Insolvency resolution high for manufacturing sector, lags for real estate

This is a tale of two sectors--manufacturing and real estate. Together, the two industries account for three out of five insolvency cases admitted in India but have thus far yielded vastly contrasting outcomes.

Manufacturing made up 38% of all such cases admitted until September 2023 since the Insolvency and Bankruptcy Code (IBC) came into force late 2016, but its share in the resolved cases was as much as 48%. Real estate, meanwhile, accounted for 21% of the admitted cases but only 15% of the resolved ones, according to the latest Insolvency and Bankruptcy Board of India (IBBI) data.

Experts said while both the sectors are “asset-heavy”, greater investor demand for manufacturing is the key differentiator in resolutions. Moreover, given the involvement of large numbers of homebuyers, who have been accorded the financial creditor status under the IBC, the resolution of insolvent real estate firms has turned out to be both complex and lengthy, they said.


Several real estate developers, including Jaypee, Unitech, Amrapali, Today Homes, Supertech, Logix and Ajnara, are facing insolvency proceedings.

Interestingly, the share of construction in admitted and resolved cases stood at 12% and 11%, respectively.

Among other key sectors, wholesale and retail trade accounted for 10% of the insolvency cases admitted up to September 2023, followed by transport and electricity (3% each) and hotels (2%). In resolved cases, the share of wholesale and retail trade was 7%, followed by electricity (5%), hotels and transport (2% each).

The data showed, as of September 2023, as many as 7,058 insolvency cases were admitted by the National Company Law Tribunal (NCLT), of which 808 saw resolution. Liquidation orders were passed in 2,249 cases, while 2,001 cases were in the process of resolution. The rest of the cases were either withdrawn or settled/closed on appeal, etc.

Manoj Kumar, partner and head of M&A and insolvency resolution services at consultancy firm Corporate Professionals Capital, said stressed manufacturing entities--unless they have been very sick for a long time--are an easy target for investors. “Many investors (in the same sector) want to acquire these insolvent companies at a reasonable cost instead of going for green-field projects for capacity expansion for a variety of reasons, including the time-consuming land acquisition and environmental clearance processes,” he said.

As for real estate, often the interests of homebuyers don’t get aligned with those of other creditors. This makes the resolution process more difficult, Kumar added.

A Delhi-based insolvency expert said, the key difference between real estate and manufacturing is the number of financial creditors. “In real estate, the number of financial creditors (homebuyers) is huge, so their individual weight is too low to influence outcomes. So, litigations are very rampant in such cases. However, in the case of manufacturing units, the number of financial creditors who make up the committee of creditors is limited. So, it’s easier to get to an agreement. Of course, there is also a greater investor appetite for industrial entities than realty estate ones,” he added.

To expedite the resolution of real estate cases, the government is considering a proposal to restrict the invocation of the IBC to only bankrupt projects and not extended to the entire company, including other solvent projects.