The resolution of 94 stressed assets achieved around 43% debt recovery as of 31 March, 2019, amounting to ₹75,000 crore since the inception of the Insolvency and Bankruptcy Code (IBC) in 2016, a report said.
The total recovery as of March-end stood at ₹75,000 crore, against the total claim of ₹1.75 lakh crore by financial creditors, the joint-report by Assocham and Crisil said, adding that the asset resolution framework in the country is still a “work in progress”.
The report, however, termed the recovery rate of 43% “respectable”. It noted that, had the 94 cases undergone the liquidation process, the recovery rate for financial creditors would have been 22%, even lower than the recovery rate through normal resolution process.
“With a respectable recovery rate of 43%, resolution for 94 stressed assets has been reached for ₹75,000 crore as on March 31, 2019 out of ₹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),” said that report titled, “Strengthening the code”.
As per the report, the average resolution timeline for the resolved 94 cases was 324 days against the stipulated insolvency resolution timeline of 270 days.
As of 31 March, 2019, there were 1,143 cases outstanding under CIRP, of which resolution in 32% 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.
The report suggested the improvement of the infrastructure of NCLT and NCLAT and digitisation of both these platforms. It said that 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,” it said.
According to the report, an active secondary market and funding from banks could foster entrepreneurial interest, helping in faster redeployment of these assets and ensuring better price discovery.
It however, said that IBC has provided creditors and other stakeholders the ammunition to obtain the maximum value for stressed assets by shifting the balance of power from debtors.
“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,” it added.
Source: Mint