Haircut under IBC jumps to 68% amid delay in resolution: CareEdge

With a dismal recovery outlook, haircut taken by debtors under the Insolvency and Bankruptcy Code has increased to 68 per cent of the admitted claims in the first quarter of this fiscal, against 57 per cent logged in Q1 of FY20.

Of the total admitted claims of ₹10.60 lakh crore, debtors could recover only ₹3.39 lakh crore in the last four fiscals, according to CareEdge Ratings.

The decline in recovery rate was largely due to the lack of interest in the deteriorating smaller asset as larger resolution cases have already been settled.

Number of cases grow

Most of the current resolution cases are either BIFR cases or defunct with high-resolution time as the average time taken for resolution or liquidation continues to increase for both operational and financial creditors in the June quarter.

After the Covid-induced slowdown, the number of insolvency cases referred has increased by about 15 per cent y-o-y in June quarter of this fiscal.

However, the number of cases admitted to the insolvency process continued to be lower compared to earlier quarters in FY20, it said.

The number of admitted cases increased by 230 in the last quarter to 7,813 in June quarter, as against 7,583 in March quarter.

FCs file less cases

The cases filed by financial creditors was lower, at 3,594, than those filed by operational creditors (3,749 cases). The share of corporate debtors has continued to remain the smallest over the same period, it said.

Of the 1,973 ongoing Corporate Insolvency and Resolution Process (CIRP), about 68 per cent of cases are delayed by more than 270 days as of June against 65 per cent registered in the previous year.

The addition of new cases and delay in resolution of older cases has delayed the entire process of resolution, said CareEdge Ratings.

In June quarter, about 240 cases were admitted to the insolvency process with major contribution from the financial creditors.