Recovery rate at paltry 12.5% as only 7 insolvency cases saw resolutions in Apr-June

Covid19 has taken a toll on the whole insolvency ecosystem as is evident from the number of cases which saw resolutions during the April-June 2020 quarter. In all there were seven cases, where the resolution plans were approved by the NCLT during the quarter compared to 22 during the same period last year.

The total admitted claims of financial creditors’ in these seven cases of resolutions were to the tune of Rs 66,600 crore of which the financial creditors could recover only Rs 8,330 crore, which is a paltry 12.5% of the admitted claims. The operational creditors, however, got the worst deal as they had to satisfy with virtually nothing in most of these cases of resolutions.

Cases which saw resolution include Aircel Limited and two of its subsidiaries Dishnet Wireless Limited and Aircel Cellular Limited. All the three were bought by UV Asset Reconstruction Company for a total sum of Rs 6,686 crore against a total Rs 66,224 crore. All the three cases were disposed off through one order.  The financial creditors in these three cases could recover only Rs 6,630 crore against the admitted claims of Rs 58,800 crore, or 11% of the admitted claim.

 The operational creditors claim admitted by the resolution professional in these three cases was Rs 7,082 crore, but they had could get only Rs 56 crore.

Like the Aircel and its two subsidiaries, two separate cases of Uttam Galva Metallics and Uttam Value Steel were heard jointly by the NCLT and approval of the resolution plans of the two were passed through single order. Both Uttam Glava Metallics and Uttam Galva Steel have been bought by a consortium of Carval Investors LLP and Nithiya Capital Resources Advisors LLP, both alternative funds focused on distressed assets.

Uttam Galva Metallics was bought for a sum of Rs 1,056 crore against total admitted claims of Rs 4,200 crore. Uttam Galva Steel, on the other hand, went to Carval at a sum of Rs 775 crore against admitted creditors’ claim of Rs 3,000 crore.

The financial creditors claim admitted by the resolution professional in these two cases were to the tune of Rs 6,100 crore against which they could recover only Rs 1,600 crore or just 25% of the total admitted claim. Here also the operational creditors got a raw deal. Against admitted claims of Rs 1,080 crore, the operational creditors could recover only Rs 2 crore.

Information technology firm Trimax IT Infrastructure & Services was successfully bid by Ebix Software for around Rs 75 crore against total admitted claims of Rs 1,730 crore.

In another successful resolution, Evan Multi speciality Hospital and Research Centre was bought by Devikripa Ispat Ltd for Rs 24 crore.

Table: Total recovery by financial Creditors