Cracking the Code: Q2 recovery under IBC rises to 33%

Creditors' recovery from loans to bankrupt companies under the Insolvency and Bankruptcy Code (IBC) rose to 33% of their admitted claims in the September quarter from 29.5% in the previous three months, according to the latest data compiled by the insolvency regulator.

Improved investor interest in a broad range of small and medium enterprises and above-average realisation from the assets of a large company - Srei Group - boosted the recovery last quarter, showed the data.

The realisation in the September quarter stood at ₹20,771 crore from about 85 stressed firms.

The recovery, however, was as high as 133.3% of the fair value of the stressed companies when they were admitted for resolution. This suggests the substantial value of the assets had already eroded by the time bankruptcy proceedings were initiated.

Moreover, the recovery was 219.6% of liquidation value of these companies.

The improved realisation in the last quarter pushed up the overall recovery since the insolvency regime came into force in late 2016 to ₹3.16 lakh crore, or 31.85% of the claims that were admitted by the adjudicating authority relating to 808 stressed firms.

However, the cumulative proceeds were 86.31% of the fair value of the companies (when the IBC was invoked) and 168.5% of their liquidation value.

Key assets

The Insolvency and Bankruptcy Board of India (IBBI) data for the September quarter showed Srei Group assets fetched over 41.7% of the admitted claims of creditors.

The resolution of Srei Equipment Finance and Srei Infrastructure Finance fetched ₹13,785 crore, against the admitted claims of ₹33,050 crore. The recovery was as high as 172.7% of the fair value of the company when the IBC was invoked and 280.7% of its liquidation value.

The rescue of other stressed assets (with admitted claims above ₹200 crore each) that propped up the overall recovery rate in the September quarter were Arena Superstructures (74.1% of claims of ₹781 crore); Sivana Realty (66% of ₹459 crore); Capricorn Food Products (34.9% of ₹228 crore); and UBS Publishers (56.2% of ₹221 crore). The realisation, however, was much higher in terms of the fair or liquidation value of these assets.