No country has the resources to be able to close the economy for long, thinks Prem Watsa, Canadian investor and founder Chairman and CEO of Fairfax Financial Holdings. He added that since countries are now opening up, there should be significant increase in activity within a year’s time.
India’s economy will 'bounce back' once the lockdown is lifted, Watsa told The Economic Times. “We have to be careful about the hotspots. Once the economy opens up there will be a lot of pent up demand,” he noted, citing China as an example, which rebounded post relaxation of the lockdown with oil demand back to pre-COVID-19 levels.
On India’s financial stimulus package, Watsa said the government has been fiscally prudent and provided stimulus that is necessary. “The government can only do so much. Its individual businesses and their hard work which creates jobs. We cannot do that if the economy is closed. You have to open up the economy so that it frees the average Indian to take advantage of opportunities,” he added.
Watsa was also optimistic about testing, treatment and a vaccine for coronavirus as these “are being developed all over the world.” He added that the United States, Canada and India has “lots of opportunity to buy stocks at reasonable prices.”
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On his company’s investment in IIFL, Watsa said the company will survive, adding that it is an “outstanding company going through a down cycle.” Adding: “We have been shareholders in this company for 10 years. It has earned 15-16 percent RoE for the last 10 years, had minimum credit losses (0.6 percent) and its business is diversified. In spite of its record and excellent management, it is selling at three times earnings – down more than 50 percent this year. In times like this, the stock market provides an opportunity to buy and hold IIFL Finance for the long term. We have not sold a single share in any of the three IIFL companies.”
Watsa felt that IIFL’s track record of loan losses is good and in the coronavirus situation while they have to defer payments from borrowers, they still have to pay lenders.
On the plan to invest $5 billion in India, he said the plan is to invest more over the next five-to-six years, adding that India’s potential has not changed and will “come back” once the economy opens up again. He also added that the company would look at investing in Indian airports and even more through the Bangalore International Airport, which is currently building a second runway.
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