IBC recoveries down even as resolutions soar in FY24

Recovery from defaulters under the Insolvency and Bankruptcy Code (IBC) decreased in 2023-24 from a year before, although 42% more cases saw resolution during the financial year, showed data compiled by the regulator.

The realisation for creditors from the resolution of stressed companies during the fiscal went down to ₹47,653 crore from ₹55,449 crore in 2022-23, according to the Insolvency and Bankruptcy Board of India data. This happened even as a record 269 stressed firms saw resolution under the IBC in 2023-24, against 189 in the previous year.

Analysts blamed long delays in resolution for the larger haircuts for lenders.

The rate of recovery fell to 27% of the creditors' admitted claims in 2023-24 from 36% in the previous year, pulling down the cumulative recovery since the IBC was introduced in 2016 to 32%. In absolute terms, the cumulative recovery from resolved firms stood at ₹3.36 lakh crore.

However, the recovery touched 85% of the fair value of the stressed companies when they were admitted for resolution and 161.8% of the liquidation value of these assets.

The regulator has said recovery is significantly influenced by the asset value when the stressed firms enter the resolution process and the time consumed in resolution. In addition, it's the outcome of a market-determined price discovery process and commercial wisdom of the committee of creditors that approve such resolution plans.