According to CARE Ratings, the number of cases admitted for Corporate Insolvency Resolution Process (CIRPs) has increased since the launch of the Insolvency and Bankruptcy Code in 2016, with the debt recoverable rate falling to 30.8 percent or Rs 243,452.5 crore (lenders foregoing Rs 70% of their admitted claims of Rs 790,626.2 crore).
According to the data, the trend in loan recovery rate is also decreasing.
According to CARE Ratings, after decreasing in H2FY21 and FY22, the number of insolvency cases surged by 24% year on year in Q2FY23.
According to the study, the overall recovery rate till Q2FY23 was 30.8 percent, meaning a 70% haircut.
According to CARE Ratings, the number of cases admitted for Corporate Insolvency Resolution Process (CIRPs) has increased since the launch of the Insolvency and Bankruptcy Code in 2016, with the debt recoverable rate falling to 30.8 percent or Rs 243,452.5 crore (lenders foregoing Rs 70% of their admitted claims of Rs 790,626.2 crore).
According to the data, the trend in loan recovery rate is also decreasing.
According to CARE Ratings, after slowing in H2FY21 and FY22, the number of insolvency cases increased by 24% year on year in Q2FY23.
“Despite the rise, the number of cases accepted to the insolvency procedure remained lower in FY19/20 than in previous quarters. When compared to previous times, the distribution of cases across industries has been essentially consistent “According to CARE Ratings.
According to the study, the overall recovery rate till Q2FY23 was 30.8 percent, meaning a 70% haircut.
“However, the cumulative recovery rate has been declining, falling from 43% in Q1FY20 to 32.9% in Q4FY22 as larger decisions are already executed as well as a considerable number of liquidated instances were either BIFR (Board for Industrial and Financial Reconstruction) cases or defunct with a long resolution time,” according to the CARE Ratings report.
Since the launch of the Insolvency and Bankruptcy Code (IBC) in 2016, the number of cases admitted for Corporate Insolvency Resolution Process (CIRPs) has increased each quarter, highlighting the IBC’s growing acceptance as an effective debt resolution mechanism.
The number of cases admitted to the insolvency process increased by around 24% year on year in Q2FY23 after decreasing in the previous quarters in FY21 and FY22; however, despite the increase, the number of cases admitted to the insolvency process remains lower compared to earlier quarters in FY19/20.
As per CARE Ratings, the IBC has grown in popularity, with over 6,000 entities admitted and a considerable number of these cases filed by financial creditors (2,531 instances) and operational creditors (2,531 cases) (3,008 cases).
Financial creditors’ stake has reduced as of September 2022, but operational creditors’ portion has climbed. Over the same time period, the percentage of corporate borrowers has remained the smallest.
In comparison to the preceding era, the share of the various sectors has essentially stayed stable.
According to the credit rating agency, the manufacturing sector accounted for 39% of all cases, followed by real estate (21%), construction (11%), and trading (10%).
When compared to the preceding period, the status of cases under the Corporate Insolvency Resolution Process (CIRP) remained steady.
According to the study, just 9% of the 5,889 cases entered into CIRP at the end of September 2022 resulted in the approval of resolution plans, while 33% continue in the resolution process versus 35% at the end of March 2022.
A total of 1,807 have been liquidated (31 per cent of the total cases admitted). Meanwhile, 76% of such instances were either BIFR cases or had expired.
“Approximately 14% (846 CIRPs) have been closed on appeal/review/settlement, while 11% have been withdrawn under Section 12A. A significant number of withdrawn cases (around 54%) were less than Rs 1 crore in value, with the primary reason for withdrawal being either full settlement with the applicant (40.6%) or other settlement with creditors (24%) “According to CARE Ratings.