Debentures

In 2019 the company invested $13,970 (approximately 1.0 billion Indian rupees) in 12.5% unsecured compulsorily
convertible debentures (“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, 2021 the fair value of the company’s investment in NCML CCD was $14,630 (December 31,
2020 – $14,884) with the changes in fair value in 2021 and 2020 presented within Other Indian Fixed Income 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.

During 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, 2021 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
17.2% to 19.8% and long term growth rates ranging from 4.0% to 5.0% (December 31, 2020 – 14.3% to 17.7%, and
4.0% to 5.0%, respectively). At December 31, 2021 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 2021
(December 31, 2020 – fourth quarter of 2020) 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

Free cash flows were revised by Saurashtra’s management in the fourth quarter of 2021 primarily to reflect changes
in the timing of forecasted capital expenditures and to adjust EBITDA growth based on increased capacity,
specifically due to recent growth seen in Fairfreight Lines. 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. Long
term growth rates were based on the expected long term sustainable growth rate of the economic environment
and sectors in which Saurashtra operates.

Investment in Maxop Engineering Company Private Limited

On September 16, 2021 Fairfax India entered into an agreement to acquire, in aggregate, a 67.0% equity interest in
Maxop in two transactions. On November 30, 2021 the company invested cash consideration of $29,520
(approximately 2.2 billion Indian rupees) for a 51.0% equity interest in Maxop under the initial transaction.

In the second transaction, the company shall invest an amount between approximately $9 million and $36 million
based on period end exchange rates (700 million Indian rupees and 2.7 billion Indian rupees, respectively) for an
additional 16.0% equity interest. The final purchase price for the second transaction will be determined based on
the achievement of certain financial-based performance targets by Maxop. The second transaction is expected to
close in the second half of 2022, subject to customary closing conditions.

FAIRFAX INDIA HOLDINGS CORPORATION

It was determined the initial transaction price for the company’s investment in Maxop approximated fair value at
December 31, 2021 as there had been no significant changes to Maxop’s business, capital structure or operating
environment, and the key assumptions in the company’s acquisition valuation model continued to be valid. Based
on the financial performance data of Maxop available at December 31, 2021, the company determined the fair
value of the forward commitment for the purchase of the remaining 16.0% equity interest in Maxop to be
insignificant. At December 31, 2021 the fair value of the company’s investment in Maxop was $29,844 with the
changes in fair value in 2021 related to unrealized foreign currency translation gains presented in the table
disclosed earlier in note 5.

Investment in National Stock Exchange of India Limited

In 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, 2021 the company estimated the fair value of its investment in NSE of $111,216 (December 31,
2020 – $72,617) based on recent third party transactions completed in the fourth quarter of 2021 (December 31,
2020 – fourth quarter of 2020). The changes in fair value of the company’s investment in NSE in 2021 and 2020 are
presented in the tables disclosed earlier in note 5.

Investment in India Housing Fund

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.

During 2019 and 2020, Fairfax India invested aggregate cash consideration of $24,399 (approximately 1.7 billion
Indian rupees) in IH Fund.

At December 31, 2021 the company estimated the fair value of its investment in IH Fund of $23,613 (December 31,
2020 – $25,354) 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 2021
and 2020 are presented in the tables disclosed earlier in note 5.

Investment in Jaynix Engineering Private Limited

Jaynix Engineering Private Limited (“Jaynix”), a private company based in Gujarat, India, is a manufacturer of
non-ferrous electrical connectors and electrical assemblies, and is a critical Tier 1 supplier to major electrical
original equipment manufacturers in North America and Europe.

Subsequent to December 31, 2021

Pursuant to an agreement entered into on January 26, 2022, the company completed the purchase of a 70.0%
equity interest in Jaynix for $32,504 (approximately 2.5 billion Indian rupees) on February 11, 2022.

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, 2021

December 31, 2020

Significant
other
observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)

Quoted
prices
(Level 1)

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

Quoted
prices
(Level 1)

Significant
other
observable
inputs
(Level 2)

Significant
unobservable
inputs
(Level 3)

Cash and cash equivalents

30,376

Restricted cash(1)

Short term investments:

Government of India(2)

Bonds:

Government of India(2)

Other Indian Fixed

Income

Common stocks:

IIFL Finance

IIFL Wealth

IIFL Securities

Privi Speciality

–

30,376

–

318,136

230,111

103,217

Fairchem Organics

155,020

5paisa(3)

Other

BIAL

Sanmar

CSB Bank(4)

Seven Islands

NCML

Saurashtra

Maxop

NSE

IH Fund

36,824

69,612

–

53,282

–

966,281

Total fair
value
of assets

30,376

–

2,258

22,057

–

16,315

30,376

2,258

38,372

6,151

457

192,385

14,301

–

6,151

192,385

–

22,083

192,385

22,083

214,468

1,642

15,943

–

318,136

230,111

103,217

23,649 131,478

17,105 166,702

7,673

55,603

6 138,413

155,020

11,524

54,566

4,408

41,232

3,065

27,788

–

69,612

5,175 147,604

1,372,170 1,372,170

421,153

102,001

31,307

–

174,367

227,649

16,922

50,410

105,926

69,578

47,157

29,844

111,216

23,613

7,874

5,172

3,506

2,218

8,267

1,755

–

2,359,432 3,325,713

247,219 772,564

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

1,612

1,192

2,804

Total fair
value
of assets

22,057

16,315

38,372

–

20,989

–

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 1,396,117

338,621

163,931

214,341

103,543

86,216

32,812

–

72,617

25,354

2,219,211 2,991,775

1,533

1,088

2,621

9,607

12,180

4,063

10,113

3,987

2,030

10,785

102,011

24,742

15,661

7,566

6,300

2,398

–

5,306

1,853

218,602

224,027

100.0%

Total cash and investments

996,657

198,536

2,381,515 3,576,708

265,877 810,936

20,989

2,234,095 3,066,020

27.9%

5.6%

66.5%

100.0%

26.4%

0.7%

72.9%

100.0%

(1)

(2)

(3)

(4)

At December 31, 2020 primarily comprised of funds set aside as restricted cash to fund the interest payments on the company’s borrowings.

Priced based on information provided by independent pricing service providers at December 31, 2021 and 2020. Short term investments relate to
Government of India bonds maturing between three and twelve months from the date of purchase.

The company is restricted from selling its common shares of 5paisa issued through the 5paisa Preferential Share Rights Offer until May 28, 2022 and
has applied a discount for lack of marketability (a significant unobservable valuation input) to the quoted price for the restricted common shares of
5paisa held by the company at December 31, 2021.

The company is restricted from selling certain of its common shares of CSB Bank for a specified period ranging up 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, 2021 and 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 2021 and 2020 there were no transfers of financial instruments
between Level 1 and Level 2.

During 2021 as a result of an increase in total common shares outstanding of CSB Bank, additional common shares
of CSB Bank held by the company were subject to selling restrictions and were transferred from Level 1 to Level 3.

During 2020 as a result of a release of selling restrictions on 16,880,645 common shares of CSB Bank held by the
company, 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.

FAIRFAX INDIA HOLDINGS CORPORATION

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:

2021

2020

Year ended

Balance
as of

January 1 Purchases

Sales Transfers Amortization

Net change
in
unrealized
gains
(losses) on
investments

Net
realized
losses on
investments

Balance
as of
December 31

Balance
as of

January 1 Purchases

Sales Transfers

102,011

24,742

11,978

7,566

6,300

2,398

–

2,218

5,306

1,853

–

1,088

–

449

550

–

(187)

–

(189)

–

(10)

6,565

982

308

(1,128)

1,108

–

2,961

–

102,001

102,060

31,307

12,962

29,474

16,364

7,874

5,172

3,506

2,218

8,267

1,755

328

6,338

8,618

2,227

–

4,084

1,081

–

1,642

1,020

–

699

(20)

–

(3,639)

–

Net change
in
unrealized
gains
(losses) on
investments

Balance
as of
December 31

(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

–

1,088

Indian rupees
(in millions)

Common stocks:

BIAL

Sanmar

CSB Bank

Seven Islands

NCML

Saurashtra

Maxop

NSE

IH Fund

5paisa

Other Indian Fixed

Income

Total

163,242

3,217

(187)

(189)

10,943

177,032

171,266

699

(20)

(3,639)

(5,064)

163,242

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.

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, 2021. 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, management
widened its reasonably possible range of after-tax discount rates to changes within 100 basis points from changes
within 50 basis points previously applied by management prior to the COVID-19 pandemic. 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 Maxop, NSE, IH Fund and Other
Indian Fixed Income investments, as the company determined that there were no significant unobservable inputs
suited for a sensitivity analysis.

Fair value
of Level 3
investment Valuation technique

Significant
unobservable inputs

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)

Investments

Common stocks:

BIAL

$1,372,170 Discounted cash flow After-tax discount rate

12.1% to 16.0%

(350,563) / 458,715

(304,113) / 397,935

Sanmar(3)

$ 421,153 Discounted cash flow After-tax discount rate

Long term growth rate

CSB Bank(4)

$ 174,367

Long term growth rate

Bid price, net of
discount

Discount for lack of
marketability

Seven Islands

$ 105,926 Discounted cash flow After-tax discount rate

Long term growth rate

3.5%

14.6%

3.0%

20.5%

11.0%

3.0%

24,943 / (23,544)

21,638 / (20,425)

(38,059) / 45,025

(33,016) / 39,059

5,334 / (5,109)

4,628 / (4,432)

(3,043) / 3,058

(2,640) / 2,653

(21,251) / 27,408

(18,435) / 23,776

4,986 / (4,682)

4,326 / (4,062)

NCML(5)

Saurashtra

5paisa(4)

69,578 Discounted cash flow After-tax discount rate

11.0% to 11.7%

(20,765) / 29,036

(18,013) / 25,188

Long term growth rate

2.4% to 6.0%

3,645 / (3,322)

3,162 / (2,881)

47,157 Discounted cash flow After-tax discount rate

17.2% to 19.8%

(2,637) / 3,053

(2,288) / 2,649

4,408

Bid price, net of
discount

Discount for lack of
marketability

9.8%

Long term growth rate

4.0% to 5.0%

459 / (443)

(30) / 30

398 / (385)

(26) / 26

(1)

(2)

(3)

(4)

(5)

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 (changes of 250 basis points to underlying historical share
price volatility), 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.

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.

Significant unobservable inputs relate only to the Sanmar Egypt business unit as Chemplast became publicly traded on the BSE and NSE of India
during the third quarter of 2021. The hypothetical $ change effect from a 10% increase or decrease in Chemplast’s traded share price would be an
increase or decrease in fair value of Sanmar of $27,749, and an increase or decrease in net earnings of $24,072.

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.

The company determined that there were no significant unobservable inputs suited for a sensitivity analysis for NCML’s NBFC business unit where an
adjusted net book value approach was applied.

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, 2021 and 2020
there were no bonds containing call or put features. The increase in bonds due in 1 year or less and due after 1 year
through 5 years primarily reflects the partial reinvestment of net proceeds received from the sales of Privi Speciality,
an 11.5% non-controlling interest in Anchorage and Other Public Indian Investments into Government of India
bonds.

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

Effective interest rate

December 31, 2021

December 31, 2020

Amortized cost

Fair value

Amortized cost

Fair value

53,147
147,742
13,489

52,944
146,894
14,630

214,378

214,468

5.0%

−
20,936
13,724

34,660

−
20,989
14,884

35,873

7.3%

FAIRFAX INDIA HOLDINGS CORPORATION

Investment Income

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

Dividends: Common stocks

2021

2020

168
76
5,256

5,500

94
–
5,919

6,013

27,468

16,449

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

2021

2020

Net
realized
gains
(losses)

Net change in
unrealized
gains
(losses)

Net
realized
gains
(losses)

Net change in
unrealized
gains
(losses)

Net gains
(losses)

Net gains (losses) on investments:

Short term investments
Bonds
Common stocks
Derivatives

Net foreign exchange gains

(losses) on:
Cash and cash equivalents
Borrowings
Other

–
128
222,218(1)
4,847(1)

227,193

2,113
(36,032)(2)
1,515

(32,404)

(5)
(1,109)

(5)
(981)
440,049(1) 662,267
4,847

–

–
1,590
3,782(1)
–

–
1,231

–
2,821
(27,849)(1) (24,067)
–

–

438,935

666,128

5,372

(26,618)

(21,246)

–

26,847(2)

–

2,113
(9,185)
1,515

(514)
–
(1,153)

–

(514)
(12,521)(2) (12,521)
(1,153)

–

26,847

(5,557)

(1,667)

(12,521)

(14,188)

(1) Refer to note 5 for a summary of changes in the fair value of the company’s Public and Private Indian Investments

during 2021 and 2020.

(2)

In 2021 net realized foreign exchange loss of $36,032 related to the extinguishment of the Secured Term Loan. The
net change in unrealized gain of $26,847 was primarily comprised of the reversal of unrealized foreign exchange
losses in prior years of $32,546 on the extinguishment of the Secured Term Loan, partially offset by unrealized
foreign exchange losses of $5,699 primarily related to the new Unsecured Senior Notes issued in February 2021. In
2020 unrealized foreign exchange loss on borrowings related to the Secured Term Loan.

7. Borrowings

December 31, 2021
Carrying
value(1)

Fair
value(2)

Principal

December 31, 2020
Carrying
value(1)

Fair
value(2)

Principal

Secured Term Loan:
1 Year Secured Term Loan, floating rate due

June 28, 2021

Unsecured Senior Notes:
5.0% Unsecured Senior Notes due February 26,

–

550,000

547,228

550,000

2028

Total borrowings

500,000
500,000

496,785
496,785

498,450
498,450

–
550,000

–
547,228

–
550,000

(1) Principal net of unamortized issue costs.

(2) Principal for the Secured Term Loan approximated fair value at December 31, 2020. Fair value of the Unsecured
Senior Notes was based principally on information provided by independent pricing service providers (Level 2 in the
fair value hierarchy).

Unsecured Senior Notes

On February 26, 2021 the company completed an offering of $500,000 principal amount of 5.0% unsecured senior
notes due February 26, 2028 (“Unsecured Senior Notes”) at par. Net proceeds after commissions and expenses of
$3,650 were $496,350. Fairfax, through its subsidiaries, purchased $58,400 of the $500,000 principal amount under
the same terms as the other participants. Refer to note 12 for further details of amounts due to related parties.

At December 31, 2021 the Unsecured Senior Notes were recognized net of unamortized issuance costs of $3,215
(issuance costs of $3,650 less amortization of $435) and recorded in borrowings within the consolidated balance
sheets. The issuance costs are amortized over the remaining life of the Unsecured Senior Notes and recorded in
interest expense in the consolidated statements of earnings (loss).

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 (“Secured Term Loan”), with a syndicate led by a Canadian bank. The Secured
Term Loan was 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 Secured Term Loan 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 Secured Term Loan to extend its maturity to June 28, 2021 at an
interest rate of LIBOR plus 400 basis points, while maintaining the option to extend for an additional year.

On March 1, 2021 the company used the net proceeds of the Unsecured Senior Notes and cash to repay $500,000
of the Secured Term Loan, which permanently reduced the principal to $50,000. With the consent of the lenders,
the cash amount previously held in the debt service reserve account to fund Secured Term Loan interest payments
was released to the company. At December 31, 2020 the cash held in the debt service reserve account was
classified as restricted cash within the consolidated balance sheets.

On May 11, 2021 the company used a portion of the proceeds received from the sale of Privi Speciality common
shares to repay the remaining $50,000 term loan principal. The repayments during 2021 resulted in the
extinguishment of the Secured Term Loan and release of unamortized issuance costs of $1,749 recorded in interest
expense in the consolidated statements of earnings (loss). At December 31, 2020 the Secured Term Loan was
recognized net of unamortized issuance costs of $2,772 (issuance costs of $5,545 less amortization of $2,773) and
recorded in borrowings within the consolidated balance sheets.

Revolving Credit Facility

On December 17, 2021 the company entered into a $175,000 unsecured revolving credit facility (“Revolving Credit
Facility”) with a syndicate led by a Canadian bank. The Revolving Credit Facility has a three-year term with an
option to extend for an additional year. At December 31, 2021 the Revolving Credit Facility was undrawn and
remains available.

Interest Expense

In 2021 interest expense of $28,515 (2020 – $29,844) was comprised of interest expense related to stated interest
of $25,308 (2020 – $24,299), the amortization of issuance costs of $1,458 (2020 – $5,545) and the release of
unamortized issuance costs of $1,749 (2020 – nil). At December 31, 2021 the company recognized accrued interest
expense of $8,611 (December 31, 2020 – nil) within the consolidated balance sheets.

Total Equity

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, 2021 included 30,000,000 (December 31, 2020 – 30,000,000) multiple voting shares
and 111,235,352 (December 31, 2020 – 119,470,571) 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

FAIRFAX INDIA HOLDINGS CORPORATION

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, 2021 there were no
preference shares outstanding.

Common Stock

The number of shares outstanding was as follows:

Subordinate voting shares – January 1

Issuances of shares
Purchases for cancellation

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

Common shares effectively outstanding – December 31

Issuance of Shares

2021

2020

119,470,571
546,263
(8,781,482)

122,631,481
–
(3,160,910)

111,235,352
30,000,000

119,470,571
30,000,000

141,235,352

149,470,571

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

The company has the ability to purchase for cancellation subordinate voting shares at prevailing market prices
under the terms of its normal course issuer bid and in accordance with the rules and policies of the TSX. During
2021, under the terms of its normal course issuer bid, the company purchased for cancellation 1,734,503
subordinate voting shares (2020 – 3,160,910) for a net cost of $21,869 (2020 – $28,905), of which $3,619 was
charged to retained earnings (2020 – $4,366 was recorded as a benefit to retained earnings).

On August 11, 2021 the company completed a substantial issuer bid pursuant to which it purchased for cancellation
7,046,979 subordinate voting shares at a price of $14.90 per share, for aggregate consideration of $105,000, of
which $30,857 was charged to retained earnings. Fairfax did not tender any shares to the substantial issuer bid.

In connection with the normal course issuer bid, the company also entered into an automatic share purchase plan
with its designated broker to allow for the purchase of subordinate voting shares during times when the company
normally would not be active in the market. Such purchases are determined by the broker in its sole discretion
based on the parameters established by the company prior to commencement of the applicable trading black-out
period.

Subsequent to December 31, 2021

Subsequent to December 31, 2021, under the terms of the normal course issuer bid, the company purchased
1,897,532 subordinate voting shares for cancellation for a net cost of $24,010, of which 1,397,532 subordinate
voting shares were purchased under an automatic share purchase plan for a net cost of $18,000.

Dividends

The company did not pay any dividends on its outstanding multiple and subordinate voting shares during 2021
and 2020.

Non-controlling interests

In 2019 the company formed Anchorage as a wholly-owned subsidiary of FIH Mauritius, intended to provide
investment related services to support the company in investing in companies, businesses and opportunities in the
airport and infrastructure sectors in India. On September 16, 2021 the company transferred 43.6% out of its 54.0%
equity interest in BIAL such that it is held through Anchorage and subsequently sold 11.5% (on a fully-diluted

basis) of its interest in Anchorage to OMERS for gross proceeds of $129,221 (9.5 billion Indian rupees). Upon
closing of the transaction, the company’s effective ownership interest in BIAL decreased to approximately 49.0%
on a fully-diluted basis, while its actual ownership remained unchanged.

The company shall use commercially reasonable efforts to list Anchorage by way of an IPO in India, subject to
regulatory approvals and market conditions on or before September 2025. If the valuation of Anchorage upon
closing of the IPO is below approximately $1.2 billion (91.6 billion Indian rupees), then OMERS’ ownership in
Anchorage will increase to a maximum of 15.0% and the company’s ownership in Anchorage will decrease to a
minimum of 85.0% (effective ownership interest in BIAL will decrease to a minimum of 47.5%). If Anchorage does
not list by way of an IPO in India by September 2025, then OMERS’ ownership in Anchorage will remain at 11.5%.

9. Net Earnings (Loss) per Share

Net earnings (loss) per common share is calculated as follows using the weighted average common shares
outstanding:

Net earnings (loss) attributable to shareholders of Fairfax India – basic and

diluted

Weighted average common shares outstanding – basic
Contingently issuable subordinate voting shares
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

2021

2020

494,514

(41,476)

146,379,346
7,105,693
–

151,001,909
–
546,263

153,485,039

151,548,172

$
$

3.38
3.22

$
$

(0.27)
(0.27)

(1) On March 5, 2021, 546,263 subordinate voting shares were issued to Fairfax to settle the performance fee payable at

December 31, 2020 for the second calculation period.

At December 31, 2021 there were an estimated 7,105,693 subordinate voting shares contingently issuable to
Fairfax for the performance fee accrual for the third calculation period (December 31, 2020 – 546,263 subordinate
voting shares for the second calculation period). The performance fee for the third calculation period is assessed
quarterly and relates to the three-year period from January 1, 2021 to December 31, 2023. Under the terms of the
Investment Advisory Agreement (defined in note 12), if a performance fee is payable for the period ending on
December 31, 2023, the performance fee will be payable in cash, or at Fairfax’s option, in subordinate voting
shares. The number of subordinate voting shares issued will be calculated based on the VWAP. Refer to note 12 for
further details on performance fee.

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

2021

2020

20,762
(88)

1,820
192

20,674

2,012

18,356

484

39,030

2,496

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.

FAIRFAX INDIA HOLDINGS CORPORATION

At December 31, 2021 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, FIH Private and Anchorage. The
company recorded deferred income taxes of $18,356 in 2021 attributable to unrealized gains on the company’s
investment in equity shares acquired or spun out subsequent to April 1, 2017, primarily Fairchem Organics, IIFL
Wealth, IIFL Securities, CSB Bank, Saurashtra, and 5paisa, partially offset by a reversal of prior period deferred
income taxes recognized on the company’s investment in BIAL and Other Public Indian Investments. On the same
basis, the company recorded deferred income taxes of $484 in 2020 primarily attributable to unrealized gains on
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 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 2021 and 2020 are summarized in the following table:

Earnings (loss) before income taxes
Provision for income taxes

Net earnings (loss)

2021

2020

Canada Mauritius

Total

Canada Mauritius

Total

(38,599)
–

(38,599)

572,129
533,530
39,030(1) 39,030
494,500
533,099

(43,731)
–

(43,731)

4,751
2,496(2)
2,255

(38,980)
2,496

(41,476)

(1)

(2)

Includes potential capital gains tax in India of $18,356 and Indian withholding taxes of $20,604, including capital
gains taxes paid on the sale of an investment in Other Public Indian Investments, on the transfer of BIAL shares to
Anchorage, and on the partial sale of Fairchem Organics.

Includes potential capital gains tax in India of $484 and Indian withholding taxes of $1,554, including withholding
taxes on dividends from Other Public Indian Investments and capital gains taxes paid on the sale of an investment
in Other Public Indian Investments.

The decrease in loss before income taxes in Canada during 2021 compared to 2020 principally related to decreased
net foreign exchange losses on borrowings, partially offset by increased performance fees. The increase in earnings
before income taxes in Mauritius during 2021 compared to 2020 primarily reflected increased net gains on
investments and increased dividend income, partially offset by an increase in performance and investment and
advisory fees.

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 (recovery) 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

2021
26.5%
141,385
(125,465)
(88)
22,416
783
(1)
39,030

2020
26.5%
(10,330)
3,198
192
6,333
3,080
23
2,496

The tax rate differential on income earned outside of Canada of $125,465 in 2021 principally reflected the impact
of net investment income taxed in India and Mauritius at lower rates. The tax rate differential on income earned
outside of Canada of $3,198 in 2020 principally reflected the impact of net investment losses taxed in India at a
lower rate, partially offset by earnings taxed in India and Mauritius at lower rates.

The change in unrecorded tax benefit of losses and temporary differences of $22,416 in 2021 principally reflected
changes in unrecorded deferred tax assets related to temporary timing differences on performance and professional
fees of $22,393 and on debt and equity issuance costs of $2,669, net operating loss carryforward in Canada of
$1,924 and the impact of foreign exchange of $1,779, partially offset by the potential impact of the application of
capital loss benefit in India on future dispositions of investments in equity shares of $5,779 and the utilization of
foreign accrual property losses of $570 with respect to the company’s wholly-owned subsidiaries 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 $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 and the
impact of foreign exchange of $2,829, partially offset by temporary timing differences on performance and
professional fees of $11,724 and 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. At December 31, 2021
deferred tax assets of $97,945 in Canada and $2,519 in India (December 31, 2020 – $71,268 in Canada and $8,410
in India) were not recorded as it was considered not probable that those losses could be utilized by the company.

Foreign exchange effect of $783 in 2021 (2020 – $3,080) 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.

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

2021
2,803
(20,674)
18,964
(37)
1,056

2020
(822)
(2,012)
5,568
69
2,803

Management reviews the recoverability of potential deferred tax assets on an ongoing basis and adjusts, as
necessary, to reflect their anticipated realization. The deferred income tax liability of $80,648 at December 31, 2021
(December 31, 2020 – $63,477) 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, 2021 deferred tax
assets not recorded by the company of $100,464 (December 31, 2020 – $79,678) were primarily comprised of
foreign accrual property losses of $39,247 (December 31, 2020 – $39,519), net operating loss carryforwards of
$34,756 (December 31, 2020 – $32,341), temporary timing differences on performance and professional fees of
$22,267 (December 31, 2020 – $19) and potential impact of the application of capital loss benefit in India on future
dispositions of investments in equity shares of $2,519 (December 31, 2020 – $8,410). The net operating loss
carryforwards and foreign accrual property losses expire between 2037 and 2041, and between 2036 and 2041,
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 $1,505,760 at
December 31, 2021 (December 31, 2020 – $1,214,285).

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, 2021 compared to those identified at December 31, 2020, except as described below.

COVID-19

Given the ongoing and evolving situation resulting from COVID-19, including subsequent variants, it is difficult to
predict how significant the impact of the pandemic, 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, including new information which may emerge
concerning the severity of COVID-19 and additional actions which may be taken to contain COVID-19. In particular,
the potential resurgence of COVID-19 cases and its new variants, and consequently the extension or reintroduction
of containment measures may contribute to further uncertainty and delay the recovery of economic activity. Such
further developments could have a material adverse effect on the company’s business, financial condition, results
of operations and cash flows.

FAIRFAX INDIA HOLDINGS CORPORATION

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 equity when measured in Indian rupees, the company’s functional currency. The company’s net earnings and
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, 2021 compared to December 31,
2020.

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:

December 31, 2021

December 31, 2020

Cash and
cash

equivalents Borrowings

Payable to
related
parties

Accrued
interest
expense

Net
exposure

Cash and
cash

equivalents Borrowings

Payable to
related
parties

Net
exposure

U.S. dollars

23,272

(496,785)

(94,977)

(8,611)

(577,101)

35,369(1)

(547,228)

(14,404)

(526,263)

All other currencies

2,639

–

(25)

–

2,614

777

–

(24)

753

Total

25,911

(496,785)

(95,002)

(8,611)

(574,487)

36,146

(547,228)

(14,428)

(525,510)

(1)

At December 31, 2020 cash and cash equivalents included restricted cash of $16,315 primarily 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 increased at December 31, 2021 compared to
December 31, 2020 primarily due to an increase in payable to related parties as a result of increased performance
and investment and advisory fees payable, a decrease in cash and cash equivalents denominated in U.S. dollars,
and accrued interest expense at December 31, 2021 related to the Unsecured Senior Notes, partially offset by a net
repayment of borrowings.

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, 2021

December 31, 2020

Net foreign
currency
exposure

Hypothetical $
change effect
on pre-tax
earnings

Hypothetical $
change effect
on net
earnings(1)

Net foreign
currency
exposure

Hypothetical $
change effect
on pre-tax
earnings

Hypothetical $
change effect
on net
earnings(1)

Change in Indian rupee

exchange rate

10.0% appreciation

5.0% appreciation

No change

5.0% depreciation

10.0% depreciation

(517,038)

(545,763)

(574,487)

(603,211)

(631,936)

57,449

28,724

–

(28,724)

(57,449)

42,225

21,112

(472,959)

(499,234)

–

(525,510)

(21,112)

(551,786)

(42,225)

(578,061)

52,551

26,276

–

(26,276)

(52,551)

38,625

19,313

–

(19,313)

(38,625)

(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 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, 2021 compared to
December 31, 2020.

The company’s exposure to interest rate risk increased in 2021 primarily reflecting partial reinvestment of net
proceeds received from the sales of Privi Speciality, an 11.5% non-controlling interest in Anchorage and Other
Public Indian Investments into Government of India bonds. 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. This analysis was performed on each individual security, with the hypothetical effect on net earnings
(loss).

December 31, 2021

December 31, 2020

Fair value of
fixed income
portfolio

Hypothetical $
change effect
on net
earnings(1)

Hypothetical %
change in
fair value

Fair value of
fixed income
portfolio

Hypothetical $
change effect
on net
earnings(1)

Hypothetical %
change in
fair value

Change in interest rates

200 basis point increase

100 basis point increase

No change

100 basis point decrease

200 basis point decrease

209,670

212,051

214,468

216,946

219,462

(3,526)

(1,776)

–

1,822

3,671

(2.2)%

(1.1)%

–

1.2%

2.3%

35,373

35,621

35,873

36,130

36,392

(367)

(185)

–

189

381

(1.4)%

(0.7)%

–

0.7%

1.4%

(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 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, 2021 compared to December 31, 2020 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 increased to $3,325,713 at December 31, 2021 from $2,991,775 at
December 31, 2020 primarily as a result of unrealized gains on the Public Indian Investments (principally IIFL
Finance, Fairchem Organics, IIFL Wealth, IIFL Securities and CSB Bank), unrealized gains on the Private Indian
Investments (principally Sanmar, NSE and Saurashtra), a new investment in Maxop and an additional investment in
5paisa, partially offset by the net sales of the company’s investments in Privi Speciality, Other Public Indian

FAIRFAX INDIA HOLDINGS CORPORATION

Investments and Fairchem Organics, and unrealized loss on the company’s private investment in NCML common
shares. 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, 2021 to be an increase or decrease in net earnings (loss) of
$196,820 (December 31, 2020 – increase or decrease in net earnings (loss) of $158,570). 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, short term investments 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,
2021 compared to December 31, 2020.

Cash and Cash Equivalents and Short Term Investments

At December 31, 2021 the company’s cash and cash equivalents of $30,376 (December 31, 2020 – $22,057) 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.

At December 31, 2021 the company’s short term investments in Government of India bonds of $6,151
(December 31, 2020 – nil) were rated Baa3 by Moody’s and BBB- by S&P.

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.

At December 31, 2021 the company’s debt instruments were all considered to be subject to credit risk with a fair
value of $214,468 (December 31, 2020 – $35,873), representing 6.0% (December 31, 2020 – 1.2%) 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)
Other Indian Fixed Income

Total bonds

December 31, 2021

December 31, 2020

Fair value

Rating

Fair value

Rating

192,385 Baa3/BBB-
Not rated

22,083

20,989 Baa3/BBB-
Not rated
14,884

214,468

35,873

(1) Rated Baa3 by Moody’s and BBB- by S&P at December 31, 2021 and 2020.

The company’s exposure to credit risk from its investments in fixed income securities increased at December 31,
2021 compared to December 31, 2020 primarily reflecting the partial reinvestment of net proceeds received from
the sales of Privi Speciality, an 11.5% non-controlling interest in Anchorage and Other Public Indian Investments
into Government of India bonds. 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, 2021 compared to December 31, 2020.

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, 2021 compared to December 31, 2020.

The undeployed cash and investments at December 31, 2021 provide adequate liquidity to meet the company’s
known significant commitments over the next twelve months, which are principally comprised of an additional
investment in Maxop, purchases of subordinate voting shares for cancellation under its automatic share purchase
plan, interest expense, investment and advisory fees, and general and administration expenses.

At December 31, 2021 the company’s payment obligations which are due beyond one year primarily relate to the
recurring nature of expenses described above and a principal repayment on the Unsecured Senior Notes due in
February 2028, which bear interest at a fixed rate of 5.0% per annum, payable in semi-annual installments. In
addition, under the Investment Advisory Agreement (defined in note 12), if a performance fee is payable for the
period ending on December 31, 2023, the performance fee will be payable in cash, or at Fairfax’s option, in
subordinate voting shares.

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, 2021 the company held common shares of Public Indian
Investments which carry no selling restrictions with a fair value of $966,281, Government of India bonds with a fair
value of $192,385 and short term investments of $6,151. 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. To further augment its liquidity, the company can draw upon its Revolving Credit Facility.
Accordingly, the company has adequate working capital to support its operations.

Subsequent to December 31, 2021

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, 2021 and 2020
the company’s total cash and investments composition by the issuer’s country of domicile was primarily India, and
at December 31, 2021 represented 99.3% (December 31, 2020 – 98.8%) of the total cash and investments portfolio.

The company’s holdings of Public and Private Indian Investments (see note 5) at December 31, 2021 and 2020 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, 2021 December 31, 2020

1,372,170
1,062,627
690,304
153,083
69,612

3,347,796

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

3,006,659

During 2021 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 increased primarily due to unrealized gains on the company’s investments in IIFL Finance,
IIFL Wealth, IIFL Securities, NSE and CSB Bank, partially offset by the sale of the company’s investments in
financial services companies within Other Public Indian Investments and unrealized foreign currency translation

FAIRFAX INDIA HOLDINGS CORPORATION

losses. The company’s concentration risk in the commercial and industrial sector increased primarily due to
unrealized gains on the company’s investments in Fairchem Organics and Sanmar and the company’s investment in
Maxop, partially offset by net sales of the company’s investments in Privi Speciality and Fairchem Organics, and
unrealized losses on the company’s investment in NCML common shares. The company’s concentration risk in the
ports and shipping sector increased primarily due to unrealized gains on the company’s investments in Saurashtra
and Seven Islands. The company’s concentration risk in the utilities sector increased primarily due to unrealized
gains on the company’s investments in common stocks of utility companies within Other Public Indian Investments.

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 increased at December 31,
2021 from December 31, 2020 principally as a result of unrealized gains on investments, sales of subsidiary shares
to non-controlling interests, and dividend and interest income, partially offset by purchases of subordinate voting
shares for cancellation, net repayments of borrowings, unrealized foreign currency translation losses, investment
and advisory fees, and income tax and interest payments. 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, 2021 the company determined that it was in compliance with the Investment
Concentration Restriction.

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, common
shareholders’ equity and non-controlling interests) increased from $2,994,162 at December 31, 2020 to $3,399,219
at December 31, 2021 principally reflecting an increase in common shareholders’ equity and non-controlling
interests, partially offset by net repayments of borrowings, as described below.

Common shareholders’ equity increased from $2,446,934 at December 31, 2020 to $2,774,792 at December 31,
2021 primarily reflecting net earnings attributable to shareholders of Fairfax India of $494,514 and the issuance of
subordinate voting shares to Fairfax to settle the December 31, 2020 performance fee payable of $5,217, partially
offset by purchases of subordinate voting shares for cancellation of $126,869 and unrealized foreign currency
translation losses attributable to shareholders of Fairfax India of $44,842 in 2021.

Non-controlling interests of $127,642 at December 31, 2021 (December 31, 2020 – nil) primarily reflected the sale
of an 11.5% minority interest in Anchorage to OMERS, resulting in the recognition of non-controlling interests of
$129,076, partially offset by unrealized foreign currency translation losses attributable to non-controlling interests
of $1,420 in 2021.

On February 26, 2021 the company completed an offering of $500,000 principal amount of 5.0% unsecured senior
notes due February 26, 2028. On March 1, 2021 the company used the net proceeds from the offering and cash to
repay $500,000 of its Secured Term Loan. On May 11, 2021 the company used a portion of the proceeds received
from the sale of Privi Speciality common shares to repay the remaining $50,000 term loan principal.

On December 17, 2021 the company entered into a $175,000 unsecured revolving credit facility with a syndicate
led by a Canadian bank. The Revolving Credit Facility has a three-year term with an option to extend for an
additional year. At December 31, 2021 the Revolving Credit Facility was undrawn and remains available.

12. Related Party Transactions

Payable to Related Parties

The company’s payable to related parties (excluding amounts related to Unsecured Senior Notes discussed below)
was comprised as follows:

Performance fee
Investment and advisory fees
Other

December 31, 2021 December 31, 2020

84,716
9,942
344

95,002

5,217
9,187
24

14,428

Investment Advisory Agreement

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 (before factoring in the impact of the performance fee for the current
calculation period) 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

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, 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.

Third Calculation Period

The period from January 1, 2021 to December 31, 2023 (the “third calculation period”) will be the next consecutive
three-year period after December 31, 2020 for which a performance fee, if applicable, will be accrued. Under the
Investment Advisory Agreement, if a performance fee is payable for the period ending on December 31, 2023, the
performance fee will be payable in cash, or at Fairfax’s option, in subordinate voting shares. If Fairfax elects to
have the performance fee paid in subordinate voting shares, such election must be made no later than December 15,
2023. The number of subordinate voting shares to be issued will be calculated based on the VWAP.

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 2021 the
investment and advisory fees recorded in the consolidated statements of earnings (loss) was $40,775
(2020 – $33,922).

Unsecured Senior Notes

Fairfax, through its subsidiaries, purchased $58,400 of the Unsecured Senior Notes under the same terms as the
other participants. Amounts due to related parties related to the Unsecured Senior Notes were comprised as
follows:

Principal portion, presented within borrowings on the consolidated

balance sheet

Interest portion, presented within accrued interest expense on the

consolidated balance sheet

December 31, 2021 December 31, 2020

58,400

1,006

59,406

–

Interest expense recorded in the consolidated statements of earnings (loss) in 2021 included $2,466 related to
amounts due to related parties (2020 – nil). Refer to note 7 for further details on the Unsecured Senior Notes.

FAIRFAX INDIA HOLDINGS CORPORATION

Fairfax’s Voting Rights and Equity Interest

At December 31, 2021 Fairfax, through its subsidiaries, owned 30,000,000 multiple voting shares (December 31,
2020 – 30,000,000) and owned and/or exercised control or direction over 23,030,285 subordinate voting shares
(December 31, 2020 – 12,841,578) of Fairfax India. At December 31, 2021 Fairfax’s aggregate ownership, control
and/or direction of the subordinate voting shares and multiple voting shares represented a 94.5% voting interest
and a 37.5% equity interest (December 31, 2020 – 93.4% and 28.7%) in Fairfax India. Fairfax did not tender any
shares to the substantial issuer bid discussed in note 8.

Subsequent to December 31, 2021

On February 15, 2022 Fairfax acquired an aggregate of 5,416,000 subordinate voting shares from existing
shareholders. As of March 4, 2022, after giving effect to the above transaction and the company’s purchases of
subordinate voting shares for cancellation subsequent to December 31, 2021, Fairfax and its affiliates hold 95.0%
and 41.9% voting and equity interests respectively, in the company through ownership of all of the 30,000,000
multiple voting shares and ownership, control and/or direction over 28,446,285 subordinate voting shares.

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 Chief
Operating Officer, the Vice President and Vice President, Corporate Affairs is borne by Fairfax.

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

2021

2020

150
26
50

226

150
70
50

270

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(1)

2021

2020

2,283
921
1,124
1,198

2,071
977
646
539

5,526

4,233

(1) Other expenses primarily included brokerage fees on sales of investments and stamp duties related to the transfer of
43.6% out of the company’s 54.0% equity interest in BIAL such that it is held through Anchorage, and subsequent
sale of 11.5% equity interest in Anchorage in 2021.

15. Supplementary Cash Flow Information

Cash and cash equivalents of $30,376 (December 31, 2020 – $22,057) included in the consolidated balance sheets
and statements of cash flows were comprised of cash and term deposits with banks.

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

2021

2020

(262,973)
(53,780)

(91,733)
(94,178)

(316,753)

(185,911)

79,557
334,920

189,003
42,190

414,477

231,193

4,226
27,137
(14,670)

16,693

8,718
16,043
(25,047)

(286)

(18,964)

(5,568)

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quarterly Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock Prices and Share Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compliance with Corporate Governance Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forward-Looking Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Glossary of Non-GAAP and Other Financial Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accounting and Disclosure Matters

Risk Management

71
71
71
71
72
73
73
74
74
75
75
76
77
78
88
101
103
104
105
105
107
109
109
109
109
110
110
110
110
110
110
117
117
119
119
120
121

Management’s Discussion and Analysis of Financial Condition and Results of Operations
(as of March 4, 2022)

(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
information can also be accessed from the company’s website
www.sedar.com. Additional
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) Management analyzes and assesses the financial position of the consolidated company in various ways.
Certain of the measures included in this Annual Report, which have been used consistently and disclosed
regularly in the company’s Annual Reports and interim financial reporting, do not have a prescribed
meaning under IFRS as issued by the IASB and may not be comparable to similar measures presented by
other companies. Please refer to the Glossary of Non-GAAP and Other Financial Measures located at the
end of this MD&A for details.

Business Developments

Overview

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. 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, 2021 was $19.65 compared to $16.37 at December 31, 2020 representing
an increase in 2021 of 20.0%, primarily reflecting net earnings attributable to shareholders of Fairfax India of
$494,514 (primarily related to net change in unrealized gains and net realized gains on investments and dividend
income, partially offset by performance fees, investment and advisory fees, provision for income taxes, and interest
expense), partially offset by unrealized foreign currency translation losses attributable to shareholders of Fairfax
India of $44,842. In addition, the company purchased for cancellation 8,781,482 subordinate voting shares during
2021 for a net cost of $126,869 ($14.45 per subordinate voting share) through its normal course issuer bid and
substantial issuer bid which resulted in a further increase in book value per share.

The following narrative sets out the company’s key business developments in 2021 and 2020.

Capital Transactions

On February 26, 2021 the company completed an offering of $500,000 principal amount of 5.0% unsecured senior
notes due February 26, 2028 (“Unsecured Senior Notes”) at par. Net proceeds after commissions and expenses of
$3,650 were $496,350. During 2021 the company used the net proceeds of the Unsecured Senior Notes, a portion
of proceeds from the sale of Privi Speciality common shares and cash to repay its $550,000 secured term loan
(“Secured Term Loan”).

FAIRFAX INDIA HOLDINGS CORPORATION

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 (Related Party
Transactions) to the consolidated financial statements for the year ended December 31, 2021 for additional
discussion relating to the settlement of the performance fee payable.

On August 11, 2021 the company completed a substantial issuer bid, pursuant to which the company purchased
for cancellation 7,046,979 subordinate voting shares at a price of $14.90 per share, for aggregate consideration of
$105,000, of which $30,857 was charged to retained earnings. The company also continued to purchase shares
under its normal course issuer bid, and during 2021, the company purchased for cancellation 1,734,503 subordinate
voting shares (2020 – 3,160,910) for a net cost of $21,869 (2020 – $28,905), of which $3,619 was charged to
retained earnings (2020 – $4,366 was recorded as a benefit to retained earnings).

On September 16, 2021 the company transferred 43.6% out of its 54.0% equity interest in BIAL such that it is held
through Anchorage Infrastructure Investments Holdings Limited (“Anchorage”) and subsequently sold 11.5% (on a
fully-diluted basis) of its interest in Anchorage to Ontario Municipal Employees Retirement System (“OMERS”) for
gross proceeds of $129,221 (9.5 billion Indian rupees).

For further details refer to notes 7 (Borrowings) and 8 (Total Equity) to the consolidated financial statements for
the year ended December 31, 2021.

Indian Investments

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, 2021. Full descriptions of the Indian Investments committed to, acquired and sold in 2021
and 2020 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. 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

Global recovery from the COVID-19 pandemic continued during 2021, although its momentum has been impacted
by the introduction of new variants and certain prolonged disruptions. According to the World Economic Outlook
( January 2022) published by the International Monetary Fund (“IMF”), global GDP growth is estimated at 5.9% in
2021 (2020 – contraction of 3.1%) and is expected to moderate to 4.4% in 2022, as a result of mobility restrictions,
border closures, and health impacts from the spread of variants. The emergence of new variants could prolong the
pandemic and induce renewed disruption.

India’s Response to the COVID-19 Pandemic

On March 25, 2020 the Indian government ordered a nationwide lockdown in an effort to contain the spread of
COVID-19. Restrictions were lifted in phases beginning May 31, 2020 for districts that were deemed safe and it
remains in place for certain containment zones until March 31, 2022 (and may extend further) (“India’s lockdown”).
The emergence of COVID-19 variants has also resulted in the introduction of partial lockdowns by local and state
governments in high concentration areas, hindering the pace of economic recovery. International travel remains
limited to select countries with which India has established air bubble arrangements. Vaccination remains a key
focus for India’s path to recovery. In February 2022, India reported over 1.7 billion doses administered and over
50% of the population fully vaccinated with two doses, with third doses available for priority groups.

In response to the COVID-19 pandemic, the Indian government introduced several monetary stimulus packages
aimed to ease the economic and social hardships for businesses and individuals and support 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.

The RBI has adopted an accommodative stance on monetary policy since 2020, and continuously emphasized that
it would maintain this policy stance as long as necessary to revive growth on a sustained basis and the impact of
COVID-19 on the economy is mitigated. As part of the RBI’s measures to ease liquidity for both lenders and

borrowers, interest rates were reduced and remained unchanged since May 2020, and relief was granted in the
form of loan moratoriums and restructuring options over specified periods throughout 2020 to 2021 to help
mitigate the economic hardships of the lockdown.

Indian Economy

In its January 2022 report the IMF estimated India’s GDP to expand by 9.0% in the country’s 2021-22 fiscal year
(April 2021 to March 2022), reflecting a rebound from the 7.3% contraction in the prior fiscal year, driven primarily
by private consumption, private investment, and government spending. The IMF also estimates growth of 9.0% for
the 2022-23 fiscal year, highlighting expected improvements to credit growth, and a resulting increase in investment
and consumption. Certain risks to growth continue to be carefully monitored and include the impact of new
COVID-19 variants, prolonged supply chain disruptions, and inflation, including elevated energy prices.

Oil prices increased significantly during 2021 as economic recovery resulted in global demand rising faster than
supply. As a result, oil prices have reached their highest since 2018. As one of the world’s largest net importers of
oil, the Indian economy is sensitive to movements in oil prices. The sharp increase has contributed to heightened
inflation rates and created pressure on the value of the Indian rupee in global markets.

Union Budget for Fiscal Year 2022-23

On February 1, 2022 Finance Minister Nirmala Sitharaman presented the 2022 Union Budget of India, which
focused on boosting growth and all-inclusive development, setting the stage for a progressive post-pandemic
environment. The budget proposed increased government spending on infrastructure with the intention to improve
ease of doing business and to encourage private investment. The budget also emphasized technological
development to drive the nation forward, including plans to introduce a digital currency using blockchain
technology and investing in digital innovation across agriculture, education and health sectors. Corporate and
personal income tax rates, which were significantly cut over the past two years, remain unchanged in an effort to
mitigate the financial hardships of the pandemic.

Indian Market Indices and Foreign Exchange Rate

The S&P BSE Sensex 30 exceeded pre-pandemic levels and grew 19.6% during 2021. The performance was primarily
driven by domestic retail investors with positive growth across all index sectors, and reflected the revival and
growth of corporate earnings, combined with investors’ increased appetite for risk as COVID-19 disruptions were
eased. Despite strong overall index performance, Indian equity markets continue to be impacted by heightened
volatility driven by global trends, movement in the Indian rupee, and foreign institutional investors. The Indian
rupee depreciated against the U.S. dollar during the year, against a backdrop of increased oil prices and rising
inflation.

Consistent with Indian equity markets, the fair values of the company’s Public Indian Investments demonstrated
significant growth compared to the prior year. The company 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 2021, the development of unobservable inputs included added uncertainty related to the global
economic disruption caused by the ongoing COVID-19 pandemic. Further discussion on the degree and severity of
business disruption specific to each Indian Investment are discussed further in the Indian Investments section
under the respective heading of each Indian Investment of this MD&A.

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, a subsidiary of FIH
Mauritius based in India.

FAIRFAX INDIA HOLDINGS CORPORATION

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 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, 2021 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
Commodities Management Services Limited (formerly National Collateral Management Services Limited), IIFL
Finance 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 management teams 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.

FAIRFAX INDIA HOLDINGS CORPORATION

Summary of Indian Investments

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

Dates Acquired

Ownership
%

Cost

Fair
value

Net
change

Ownership
%

Cost

Fair
value

Net
change

December 31, 2021

December 31, 2020

Public Indian Investments:

Common stocks:

IIFL Finance

IIFL Wealth

IIFL Securities

CSB Bank

December 2015 and February 2017

May 2019

October 2018, March and June 2019

Fairchem Organics

August 2020, March and April 2021

5paisa

Privi Speciality

October 2017, August 2019 and May 2021

February and August 2016

March and August 2018,

22.3%

13.6%

27.9%

49.7%

52.8%

26.1%

<1.0%

–

318,136

191,443

230,111

91,310

103,217

169,447

227,649

38,668

11,907

58,202

42,021

155,020

112,999

29,676

41,232

11,556

22.4%

13.8%

26.5%

49.7%

48.8%

26.6%

48.8%

–

131,478

191,443

166,702

(24,741)

91,310

55,603

(35,707)

169,447

214,341

34,895

23,535

54,566

27,788

44,894

19,671

4,253

39,489

138,413

98,924

Other

March to June 2020, August 2020

<1.0%

43,458

69,612

26,154

<1.0%

107,734

147,604

39,870

567,362 1,145,056

577,694

657,853

936,495

278,642

Private Indian Investments:

Common stocks:

BIAL (1)

Sanmar

March and July 2017, May 2018

April 2016 and December 2019

Seven Islands

March, September and October 2019

NCML

Saurashtra

Maxop

NSE

IH Fund

August 2015 and August 2017

February 2017

November 2021

July 2016

January and November 2019, December 2020

Other Indian Fixed Income

October 2019 and November 2021

Total Indian Investments

54.0%

42.9%

48.5%

89.5%

51.0%

1.0%

–

652,982 1,372,170

719,188

199,039

421,153

222,114

83,846

105,926

22,080

174,318

69,578

(104,740)

30,018

29,520

47,157

29,844

17,139

324

26,783

111,216

84,433

21,563

21,365

23,613

22,083

2,050

718

54.0%

42.9%

48.5%

89.5%

51.0%

–

1.0%

–

652,982 1,396,117

743,135

199,039

338,621

139,582

83,846

103,543

19,697

174,318

86,216

(88,102)

30,018

32,812

2,794

–

26,783

24,098

13,970

–

72,617

25,354

14,884

–

45,834

1,256

914

1,239,434 2,202,740

963,306

1,205,054 2,070,164

865,110

1,806,796 3,347,796 1,541,000

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

(1)

On September 16, 2021 the company sold an 11.5% equity interest in Anchorage to OMERS, resulting in the recognition of non-controlling interest in the consolidated balance
sheets. As part of the transaction, the company transferred 43.6% of its 54.0% equity interest in BIAL such that it is held through Anchorage. Upon closing of the transaction,
the company’s effective ownership interest in BIAL decreased to approximately 49.0% on a fully-diluted basis, while its actual ownership remains unchanged.

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 2021 is as
follows:

Balance
as of
January 1

Purchases

Sales

Amortization

2021

Net
realized
gains
(losses) on
investments

Net
change in
unrealized
gains
(losses) on
investments

Net
unrealized
foreign
currency
translation
gains
(losses)

Balance
as of
December 31

Public Indian Investments:

Common stocks:

IIFL Finance

IIFL Wealth

IIFL Securities

CSB Bank

Privi Speciality(1)

Fairchem Organics(2)(3)

5paisa(4)

Other

Derivatives – Fairchem Organics forward

purchase derivative(2)

131,478

166,702

55,603

214,341

138,413

54,566

27,788

147,604

–

(164,812)

22,919

(45,560)

6,141

–

(122,013)

(4,800)

Total Public Indian Investments

936,495

29,060

(337,185)

Private Indian Investments:

Common stocks:

BIAL

Sanmar

Seven Islands

NCML

Saurashtra

Maxop

NSE

IH Fund

Other Indian Fixed Income

1,396,117

338,621

103,543

86,216

32,812

–

29,520

72,617

25,354

14,884

–

7,395

–

(2,535)

Total Private Indian Investments

2,070,164

36,915

(2,535)

Total Indian Investments

3,006,659

65,975

(339,720)

–

189,963

66,625

48,836

17,060

132,303

(105,026)

33,558

(2,587)

58,944

91,035

10,477

(3,305)

(3,216)

(1,222)

(3,752)

(799)

(1,498)

(587)

(12,785)

(2,138)

318,136

230,111

103,217

227,649

155,020

41,232

69,612

4,847

–

(47)

–

227,065

306,185

(16,564)

1,145,056

–

(130)

(23,817)

1,372,170

88,806

4,173

(15,253)

14,988

–

40,062

1,218

–

(6,274)

(1,790)

(1,385)

(643)

324

421,153

105,926

69,578

47,157

29,844

(1,463)

111,216

(424)

(250)

23,613

22,083

133,864

(35,722)

2,202,740

227,065

440,049

(52,286)

3,347,796

(1)

(2)

(3)

(4)

FAIRFAX INDIA HOLDINGS CORPORATION

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

Balance
as of
January 1

Purchases

Fairchem
Reorganization

Sales

2020

Net
change in
unrealized
gains
(losses) on
investments

Net
unrealized
foreign
currency
translation
gains
(losses)

Net
realized
gains on
investments

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

Total Public Indian Investments

Private Indian Investments:

Common stocks:

BIAL

Sanmar

Seven Islands

NCML

Saurashtra

NSE

IH Fund

Other Indian Fixed Income

166,014

191,476

48,796

229,262

127,413

–

18,176

95,892

877,029

1,429,854

412,930

88,800

120,734

31,204

57,210

15,146

14,286

–

84,672

–

9,506

–

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

(30,262)

(20,058)

7,823

(9,484)

48,732

18,808

9,889

5,896

(4,274)

(4,716)

(1,016)

(5,437)

131,478

166,702

55,603

214,341

(2,837)

138,413

863

(277)

(725)

54,566

27,788

147,604

936,495

31,344

(18,419)

–

(277)

–

(277)

–

(669)

(33,068)

1,396,117

(63,844)

(10,465)

16,558

(31,277)

2,297

16,493

1,249

915

(1,815)

(3,241)

(689)

(1,086)

(270)

(317)

338,621

103,543

86,216

32,812

72,617

25,354

14,884

(58,278)

(50,951)

2,070,164

(42,190)

3,782

(26,934)

(69,370)

3,006,659

(1)

Public Indian Investments

Investment in IIFL Finance Limited

Business Overview

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

Transaction Description

cost basis in IIFL Holdings based on the estimated fair values of the spun off subsidiaries at the date of the
transactions. Upon completion of the spin off of IIFL Wealth and IIFL Securities in May 2019, IIFL Holdings Limited
was renamed IIFL Finance Limited and continued to trade on the BSE and NSE of India.

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 was decreased to 22.4% at March 30, 2020.

At December 31, 2021 the company held 84,641,445 common shares of IIFL Finance representing a 22.3% equity
interest (December 31, 2020 – 22.4%). At December 31, 2021 the company, had appointed one of the nine IIFL
Finance board members.

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 deliver credit to underserved
segments and under penetrated geographical areas in India. At December 31, 2021 IIFL Finance had 3,119 branches
across India, making it one of the largest retail focused NBFCs.

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.

At December 31, 2021 IIFL Finance managed assets worth approximately $6 billion (approximately 468 billion
Indian rupees) comprised of home loans (35%), gold loans (31%), business loans (15%), microfinance (11%),
construction and real estate finance (6%), and capital market finance (2%).

During 2021 IIFL Finance sold a significant portion of the construction and real estate loan asset portfolio to an
Alternate Investment Fund (“AIF”) and also made a partial investment in the AIF which had a target size of
approximately $0.5 billion (36 billion Indian rupees). The transaction will allow IIFL Finance to enhance its focus
on retail lending.

COVID-19 Impact

As discussed in the Business Developments section under the heading Operating Environment of this MD&A, the
RBI introduced several measures throughout the pandemic to assist borrowers facing financial difficulty as a result
of COVID-19. IIFL Finance has been sufficiently capitalized to withstand the liquidity pressures arising from such
measures. IIFL Finance continued to source long term funding during the pandemic primarily through term loans
and refinancing from banks, private and public issuances of non-convertible debentures, as well as incremental
funding through the assignment and securitization of loans.

Disbursements and collection efficiencies experienced temporary declines from regular levels during peak periods
of the pandemic, and gradually regained momentum in line with the recovery in economic activity.

Valuation and Consolidated Financial Statement Impact

At December 31, 2021 the fair value of the company’s investment in IIFL Finance was $318,136 (December 31,
2020 – $131,478) with the changes in fair value in 2021 and 2020 presented in the tables at the outset of the Indian
Investments section of this MD&A. IIFL Finance’s share price increased by 146.2% from 113.50 Indian rupees per
share at December 31, 2020 to 279.40 Indian rupees per share at December 31, 2021.

In 2021 the consolidated statements of earnings (loss) included dividend income earned from the company’s
investment in IIFL Finance of $3,484 (2020 – $2,628).

FAIRFAX INDIA HOLDINGS CORPORATION

Subsequent to December 31, 2021

On February 11, 2022 the company received dividend income from the company’s investment in IIFL Finance of
approximately $3.9 million (296 million Indian rupees).

IIFL Finance’s Summarized Financial Information

IIFL Finance’s fiscal year ends on March 31. Summarized below are IIFL Finance’s balance sheets at September 30,
2021 and March 31, 2021.

Balance Sheets
(unaudited – US$ thousands)

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

September 30, 2021(1) March 31, 2021(1)(2)
5,345,415
216,729
4,778,921
45,547
737,676

5,443,826
224,932
4,833,598
35,188
799,972

(1) The net assets of IIFL Finance were translated at September 30, 2021 at $1 U.S. dollar = 74.23 Indian rupees and at
March 31, 2021 at $1 U.S. dollar = 73.11 Indian rupees. The exchange rates used were the spot rates prevailing on
those respective dates.

(2) Certain prior period comparative figures have been reclassified to be consistent with current period’s presentation.

Financial assets increased primarily reflecting increased cash balances from improved liquidity, and additional
proceeds raised from term loan financing. Non-financial assets increased primarily due to additions to property,
plant and equipment and investment properties. Financial liabilities increased primarily due to additional financing
from term loans and subordinated debentures, partially offset by net repayments on debt securities. Non-financial
liabilities decreased primarily due to decreases in current tax liabilities and advances from customers.

Summarized below are IIFL Finance’s statements of earnings for the six months ended September 30, 2021 and
2020.

Statements of Earnings
(unaudited – US$ thousands)

Revenue
Earnings before income taxes
Net earnings

Six months ended
September 30, 2021(1)
439,020
97,685
75,409

Six months ended
September 30, 2020(1)(2)
374,176
44,732
32,553

(1) Amounts for the six months ended September 30, 2021 and 2020 were translated into US$ using the average
exchange rates of $1 U.S. dollar = 73.92 Indian rupees and $1 U.S. dollar = 75.11 Indian rupees prevailing during
those periods.

(2) Certain prior period comparative figures have been reclassified to be consistent with current period’s presentation.

IIFL Finance’s revenue increased primarily reflecting an increase in interest and other income arising from higher
assets under management, particularly across higher yielding segments such as gold loans and microfinance.
Earnings before income taxes and net earnings increased primarily due to the increased interest income as noted
above, combined with overall lower cost of borrowing, in addition to decreased loan loss provisioning compared
to the six months ended September 30, 2020 as loan loss provisions were significantly affected by the initial impact
of the COVID-19 pandemic in the prior period. The increase in earnings were partially offset by increased employee
benefit and other administrative expenses attributed to the expansion of IIFL Finance’s digital and physical
footprint.

Investment in IIFL Wealth Management Limited

Business Overview

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.

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

Transaction Description

At December 31, 2021 the company held 12,091,635 common shares of IIFL Wealth representing a 13.6% equity
interest (December 31, 2020 – 13.8%). At December 31, 2021 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 27 locations across
5 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 affluent segment. In 2021 it was estimated that there were over 275,000 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. IIFL Wealth aims 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, 2021 the wealth management business had assets under management (“AUM”) of approximately
$28 billion (2,070 billion Indian rupees) and the asset management business had AUM of approximately $7 billion
(557 billion Indian rupees). The total AUM included annual recurring revenue assets of approximately $19 billion
(1,389 billion Indian rupees).

COVID-19 Impact

During 2021 IIFL Wealth continued to operate with minimal business disruption arising from the COVID-19
pandemic.

Valuation and Consolidated Financial Statement Impact

At December 31, 2021 the fair value of the company’s investment in IIFL Wealth was $230,111 (December 31,
2020 – $166,702) with the changes in fair value in 2021 and 2020 presented in the tables at the outset of the Indian
Investments section of this MD&A. IIFL Wealth’s share price increased by 40.4% from 1,007.35 Indian rupees per
share at December 31, 2020 to 1,414.65 Indian rupees per share at December 31, 2021.

In 2021 the consolidated statements of earnings (loss) included dividend income earned from the company’s
investment in IIFL Wealth of $13,904 (2020 – $8,145).

Investment in IIFL Securities Limited

Business Overview

FAIRFAX INDIA HOLDINGS CORPORATION

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.

Additional information can be accessed from IIFL Securities’ website www.iiflsecurities.com.

Transaction Description

At December 31, 2021 the company held 84,641,445 common shares of IIFL Securities representing a 27.9% equity
interest (December 31, 2020 – 26.5%). At December 31, 2021 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,
as a key player in both retail and institutional segments. IIFL Securities’ 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 include mobile applications such as IIFL Markets which is widely used and highly rated, as well as the
Advisor Anytime Anywhere mobile office platform for the growing sub-broker segment. IIFL Securities has also
entered into partnerships with various banks and investment platforms to deliver innovative investment products
and increase access, providing a one-stop shop for financial products to its customers.

IIFL Securities’ institutional broking franchise business services over 750 domestic and foreign clients, and provides
comprehensive research coverage in over 250 stocks in more than 20 sectors, which account for over 80% of India’s
market capitalization. The investment banking business closed over 40 transactions in 2021 across the capital
markets and advisory business segments, despite volatile market conditions, and has a number of transactions in
the pipeline.

On February 15, 2021 IIFL Securities closed a buy-back offer of equity shares from its shareholders which
commenced on December 30, 2020. The buy-back resulted in the purchase and cancellation of 17,000,394 common
shares of IIFL Securities for approximately $12 million (867 million Indian rupees) (excluding taxes). The company
did not tender any shares and as a result, its equity interest in IIFL Securities increased from 26.5% at December 31,
2020 to 27.9% on completion of the buy-back offer.

On February 24, 2021 IIFL Securities was announced as the successful bidder for the acquisition of approximately
1.1 million electronic securities holding accounts (demat accounts) in a formal bidding process organized by stock
exchanges and depositories. The acquisition provided IIFL Securities with access to an increased customer base
and significantly increased its assets under management. At December 31, 2021 IIFL Securities had assets under
management across its retail segment (comprised of depository participant services and financial product
distribution) of approximately $18 billion (1,323 billion Indian rupees) (December 31, 2020 – approximately
$5 billion (387 billion Indian rupees)).

COVID-19 Impact

During 2021 IIFL Securities continued to operate with minimal business disruption arising from the COVID-19
pandemic.

Valuation and Consolidated Financial Statement Impact

At December 31, 2021 the fair value of the company’s investment in IIFL Securities was $103,217 (December 31,
2020 – $55,603) with the changes in fair value in 2021 and 2020 presented in the tables at the outset of the Indian
Investments section of this MD&A. IIFL Securities’ share price increased by 88.9% to 90.65 Indian rupees per share
at December 31, 2021 from 48.00 Indian rupees per share at December 31, 2020.

In 2021 the consolidated statements of earnings (loss) included dividend income earned from the company’s
investment in IIFL Securities of $1,161 (2020 – $2,336).

Subsequent to December 31, 2021

On February 14, 2022 Fairfax India received dividend income from the company’s investment in IIFL Securities of
approximately $3.4 million (254 million Indian rupees).

Investment in CSB Bank Limited

Business Overview

Additional information can be accessed from CSB Bank’s website www.csb.co.in.

Transaction Description

At December 31, 2021 the company held 86,262,976 common shares of CSB Bank representing a 49.7% equity
interest (December 31, 2020 – 49.7%).

At December 31, 2021 the company had appointed two of the eight 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 Bank opened 101
branches during its fiscal year ended March 31, 2021.

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.

In the BT-KPMG Best Banks Survey 2020-21, CSB Bank has emerged as the best bank under the small banks
category.

COVID-19 Impact

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

FAIRFAX INDIA HOLDINGS CORPORATION

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 sustainable net interest income growth. While the RBI introduced several measures
throughout the pandemic to assist borrowers facing financial difficulty on account of COVID-19, CSB Bank has
been sufficiently capitalized to withstand the liquidity pressures arising from such measures.

Valuation and Consolidated Financial Statement Impact

At December 31, 2021 the fair value of the company’s investment in CSB Bank was $227,649 (December 31,
2020 – $214,341) with the changes in fair value for 2021 and 2020 presented in the tables at the outset of the
Indian Investments section of this MD&A. CSB Bank’s share price increased by 7.6% from 218.20 Indian rupees per
share at December 31, 2020 to 234.80 Indian rupees per share at December 31, 2021. For further details, refer to
note 5 (Indian Investments) to the consolidated financial statements for the year ended December 31, 2021.

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, 2021
and March 31, 2021.

Balance Sheets
(unaudited – US$ thousands)

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

September 30, 2021(1) March 31, 2021(1)
3,054,738
144,852
2,829,138
69,944
300,508

3,015,951
170,203
2,785,827
76,800
323,527

(1) The net assets of CSB Bank were translated at September 30, 2021 at $1 U.S. dollar = 74.23 Indian rupees and at
March 31, 2021 at $1 U.S. dollar = 73.11 Indian rupees. The exchange rates used were the spot rates prevailing on
those respective dates.

Financial assets decreased primarily due to the weakening of the Indian rupee relative to the U.S. dollar during the
six months ended September 30, 2021. Non-financial assets increased primarily as a result of increased security
deposits to facilitate foreign currency transactions, and increased advances for employee benefit plans. Financial
liabilities decreased as a result of decreased savings and term deposits from customers. Non-financial liabilities
increased primarily as a result of increased deferred tax liabilities.

Summarized below are CSB Bank’s statements of earnings for the six months ended September 30, 2021 and 2020.

Statements of Earnings
(unaudited – US$ thousands)

Revenue
Earnings before income taxes
Net earnings

Six months ended
September 30, 2021(1)
97,514
39,202
29,357

Six months ended
September 30, 2020(1)(2)
79,306
44,101
33,024

(2) Certain prior period comparative figures have been reclassified to be consistent with current period’s presentation.

Revenue increased primarily as a result of an increase in net interest income due to higher yielding advances and
reduced cost of deposits. Earnings before income taxes and net earnings decreased primarily reflecting increased
loss provisions on loans and advances and increased cost-income ratio excluding provision for expected credit

losses (45.5% for the six months ended September 30, 2021 compared to 38.6% for the six months ended
September 30, 2020), partially offset by increased revenue as discussed above.

Investment in Fairchem Speciality Limited / Privi Speciality Chemicals Limited

Fairchem Speciality Limited

Business Overview

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”), previously a wholly-owned
subsidiary of Fairchem located in Mumbai was a supplier of aroma chemicals to the fragrance industry.

Transaction Description

Privi Speciality Chemicals Limited

Transaction Description

On April 29, 2021 the company completed the sale of its 48.8% equity interest in Privi Speciality for cash
consideration of $164,812 (approximately 12.2 billion Indian rupees). At December 31, 2021 the company held
3,250 common shares representing less than 1% equity interest in Privi Speciality (December 31, 2020 – 19,046,078
common shares representing a 48.8% equity interest).

At December 31, 2021 the company did not have any representation on the board of Privi Speciality.

Subsequent to December 31, 2021

On February 16, 2022 the company sold its remaining equity interest in Privi Speciality for cash consideration of
$83 (approximately 6.3 million Indian rupees).

Valuation and Consolidated Financial Statement Impact

At December 31, 2021 the fair value of the company’s investment in Privi Speciality was $79 (December 31,
2020 – $138,413) with the changes in fair value in 2021 and 2020 presented in the tables at the outset of the Indian
Investments section of this MD&A. At December 31, 2021 the fair value of the company’s investment in the
non-convertible debentures was $7,453 with the changes in fair value in 2021 presented within Other Indian Fixed
Income in the table at the outset of the Indian Investments section of this MD&A.

In 2021 the consolidated statements of earnings (loss) included dividend income earned from the company’s
investment in Privi Speciality of nil (2020 – $385).

FAIRFAX INDIA HOLDINGS CORPORATION

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 March 2, 2021 the company completed the settlement of 290 common shares of Fairchem Organics tendered
for $2 and the remaining cash deposit of $264 was returned.

At December 31, 2021 the company held 6,879,739 common shares of Fairchem Organics representing a 52.8%
equity interest (December 31, 2020 – 6,348,692 common shares representing a 48.8% equity interest). At
December 31, 2021 the company had appointed one of the six Fairchem Organics board members.

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.

Valuation and Consolidated Financial Statement Impact

At December 31, 2021 the fair value of the company’s investment in Fairchem Organics was $155,020 (December 31,
2020 – $54,566) with the changes in fair value in 2021 and 2020 presented in the tables at the outset of the Indian
Investments section of this MD&A. Fairchem Organics’ share price increased by 166.7% from 628.00 Indian rupees
per share at December 31, 2020 to 1,675.00 Indian rupees per share at December 31, 2021.

In 2021 the consolidated statements of earnings (loss) included dividend income earned from the company’s
investment in Fairchem Organics of $413 (2020 – nil).

Investment in 5paisa Capital Limited

Business Overview

Additional information can be accessed from 5paisa’s website www.5paisa.com.

Transaction Description

At December 31, 2021 the company held 7,670,130 common shares of 5paisa representing a 26.1% equity interest
(December 31, 2020 – 6,771,314 common shares representing a 26.6% equity interest). At December 31, 2021 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 digital investment and lending solutions, 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 2020 5paisa, through its wholly-owned subsidiary, 5paisa P2P Limited, launched a digital peer-to-peer lending
platform registered with the RBI which connects verified creditworthy lenders and individual borrowers in India.

At December 31, 2021 the 5paisa mobile application has reached over 10.4 million downloads and its active
customer base exceeded 1.3 million. Customer acquisitions have continued to grow rapidly at reduced unit
customer acquisition costs, with over 50% of customer acquisitions during 2021 attributed to do-it-yourself
customers which were onboarded to the digital platform without intervention or assistance.

The proceeds raised from the preferential issuance of equity shares discussed above will allow 5paisa to accelerate
its investment in customer centric technology, customer acquisition and sustain the pace of growth.

COVID-19 Impact

During 2021 5paisa continued to operate with minimal business disruption arising from the COVID-19 pandemic.

FAIRFAX INDIA HOLDINGS CORPORATION

Valuation and Consolidated Financial Statement Impact

At December 31, 2021 the fair value of the company’s investment in 5paisa was $41,232 (December 31,
2020 – $27,788) with the changes in fair value in 2021 and 2020 presented in the tables at the outset of the Indian
Investments section of this MD&A. 5paisa’s share price increased by 34.8% from 299.85 Indian rupees per share at
December 31, 2020 to 404.25 Indian rupees per share at December 31, 2021. For further details, refer to note 5
(Indian Investments) to the consolidated financial statements for the year ended December 31, 2021.

Investment in Other Public Indian Investments

In 2021 the company sold investments in Other Public Indian Investments for total net proceeds of $122,013,
resulting in realized gains of $58,944.

In 2021 the consolidated statements of earnings (loss) included dividend income earned from the investment in
Other Public Indian Investments of $4,237 (2020 – $1,712).

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
2021 the development of unobservable inputs included added uncertainty related to the global economic disruption
caused by the ongoing COVID-19 pandemic. The company has assessed the assumptions related to the COVID-19
pandemic which were included in the estimates of the amount and timing of future cash flows prepared by
investees’ management, and the uncertainty in those assumptions has been considered in the determination of risk
premiums incorporated in the company’s valuations of Private Indian Investments. 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

During 2017 and 2018 Fairfax India had invested aggregate cash consideration of $652,982 (approximately
42.7 billion Indian rupees) for a 54.0% equity interest in BIAL.

On September 16, 2021 the company transferred 43.6% out of its 54.0% equity interest in BIAL such that it is held
through Anchorage and subsequently sold 11.5% (on a fully-diluted basis) of its interest in Anchorage to OMERS
for gross proceeds of $129,221 (9.5 billion Indian rupees), implying an equity valuation for 100% of BIAL of
approximately $2.6 billion at exchange rates on that date (approximately 189.7 billion Indian rupees). Upon
closing of the transaction, the company’s effective ownership interest in BIAL decreased to approximately 49.0%
on a fully-diluted basis, while its actual ownership remained unchanged. Refer to note 8 (Total Equity, under the
heading Non-controlling interests) to the consolidated financial statements for the year ended December 31, 2021
for further discussion on Anchorage.

At December 31, 2021 the company had appointed five of the fourteen 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 Airport Staff
in India and Central Asia’ during 2021 by Skytrax, a UK-based consultancy who conducts a global airport customer
satisfaction survey.

The airport handled approximately 16.1 million passengers in 2021 representing an increase in overall traffic of
18.9% compared to 2020. The airport also processed an all-time high tonnage of 406,688 metric tons of cargo in
2021 representing an increase of 28.6% compared to 2020 and an increase of 7.2% compared to 2019.

On October 16, 2020 BIAL exercised its right to extend the concession agreement for an additional 30 years until
the year 2068.

FAIRFAX INDIA HOLDINGS CORPORATION

Plans to expand the capacity of the airport are underway and include the following projects:

• 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 the third quarter of
calendar 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 primarily due to incremental interest and
pre-operational expenses.

• 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 impact
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.

• 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 three-star and four-star hotel rooms (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 and a five-star hotel on approximately 5 acres each.
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. BIAL has made the following progress on its real estate development
plan:

• In July 2021 BACL signed an agreement with SATS Ltd. to establish a large state-of-the-art central kitchen,

expected to produce 170,000 ready-to-eat meals per day and be operational in 2023.

• A 3D technology printing is under construction and expected to be completed in April 2022.

• In October 2021 a letter of intent for a business hotel of 775 rooms under the brands of Vivanta and

Ginger (a part of the Taj Group) was agreed with developers from Dubai.

• DP Architects, Singapore has now been appointed as the concept design architect and Portland Design,

UK appointed as the retail space planner for the retail, dining and entertainment village.

COVID-19 Impact

BIAL has sufficient liquidity in place to continue its operations.

Valuation and Consolidated Financial Statement Impact

BIAL’s Summarized Financial Information

BIAL’s fiscal year ends on March 31. Summarized below are BIAL’s balance sheets at September 30, 2021 and
March 31, 2021.

Balance Sheets
(unaudited – US$ thousands)

Current assets
Non-current assets
Current liabilities
Non-current liabilities
Shareholders’ equity

September 30, 2021(1) March 31, 2021(1)
134,106
1,342,511
148,262
973,729
354,626

161,719
1,394,483
136,041
1,110,168
309,993

(1) The net assets of BIAL were translated at September 30, 2021 at $1 U.S. dollar = 74.23 Indian rupees and at March 31,
2021 at $1 U.S. dollar = 73.11 Indian rupees. The exchange rates used were the spot rates prevailing on those
respective dates.

Current assets increased primarily due to increased borrowings. Non-current assets increased principally as a
result of ongoing capital expenditures for BIAL’s expansion projects. Current liabilities decreased primarily as a
result of a refinancing of term loans which reduced the current maturities of borrowings, and a decrease in other
financial liabilities. Non-current liabilities increased primarily as a result of additional borrowings for BIAL’s
expansion projects.

Summarized below are BIAL’s statements of earnings (loss) for the six months ended September 30, 2021 and
2020.

Statements of Earnings (Loss)
(unaudited – US$ thousands)

Revenue
Loss before income taxes
Net loss

Six months ended
September 30, 2021(1)
43,509
(36,758)
(39,356)

Six months ended
September 30, 2020(1)
22,885
(47,288)
(46,889)

The increase in revenue is primarily a result of an increase in passenger traffic, spend per passenger and cargo
volumes, as described in the Key Business Drivers, Events and Risks. Loss before income taxes and net loss
decreased primarily as a result of the increase in the revenue as noted above, partially offset by an increase in
depreciation and interest expense recognized as a result of the capitalization of expansion projects and increased
borrowings.

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

FAIRFAX INDIA HOLDINGS CORPORATION

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 is listed on both the BSE and NSE of India.

Chemplast’s Specialty Chemicals (“Speciality Chemicals”) business is primarily engaged in the custom
manufacturing and marketing of starting materials and intermediates for pharmaceutical, agro-chemical, and fine
chemical sectors.

Chemplast Cuddalore Vinyls Limited (“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.

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

During 2016 and 2019 Fairfax India invested aggregate cash consideration of $199,039 (approximately 14.2 billion
Indian rupees) for a 42.9% equity interest in Sanmar.

At December 31, 2021 the company had appointed one of the four 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. In recent years, large global specialty PVC producers have shut
down their production facilities in South Korea, China, U.S., United Kingdom and Germany, further tightening
global supply.

Sanmar continues to draw strength from the strong brand equity of the 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.

In September 2020, the Egyptian government introduced import duties for PVC at 2.0% and reduced import duties
on Ethylene Dichloride (“EDC”), a key raw material used in the production of PVC, from 2.0% to nil. In
December 2021, the Egyptian government announced a five-year anti-dumping duty of 9.0% on imports of PVC
from the United States. As a result, Sanmar Egypt is expected to benefit through increased sales and margins.

During the second quarter of 2021, Sanmar Egypt received approval from its lenders to restructure $785.4 million
of its term loans, which eased liquidity pressures that worsened during the COVID-19 pandemic.

On August 24, 2021 Chemplast completed an IPO, issuing 24,029,574 common shares to the public for proceeds of
approximately $175 million (13.0 billion Indian rupees). The IPO also included a secondary offering, whereby
Sanmar sold 47,134,935 common shares of Chemplast to the public for proceeds of approximately $344 million
(25.5 billion Indian rupees). As a result of the IPO, Sanmar’s ownership interest in Chemplast was diluted from

100.0% to 55.0%. The proceeds from the IPO were used to repay Chemplast’s debt and Sanmar’s holding company
debt. Following the listing of Chemplast shares the share price increased by 2.1% from the IPO price of 541.00
Indian rupees per share to 552.50 Indian rupees per share at December 31, 2021.

COVID-19 Impact

The COVID-19 pandemic resulted in a temporary closure of Sanmar’s plants in India due to India’s lockdown in
2020. The Sanmar plant in Egypt was temporarily closed on March 18, 2020 and re-opened on April 3, 2020. The
operations at the suspension PVC plant in India were constrained until May 15, 2020. The remaining plants in
India, including the specialty PVC plant, gradually re-opened in May 2020. Specialty Chemicals has not been
significantly impacted by the COVID-19 pandemic. Since the second quarter of Sanmar’s fiscal year 2021, demand
increased for PVC, chloromethanes and caustic soda, and global PVC supply tightened resulting in a swift recovery
of suspension and specialty PVC prices, contributing to improved sales volume and margins.

Valuation and Consolidated Financial Statement Impact

At December 31, 2021 the company’s internal valuation model indicated that the fair value of the company’s
investment in Sanmar was $421,153 (December 31, 2020 – $338,621) with the changes in fair value in 2021 and
2020 presented in the tables at the outset of the Indian Investments section of this MD&A. For further details, refer
to note 5 (Indian Investments) to the consolidated financial statements for the year ended December 31, 2021.

Sanmar’s Summarized Financial Information

Sanmar’s fiscal year ends on March 31. Summarized below are Sanmar’s balance sheets at September 30, 2021 and
March 31, 2021.

Balance Sheets
(unaudited – US$ thousands)

Current assets
Non-current assets
Current liabilities
Non-current liabilities
Shareholders’ equity (deficit)

September 30, 2021(1) March 31, 2021(1)
258,408
1,758,517
655,819
1,522,588
(161,482)

417,608
1,748,947
758,546
1,010,178
397,831

(1) The net assets of Sanmar were translated at September 30, 2021 at $1 U.S. dollar = 74.23 Indian rupees and at
March 31, 2021 at $1 U.S. dollar = 73.11 Indian rupees. The exchange rates used were the spot rates prevailing on
those respective dates.

Current assets increased primarily due to increased quantity and cost of inventories, cash and cash equivalents,
and other financial assets. Non-current assets in U.S. dollars decreased primarily due to the weakening of the
Indian rupee relative to the U.S. dollar during the six months ended September 30, 2021. Current liabilities increased
primarily due to increased tax provisions related to the sale of a minority interest in Chemplast and increased trade
payables as a result of higher inventory prices. Non-current liabilities decreased primarily as a result of reduced
borrowings due to repayment of term loans and the debt restructuring at Sanmar Egypt as described in the Key
Business Drivers, Events and Risks section.

Summarized below are Sanmar’s statements of earnings (loss) for the six months ended September 30, 2021 and
2020.

Statements of Earnings (Loss)
(unaudited – US$ thousands)

Revenue
Earnings (loss) before income taxes
Net earnings (loss)

Six months ended
September 30, 2021(1)
624,209
15,585
7,955

Six months ended
September 30, 2020(1)
307,481
(52,827)
(58,019)

FAIRFAX INDIA HOLDINGS CORPORATION

Revenue increased primarily due to increased demand for PVC and caustic soda leading to increased sales volume
and prices. Furthermore, increased demand in the pharmaceutical industry also resulted in increased sales volume
and prices for chloromethanes. Earnings before income taxes and net earnings for the six months ended
September 30, 2021 compared to loss before income taxes and net loss for the six months ended September 30,
2020 primarily reflecting increased revenue as noted above and lower interest costs due to reduced borrowings,
partially offset by increased power costs and other expenses due to sales volume increases.

Investment in Seven Islands Shipping Limited

Business Overview

Additional information can be accessed from Seven Islands’ website www.sishipping.com.

Transaction Description

During 2019 Fairfax India invested aggregate cash consideration of $83,846 (approximately 5.8 billion Indian
rupees) for a 48.5% equity interest in Seven Islands.

At December 31, 2021 the company had appointed one of the six 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 quickly deploy those vessels through charter contracts with India’s largest oil and gas
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, oil products and liquefied petroleum gas transport segments wherein India has one of the fastest
growing energy consumption rates, mitigating business deployment risk for oil and gas 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.

Global oil demand continued to recover in 2021 following the decline in the prior year. OPEC estimated that
demand would exceed pre-pandemic levels in 2022, led by growth in the United States, China and India.
Additionally, the global production cuts introduced in the prior year have contributed to a significant rise in oil
prices due to an imbalance in supply against the recovery in demand. The tanker market is expected to benefit as
oil trade trends are stabilized and lockdown measures are eased.

During 2021, Seven Islands acquired its first two gas carrier vessels, marking its venture into the gas seaborne
logistics business to tap into the growing demand for liquefied petroleum gas imports in India.

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 that new
vessels are acquired as the asset purchases are negotiated and settled in U.S. dollars.

COVID-19 Impact

Seven Islands continued to operate as transportation of goods is considered an essential service under India’s
lockdown guidelines. Seven Islands has reasonable safeguards against loss of business in the short term arising
from the imbalance in the oil markets since the majority of its revenue contracts are on time charter which range
between six months to three years.

Valuation and Consolidated Financial Statement Impact

At December 31, 2021 the company’s internal valuation model indicated that the fair value of the company’s
investment in Seven Islands was $105,926 (December 31, 2020 – $103,543) with the changes in fair value in 2021
and 2020 presented in the tables at the outset of the Indian Investments section of this MD&A. For further details,
refer to note 5 (Indian Investments) to the consolidated financial statements for the year ended December 31,
2021.

Investment in National Commodities Management Services Limited

Business Overview

National Commodities Management Services Limited (“NCML”) (formerly National Collateral Management Services
Limited), a private company located in Gurugram, India, is a leading integrated agriculture value chain solutions
company, and offers end-to-end solutions in grain procurement, storage and preservation, testing and certification,
collateral management, and commodity and weather intelligence. 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, alongside adjacent services such as testing and certification, commodity and weather
intelligence, and logistics services. NCML’s warehousing business is a market leader in India and comprised of over
1.9 million metric tons of storage capacity across approximately 700 leased, owned, and franchised 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 $0.3 billion (approximately
25 billion Indian rupees) and a market share of approximately 20%.

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 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. During 2017 to 2018, NCML was awarded with 30 year concession agreements to build a total of 16 silo
projects with combined capacity of 800,000 metric tons. In 2020, NCML and FCI, mutually agreed to terminate the
building of 3 silos due to unavailability of land with the specified requirements, bringing total capacity for all 13
silo projects to 650,000 metric tons.

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.

Additional information can be accessed from NCML’s website www.ncml.com.

Transaction Description

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

FAIRFAX INDIA HOLDINGS CORPORATION

At December 31, 2021 the company had appointed two of the five 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.

According to the Government of India’s most recent estimates, food grain production in India increased by
approximately 3.7% during the 2020-21 crop year ( July 2020 to June 2021), representing a market of approximately
309 million metric tons of food grains. NCML’s commodity management solutions business currently services
approximately 1.9 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.

Two of the silo projects successfully achieved commercial operations during 2021 and began to generate revenue.
The remaining silo projects are expected to be substantially completed throughout 2022 to 2023.

COVID-19 Impact

During 2021 NCML’s commodity management solutions and NBFC businesses continued to operate at reduced
capacities. The reduced capacities were primarily attributable to an overall decrease in volume of commodity
deposits and restrictions affecting inflows during year, combined with a conscious effort to reduce exposure across
its lending and collateral management businesses.

As lockdown restrictions relating to movement of goods and labour were eased, NCML observed gradual recovery
in demand across its business lines, however sales volume remained below pre-pandemic levels due to decreased
funding as a result of the tightened credit environment. To manage working capital, NCML has focused on risk
mitigation controls and protocols and primarily 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 parcels and
the scaling down of businesses with less favourable risk-reward characteristics.

Valuation and Consolidated Financial Statement Impact

NCML Common Shares

At December 31, 2021 the company’s internal valuation model indicated that the fair value of the company’s equity
investment in NCML was $69,578 (December 31, 2020 – $86,216) with the changes in fair value in 2021 and 2020
presented in the tables at the outset of the Indian Investments section of this MD&A. For further details, refer to
note 5 (Indian Investments) to the consolidated financial statements for the year ended December 31, 2021.

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, 2021 and
March 31, 2021.

Balance Sheets
(unaudited – US$ thousands)

Current assets
Non-current assets
Current liabilities
Non-current liabilities
Shareholders’ equity

December 31, 2021(1) March 31, 2021(1)
60,391
137,664
34,360
73,490
90,205

49,192
138,799
33,854
75,039
79,098

(1) The net assets of NCML were translated at December 31, 2021 at $1 U.S. dollar = 74.34 Indian rupees and at
March 31, 2021 at $1 U.S. dollar = 73.11 Indian rupees. The exchange rates used were the spot rates prevailing on
those respective dates.

Current assets decreased primarily reflecting decreased trade receivables in line with reduced business volumes
and decreased advances made by NCML’s NBFC due to the tighter credit environment in India. Non-current assets
increased principally due to continued construction of silo projects and additions to right of use assets. Current
liabilities in U.S. dollars decreased primarily due to the weakening of the Indian rupee relative to the U.S. dollar
during the nine months ended December 31, 2021, partially offset by increased interest payable on the NCML CCD.
Non-current liabilities increased primarily due to loan proceeds received in connection with silo project milestones
and increased right of use lease liabilities.

Summarized below are NCML’s statements of earnings (loss) for the nine months ended December 31, 2021 and
2020.

Statements of Earnings (Loss)
(unaudited – US$ thousands)

Revenue
Loss before income taxes
Net loss

Nine months ended
December 31, 2021(1)
26,301
(9,198)
(9,211)

Nine months ended
December 31, 2020(1)
52,207
(10,460)
(7,527)

(1) Amounts for the nine months ended December 31, 2021 and 2020 were translated into US$ using the average
exchange rates of $1 U.S. dollar = 74.26 Indian rupees and $1 U.S. dollar = 74.66 Indian rupees prevailing during
those periods.

Revenue decreased primarily reflecting reduced business volumes in the supply chain management business,
consistent with NCML management’s strategy to reduce financing exposure and focus on specific customer
segments in response to the tightened credit environment. The above was partially offset by incremental revenue
from recently operating silos as well as NCML’s new logistics services line of business. Loss before income taxes
and net loss for the nine months ended December 31, 2021 was impacted by decreased revenues as noted above
and accounting loss provisions recorded in the current period relating to insurance claim receivables which will be
recorded as gains in future periods if received. Loss before income taxes and net loss for the nine months ended
December 31, 2020 was impacted by losses incurred in connection with withdrawal from three silo projects,
partially offset by a recovery of income taxes.

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.

FAIRFAX INDIA HOLDINGS CORPORATION

Additional information can be accessed from Saurashtra’s website www.saurashtrafreight.com.

Transaction Description

During 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, 2021 the company had appointed one of the three Saurashtra board members.

Key Business Drivers, Events and Risks

Saurashtra measures the operating performance of its CFS business based on the utilization of its standard twenty-
foot (shipping container) equivalent units (“TEUs”) relative to total installed capacity, and total import and export
container traffic in the market. In 2021 Saurashtra handled 119,529 TEUs compared to annual installed capacity of
188,600 TEUs, implying a capacity utilization of approximately 63% (2020 – 97,155 TEUs compared to annual
installed capacity of 180,000, implying a capacity utilization of approximately 54%). At December 31, 2021
Saurashtra had the highest market share of imports at approximately 16% and second highest market share in
exports at approximately 12% at Mundra port in India. Saurashtra remains the largest CFS at that port in terms of
total throughput achieved with a 15% market share for the quarter ended December 31, 2021.

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.

During 2021 Saurashtra completed the construction of a new logistics park in Mundra, which increased the total
capacity of its CFS business and is expected to improve utilization. Saurashtra has also invested in additional
container units to expand Fairfreight Lines’ container carrier business, where profitability has benefited from high
ocean freight rates. Saurashtra is continuing to actively pursue additional volume and increase capacity through
offering comprehensive packages to shipping lines and evaluating expansion projects in its 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

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

Valuation and Consolidated Financial Statement Impact

At December 31, 2021 the company’s internal valuation model indicated that the fair value of the company’s
investment in Saurashtra was $47,157 (December 31, 2020 – $32,812) with the changes in fair value in 2021 and
2020 presented in the tables at the outset of the Indian Investments section of this MD&A. For further details, refer
to note 5 (Indian Investments) to the consolidated financial statements for the year ended December 31, 2021.

In 2021 the consolidated statements of earnings (loss) included dividend income earned from the company’s
investment in Saurashtra of $1,317 (2020 – nil).

Investment in Maxop Engineering Company Private Limited

Business Overview

Maxop Engineering Company Private Limited (“Maxop”), a private company located in New Delhi, India, is a
precision aluminum die casting and machining solution provider for customers in the automotive and industrial
sectors. Maxop operates from six manufacturing facilities located in India with total installed casting capacity of
approximately 20,000 metric tons, and caters to customers in Asia, North America and Europe.

Additional information can be accessed from Maxop’s website www.maxop.com.

Transaction Description

At December 31, 2021 the company had appointed one of the two Maxop board members. Maxop expects to have
a total of four board seats.

Key Business Drivers, Events and Risks

Maxop’s key business drivers relate to the growing demand for aluminum die-cast products, particularly within the
global automotive parts industry, as aluminum is lightweight and durable and provides a safe and effective
alternative to reduce vehicle weight in order to meet increasingly strict fuel economy standards. The global market
size for electric vehicles is also projected to reach $1,300 billion by 2028 from $280 billion in 2021, driving an
increase in demand for aluminum. Maxop has primarily focused on the passenger vehicle segment of the
automotive sector, and over half of its revenue is comprised of exports. In addition to the automotive parts die
casting segment, Maxop is also a supplier of fully machined precision components, and caters to general
engineering product segments with applications in air conditioning parts and food processing machines.

Maxop mitigates its exposure to volatility in input prices through its aluminum processing plant which transforms
scrap metal to aluminum ingots for its aluminum die casting and machinery supply segment.

COVID-19 Impact

Maxop has continued to operate and grow during the pandemic. Maxop continues to actively monitor its material
sourcing and consumption amid global supply chain issues (particularly surrounding semi-conductor chips), as
well as its liquidity requirements through prudent working capital management.

Valuation and Consolidated Financial Statement Impact

At December 31, 2021 the fair value of the company’s investment in Maxop was $29,844 with the changes in fair
value in 2021 related to unrealized foreign currency translation gains presented in the table at the outset of the
Indian Investments section of this MD&A. For further details, refer to note 5 (Indian Investments) to the
consolidated financial statements for the year ended December 31, 2021.

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 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, 2021 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 93% market share in the equity trading segment, a 100% market share in the equity
derivatives trading segment and a 70% and 95% market share in the foreign exchange futures and options markets,
respectively. In 2021 NSE of India is the world’s largest exchange in derivatives trading volumes for the third
straight year.

NSE will undertake to complete an IPO sometime in 2022 or 2023 depending on the outcome of the Securities
Appellate Tribunal (“SAT”) ruling, previously disclosed. NSE will also seek to file for an overseas listing subsequent

FAIRFAX INDIA HOLDINGS CORPORATION

to closing of the IPO. NSE has appointed Citibank, JM Financial, Kotak Mahindra and Morgan Stanley as lead
investment banks to manage the IPO.

COVID-19 Impact

NSE continued to operate as financial services are considered essential services under India’s lockdown guidelines.

Valuation and Consolidated Financial Statement Impact

At December 31, 2021 the company estimated the fair value of its investment in NSE was $111,216 (December 31,
2020 – $72,617) with the changes in fair value in 2021 and 2020 presented in the tables at the outset of the Indian
Investments section of this MD&A. For further details, refer to note 5 (Indian Investments) to the consolidated
financial statements for the year ended December 31, 2021.

In 2021 the consolidated statements of earnings (loss) included dividend income earned from the investment in
NSE of $1,685 (2020 – $743).

Investment in India Housing Fund

Business Overview

At December 31, 2021 IH Fund had invested approximately $203 million at period end exchange rates
(approximately 15 billion Indian rupees) in 11 real estate sector investments.

Transaction Description

During 2019 and 2020, Fairfax India had invested aggregate cash consideration of $24,399 (approximately
1.7 billion Indian rupees) in IH Fund.

At December 31, 2021 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 sector is a key growth driver of the country’s economy and is the second-highest employment
generator in India. The Indian real estate sector is expected to contribute approximately 13% to the country’s GDP
by 2025 and reach $1 trillion by 2030.

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.

Valuation and Consolidated Financial Statement Impact

At December 31, 2021 the company estimated the fair value of its investment in IH Fund was $23,613 (December 31,
2020 – $25,354) with the changes in fair value in 2021 and 2020 presented in the tables at the outset of the Indian
Investments section of this MD&A. For further details, refer to note 5 (Indian Investments) to the consolidated
financial statements for the year ended December 31, 2021.

In 2021 the consolidated statements of earnings (loss) included dividend income earned from the investment in IH
Fund of $1,267 (2020 – $500).

Investment in Jaynix Engineering Private Limited

100

Subsequent to December 31, 2021

Results of Operations

Fairfax India’s consolidated statements of earnings (loss) for the years ended December 31, 2021, 2020 and 2019
are shown in the following table:

2021

2020

2019

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)
Attributable to:
Shareholders of Fairfax India
Non-controlling interests

Net earnings (loss) per share
Net earnings (loss) per diluted share

5,500
27,468
227,193
438,935
(5,557)
693,539

40,775
85,193
5,526
28,515
160,009
533,530
39,030
494,500

494,514
(14)
494,500
3.38
3.22

$
$

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)

(41,476)
–
(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

516,338
–
516,338
3.38
3.30

$
$

(0.27) $
(0.27) $

Total income of $693,539 in 2021 compared to total loss from income of $12,972 in 2020 principally due to net
change in unrealized gains on investments (discussed below), increased net realized gains on investments primarily
arising from sales of the company’s investments in Privi Speciality ($132,303), Other Public Indian Investments
($58,944) and Fairchem Organics ($33,558), increased dividend income and decreased net foreign exchange losses,
partially offset by decreased interest income. In 2021, the net change in unrealized gains on investments of
$438,935 was principally comprised of unrealized gains on the company’s investments in IIFL Finance ($189,963),
Fairchem Organics ($96,381), Sanmar ($88,806), IIFL Wealth ($66,625), IIFL Securities ($48,836), NSE ($40,062),
CSB Bank ($17,060), Saurashtra ($14,988) and 5paisa ($10,477), partially offset by unrealized losses on the
company’s investments in NCML common shares ($15,253) and the reversal of prior period unrealized gains
arising from sales of the company’s investments in Privi Speciality ($105,082), Other Public Indian Investments
($30,297) and Fairchem Organics ($5,346). 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 ($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 ($48,732), Fairchem Organics ($18,808), Seven Islands
($16,558), NSE ($16,493), 5paisa ($9,889) and IIFL Securities ($7,823). Interest income of $5,500 in 2021 decreased
from $6,013 in 2020 principally as a result of decreased interest income from Indian corporate bonds held during
2020. Dividend income of $27,468 in 2021 principally related to dividends received from the company’s investments
in IIFL Wealth, Other Public Indian Investments, IIFL Finance, NSE, Saurashtra, IH Fund and IIFL Securities.
Dividend income of $16,449 in 2020 principally related to dividends received from the company’s investments in
IIFL Wealth, IIFL Finance, IIFL Securities, Other Public Indian Investments, NSE and IH Fund.

101

FAIRFAX INDIA HOLDINGS CORPORATION

Net gains (losses) on investments and net foreign exchange gains (losses) in 2021 and 2020 were comprised as
follows:

2021

2020

Net
realized
gains
(losses)

Net change in
unrealized
gains
(losses)

Net gains
(losses)

Net
realized
gains
(losses)

Net change in
unrealized
gains
(losses)

Net gains
(losses)

Net gains (losses) on investments:

Short term investments
Bonds
Common stocks
Derivatives

Net foreign exchange gains

(losses) on:
Cash and cash equivalents
Borrowings
Other

–
128
222,218(1)
4,847(1)

227,193

2,113
(36,032)(2)
1,515

(32,404)

(5)
(1,109)

(5)
(981)
440,049(1) 662,267
4,847

–

–
1,590
3,782(1)
–

–
1,231

–
2,821
(27,849)(1) (24,067)
–

–

438,935

666,128

5,372

(26,618)

(21,246)

–

26,847(2)

–

2,113
(9,185)
1,515

(514)
–
(1,153)

–

(514)
(12,521)(2) (12,521)
(1,153)

–

26,847

(5,557)

(1,667)

(12,521)

(14,188)

(1) 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 2021 and 2020.

(2)

Total expenses of $26,008 in 2020 increased to $160,009 in 2021 principally as a result of increased performance
and investment and advisory fees principally reflecting the increased fair value of Indian Investments, increased
general and administration expenses primarily due to increased brokerage fees and stamp duties on transactions
completed in 2021, partially offset by decreased interest expense.

At December 31, 2021 the company recorded a performance fee accrual of $84,716 related to the third calculation
period (December 31, 2020 – $5,217 performance fee payable related to the second calculation period). In 2021 a
performance fee of $85,193 was recorded in the consolidated statements of earnings (loss) (2020 – a net
performance fee recovery of $41,991, primarily representing the partial reversal of the performance fee accrual at
December 31, 2019). Refer to note 12 (Related Party Transactions) of the consolidated financial statements for the
year ended December 31, 2021 for additional discussion on the performance fee accrual at December 31, 2021.

The provision for income taxes of $39,030 in 2021 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, partially
offset by the change in unrecorded tax benefit of losses and temporary differences, and foreign exchange
fluctuations.

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.

The company reported net earnings attributable to shareholders of $494,514 (net earnings of $3.38 per basic share
and $3.22 per diluted share) in 2021 compared to a net loss attributable to shareholders of $41,476 (a net loss of
$0.27 per basic and diluted share) in 2020. The year-over-year increase in profitability primarily reflected the net
change in unrealized gains on investments in 2021 compared to net change in unrealized losses on investments in
2020, increased net realized gains on investments, increased dividend income and decreased foreign exchange

102

losses, partially offset by a performance fee recorded in 2021 compared to a net performance fee recovery in 2020,
and increased provision for income taxes and investment and advisory fees.

Consolidated Balance Sheet Summary

The assets and liabilities reflected on the company’s consolidated balance sheet at December 31, 2021 were
primarily impacted by the net change in unrealized gains on investments resulting in the accrual of performance
fees and provision for deferred income taxes, purchases and sales of investments, the sale of subsidiary shares to
non-controlling interests, purchases of subordinate voting shares for cancellation, net repayment of borrowings,
and unrealized foreign currency translation losses.

Total Assets

Total assets at December 31, 2021 of $3,584,346 (December 31, 2020 – $3,072,998) were principally comprised as
follows:

Total cash and investments increased from $3,066,020 at December 31, 2020 to $3,576,708 at December 31, 2021.
The company’s total cash and investments composition by the issuer’s country of domicile was as follows:

Cash and cash equivalents
Restricted cash
Short term investments
Bonds:

Government of India
Other Indian Fixed

Income

Common stocks:
IIFL Finance
IIFL Wealth
IIFL Securities
CSB Bank
Privi Speciality
Fairchem Organics
5paisa
Other
BIAL
Sanmar
Seven Islands
NCML
Saurashtra
Maxop
NSE
IH Fund

Total cash and investments

December 31, 2021
Canada Other
8,565
17,346
–
–
–
–

India
4,465
–
6,151

Total
30,376
–
6,151

December 31, 2020
Canada Other
3,521
16,577
–
16,048
–
–

India
1,959
267
–

192,385

22,083
214,468

318,136
230,111
103,217
227,649
79
155,020
41,232
69,612
1,372,170
421,153
105,926
69,578
47,157
29,844
111,216
23,613
3,325,713
3,550,797

–

–
–

–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
17,346

–

–
–

–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8,565

192,385

20,989

22,083
214,468

14,884
35,873

318,136
230,111
103,217
227,649
79
155,020
41,232
69,612
1,372,170
421,153
105,926
69,578
47,157
29,844
111,216
23,613
3,325,713
3,576,708

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
3,029,874

–

–
–

–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
32,625

–

–
–

–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3,521

Total
22,057
16,315
–

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
3,066,020

Cash and cash equivalents increased from $22,057 at December 31, 2020 to $30,376 at December 31, 2021
principally due to net proceeds received from the sale of subsidiary shares to non-controlling interests and net
sales of investments, and the release of the company’s debt service reserve account which was previously held to
fund term loan interest payments, partially offset by purchases of subordinate voting shares for cancellation and
net repayments of borrowings.

Restricted cash decreased to nil at December 31, 2021 from $16,315 at December 31, 2020 primarily due to the
release of the company’s debt service reserve account as discussed above.

Short term investments of $6,151 at December 31, 2021 (December 31, 2020 – nil) related to the reinvestment of
a portion of the net proceeds from the sale of Other Public Indian Investments into Government of India treasury
bills.

103

FAIRFAX INDIA HOLDINGS CORPORATION

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, short term investments, and Government of India bonds 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 $3,576,708 at December 31, 2021 (December 31, 2020 – $3,066,020) see note 6 (Cash
and Investments) of the consolidated financial statements for the year ended December 31, 2021.

Interest and dividends receivable increased from $1,911 at December 31, 2020 to $5,339 at December 31, 2021
primarily reflecting increased interest receivable from Other Indian Fixed Income securities and Government of
India bonds and increased dividends receivable from Other Public Indian Investments.

Income taxes refundable decreased to $1,056 at December 31, 2021 from $2,803 at December 31, 2020, primarily
due to the receipt of a corporate income tax refund during 2021.

Other assets decreased to $1,243 at December 31, 2021 from $2,264 at December 31, 2020, primarily due to the
release of prepaid interest expense of $2,027 related to borrowings during 2021, partially offset by unamortized
upfront costs related to the Revolving Credit Facility.

Total Liabilities and Equity

Total liabilities at December 31, 2021 of $681,912 (December 31, 2020 – $626,064) were principally comprised as
follows:

Accrued interest expense of $8,611 at December 31, 2021 (December 31, 2020 – nil) was principally comprised
of accrued interest expense for the Unsecured Senior Notes.

Payable to related parties increased from $14,428 at December 31, 2020 to $95,002 at December 31, 2021
principally as a result of a performance fee accrual of $84,716 (relating to the third calculation period ending on
December 31, 2023) to Fairfax, partially offset by the settlement of the performance fee payable at December 31,
2020 of $5,217 (relating to the second calculation period ending on December 31, 2020).

Deferred income taxes increased from $63,477 at December 31, 2020 to $80,648 at December 31, 2021 primarily
as a result of a provision for deferred income taxes primarily attributable to unrealized gains on Fairchem Organics,
IIFL Wealth, IIFL Securities, CSB Bank, Saurashtra, and 5paisa, partially offset by a reversal of prior period deferred
taxes realized on the company’s investment in BIAL and Other Public Indian Investments.

Borrowings decreased to $496,785 at December 31, 2021 from $547,228 at December 31, 2020. At December 31,
2021 borrowings comprised of the Unsecured Senior Notes net of unamortized issuance costs (December 31,
2020 – comprised of the Secured Term Loan net of unamortized issuance costs). Refer to note 7 (Borrowings) to
the consolidated financial statements for the year ended December 31, 2021.

Total equity at December 31, 2021 of $2,902,434 (December 31, 2020 – $2,446,934) was comprised of common
shareholders’ equity of $2,774,792 (December 31, 2020 – $2,446,934) and non-controlling interests of $127,642
(December 31, 2020 – nil). Non-controlling interests at December 31, 2021 primarily related to the sale of an 11.5%
minority interest (on a fully-diluted basis) in Anchorage during 2021. Refer to note 8 (Total Equity, under the
heading Non-controlling interests) to the consolidated financial statements for the year ended December 31, 2021.

Comparison of 2020 to 2019 – Total assets of $3,072,998 at December 31, 2020 (December 31, 2019 – $3,244,937)
and total liabilities of $626,064 at December 31, 2020 (December 31, 2019 – $667,086) were primarily impacted by
unrealized foreign currency translation losses and net unrealized losses on investments, which resulted in a net
recovery of previously accrued performance fees. In addition, during 2020 the company had purchases of
subordinate voting shares for cancellation, net sales of Government of India and Indian corporate bonds, and
additional investments in Other Public Indian Investments and IH Fund.

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, 2021 compared to those identified at December 31, 2020, other than as outlined in
note 11 (Financial Risk Management) to the consolidated financial statements for the year ended December 31,
2021.

104

Capital Resources and Management

On February 19, 2021 the company was assigned an issuer credit rating of BBB (low) by DBRS Morningstar.

Book Value per Share

Common shareholders’ equity at December 31, 2021 was $2,774,792 (December 31, 2020 – $2,446,934). The book
value per share at December 31, 2021 was $19.65 compared to $16.37 at December 31, 2020 representing an
increase in 2021 of 20.0%, primarily reflecting net earnings attributable to shareholders of Fairfax India of $494,514
(primarily related to net change in unrealized gains and net realized gains on investments and dividend income,
partially offset by performance fees, investment and advisory fees, provision for income taxes, and interest
expense), partially offset by unrealized foreign currency translation losses attributable to shareholders of Fairfax
India of $44,842. In addition, the company purchased for cancellation 8,781,482 subordinate voting shares during
2021 for a net cost of $126,869 ($14.45 per subordinate voting share) through its normal course issuer bid and
substantial issuer bid which resulted in a further increase in book value per share.

The table below presents the book value per share and book value per share before cumulative performance fees
for the period from the company’s IPO date of January 30, 2015 to December 31, 2021, and the annual growth rate
and the compound annual growth rate in book value per share and book value per share before cumulative
performance fees.

105

FAIRFAX INDIA HOLDINGS CORPORATION

January 30, 2015(1)
December 31, 2015
December 31, 2016
December 31, 2017
December 31, 2018
December 31, 2019
December 31, 2020
December 31, 2021
Compound annual growth in book value per

share(2)

Book value per
share
$10.00
$ 9.50
$10.25
$14.46
$13.86
$16.89
$16.37
$19.65

Annual growth
in book value
per share
–
(5.0)%
7.9%
41.1%
(4.1)%
21.9%
(3.1)%
20.0%

10.3%

Book value per
share before
cumulative
performance
fees
$10.00
$ 9.50
$10.25
$15.24
$14.59
$18.11
$17.29
$21.50

Annual growth
in book value
per share before
cumulative
performance
fees
–
(5.0)%
7.9%
48.7%
(4.3)%
24.1%
(4.5)%
24.3%

11.7%

(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 $19.65 at December 31, 2021 represented a compound annual growth rate

from the IPO price of $10.00 per share of 10.3% (a growth of 11.7% before cumulative performance fees).

The company has had strong performance during the period from the closing of its IPO in January 2015 to
December 31, 2021. As a result of that strong performance, the company’s book value per share of $19.65 at
December 31, 2021 represented a compound annual growth rate during that period of 10.3% (11.7% before
cumulative performance fees described in note 12 (Related Party Transactions) to the consolidated financial
statements for the year ended December 31, 2021) from the IPO price of $10.00 per share, outperforming the
compound annual growth rate of the S&P USD BSE Sensex Index of 7.6% during the same period.

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 – issuance of shares(3)
2021 – purchase of shares

Subsequent to

2021 – purchase of shares

Number of
subordinate
voting shares
–
76,678,879
(1,797,848)
42,553,500
(1,900)
7,663,685
(2,234,782)
(230,053)
(3,160,910)
546,263
(8,781,482)
111,235,352

Number of
multiple
voting shares(1)
1
29,999,999
–
–
–
–
–
–
–
–
–
30,000,000

Total number of
shares
1
106,678,878
(1,797,848)
42,553,500
(1,900)
7,663,685
(2,234,782)
(230,053)
(3,160,910)
546,263
(8,781,482)
141,235,352

Average
issue/purchase
price per share
$10.00
$ 9.62
$11.78
$11.60
$14.21
$14.93
$14.42
$13.03
$ 9.14
$ 9.55
$14.45

Net proceeds/
(purchase cost)
–
1,025,825
(21,178)
493,504
(27)
114,437
(32,218)
(2,998)
(28,905)
5,217
(126,869)

(1,897,532)
109,337,820

–
30,000,000

(1,897,532)
139,337,820

$12.65

(24,010)

(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 28, 2021 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 over a twelve month period from
September 30, 2021 to September 29, 2022. Prior to the above announcement, the company had an existing normal
course issuer bid to purchase up to 3,500,000 subordinate voting shares which commenced on September 30, 2020

106

and expired on 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 2021, the total number of shares effectively outstanding decreased as a result of the purchase of 7,046,979
subordinate voting shares for cancellation under a substantial issuer bid completed in August 2021 for aggregate
consideration of $105,000 and purchases for cancellation under the normal course issuer bid of 1,734,503
subordinate voting shares (2020 – 3,160,910) for a net cost of $21,869 (2020 – $28,905), partially offset by the
issuance of 546,263 subordinate voting shares to Fairfax to settle the performance fee payable at
December 31, 2020. At December 31, 2021 there were 141,235,352 common shares effectively outstanding.

Liquidity

At December 31, 2021 the company’s payment obligations which are due beyond one year primarily relate to the
recurring nature of expenses described above and a principal repayment on the Unsecured Senior Notes due in
February 2028, which bear interest at a fixed rate of 5.0% per annum, payable in semi-annual installments.
In addition, under the Investment Advisory Agreement (defined in note 12 (Related Party Transactions) to the
consolidated financial statements for the year ended December 31, 2021), if a performance fee is payable for
the period ending on December 31, 2023, the performance fee will be payable in cash, or at Fairfax’s option, in
subordinate voting shares.

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. The fair values of cash and investments at December 31, 2021, including selling
restrictions and financial risks related to the investments, are disclosed in note 6 (Cash and Investments) and
note 11 (Financial Risk Management)
the year ended
December 31, 2021. At December 31, 2021 the company held common shares of Public Indian Investments which
carry no selling restrictions with a fair value of $966,281, Government of India bonds with a fair value of $192,385
and short term investments of $6,151. 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. To further augment its liquidity, the company can draw upon its Revolving Credit Facility. Accordingly,
the company has adequate working capital to support its operations.

to the consolidated financial statements for

107

FAIRFAX INDIA HOLDINGS CORPORATION

Highlights in 2021 (with comparisons to 2020) 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

Decrease in restricted cash in support of borrowings
Decrease (increase) in restricted cash in support of investments
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
Sales of subsidiary shares to non-controlling interests

Cash used in financing activities
Increase (decrease) in cash and cash equivalents during the year

2021

2020

(46,667)
16,051
264
(6,283)
(316,753)
414,477
61,089

(34,991)
867
(267)
–
(185,911)
231,193
10,891

500,000
(3,650)
(550,000)
(126,869)
129,221
(51,298)
9,791

–
(5,545)
–
(28,905)
–
(34,450)
(23,559)

“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 $46,667 in 2021 increased from $34,991 in
2020, primarily reflecting increased cash used to pay income tax and investment and advisory fees, partially offset
by decreased interest payments and increased cash provided by dividend income.

Decrease in restricted cash in support of borrowings of $16,051 in 2021 increased from $867 in 2020 primarily
related to the release of restricted cash during 2021 upon the repayment of the Secured Term Loan. Refer to note 7
(Borrowings) to the consolidated financial statements for the year ended December 31, 2021 for additional details.
Purchases of short term investments of $6,283 in 2021 related to the purchase of Government of India treasury
bills. Purchases of investments of $316,753 in 2021 primarily related to purchases of Government of India bonds,
Maxop, Fairchem Organics, 5paisa, and Other Indian Fixed Income. 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. Sales of investments of $414,477 in 2021 primarily related to
sales of the company’s investments in Privi Speciality, Other Public Indian Investments, the partial sale of Fairchem
Organics, and Government of India bonds. Sales of investments of $231,193 in 2020 related to the sales of
Government of India and Indian corporate bonds, and sales of Other Public Indian Investments. Refer to note 15
(Supplementary Cash Flow Information)
the year ended
December 31, 2021 for details of purchases and sales of investments.

to the consolidated financial statements for

Proceeds from borrowings of $500,000 and issuance costs of $3,650 in 2021 related to the issuance of the Unsecured
Senior Notes on February 26, 2021. Repayments of borrowings of $550,000 in 2021 related to the repayment of the
Secured Term Loan. Issuance costs of $5,545 in 2020 related to the issuance costs on the Secured Term Loan
amended on June 26, 2020. Refer to note 7 (Borrowings) to the consolidated financial statements for the year
ended December 31, 2021 for additional details.

Purchases of subordinate voting shares for cancellation of $126,869 in 2021 (2020 – $28,905) related to the
company’s purchases of 8,781,482 subordinate voting shares (2020 – 3,160,910) under the terms of the normal
course issuer bids and substantial issuer bid completed in 2021. Sales of subsidiary shares to non-controlling
interests of $129,221 in 2021 related to the sale of an 11.5% non-controlling interest in Anchorage to OMERS. Refer
to note 8 (Total Equity) to the consolidated financial statements for the year ended December 31, 2021 for additional
details.

108

Contractual Obligations

On February 26, 2021 the company completed an offering of $500,000 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 Unsecured
Senior Notes bear interest at a fixed rate of 5.0% per annum, payable in semi-annual installments.

On September 16, 2021 Fairfax India entered into an agreement to acquire, in aggregate, a 67.0% equity interest in
Maxop in two transactions. The first transaction was completed on November 30, 2021. In the second transaction,
the company shall invest an amount between approximately $9 million and $36 million based on period end
exchange rates (700 million Indian rupees and 2.7 billion Indian rupees, respectively) for an additional 16.0%
equity interest. The second transaction is expected to close in the second half of 2022, subject to customary closing
conditions.

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, 2021), 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 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. The investment and
advisory fees recorded in the consolidated statements of earnings (loss) for 2021 were $40,775 (2020 – $33,922).

At December 31, 2021 the company recorded a performance fee accrual of $84,716 related to the third calculation
period (December 31, 2020 – payable of $5,217 relating to the second calculation period). Refer to note 12 (Related
Party Transactions) to the consolidated financial statements for the year ended December 31, 2021 for discussion
on the performance fee.

Subsequent to December 31, 2021

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, 2021, 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, 2021, 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.

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FAIRFAX INDIA HOLDINGS CORPORATION

The company’s management assessed the effectiveness of the company’s internal control over financial reporting
as of December 31, 2021. 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, 2021, 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, 2021.

Significant Accounting Policy Changes

There were no significant accounting policy changes during 2021. Please refer to note 3 (Summary of Significant
Accounting Policies) to the consolidated financial statements for the year ended December 31, 2021 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, 2021.

Risk Management

Overview

to the consolidated financial statements for

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

110

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 continued 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.

Foreign Currency Fluctuation

All of the company’s portfolio investments have been and will be made in India and in 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, 2021. 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:

• have reduced access to the capital markets, resulting in diminished capital resources and ability to withstand

financial distress;

• may have limited financial resources and may be unable to meet their obligations under any 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;

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FAIRFAX INDIA HOLDINGS CORPORATION

• 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;

• 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 a
portfolio investment and, as a result, the company; and

• 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.

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 are 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.

112

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, 2021, fluctuations in the market prices of such securities may negatively affect the value of such
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 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.

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

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FAIRFAX INDIA HOLDINGS CORPORATION

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 manages 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 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, 2021 Fairfax, through its subsidiaries, owned 30,000,000 multiple voting shares (December 31,
2020 – 30,000,000) and owned and/or exercised control or direction over 23,030,285 subordinate voting shares
(December 31, 2020 – 12,841,578) of Fairfax India. At December 31, 2021 Fairfax’s aggregate ownership, control
and/or direction of the subordinate voting shares and multiple voting shares represented a 94.5% voting interest
and a 37.5% equity interest in Fairfax India (December 31, 2020 – 93.4% and 28.7%). 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.

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
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

114

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 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.

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.

There is a risk that Canadian or foreign tax laws, or the interpretation thereof, could change in a manner that
adversely affects the company. Canada, together with approximately 140 other countries comprising the
Organisation for Economic Co-operation and Development (“OECD”) and the G20 Inclusive Framework on Base
Erosion and Profit Shifting (“BEPS”), approved in principle in 2021 certain base erosion tax initiatives including
the introduction of a 15% global minimum tax which is intended to be effective in 2023. Canada has not yet
released any domestic legislation in respect of the introduction of a global minimum tax. In February 2022, the
Department of Finance Canada released for public comment draft legislative proposals which, if enacted, may limit
the deductibility of interest and financing expenses for Canadian tax purposes. The draft legislative proposals are
generally intended to apply in respect of taxation years beginning on or after January 1, 2023. Comments on the

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FAIRFAX INDIA HOLDINGS CORPORATION

draft legislative proposals are invited until May 5, 2022. The company will continue to monitor the BEPS and
interest deductibility limitation proposals, which may result in an increase in future taxes and an adverse affect on
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 and the
United States, 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 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.

116

MLI

Under a mandate given by G20 nations to address global tax avoidance, in 2015, the OECD developed 15 action
plans aimed at tackling 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 its 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.

Other

Quarterly Data (unaudited)

Years ended December 31

US$ thousands, except per share amounts
2021

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Full Year

186,020
37,460
16,655
131,905
131,910

(145,885)
(15,481)
(12,679)
(117,725)
(117,716)

$
$

0.91 $
0.85 $

(0.83) $
(0.83) $

693,539
160,009
39,030
494,500
494,514
3.38
3.22

99,448
16,643
5,153
77,652
77,652

$
$

0.52 $
0.52 $

110,221
22,552
5,372
82,297
82,297
0.55
0.55

(12,972)
26,008
2,496
(41,476)
(41,476)
(0.27)
(0.27)

$
$

Income (loss)
Expenses
Provision for (recovery of) income taxes
Net earnings (loss)
Net earnings (loss) attributable to shareholders
Net earnings (loss) per share
Net earnings (loss) per diluted share

2020

340,101
76,393
8,282
255,426
255,426
1.71
1.66

$
$

313,303
61,637
26,772
224,894
224,894
1.51
1.43

$
$

(295,364)
(29,368)
(12,187)
(253,809)
(253,809)

$
$

(1.67) $
(1.67) $

72,723
16,181
4,158
52,384
52,384
0.35
0.35

117

FAIRFAX INDIA HOLDINGS CORPORATION

Years ended December 31

Indian rupees and in millions, except per share amounts(1)
2021

2020

(1) Presented in the company’s functional currency.

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

Full Year

24,791
5,568
604
18,619
18,619
124.65
120.98

(21,403)
(2,128)
(883)
(18,392)
(18,392)
(120.71)
(120.71)

23,118
4,552
1,967
16,599
16,599
111.11
105.75

4,894
1,150
288
3,456
3,456
22.84
22.84

13,857
2,792
1,235
9,830
9,830
67.58
63.71

7,364
1,234
382
5,748
5,748
38.21
38.21

(10,499)
(1,085)
(920)
(8,494)
(8,494)
(60.07)
(60.07)

8,183
1,671
398
6,114
6,114
40.79
40.64

51,267
11,827
2,886
36,554
36,554
249.72
238.16

(962)
1,927
185
(3,074)
(3,074)
(20.36)
(20.28)

Loss from income of $145,885 in the fourth quarter of 2021 compared to income of $110,221 in the fourth quarter
of 2020 primarily as a result of net change in unrealized losses on investments, partially offset by increased
realized gains on investments related to the partial sale of Fairchem Organics common stock, and increased
dividend income. Net change in unrealized losses on investments of $186,133 in the fourth quarter 2021 primarily
included net unrealized losses on common stocks of $185,433 (principally related to unrealized losses on CSB
Bank, IIFL Wealth, Sanmar and Fairchem Organics, in addition to the reversal of prior period gains on Fairchem
Organics as a result of its partial sale, partially offset by unrealized gains on Saurashtra and NSE). Net change in
unrealized gains on investments of $102,670 in the fourth quarter of 2020 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). In addition, loss from income in the fourth quarter of 2021 was impacted
by net foreign exchange losses compared to net foreign exchange gains in the fourth quarter of 2020, principally
as a result of the weakening of the Indian rupee relative to the U.S. dollar in the fourth quarter of 2021, whereas
the Indian rupee strengthened relative to the U.S. dollar in the fourth quarter of 2020.

Total recovery from expenses of $15,481 in the fourth quarter of 2021 compared to total expenses of $22,552 in the
fourth quarter of 2020, primarily as a result of a performance fee recovery of $32,976 recorded in the fourth
quarter of 2021 (fourth quarter of 2020 – performance fee of $5,143) and decreased interest expense, partially
offset by increased investment and advisory fees.

The company reported a net loss attributable to shareholders of Fairfax India of $117,716 (a net loss of $0.83 per
basic and diluted share) in the fourth quarter of 2021 compared to net earnings attributable to shareholders of
Fairfax India of $82,297 (net earnings of $0.55 per basic and diluted share) in the fourth quarter of 2020. The
decrease in profitability in the fourth quarter of 2021 primarily reflected net unrealized losses on investments, net
foreign exchange losses, and increased investment and advisory fees, partially offset by a performance fee recovery,
increased net realized gains on investments, a recovery of income taxes, and increased interest and dividend
income recorded in the fourth quarter of 2021.

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.

118

Stock Prices and Share Information

At March 4, 2022 the company had 109,337,820 subordinate voting shares and 30,000,000 multiple voting shares
outstanding (an aggregate of 139,337,820 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 2021 and 2020.

2021

High
Low
Close

2020

High
Low
Close

First
Quarter

Second
Quarter

Third
Quarter

Fourth
Quarter

(US$)

12.97
9.65
12.44

13.86
5.28
6.55

13.50
11.96
13.50

9.35
5.60
8.40

14.90
12.74
13.10

9.49
6.80
6.84

13.90
11.43
12.61

10.97
6.84
9.60

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.

119

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.

120

Glossary of Non-GAAP and Other Financial Measures

Management analyzes and assesses the financial position of the consolidated company in various ways. Certain of
the measures included in this Annual Report, which have been used consistently and disclosed regularly in the
company’s Annual Reports and interim financial reporting, do not have a prescribed meaning under IFRS as issued
by the IASB and may not be comparable to similar measures presented by other companies.

Supplementary Financial Measures

Book value per share – The company considers book value per share a key performance measure in evaluating
its objective of long term capital appreciation, while preserving capital. This measure is also closely monitored as
it is used to calculate the performance fee, if any, to Fairfax. This measure is calculated by the company as common
shareholders’ equity divided by the number of common shares outstanding. Those amounts are presented in the
consolidated balance sheet and note 8 (Total Equity under the heading Common Stock) respectively within
the consolidated financial statements for the year ended December 31, 2021.

Non-GAAP Financial Measures

Book value per share prior to the performance fee – This measure adjusts common shareholders’ equity in the
book value per share calculation to remove the performance fee accrued at the end of the current reporting period
as presented in note 12 (Related Party Transactions) within the consolidated financial statements for the year
ended December 31, 2021, and is a key performance measure.

Book value per share before cumulative performance fees – This measure adjusts the common shareholder’s
equity in the book value per share calculation to add the performance fee accrued or payable at the end of the
reporting period and adjusts the common shares outstanding at the end of the reporting period to remove the
subordinate voting shares issued to settle performance fees in prior periods. The company issued 7,663,685 and
546,263 subordinate voting shares in connection with the first and second calculation periods, respectively. The
company uses this measure to monitor the company’s performance had it not been impacted by any performance
fees.

Cash used in operating activities excluding the impact of changes in restricted cash and net sales
(purchases) of investments – The company uses this measure to monitor 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 a component of cash provided by (used in) operating activities as presented in the consolidated
statement of cash flows within the consolidated financial statements for the year ended December 31, 2021.

Cash and marketable securities – The company uses this measure to monitor short term liquidity risk. This
measure is calculated by the company as the sum of cash, cash equivalents, short term investments, Government
of India bonds and Other Public Indian Investments. Those amounts are presented in note 6 (Cash and Investments)
within the consolidated financial statements for the year ended December 31, 2021.

Compound annual growth rate (“CAGR”) – The company uses the CAGR to measure performance of certain of
the above-noted metrics over a specified period of time. CAGR is calculated using the formula: (ending value /
beginning value) ^ (1 / number of years) – 1.

Other Financial Measures related to Indian Investments

The Annual Report contains certain unaudited financial information related to Indian Investments (and related
financial measures derived therefrom) which are prepared under 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), unless otherwise noted. Such unaudited financial information is prepared
by and is the responsibility of the respective Indian Investments’ management teams. Fairfax India is limited with
respect to the amount of independent verification it is able to perform on the Indian Investments’ unaudited
financial information.

Certain financial measures related to Indian Investments included in the Annual Report do not have a prescribed
meaning under IFRS as issued by the IASB and may not be comparable to similar measures presented by the
company or other companies.

121

FAIRFAX INDIA HOLDINGS CORPORATION

Appendix to the Letter to Shareholders

Management analyzes and assesses the financial position of the consolidated company in various ways. Certain of
the measures included in its letter to shareholders do not have a prescribed meaning under IFRS as issued by the
IASB and may not be comparable to similar measures presented by other companies. Those measures are described
below.

Supplementary Financial Measures

Return on equity – The company uses this measure to assess profitability for shareholders. This measure is
calculated based on net earnings attributable to the company’s shareholders divided by the average common
shareholders’ equity for the period. These amounts are presented on the consolidated balance sheet and
consolidated statements of earnings (loss), respectively, within the consolidated financial statements.

Proportion of the publicly listed investments in Fairfax India – The company uses this measure to determine
the proportion of the company’s Indian Investments with fair values based on published quotes in active markets,
an important risk measure. This measure is calculated as the total fair value of the company’s Public Indian
Investments plus the fair value of the company’s share of Chemplast Sanmar Limited (a publicly listed subsidiary
of Sanmar, approximately $277.5 million), divided by the total fair value of the company’s Indian Investments.

Internal rate of return – The company uses this measure to assess the performance of its investments. This
measure represents the U.S. dollar annualized rate of return and is calculated for each of the company’s Indian
Investments based on its fair value at a point of time, taking into account the timing of cash flows (including cost
of purchases, proceeds on sales, dividends received and returns of capital) over the period of the company’s
investment.

Total debt to equity – The company uses this measure to monitor and manage its capital. This measure is calculated
as total principal of Borrowings outstanding divided by common shareholders’ equity at a point in time. These
amounts are presented in note 7 (Borrowings) and the consolidated balance sheet, respectively, within the
consolidated statements.

Non-GAAP Financial Measures

Undeployed cash and investments – The company uses this measure to monitor short term liquidity risk. This
measure is calculated by the company as the sum of cash, cash equivalents, restricted cash, short term investments,
Government of India bonds and Other Public Indian Investments. These amounts are presented in note 6 (Cash
and Investments) within the consolidated financial statements.

122

Directors 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

Satish Rai
Chief Investment Officer
Ontario Municipal Employees’ Retirement System (OMERS)

Chandran Ratnaswami
Chief Executive Officer of the Company

Gopalakrishnan Soundarajan
Chief Operating Officer of the Company

Lauren C. Templeton
President
Templeton and Phillips Capital Management, LLC

Benjamin P. Watsa
Chief Executive Officer
Marval Capital Ltd.

V. Prem Watsa
Chairman of the Company

Operating Management

FIH Mauritius Investments Ltd.

Amy Tan
Chief Executive Officer

Officers of the Company

Jennifer Allen
Vice President

Jennifer Pankratz
General Counsel and Corporate Secretary

Chandran Ratnaswami
Chief Executive Officer

Amy Sherk
Chief Financial Officer

Gopalakrishnan Soundarajan
Chief Operating 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

Share Listing

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 21, 2022 at 2:00 p.m.
(Toronto time) at Roy Thomson Hall,
60 Simcoe Street, Toronto, Canada M5J 2H5
and as a virtual conference call

123