Rs 75,000 cr recovered through IBC, says report

Rs 75,000 cr recovered through IBC, says report

Agency News

New Delhi, May 3 : At least Rs 75,000 crore has been recovered with the resolution of 94 stressed assets under the Insolvency and Bankruptcy Code (IBC) till March 31 this year, a report said on Friday. The recovery has been made at the rate of 43 per cent, according to a ASSOCHAM-Crisil joint study. “With a respectable recovery rate of 43 per cent, resolution for 94 stressed assets has been reached for Rs 75,000 crore as on March 31, 2019 out of Rs 1,75,000 crore total claim of financial creditors admitted under the Corporate Insolvency Resolution Process (CIRP) approved by the National Company Law Tribunal (NCLT),” the report said.

Highlighting that adherence to IBC timelines still remains a challenge, the report said the average resolution timeline for the resolved 94 cases was 324 days while the stipulated insolvency resolution timeline is 270 days. The study – titled “Strengthening the Code” -- said had the 94 cases undergone the liquidation process, the recovery rate for financial creditors would have been 22 per cent which is significantly lower than the recovery rate through normal resolution process. As on March 31, 2019, there were 1,143 cases outstanding under CIRP, of which resolution in 32 per cent of the cases was pending for more than 270 days, it added.

It highlighted that there are a few big-ticket accounts for which resolution has not been finalised for over 400 days. “This still is considerably faster than the recovery time of 3.5-4 years taken by asset reconstruction companies (ARCs),” the ASSOCHAM-Crisil report stated, adding that it is also far better than the World Bank’s Doing Business 2019 report, which pegs the recovery timeline for stressed assets in India at 4.3 years. It further said that IBC is a key reform in the path of strengthening identification and resolution of insolvencies in India and in an expedited manner. “The code has provided creditors and other stakeholders the ammunition to obtain the maximum value for stressed assets by shifting the balance of power from debtors – a big plus.”

The report, however, said that given the development and the amendments that have seen already, the stressed assets resolution framework in the country is still a work in progress. While resolution in a time-bound manner remains a challenge along with other teething issues, the IBC, undoubtedly, since the time of its enactment has evolved considerably. “The government will need to relook at the code based on stakeholder suggestion, and keep the credit lines well-oiled,” noted the ASSOCHAM-Crisil report.

“But one thing is certain – there is no going back to the pre-IBC era.” The report also suggested that an immediate ramp-up of NCLT and NCLAT infrastructure, digitisation of both these platforms, proactive training/on-boarding of judges, lawyers and other intermediaries will be necessary for effective implementation of the code. According to the report, the committee of creditors (CoC) must work dynamically with resolution professionals to revive the company and should be better equipped through various training programmes to handle professional challenges. To maximise value and stakeholders’ interest the IBC framework for liquidation under a ‘going concern’ basis needs to be explored further and should be followed in true spirit. The report said an active secondary market and funding from banks could foster entrepreneurial interest, helping in faster redeployment of these assets and ensuring better price discovery. (UNI)