According to the IBBI, over 47% of cases closed under the insolvency law ended up in liquidation by the end of June this year, although the bulk of the cases' economic worth had deteriorated even before the start of the corporate insolvency resolution procedure.
Until the end of June, a total of 4,541 CIRPs (Corporate Insolvency Resolution Processes) had been started, with 2,859 of them being completed. According to the Insolvency and Bankruptcy Board of India's (IBBI) last quarterly bulletin, 1,349 CIRPs resulted in liquidation, while 396 resulted in the approval of resolution plans.
"Around 47% of the CIRPs that were closed resulted in liquidation orders, compared to 14% that resulted in a resolution plan." However, 75% of the CIRPs that ended in liquidation (1,011 out of 1,349) were previously affiliated with the Board for Industrial and Financial Reconstruction (BIFR) and/or were no longer in operation. Even before they were accepted to CIRP, the economic worth of most of these CDs (Corporate Debtors) had almost totally deteriorated.
"On average, these CDs had assets worth about 7% of the outstanding debt amount," the newsletter stated. Concerns have recently been expressed in certain areas regarding the rising number of firms going bankrupt and creditors taking severe haircuts under the Insolvency and Bankruptcy Code (IBC), which has been in effect for almost five years. The IBBI is a critical component of the Code's implementation.
"FCs' (Financial Creditors') realization under resolution plans in contrast to liquidation value is 167.95 percent till June 30, 2021, while their realization in comparison to their claims is 36 percent. It's worth noting that 127 of the 396 CDs recovered through resolution plans were either in BIFR or had stopped working "the newsletter has been added
Operational Creditors (OCs) were responsible for almost 51% of the CIRPs, while FCs were responsible for roughly 43%.
"However, approximately 80% of CIRPs with an underlying default of less than Rs 1 crore were begun on applications by OCs, whereas approximately 80% of CIRPs with an underlying default of more than Rs 10 crore were initiated on applications by FCs," the report stated. According to the newsletter, CDs are initiating a smaller percentage of CIRPs over time, and they generally do so with very high underlying defaults.
Comments