Nirmal Pradhan, King of Nepali Share Market NEPSE

Who Is Nirmal Pradhan? Is He Really the King of Nepal’s Stock Market?

In order to have an idea of the influence that Nirmal Pradhan, the hailed King of NEPSE, had in Nepal’s stock market, consider this excerpt from news published by Sharesansar on February 16, 2014:

“Irked by Nirmal Pradhan, who is one of the biggest share investors in the country, who “unlawfully” sold a large number of shares of Nepal Bangladesh Bank Limited, share brokers have now decided not to trade any scrip of the bank and National Hydropower Company Limited from now onward.”

Some investors envy him, some hate him. Others idolize him and argue that Nirmal Pradhan has done nothing wrong and that he was just a big fish that happened to exist in a small pond like NEPSE. Quoting a Reddit user:

“he has huge stocks. he is said to have 100cr+ worth of stock. If he had invested 10cr last year it is worth around 15cr. considering banks give 70% on loan against stock he can easily [get] another 10-12cr loan. with that 10cr money, any stock can be pumped since market cap was around 1 or 2 arba during hydro boom. i see nothing wrong here though.”

Meanwhile, some veteran investors think he was a manipulator, and that he took advantage of the small size of NEPSE in the past. It has only been about 2 years that NEPSE has entered a new bull cycle with extraordinary investor participation.

For perspective, IPOs were fairly unattractive and ignored by the masses a couple of years ago, and stocks of hydropower companies were trading for less than their par value at Rs. 100 per share. Some were trading below Rs. 50.

Suggested topic addition: Present info, what he is, what he was, what position he held

Suggested topic addition: Summary of the entire biography.

Early Life

Nirmal Pradhan was born in Bandipur, Tanahun, in the year 2011 B.S. He studied in Tanahun till grade 7.

Pradhan then went to Chitwan to finish his high schooling till grade 12. He then received his further education from Trichandra College, Kathmandu.

As a student, Pradhan was active in politics.

Career Before Investing

At a young age, Nirmal Pradhan established a successful footing as a travel operator. He owned 8 buses and 12 trucks.

He was the first person in Nepal to operate night buses.

After a successful career in this field, he shifted to the cinema industry. He claims of having built more than a couple of movies like “Kanchi”, “Santan”.

This was a time when movies could be made in Rs. 15 to 20 lakhs, and actors only took Rs. 5,000 for their roles.

At one point in time, Pradhan claims of having been the biggest movie distributor in the country. Pradhan owned cinema halls in major locations like Kantipur Cinema, Nischal Chalachitra Bhawan, and Jay Nepal Chalachitra Ghar in Kathmandu.

Pradhan also owned the Om Chalachitra Mandir in Hetauda, Purnima cinema in Pokhara, Jun Chalachitra Bhawan, and Jyoti Chalachitra Mandir in Narayanghat, Menuka Chalachitra Mandir in Damauli, and Siddhartha Chalachitra Bhawan in Bhairahawa.

Nirmal Pradhan also had a soap manufacturing industry in Narayanghat, along with many clothes and groceries retail shops.

How Nirmal Pradhan entered the stock market NEPSE

Nirmal Pradhan had to learn from the very basics, starting from opening a trading account via a stockbroker.

Fresh into Kathmandu, the nation’s capital, Pradhan knew little about investing and the securities market.

On his way home, he noticed a crowd of people queuing in front of a bank to apply for an IPO. The application system wasn’t digitized then, and one had to wait in long queues, sometimes from 3 am in the morning to fill out the physical application form.

Apparently moved by this incident, Pradhan decided he would test his luck in the investment world.

Thus, Nirmal Pradhan entered NEPSE in the year 2056 B.S. by investing in the IPO of NIC Asia Bank. He had applied with Rs. 1 lakh each on behalf of seven of his family members.

His wife and one of his sons were allotted 250 shares each.

Thus, as the investment was solely led by Pradhan’s conscience and control, he started his journey into NEPSE with 500 shares of NIC Asia Bank Limited.

Nirmal Pradhan’s Early Investing Performance

Pradhan did not realize that Nepal’s capital market was in a bullish trend when he invested in NIC Asia Bank’s IPO.

Note that allotment was done manually at that time and IPO listing took longer, sometimes three months.

Thus, Pradhan was amazed when the IPO shares that he bought at Rs. 100 per share two months earlier opened in the secondary market at Rs. 400 per share.

This is what led Pradhan to believe that the stock market was the best place to earn passively.

Nirmal admits that he was worth not more than Rs. 5 crores at the time (excluding his parental wealth). Perplexed by such an impressive gain on his first move, he invested all his money into NEPSE. Unfortunately, the market crashed within 45 days of his heavy investment.

Little did Pradhan know that he had entered the market just on the eve of a massive downturn. Pradhan was 45 years old at the time.

At 45 years of age, Nirmal Pradhan had lost all his liquid wealth in 45 days, as he himself claims.

Wait, Really though?

However, it is illogical to assume that Pradhan lost all his capital in the downturn, as total wipeouts are rare in the capital market.

The best one can assume is that his portfolio certainly took a heavy blow. As humans, we tend to exaggerate things. Nonetheless, it was only natural that this loss brought great sadness to him.

(Note: For perspective, the stocks that Pradhan bought at Rs. 4,000, 6,000, or 9,000 fell to the absolute low at 400-500. Specifically, Thus, a Youtube video claimed that Pradhan was left only with about 5% of his starting capital.)

Instead of being deterred by this unfortunate turn of events, Pradhan became hard-headedly determined to earn back his lost capital.

If the stock market is a place to lose capital, it is also a place to earn more of it, Pradhan thought.

Nirmal Pradhan and NEPSE Index

When Nirmal Pradhan entered the stock market, the NEPSE index was in an aggressive bull run.

The index had started at 200 and reached 1,200. This was the first bullish advance of the NEPSE index.

However, the index began to lose from there and went as low as 160.

Note that no charting solution in Nepal has accurate data for this time period. The index and stock prices were published in newspapers and the accuracy of even the best charting solutions available in the nation are subject to human limitations.

Nirmal Pradhan and Anchor Effect

When he first entered the secondary market, Nirmal Pradhan had his biggest investment in Bank of Kathmandu Limited. He bought 10,000 shares of the company at Rs. 1,500. The stock then reached Rs. 1,750.

However, Pradhan never felt the urge to sell it.

The stock then bounced back lower and traded near Pradhan’s entry-level at Rs. 1,500. However, Pradhan had already seen the stock trade significantly higher.

Thus, the anchor effect took the best of him and he kept holding. The stock further dove to Rs. 1,300, and kept falling but Pradhan kept holding, simply because he had not sold it when it was at Rs. 1,500.

Pradhan was paralyzed (metaphorically) by this incident and he could never sell the shares.

Eventually, he had to sell the shares at a mere price of Rs. 250 per share.

At the present, Pradhan claims that he has since never invested in the shares of the Bank of Kathmandu. It is evident that this stock scared him in his early journey, and he still has irrational fear inside him about the stock.

Sustaining a Heavy Blow, First Experience With Investor Psychology in NEPSE

Pradhan had also bought NIC Asia Bank’s shares at Rs. 700.

The stock reached as low as Rs. 165, and he sold only when the stock bounced a bit from its low to around Rs. 200.

After losing such a big amount of capital, Nirmal Pradhan claims that he entered a state of extreme sadness. He lamented about his reckless involvement without proper knowledge.

Losing 45 years’ lifetime worth of earnings in 45 days was certain to leave him scarred.

However, what is commendable is that although Nirmal Pradhan had to eventually accept his loss, this man never accepted defeat.

A lot of his friends and companions lost their own investment sum and left the industry already.

But this man persevered and survived to stand the day, and remains a controversial figure till the present when the investment scenario in NEPSE has changed drastically.

What it took to be Nirmal Pradhan, version 2.0

After losing a lifetime of his earnings, an average man would lose all his hopes in life.

It is only natural that he would begin to question his actions and purpose in life.

However, Pradhan wasn’t certainly an average man, as his story depicts.

If he took the usual business route, Pradhan knew that it would take another couple of decades to get back to where he was when he entered this bizarre investment world.

Inspired by the saying that only a diamond can cut diamond, Pradhan chose the stock market itself as his only hope of ever going back to his previous state.

How Nirmal Pradhan Further Raised Investment Funds After Losing His Net Worth

Although he had lost most of his liquid net worth already, Pradhan borrowed investment funds.

Pradhan hailed from a wealthy background in Bandipur. He even had around 4 “ropanis” of land in Kathmandu, and more in Chitwan.

He kept the lands as collateral in order to get investment funds from the banks.

This was in around 2058 B.S. Until then, Pradhan had not entered a bank in his life, never borrowed from a financial institution.

It was an unwritten rule in his family’s dealings that debt was inherently bad.

At that time, Pradhan had 1 ropani, 2 aana land in Thamel. He kept this as collateral and Dipak Bohra provided him with a Rs. 25 lakh loan, which would be Pradhan’s first borrowing in his life.

How much did he borrow really?

From his own personal record, Pradhan’s borrowing from the bank was worth Rs. 300 crores at that time.

What is important to mention is that this was at a time when the single obligor limit of Everest Bank was only Rs. 75 crores and those of Rastriya Banijya Bank and Nepal Bank Limited were Rs. 50 crores and Rs. 40 crores respectively.

By the tripartite agreement between banks, stockbroker companies, and investors, the shareholders were allowed to borrow as they invest.

Note that, unlike today, investors were not required to keep their existing shares as collateral for further borrowing at that time.

However, in another record, Pradhan has stated that he kept his EBL shares as collateral that was worth around Rs. 30 lakhs and took a 70% margin loan from Nepal Finance Limited when Rabi Chandra Pradhan was the company CEO.

Nirmal Pradhan realizes he should have a strategy, or know someone who has one

After sustaining the heavy blow, Pradhan wanted to now take investment advice from the experts of this field.

Thus, he claims of having met with experts, Jeevan Basnet being the most prominent of them. Pradhan told Basnet that he had already entitled him as his guru.

Pradhan thus requested him to tell him which share should be bought at the time.

Jeevan Basnet told Pradhan to come back after a week, so Basnet could analyze the companies listed on the exchange. On his second visit, Pradhan was then told that Everest Bank was the most emerging bank in the nation.

Determined to make up for the loss, Pradhan chose Everest Bank for his next investment.

EBL shares had traded as low as Rs. 325 at that time. Pradhan decided he would buy 10,000 shares of Everest Bank.

Nirmal Pradhan Back to Investing

Nirmal Pradhan then bought shares of Everest Bank at Rs. 300 per share, Standard Chartered Bank at Rs. 465, Nabil Bank at Rs. 465, Nepal Bangladesh Bank at Rs. 430, among other investments.

In another record, Pradhan has said that he kept on buying the shares at a higher price, and Everest Bank had reached as high as Rs. 450 in a span of 6 months.

Since Pradhan had been buying, it is imperative that his average buying price was higher than Rs. 300.

In yet another record, Pradhan revealed that during this time period, he had bought voraciously, absorbing any supply that came.

He also took margin loans against the existing shares and reinvested them into Everest Bank Limited.

Although Pradhan had bought EBL shares on Jeevan Basnet’s research, when his companions and fellow investors asked about the purchase, Pradhan simply told them the reason was that he liked Mt. Everest.

Good days for Nirmal Pradhan

The stock price of Everest Bank then reached Rs. 3,600 per share. Standard Chartered Bank reached Rs. 9,000 per share, Nabil Bank reached 7,000, and Nepal Bangladesh Bank reached Rs. 3,600.

According to one record, Pradhan also added 3,00,000 shares of Butwal Power Company Limited via auction at Rs. 135 per share. BPCL reached as high as Rs. 3,000.

More Green Days in Bull Market Frenzy

Nepal Bank then auctioned the shares of Standard Chartered Bank at a minimum rate of Rs. 1,500. Pradhan bid in the auction and the shares reached as high as Rs. 5,000 later in the secondary market.

This was a period of massive profits in NEPSE. Tripling or quadrupling an investment was normal.

Ultimately, Nirmal Pradhan’s portfolio reached Rs. 16 Arba. His loans were around Rs. 400 crores. This was at a time when the interest rate revolved around 15% in the country and the margin rate was 90%.

Central Bank Steps In, Collapse of Stock Market and Real Estate Market

While Nirmal Pradhan was making his fortune investing in stocks, development banks and financial institutions were beginning to sprout in the nation. Development Banks had narrowed themselves down to investment in real estate.

Sensing that both the investment in land and stocks are unproductive, Nepal Rastra Bank slashed the margin lend rate from 80-90% to 50%. Furthermore, development banks were forced to bring investment/ lending on real estate to 25%.

6 months into this, investors began to sell shares heavily. Banks began to empty their real-estate portfolio. However, the stock market managed to sustain the selling and no significant fall was seen. The central bank then completely prohibited margin lending in the nation.

This created further selling pressure. Pradhan was still able to repay all his loans and never defaulted. His interest payment obligations were estimated at Rs. 12.5 crores every quarter at that time.

For all these reasons, Nirmal Pradhan is called the King, Badshah of Nepal’s share market.

Meanwhile, politically intellectual people have also called him a living martyr of the stock market, for his repeated failure and success stories, and all the hardships that the central bank imposed on investors like him.

Is Nirmal Pradhan the King/ Badshah of Nepali Share Market (NEPSE)?

For all the reasons mentioned above, investors are quick to infer him with the title.

Niraj Giri, the Executive Director of the Securities Board of Nepal, said publicly in a program that NEPSE kept falling when Pradhan had to go to the US for his son’s graduation.

When Pradhan boarded a plane back to Kathmandu three months later, the market hit a positive circuit breaker, Giri claims.

Former Finance Minister Ram Sharan Mahat repeatedly referred to Nirmal Pradhan as the “Man of the Bull” of Nepal’s stock market.

Former SEBON chairman and NRB Governor Chiranjibi Nepal inferred Nirmal Pradhan the title of the lion of the market (Sher of ShareBazar.) Pradhan frequently attended meetups and seminars as a prominent investor and big player in NEPSE.

Yubaraj Khatiwada, former Finance Minister publicly voiced a statement that the government’s objective is to distribute shares to every household and promote capital investment, instead of having the shares only under the ownership of Nirmal Pradhan and his family members, indirectly implying that it was the case then.

Nirmal Pradhan’s view on the nicknames given to him

While Pradhan takes great pride in his nicknames, he admits that he himself never wanted or asked anyone to call him these names.

Pradhan argues that his presence and track record are evident to qualify him as such.

Nonetheless, Nirmal Pradhan says that his nicknames have nothing to do with the rise and fall of the market, and the recent surge in market participation is a result of digitization and active efforts by the central bank, stockbroker companies, SEBON, NEPSE, and all other concerned stakeholders.

Nirmal Pradhan and Stock Market Opinions/ Manipulation

Nirmal Pradhan does not hesitate to voice his opinions or stock picks in the media.

When the index was at 1,100-1,200, he metaphorically urged shareholders to sell their homes and invest in NEPSE and double triple or even quadruple the investment.

If the NEPSE index breaks over the previous all-time high at 1,881, Pradhan had said that it will reach 3,600 in no time.

As of writing, the index has already broken the previous all-time high and made the new all-time high at 2,947.43.

However, the index failed to rise further and went on a deep correction of 40%.

Nirmal Pradhan and his relationship/ views regarding other school of investment thoughts

Nirmal Pradhan takes great pride in (or claims) being able to forecast the direction of NEPSE long before other so-called experts or technical analysts can.

In an interview, he referred to technical analysts as “dharke,” which is a derogatory term popularized in the market by exponents of the field.

If the index breaks over the 3,600 level, Pradhan says that the index will eventually reach 5,400.

What investment strategy does Nirmal Pradhan use?

While Nirmal Pradhan frequently gives stock tips and NEPSE index forecasts, it is not clearly known what strategy he uses. Pradhan berates technical analysts, so one can safely assume he isn’t a technical analysis practitioner.

Meanwhile, in a meetup between prominent investors and traders of NEPSE, Nirmal Pradhan’s son admitted to being in charge of Pradhan’s investment decisions at the present.

Suggested topic addition: Current state and involvement in NEPSE, is he really powerful now? Personal Life

Depiction in Media

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