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INTELLECTUAL CONVERSATIONS WITH MY FATHER: How Experience Trumps Knowledge (Part2/2)

INTELLECTUAL CONVERSATIONS WITH MY FATHER: How Experience Trumps Knowledge (Part2/2)
Author: Apeksha Bansal | 30th Jan 2021 | Read Time: 8-10 mins 

Hello everyone….Apeksha Bansal here.

In continuation to the previous blog (Part 1/2), I wind up the blog by talking about the IL&FS fiasco… how the downfall of IL&FS resonated the same vibe as that of a decade old crisis…almost like a déjà vu moment…. so here’s presenting to you a saga of being a witness to the first crisis and a victim to the second one…Hope you enjoy reading through…..

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I was clearing the attic to make space for my CA Final books and stumbled upon my class V, mental math book. As a child I used to struggle with numbers, so obviously the oral number crunching exercises were definitely not my thing. I flipped through the pages of the old tattered exercise book I was holding and glanced at these numbers: “398 x 973=?” Frankly, even today my first instinct was to reach for my calc. and find the result.
I just smiled inwardly at this thought, my secret little sardonic smile, wondering about the irony of life. Some things never change yet what a sea change of difference the choices we make in life can make.
“I have come a long way”, I exclaimed to myself.
From being a ‘school student’ who hated maths to being a ‘banker’ by chance and then back to being a ‘CA student cum a part time portfolio manager’ trying my hand at managing my own little wealth that I had amassed while working in bank(s). Back then, little did I know that a profession that chose me will eventually make me fall in love with the enchanting world of numbers and finance, so much so, that one day I’ll choose to willingly quit my well settled job at the peak of my career when I was reigning in success both implicitly and financially.
A buzz on my phone brought me back to reality from my daydream.

Aug28, 2018: IL&FS financial services defaults in repayment of commercial papers”, read the Google alert.

“What?” I rubbed my eyes in disbelief. This wasn’t expected.
In the days that followed, IL&FS and its group cos. further defaulted on a series of debt payments due to multiple entities, leaving it & many others cash crunched and seriously troubled.
Even though I was a novice to the world of stock market, but my banking background was enough for me to understand that these defaults were going to have far reaching ramifications, than what appeared at the surface. After all, IL&FS was a ‘shadow bank’ and that too a ‘systemically important NBFC’. Many large institutional investors, MF houses and banks had huge exposure in it. In plain simple language, I knew it spelt trouble for the entire economy due to the sheer size and magnitude of its operations.
True to what I had apprehended (anticipated), IL&FS triggered a chain reaction. It further strained the already straining banking system under the weight of rising NPA’s and adversely impacted many MF houses, other NBFC’s, Housing Finance Cos. and the retail investors alike.
One such housing finance co. was DHFL. Its stock tanked as much as 60% when the news of IL&FS broke. But luckily, I had parked a sizeable chunk of my wealth in the BONDS of this co. and not the equity, so I felt relatively safe. But I guess the so-called-conventional-norm that ‘debt is a safer bet than equity’ was about to be proved wrong.

June 4, 2019: DHFL defaults in payment of interest worth Rs.900 crores due to its bondholders”, read a Google alert.

I winced slightly but then thought that may be due to the liquidity crunch that had been grappling most NBFC’s may have caused it to default and it shall ultimately honour its commitments in future. But a series of events that unfolded coupled with subsequent discovery of frauds and instances of siphoning of funds left me dumbstruck. The scenario looked something like this:

July, 2019: MCA proceeds with investigation into the alleged fraud of Rs.31000 crores by DHFL”, alerted my phone.

My phone beeped again

August, 2019: DHFL informs the stock exchanges that it might not be able to meet its financial obligations in the near future as well”, read the headlines.
November, 2019: RBI files insolvency proceeding against the beleaguered DHFL with NCLT”, stated yet another Google alert.

“Grrrrrrrr……Is this a joke or what? This can’t happen to me”, I cursed under my breath, feeling dejected. All the blood had drained from my face. Never before had I been this annoyed and this furious over receiving an alert. I smashed my phone hard onto the floor, burning yet another not-as-big -a-hole in my pocket.
Frankly, the downfall of DHFL was a huge blow to me. I could see it coming but there was little I could have done about it, because even though the bonds were tradable in the secondary market, there was no buyer available. So effectively, I was left with no choice but just to let the events unfold in front of my own eyes and lose a sizeable chunk of my hard earned money.
The memories of the conversation I had with my father a few days back, about how can a systemic risk metamorphose itself into reality, came flooding to my mind. I mean this seemed unreal to me. To be honest, it felt as if God was doing this to present a live example to me (a nasty challenge more so), just to make me understand a simple financial term viz ‘Systemic Risk’.
As much as I wanted to disappear from the face of the earth, I knew I would have to face the reality and my father. I kept thinking, over and over again as to how was I going to disclose this news to my father, fearing his wrath. But all that came to my mind was an age old advice given by him “Never put all your eggs in one basket”. I more than understood what that meant, but sadly I did not put it to use and there was little I could do now. Nonetheless, I somehow mustered up the courage and walked up to my father, but before I could utter even a single word, he simply said, “WELCOME TO THE WORLD OF FINANCE”.
Taken aback by his unexpected remark, I gaped at him with my mouth half open. “Are you for real?” I wondered aloud. I mean, here I was worrying myself to death thinking that he would shout at me but he was all calm and composed despite knowing that I had just lost a great deal of money primarily because of my stubbornness and partly owing to my inexperience.
But after a while I realised that after all he is my father. He knows me well enough to have figured out as to what I had been up to all this while. The fact that he let me be and did not interfere despite knowing everything still surprises me.
I marvelled at the beauty of this strange equation that I have always shared with my father, supportive yet distant. I mean we don’t talk much, but when we do, we can talk about any damn thing, right from economy to finances to emotions and relations to just being human.
In fact at that moment, another realisation dawned on me, that as students, even though at times we tend to disregard certain theoretical concepts as being irrelevant or unimportant, but studying about them actually opens up our mind and thoughts. It expands the horizon of how we perceive things, situations and life in general. However irrelevant certain things might seem at first, knowledge does not ever go wasted. All it takes is intelligence, to put that acquired knowledge to the right use, when the time arrives.

APEKSHA BANSAL

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6 Comments

  1. Thanks a lot for appreciating and taking time out to jot in your comment Sristi.

  2. Your experience was very well narrated!! I felt as if I m going through a roller coaster ride while reading dis..it was so interesting as well as informative!!!

    As a CA pursuant I definitely gained a lot of insights as to how each nd every knowledge dat we gain plays some or a very imp.role in r life( but it definitely does..may be now or in future…who knows!!)
    Thank you for sharing this!😄

  3. loved this financial conversation… feeling nostalgic….