Mon, Sep 10, 2018 3:49 PM
“If I had wider chest and larger build, I might have become police but a stronger heart and intuitive gut made me an investor.”
Ambika Prasad Paudel, with over 20 years of experience in both the public and private sectors, has expertise in areas ranging from banking and insurance, capital market and investment decision making, project development, recruiting and training to public administration. On Bhadra 9, 2075 Mr. Paudel spoke in a Venture Talk session amongst a gathering of capital market participants and aspiring investors. During the 45 minutes talk, Mr. Paudel walked us through his investment journey, the ups and downs and the lessons he learnt along 25 years of involvement in capital market. The participants surely did learn a lot of things from Mr. Paudel but a lot was still left to be said due to limited time frame. In this back drop Sandeep Rana, Aakriti Thakali and Krishna Khatiwada from Sharesansar visited Mr. Paudel. The excerpts of the interview are:
How was your experience at the Venture Talk?
First of all I’m not a seasoned speaker, so I think I fell short in properly delivering everything I had planned for. The subject matter I was talking about, “The Share Market and Other Investment Opportunities in Nepal”, is very wide and the time was limited so that was a challenge for me. The question/answer round was really interesting and felt like I was able to really address to the questions being asked.
However, at the end one participant came to me and said that he didn’t understand anything and that made me realize maybe I used too many capital market specific words, which was hard to understand for people who haven’t joined the market yet. All in all, it was a great experience.
Would you please walk us through your career graph?
My craving for capital market started after I joined I. com. I still don’t know at which point, but when I got to study about it, I became more and more fascinated and I realized that capital market is an actual sector and I would really fit in it. However at that time, I didn’t have much money and I also didn’t have anyone to guide me. So I used to listen to radio programs and just watch the indices. After I started working I also started to save a little and by that money my investment journey began in Nepal’s capital market.
At that time I gave Police exam twice, but got rejected because of small build and narrow chest. But today when I reflect to those days I feel like everything that happened was meant to happen. Me coming into capital market and making my career in this sector, was meant to happen.
After entering the capital market in 2050, you completely left the market for about half a decade. Why did you make that choice and how do you feel about it now?
To be honest I don’t feel good about that decision. The reason I left the market that time was because of the dilemma every first time investor faces. When we first start to invest, we buy because buying is easy but we don’t know when to sell. We don’t know how long we’re supposed to hold. From a normal layman perspective, we sell when the prices rise but we don’t know how high. In capital market, making profit is not the only goal, minimizing the losses is also equally important. So my failure to recognize and realize this simple fact is the reason I lost those years.
You’re an investor, the CEO of Hathaway Investment Company and the chairman of Investors Forum. All these sectors are related to capital market. So how did you initiate and became a founding member of the Chandragiri Hills and why the change of sector?
I’ve been in this sector for a long time and I’ve survived various ups and downs and I have come to realize that it’s a seasonal/cyclical sector. In addition we are far behind in terms of technology, infrastructure and psychological growth. As you might have seen even though the company is doing well and is consistently growing, the share price doesn’t seem to grow in similar tandem, which is very weird. Similarly, given that our market is seasonal there is a limited time to sow and limited time to reap and rest of the time is just wait-and-watch.
So for a sustainable income source, we moved to this sector. Tourism is a very viable and profitable sector in our country and after the introduction of Manakamana cable car, no similar projects had come. So we started looking into the possibility of another cable car service along with the investment requirements, time frame and location alternative and finally came up with Chandragiri Hills.
What strategy do you follow while making an investment decision?
To begin with we have to acknowledge a lot of factors that affects or determines the profitability of an investment in one way or other. The financial indicators are the first we should look at. However the company’s growth is not always reflected in its market price, we need to look at the following factors too:
Market indicators like Nepse index, sub-indices etc
Market wave or cycle
“My secret to being a successful and sustainable investor is tenacity despite failure”
How can you determine or access investors’ sentiment?
Investors’ sentiment is subjective but if we look closely there are a number of factors that shapes the general investors’ sentiment in the market. For example, when the trading volume is increasing, we can infer that the sentiment is improving towards market. Similarly the alternative sectors’ return like deposit interest rates of banks also play a huge role. When banks are offering higher return they are reluctant to risk that money in capital market. Similarly, the liquidity availability in market, the government’s policy and market movement also hugely affects investors’ sentiment.
You are also popularly known as the market pundit or a real risk analyst. How do you perform your analysis? What is your secret?
I’m not a market pundit or an analyst, what I am is an observer. I observe the market very keenly and then plan my actions keeping the long term vision in mind. I sow and then I reap at pre-planned level and that is my secret.
At the same time we need to look at the company’s growth and the sectors’ growth in total, because many times the growth is sector specific. Sometimes the banks do really well, sometimes the insurance and sometimes other. So we need to also look at sector wise sub-indices and determine which sector will lead the market.
My other secret is I never rely on second hand information and rumor to make my decision. Even for short term trade, I always look for firsthand information and at the primary sources. In case you made a mistake buying a scrip based on market rumor, then as soon as you realize it you should have the courage to correct that mistake at a minimum loss rather than holding it and letting the losses escalate. Or if that scrip, despite the rumor seems to have good parameters with return possibilities in long-rum then at that time you need to have the appetite and will-power to hold it.
What do you think is the reason behind this continuous bear market?
The MARKET CYCLE is the first reason. Every market has a cycle of up and down and as an investor we must respect that cycle. In my tenure of experience in capital market, I’ve seen 3 cycles and in my projection this down cycle is coming to an end.
The second reason is the lack of recognition from monetary policy as a priority sector in Nepal’s financial market. The margin loan was previously 100% of the banking institution core capital, which was decreased to 40% last fiscal year and now to 25% from this year. Yes I know that the amount might not have changed much, but it does show the government’s attitude towards this sector and that surely affects investors’ sentiment.
The third reason is the banks’ rising interest rates and the liquidity in market. When people can earn similar return by putting their money at bank, then why would they want higher risk and invest in capital market? We’ve seen that as the liquidity tightens, the trading volume also goes down, so that shows a direct impact in capital market.
“In stock market do you calculations in times not in percentage, because here you earn in times and lose in times too.”
You mentioned that the bear trend is near to an end. Why do you think so?
We, from Investors’ Forum, are continuously following up with the government and soon they are likely to internalize the importance of capital market in economy’s development. Then when facilitating policies are introduced that will lift the market up.
Similarly, the liquidity is also being eased slowly and when the market becomes comfortable enough the turnover volume will also rise.
The time cycle of downtrend is also coming to an end, so that will also have an impact. In addition the economic sector has also become more empowered and these factors show that in the days to come the capital market will pick up the pace.
Investors’ Forum represents a large mass and has to meet a lot of expectations forming the bridge between the investors and regulatory bodies. What are your achievements so far and future plans?
The Investors’ Forum was established with an aim to protect the rights and interest of the investors in Nepali Capital Market. So our prime duty is to convey the information regarding our problems or issues hindering capital market development to the authorities on behalf of the investors in the form of suggestion, demand or request. So far some of our issues have been addressed and some haven’t. For example, providing broker license to banks was our initiative. Similarly, the directive in recent monetary policy for all companies above Rs 1 arba to go public was also on our request. The capital gain tax issue is still under discussion and we are hoping positive results.
Similarly in future too our priority is sustainable development of capital market and protection of investors’ rights.
Which government body is responsible to make sure that these companies will go public as per the directive?
First of all it’s the responsibility of the government. Then the government can instruct Ministry of Commerce and Industry, which can further instruct the Company Registrar’s Office to ensure this happens. What they can do is simply circulate the information among all Rs 1 arba above capitalized companies to submit a Working Model stating when they will go public and through what modality. If the companies fail to do so, then the renewal can be halted until they comply.
So if the government has the will power then it can be done but if it has been said just for the sake of saying it then we can do nothing except complain.
IME and Hathaway bought the troubled NB Insurances by buying 45.5% shares. What was your strategic goal behind buying a virtually failing company?
At that time everybody knew that the company was failing, but we knew the sector was very promising. The insurance sector was in emerging phase in Nepal and there was a lot of room to grow further. The catch was, at that time it had been around 7-8 years that any licenses were given to new insurance companies and it wasn’t likely that any would be given soon. So our goal was to attain the license that NB Insurance already had.
Once we acquired NB Insurance, we made sure that corporate governance was being practiced with no conflict of interest. In addition we studied the market and the reasons that had led to its downfall in the past and made sure not to repeat it. In this way we took forward NB Insurance and made it what it is today.
“In retrospect, what matters to me is not the money I made but the level of satisfaction I’ve attained over the years by doing what I love to do.”
Do you have any regrets so far?
I’m not the type of person to keep regrets, but I do have a habit of making decisions on a whim. Sometimes irrespective of what my plan is I take completely different decisions which is something I regret. However I’m also very prompt at correcting my mistakes, which sort of balances things out.
What would you like to say to the young graduates out there?
To the young graduates, innovators and entrepreneurs, don’t decide your venture based on your economic capacity, base it on your thinking capacity. Think as far as your mind allows and take that idea to a group that can support you financially.
I’m personally not an innovator. My strength is that I can observe very minutely and based on that I don’t repeat the mistakes someone has already made. That is how I became who I am. It save time and resources too. So to all the entrepreneurs out there, observe others in the industry and identify what they’re doing right or wrong and use it to your favor. Tenacity despite failure is the true quality that will carry you through the process.
This is a country of possibility and maybe the employment isn’t as readily available. So patience is essential. Even though you don’t want to start a venture, identify a sector that you like and specialize on it. That is how you can get high paying job in Nepal too.