This is true about any highly leveraged company aka Banking and NBFC firms. God knows how many banks and NBFCs succumbed to leverage. Even a large player like ICICI Bank was almost wiped out during their Bank Run (Again, a perception issue).
I certainly did not expect that the second largest HFC in the country would succumb to perceptions too this way. DHFL is the exception, not the rule. So clearly, I had found the wrong balance. I paid little by way of valuations, but with spiking yields in the secondary market for their bonds, the Risk kept on increasing and I tapped out at some point.
The same applies to my investment in Mirza too. I did not expect the management to risk so much for the price I paid. I posted this just days before unwinding my entire position in Mirza:
Of course, your idea of Risk may be very different from mine. If you are only comfortable with extremely stable revenues, well-proven business models and a well-known promoter, then you wouldn’t find Value in 99% of the listed universe. This is completely fine. We should maximize our returns for the Risk we plan to take. That’s about it.
This goes beyond Equity investing. Several of my relatives aren’t interested in equities altogether. To them, it is as good as gambling. So in their eyes, Equities are extremely Risky. They invest largely in Land and Gold. They should maximize their returns in those parcels, although in your eyes it may seem like they are missing out on good returns in Equities. Risk is very personal and we haven’t really scratched the surface of understanding it. ‘Anomalies: Risk Aversion’ by Matthew Rabin and Richard Thaler is a good place to start though.