Creditor haircuts under IBC remain high at 52% 

On the other hand, creditors who signed agreements with NeSL (National E-Governance Services Limited) have continued to increase over the last few quarters.

Published: 15th May 2019 05:30 AM  |   Last Updated: 15th May 2019 09:55 AM   |  A+A-

By Express News Service

While the number of cases being admitted under the new bankruptcy process is rising unabated, it’s the lenders that are paying a steep price. Latest data from the Insolvency and Bankruptcy Board of India shows that, of the 94 cases resolved under the insolvency process, financial creditors took a haircut of 52 per cent of the admitted claims. 

What’s unsettling is, during the fourth quarter, the haircut on resolved cases was as high as 90 per cent (barring Essar Steel). However, the steep increase in the write-offs was largely on account of Alok Industries, where lenders had to forego as much as 83 per cent of the admitted claims. 
“The premium received on resolution (2X of liquidation value) compared to opportunity cost on liquidation is high but decreasing sequentially,” Edelweiss noted, adding that while some accounts have shown superior results, the overall haircut scenario has been dismal. 

Even as the corporate insolvency and resolution process keeps evolving, the number of cases admitted to NCLT has been increasing every quarter. Of the total number of admitted cases, nearly one in every two were initiated by operational creditors and the other half by financial creditors. Of the 125 cases that saw closure during the fourth quarter, only 14 cases were resolved, while in 73 cases, the company faced liquidation. The average duration of resolution is 350 days. 

Liquidation remained the most favourable closure of all admitted claims under the insolvency resolution process with 52 per cent of the closed cases facing liquidation. Out of the 378 liquidated cases, in 64 cases, the resolution value was higher than the liquidation value and hence remains a concern going ahead where companies are liquidated even in the presence of optimal resolution, the brokerage pointed out. 
Of the 1,143 ongoing processes, 362 cases have passed 270 days since admission while another 186 cases have crossed 180 days since admission. “Under such circumstances, the number of cases facing liquidation will see a significant increase in the next few quarters,” it added. Interestingly, the number of cases of voluntary liquidation have seen a rise in the last two quarters though closure of such cases is time consuming with only 41 out of 383 admitted cases being closed till 4QFY19 and in 97 cases the final reports have been submitted.

Meanwhile, the number of insolvency professionals is almost one and a half times (2,460; up 170 quarter-on-quarter) the number of corporate debtors admitted under the insolvency process till 4QFY19. 
On the other hand, creditors who signed agreements with NeSL (National E-Governance Services Limited) have continued to increase over the last few quarters.

Stay up to date on all the latest Business news with The New Indian Express App. Download now
(Get the news that matters from New Indian Express on WhatsApp. Click this link and hit 'Click to Subscribe'. Follow the instructions after that.)

Comments

Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the newindianexpress.com editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on newindianexpress.com are those of the comment writers alone. They do not represent the views or opinions of newindianexpress.com or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. newindianexpress.com reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp