Who is Prem Watsa? The billionaire behind Fairfax's Rs 52,878 crore IDBI Bank deal

Prem Watsa, the Hyderabad-born billionaire who moved to Canada in 1972 with just $8, is now at the centre of one of India's biggest proposed banking deals. His company, Fairfax Financial Holdings, has received Union Cabinet approval for its proposed acquisition of a 60.72 per cent stake in IDBI Bank for Rs 52,878 crore.

The transaction marks a significant step in the government's efforts to sell its controlling stake in the lender. For Watsa, it is also a major investment in a country whose financial sector he has backed for decades.

From Hyderabad to Canada with $8

Born in Hyderabad in 1950 to a family of schoolteachers, Watsa studied at Hyderabad Public School before pursuing chemical engineering at IIT Madras. He moved to Canada at the age of 22 to study for an MBA at the University of Western Ontario, now known as the Ivey Business School at Western University.

To support himself, he sold air conditioners and furnaces door-to-door. After completing his MBA, he joined Canadian insurer Confederation Life as a research analyst in 1974.

His early career introduced him to value investing, an approach focused on finding businesses trading below their estimated worth. Influenced by investor Benjamin Graham, Watsa built his investment philosophy around assessing companies' underlying value rather than following market trends.

How he built the Fairfax empire

Watsa co-founded Hamblin Watsa Investment Counsel in 1984. The following year, he helped take control of struggling insurer Markel Financial, which became the foundation of Fairfax Financial Holdings. The company was renamed Fairfax in 1987, with the name derived from "fair, friendly acquisitions".

Watsa has served as its chairman and chief executive since 1985. Fairfax has since grown into a global insurance and investment group with property and casualty insurance and reinsurance operations.

The company's insurance business provides capital for investments through premiums collected before claims are settled. This strategy has drawn comparisons with Warren Buffett's Berkshire Hathaway, earning Watsa the nickname "Canada's Warren Buffett".

Why India and IDBI Bank matter

Fairfax has invested in several Indian businesses, including ICICI Lombard General Insurance, Thomas Cook India, CSB Bank and Bengaluru International Airport. It also established Fairfax India Holdings in 2014 to focus on investment opportunities in the country.

The proposed IDBI Bank acquisition would give Fairfax management control, while the government and Life Insurance Corporation of India (LIC) would retain stakes of 15 per cent and 19 per cent, respectively.

IDBI Bank's recovery after a period of financial stress is central to Watsa's investment thesis. He believes the lender has room to expand as India's economy grows. The transaction, however, remains subject to applicable regulatory and other requirements.

What the deal could mean

Deloitte India's Manish Aggarwal described the disinvestment as a major structural reform in the banking sector.

"The deal is structured very well where in the foreign investor gets management control, brings in capital, expertise to grow the bank, and govt rides this upside through their residual stake," Aggarwal said.

The deal could bring Fairfax's financial services experience to IDBI Bank while allowing the government and LIC to benefit from its future growth. Its success will depend on whether the new controlling investor can expand the lender while maintaining financial stability and customer confidence.