Resolutions Recent data from the Insolvency and Bankruptcy Board of India (IBBI) has noted that financial creditors managed to recover just 12% of their claims in the quarter ended December. For the quarter ended September, the recoveries were around 34%. The statistics are published each quarter.
Resolution of large accounts
The resolution of 12 large accounts were initiated by banks, as directed by Reserve Bank of India. These accounts had an outstanding claim of Rs 3.45 lakh crore as against liquidation value of Rs 73,220 crore. The report stated that of these 12 accounts, a resolution plan of 7 corporate debtors have been approved and orders for liquidation have been passed for two.
A total of 579 cases of voluntary liquidation were admitted till December 31, 2019. Most of these corporate persons are small entities. “334 of them have paid-up equity capital of less than Rs 1 crore. Only 62 of them have paid-up capital exceeding Rs 5 crore,” the report added.
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A most recent example is that of Amtek Auto, where the consortium of lenders agreed to take an 80% haircut on the recoveries.
Also, of the total 3312 cases, 246 have been closed on appeal or review or settled; 135 have been withdrawn; 780 have ended in liquidation and 190 have ended in approval of resolution plans.
Till December 2019, a total of 135 CIRPs have been withdrawn under section 12A of the IBC. Till September 2019, 156 CIRPs had yielded resolution plans.
“It is seen that about 57.74% of the SERPs, which were closed, ended in liquidation, as compared to 14.06% ending with a resolution plan. However, it is important to note that 72.48% of the CIRPs ending in liquidation were earlier with Board for Industrial and Financial Reconstruction (BIFR) and or defunct,” the report said.
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The haircut for most of the cases resolved in 3QFY20 was quite high at 88%, indicating a worsening haircut scenario. The slow pace of resolution is a big hindrance as out of 1,961 ongoing admitted cases, only 635 cases have passed 270 days since admission, while another 247 cases have crossed 180 days since admission.
The report also stated that the total number of cases admitted for CRIP in the last 11 quarters has increased significantly, and is seeing a gradual increase with every passing quarter.
Given the slow recovery process, and a steep fall in the realization by financial creditors via IBC in Q3, experts believe that lenders may seek out-of-court settlements.