Mumbai: The cut taken by creditors in bankruptcy resolutions has increased from 64 per cent in FY2023 to 73 per cent in FY2024, a report said on Friday.
A total of 269 resolution plans were approved by the National Company Law Tribunal (NCLT) in FY24, up from 189 in the year-ago period, domestic rating agency Icra reported.
The agency said new admissions declined from 1,263 in FY2023 to 987 in FY2024, which it attributed to a higher base in the previous fiscal year due to stress related to the Covid-19 pandemic.
It may be noted that the reduction, or sacrifice, compared to the total outstanding, which is made by lenders when it comes to corporate insolvency resolutions, has in the past raised some concerns about the price at which a bidder can Is getting the property. ,
Abhishek Dafriya, its group head for structured finance ratings, said the number of haircuts taken by lenders through the Insolvency and Bankruptcy Code (IBC) process has "worsened", hitting 64 per cent in FY23. The comparison has reached 73 percent., which was already high.
He said the average time taken to resolution in fiscal year 2024 has increased from 831 days to 843 days due to lawsuits, and he cited this as one of the reasons why haircuts have also increased. It may be noted that the bankruptcy law envisaged a time frame of 330 days.
The agency believes that average recoveries for lenders will remain in the range of 30-35 per cent in FY2025.
Dafria said the increase in the number of CIRP (corporate insolvency resolution process) by 269 has been encouraging, and added that one entity has come through it as a going concern.The decline in fresh additions has helped bring down the number of CIRPs and NCLTs running till March 31, 2024, to 1,920, from 1,953 a year ago.
Apart from CIRP, NCLT also passed liquidation orders for 44 corporate debtors in FY24 as against 400 corporate debtors in FY23. It said the number of CIRPs resulting in liquidation remains quite high, accounting for 45 per cent of the 5,467 closed CIRPs since the inception of the IBC.
With the remaining cases withdrawn after entry into NCLT, only 17 per cent submitted a resolution plan, the agency said, adding that liquidation for 960 corporate debtors was completed by March 2024 with creditors getting their total sanctioned amount. Only 4 percent of the claims were received.
He said, “More than 75 per cent of the CIRPs that entered liquidation were dormant entities or were already under the Board for Industrial and Financial Reconstruction (BIFR) at the time of entry under the IBC."
A total of 269 resolution plans were approved by the National Company Law Tribunal (NCLT) in FY24, up from 189 in the year-ago period, domestic rating agency Icra reported.
The agency said new admissions declined from 1,263 in FY2023 to 987 in FY2024, which it attributed to a higher base in the previous fiscal year due to stress related to the Covid-19 pandemic.
It may be noted that the reduction, or sacrifice, compared to the total outstanding, which is made by lenders when it comes to corporate insolvency resolutions, has in the past raised some concerns about the price at which a bidder can Is getting the property. ,
Abhishek Dafriya, its group head for structured finance ratings, said the number of haircuts taken by lenders through the Insolvency and Bankruptcy Code (IBC) process has "worsened", hitting 64 per cent in FY23. The comparison has reached 73 percent., which was already high.
He said the average time taken to resolution in fiscal year 2024 has increased from 831 days to 843 days due to lawsuits, and he cited this as one of the reasons why haircuts have also increased. It may be noted that the bankruptcy law envisaged a time frame of 330 days.
The agency believes that average recoveries for lenders will remain in the range of 30-35 per cent in FY2025.
Dafria said the increase in the number of CIRP (corporate insolvency resolution process) by 269 has been encouraging, and added that one entity has come through it as a going concern.The decline in fresh additions has helped bring down the number of CIRPs and NCLTs running till March 31, 2024, to 1,920, from 1,953 a year ago.
Apart from CIRP, NCLT also passed liquidation orders for 44 corporate debtors in FY24 as against 400 corporate debtors in FY23. It said the number of CIRPs resulting in liquidation remains quite high, accounting for 45 per cent of the 5,467 closed CIRPs since the inception of the IBC.
With the remaining cases withdrawn after entry into NCLT, only 17 per cent submitted a resolution plan, the agency said, adding that liquidation for 960 corporate debtors was completed by March 2024 with creditors getting their total sanctioned amount. Only 4 percent of the claims were received.
He said, “More than 75 per cent of the CIRPs that entered liquidation were dormant entities or were already under the Board for Industrial and Financial Reconstruction (BIFR) at the time of entry under the IBC."