Recovery From IBC Decreases To 26% In December Quarter
The recovery of creditors from defaulters under the Insolvency and Bankruptcy Code (IBC) decreased to almost 26 per cent of their admitted claims during the December quarter, down from 33 per cent in the previous three months, suggested the latest data compiled by the insolvency regulator. The recovery during this quarter was Rs 4,281 crore from 79 firms. However, long delays in resolution seem to have affected realisation. About two dozen of these rescued firms saw the resolution processes stretching beyond four years, which is well beyond the stipulated time frame of 270 days, indicating a decline in the stressed asset value.
Despite the decline, the recovery was 74.7 per cent of the fair value of the stressed companies when they were admitted for resolution, and 128.6 per cent of the liquidation value of these companies, as per the data shared by the Insolvency and Bankruptcy Board of India (IBBI).
The insolvency regime, which came into force in late 2016, has led to a cumulative recovery of Rs 3.21 lakh crore. This amounts to 31.9 per cent of the claims that were admitted by the adjudicating authority, related to 891 distressed firms. The cumulative proceeds were 86.6 per cent of the fair value of the rescued companies (when the IBC was invoked), based on the proceeds involving 783 resolved cases. In all the resolved cases, the realisation was 168.6 per cent of the liquidation value of the firms.
However, experts argue that it is not fair to judge the IBC's performance based on the recovery rate for any one quarter. They suggest that the IBC is still the best tool for bad debt resolution. Recovery prospects hinge on when the IBC proceedings are invoked against a stressed firm. The delay in invoking the proceedings can lower realisation. The recovery rate under the IBC is way above that through other channels such as Lok Adalat, Debt Recovery Tribunal, or the Sarfaesi Act.
