DEEPESH VAIDYA on INTELLIGENT INVESTING
Photo: Bibhas Maharjan Suwal
Mr. Deepesh Vaidya, Managing Director of Kriti Capital and Investment Ltd, has been in the capital market related services in Nepal and US for more than 12 years. Mr. Vaidya worked for 6 years as head of merchant banking department of NMB Bank managing IPOs, private placement of shares and bonds in Nepal. He then went to USA to earn his MBA degree under the Fulbright Scholarship Scheme. In USA, he worked for 14 months as a research analyst in Knight Capital Group, a leading Wall-Street firm. While in USA, he covered the automobile, energy, finance industry and REITs. In 2009, he returned to Nepal and worked in Vibor Capital Ltd. from November 2009 to February 2011 covering mainly private equity business and real estate business in Nepal.
Now, he heads the management team at Kriti Capital as founding Managing Director. Established with the motto of ‘creating growth opportunities’, KCIL is a public limited company established by a group of professionals who have realized the need and understood the benefits of institutionalizing investment banking services in Nepal.
KCIL has obtained Portfolio Management Services license from the Securities Exchange Board of Nepal (SEBON). The company also has an approved plan in place to apply for other merchant banking licenses under the SEBON regulations.
Deepesh says Nepal trails the world when it comes to investments. And that needs to change.
Excerpts from the interview:
TNM: What makes Kriti Investment different from other companies?
DV: Investments reap rewards best when it is complimented with professional expertise. Not only do we specialize in investing, we also carry out thorough research and analysis of the market to make better investment decisions. Within our team, we have more than 35 years of cumulative experience in capital markets, financial advisory, securities/ industry research, valuations, capital restructuring, private equity, venture capital and asset management.
Our company is backed by a dedicated research team. We carefully research and analyse the current and potential value of the funds. Our team constantly monitors and rebalances an investors’ portfolio to keep it on track with its goals. That’s what makes us different.
TNM: What are the services provided by Kriti Investment?
DV: We provide a wide array of advisory services to clients, start-ups and established public/private enterprises. These services include Portfolio Management Services, Financial Advisory Services, Venture Promotion Services, Capital Markets Research, Custodial Services to Investment Funds, Merger and Acquisition Services.
TNM: How is your approach towards Portfolio Management Service?
DV: As part of the portfolio advisory service, we monitor the market and provide advisory service for our clients. Through Portfolio Management Service, we provide active and customized investment management services.
We offer Discretionary and Non-Discretionary Portfolio Management service. Under the Discretionary Portfolio Management service, we design the Investment Policy Statement (IPS) of an investor. We have numerous designated as well as tailor-made portfolios to match the needs and aspirations of both individual and institutional investors.
Similarly, under the non-discretionary portfolio management service, we help the clients define their investment strategies based on the market analysis we conduct. We provide our insights based on market research. This service also has a separate tailor-made portfolio to cater to both individual as well as institutional investors.
TNM: How do you help new companies through Venture Promotion Service?
DV: We have arranged equity funding for start-up companies. We also help start-ups to acquire funds through debt financing from banks/financial institutions. Similarly, we help in the preparation of business plan for these clients. We also provide other services like Incorporation Advisory including Capital Structure Planning and Shareholders’ Management.
TNM: Where are Nepalese placing their money? Is it reasonable to invest in the present climate?
DV: Earlier, people chose the real estate sector to put their money reacting to the boom. But after the debacle, Nepalese investors are not confident to invest. In particular, people now trust in IPOs and secondary stock market and to some extent investing in commodities like gold to protect their wealth. Almost all the IPOs in Nepal have been oversubscribed by more than 100 percent over the last 10 years.
Nepalese people run businesses on profit margins rather than big volumes. We have many sectors to invest in: hydropower, tourism and energy, construction and agriculture. But there is an investment gap. Hence, we are trying our best to fill that gap by connecting investors with these mapped projects.
TNM: What are some of the things we don’t know about investment? Is there a set method of investing?
DV: Whether you invest in stocks, bonds, shares, money market securities or real estate, the objective of investment is the same – to generate more cash-flow in the future. Investments will increase the value of your money better than a normal savings account can. Timing is key. When the trend is improving, people jump and invest without the fundamental knowledge. Know your areas of investment rather than jumping into the bandwagon. Instead of speculating and gambling, an investor should look to invest in companies that have risk but also greater return potential over the long term.
Long-term investment is a battle-cry for many of us. Because we can never be sure of the market uncertainty, we cannot forget the importance of a well-diversified portfolio rather than investing into a huge chunk of assets. A well-diversified portfolio eliminates individual risk on your investments while at the same time improving your chances of getting higher returns from your investment.
Make regular, balanced, diversified investments on time to ensure your money keeps its value.
TNM: What are the key aspects in identifying the potentially good investments from the bad ones?
DV: High-return investment can be spoiled by money-losing investments. So, before putting money into an opportunity, the investors should spend a lot of time looking for factors that determines the success of the investment. Investors should look to reduce the riskiness of the opportunity, size of the market and more importantly know the people behind the idea or top level management team. Smart investors opt for best value from their investments.
TNM: Should we invest in a safe well managed stocks or a profitable stock of a company with small market capitalization?
DV: If we were in early 2000s then investing in small-mid capital companies would be riskier. But, we are already out of the speculative real estate bubble and hence, the stock market has gone up. If you look at the trends, mainly mid-cap companies have outperformed large-cap companies. Prospective investors need to have a strong understanding of market capitalization in order to make an effective investment. Small and mid-cap companies can produce greater returns through more businesses that tend to be more growth oriented than larger ones. But, you need to be very sure of the people behind such small or mid cap companies.
TNM: And what about the risks in small cap funds?
DV: Investing in small cap funds carries additional risk, but because of their potential for growth, they can really payoff if they have the right management team.
TNM: How do we choose the right asset?
DV: When you consider what type of asset is right for your portfolio, it’s crucial that you remember that there are many other factors to consider, including whether the asset specializes in growth, value or another investing style.
TNM: What is a portfolio? And why should one choose a portfolio over individual securities?
DV: A portfolio is a combination of different investment assets mixed and matched for the purpose of achieving an investor’s goal. These are mainly: cash, bonds, equities and property. The portfolios are built for long-term growth of money, and not designed for those looking to get an income from their investments. While there are a plethora of other investment options, creating a portfolio offers a simple, efficient way to invest for retirement, education or other financial goals at minimal costs.
The beauty of establishing a portfolio is diversification. We invest your money in a range of different investment assets so you don’t have all your eggs in one basket. This allows investors to pool in their money for a diversified selection of securities and funds. This investment will generate more cash in the future. Moreover, they require only moderate minimum investments, enabling investors to construct a diversified portfolio more cheaply.
TNM: What are the benefits of creating a portfolio?
DV: Portfolios offer many benefits whether its financial gains or convenience. They help investors generate better inflation-adjusted returns on their own convenience. Further, portfolio can be active and customized as per the need and risk appetite of the investor.
Based on medium or long-term investments, portfolios have the potential to generate a higher return, as you can invest on a diverse range of sectors and industries.
TNM: What about the risks?
DV: Every form of investment involves risk. However, selection of fundamentally sound securities and a strong management expertise can help reduce the risk, while increasing the chances of higher returns over time. Moreover, since everything is regulated by SEBON, you can be assured that your investments are managed in a disciplined and regulated manner and are in safe hands.
TNM: Where will our economy be in the years to come?
DV: If we analyse and compare Nepal with similar countries, investments are not very high. The main problem in Nepal is the lack of a climate that sparks an investment boom. We have huge potential for growth and there are many untapped natural resources. The possible areas of investment include industrial manufacturing, services, tourism, construction, agriculture, minerals and energy.
Though Nepal is geographically small, it has a market size bigger than that of few developed and developing countries because of its relatively large population of about 27 million. Nepal lies between two important economic giants of the world- India and China. This provides Nepal with a unique comparative advantage. It has preferential market access and good economic relations with both of these countries. Despite all of the negativities attached, we’re in one of the best economic phases. If the government becomes stable, Nepal will achieve phenomenal growth in the next 10 years. It’s always good to be optimistic and I bet on the economy to achieve growth.
TNM: If you were made the finance minister of Nepal for a day, what would you change?
DV: Among others, one thing I feel is that the government has yet not realized the importance of the capital market. I would promote long term investments. Our economy is generally characterized by high inflation and uncertainty. However, it’s changing and there are brighter prospects for the economy.
The macro-economic indicators of the country are positive and our foreign reserve is also comfortable. The only thing we lack is the investment. Investments are not taking place. A few years back, there was a boom in the realty sector and that provided money to different sectors but there is not much happening now. People now lack the confidence to put their money into long term commitments. Hence, I would make policies to incentivize investors to invest that deposit in commercial banks. Apart from political instability, power crisis is the other challenge to investment. The government needs to work with the private sector. The sector needs huge additional investments to meet energy demands, which is increasing every year. Such huge investment is not possible without the government, private and foreign investor working together.
TNM: Finally, how is the company reaching out to investors outside the valley and future investors?
DV: We’re slowly reaching to places outside Kathmandu valley. Due to technological crunch, people outside Kathmandu valley had problems regarding transaction facilitation. Investors can now access their portfolio online through us. We have joined hands with KUSOM (Kathmandu University School of Management) to offer classes on investment where we educate and advocate the smart use of investment services. We are trying to be a one stop solution for investors within and outside the valley in terms of managing their hard earned money.