Lenders made better recovery in large IBC cases: Official data

New Delhi: Lenders made a better recovery in the case of large stressed firms, each with a default of at least ₹1,000 crore, than the smaller ones under the Insolvency and Bankruptcy Code (IBC), official data showed.

Data compiled by the Insolvency and Bankruptcy Board of India (IBBI) showed that creditors recovered 33.2% of their admitted claims from 152 large stressed firms until March 2024 since the IBC was adopted in late 2016.

However, the recovery from all the 947 bankrupt firms that saw resolution until March 2024 stood at 32.1%, indicating that lenders to smaller firms had to take larger haircuts.


Most of the larger firms are "asset-heavy", driving up the recovery rate, experts had told ET earlier. They also have greater presence across the country, which draw large strategic investors.

However, what influences the recovery rate the most is when the IBC is invoked to rescue the bankrupt firm, they said, adding that the longer the delay, the lower the chances of a good recovery.

Creditors recovered as much as 49% of their claims when the IBC process was completed within the 330-day deadline but this dropped to 26% when it took 600 days or more, ET had reported last month, citing regulatory data.

While the IBBI data don't separately capture the time taken for the resolution of large and small assets, they make it amply clear that delays in resolution lead to asset value erosion and consequent poor recovery for lenders. As of March 2024, resolution in 68% of the ongoing cases has exceeded nine months.

To be sure, the gap between the recovery rates between large and small companies isn't significant.

Also, robust realisation, or lack of it, in a few large cases can potentially distort the broader picture given the huge amount of default involved, the experts said.

Recovery beats realisable value
The data by the Insolvency and Bankruptcy Board of India (IBBI) showed the aggregate default involving the 152 large debtors was ₹9.14 lakh crore as of March 2024.

However, the realisable value of these assets when they entered the resolution process was just ₹1.81 lakh crore. This means these firms were leveraged way beyond the assets they held when the insolvency proceedings were invoked. The eventual realisation in these cases was to the tune of ₹3.03 lakh crore.

The recovery, however, doesn't include potential future realisations from the value of equity holdings after the rescue, resolution of personal guarantors to corporate debtors and the disposal of applications for avoidance transactions.

Liquidation of big firms
Of the 2,476 stressed firms that ended up in liquidation, 200 were large ones with claims of more than ₹1,000 crore each, the IBBI data showed. While creditors to these failed companies had an aggregate claim of ₹8.84 lakh crore, these debtors had assets of only ₹44,000 crore on the ground when the IBC was invoked.