Bankers take 80% haircut in 22 insolvency resolutions in July-September; total recovery at Rs 3,779 cr

As many as 22 CIRP resolutions were reported to the Insolvency and Bankruptcy Board of India (IBBI) in the July-September 2020 quarter, according to IBBI’s quarterly report released today. These resolutions yielded recoveries of Rs 3,779 crore against total financial creditors’ claim of Rs 18,337 crore, a recovery rate of 20.6%.

Bulk of this recovery came from Amtek Auto case, where the successful resolution applicant – Deccan Value Investors – has paid the financial creditors Rs 2,614 crore, or 20.7% of their claims of Rs 12,641 crore. Another major case that saw resolution during the quarter was that of GVR Infra Projects, where the resolution applicant had offered to pay Rs 352 crore to financial creditors, a mere 15.5% of Rs 2271 crore claimed  by them.

Till 30 September 2020, a total of 4,008 insolvency applications had been admitted by the National Company Law Tribunal (NCLT), out of which 277 had seen resolutions, which helped financial creditors recover Rs 1.89 lakh crore against their claim of Rs 4.34 lakh crore, showing a recovery rate of 43%. The average time taken to approve a resolution plan is 433 days.

Liquidation

A total of 1025 cases have been sent for liquidation. During the July-September 2020 quarter, 68 CIRPs ended in liquidation.

About 49.61% of the CIRPs, which were closed, yielded orders for liquidation as compared to 13.41% ending in resolution. However, 73.48% of the CIRPs ending in liquidation (751 out of 1022 for which data are available) were earlier under BIFR and, or defunct.

Of the 1025 corporate debtors ending up with orders for liquidation, data in respect of 1022 CDs are available. These had an aggregate claim of Rs 5.88 lakh crore. Unfortunately, they had assets, on the ground, valued only at Rs 0.42 lakh crore.

Of the 1025 cases which have gone into liquidation, 77 have been closed by dissolution, and four have been closed as going concern.

Till 30 September 2020, four corporate debtors — namely, Emmanuel Engineering Private Limited, KTC Foods Private Limited, Southern Online Bio Technologies and Smaat India Private Limited were closed by sale as a going concern under liquidation process. These four coporate debtors had claims amounting to Rs 737crore as against the liquidation value of Rs 60 crore. The liquidators in these cases realised Rs  81.58 crore and companies were rescued.

Average time taken for sending a case for liquidation is 318 days, but closure of the liquidation process takes on an average 332 days. Insolvency cases which fail to see any resolutions are ordered to be liquidated.

Voluntary Liquidation

A corporate person may initiate voluntary liquidation proceeding if majority of the directors or designated partners of the corporate person make a declaration to the effect that the corporate person has no debt or it will be able to pay its debts in full from the proceeds of the assets to be sold under the proposed liquidation, and the corporate person is not being liquidated to defraud any person.

At the end of September 2020, 747 corporate persons initiated voluntary liquidation, out which final reports in respect of 295 voluntary liquidations have been submitted by 30 September. Of the 295 voluntary liquidation cases, 152 corporate persons, who owed Rs 9.85 crore to creditors, had been dissolved leading to recovery of full amount of Rs 9.85 crore.

Closure of voluntary liquidation cases on an average takes 359 days.

Resolution before admission

The threat that the Insolvency and Bankruptcy Code (IBC) poses to corporate debtor has changed the behaviour of debtors. Thousands of debtors are resolving distress in early stages of distress. Most CDs are trying to settle with their creditors even before the insolvency application is admitted by the NCLT.

Till September 2020, 14,884 applications for initiation of CIRPs of CDs having underlying default of Rs 5,15,170 crore were resolved before their admission.

Status of CIRPs as on 30 September 2020