The cumulative recovery rate under the insolvency resolution processes of debt-ridden companies declined to 30.18% at the end of the September quarter, indicating that lenders took more haircut on their exposure, shows a study.
The recovery rate has fallen steeply from a peak of 43% in Q1 FY20.
Of the Rs 7,90,626.2 crore claims from the financial creditors admitted by various benches of the National Company Law Tribunal, only Rs 2,43,452.5 crore or 30.18% have been recovered till the end of Q2 FY23, as per an analysis of IBBI data done by Care Ratings.
The overall recovery rate implies a haircut of around 70% for the lenders.
The Insolvency and Bankruptcy Board of India is a key institution in implementing the Insolvency and Bankruptcy Code, which provides for market-linked and time-bound resolution of stressed assets.
The cumulative recovery rate has been on a downtrend, falling from 43% in Q1 FY20 and 32.9% in Q4 FY22 as larger resolutions have already been executed and a significant number of liquidated cases were either Board for Industrial and Financial Reconstruction cases and/or defunct with high resolution time, the report said.
There has also been a fall in the number of cases going to/admitted by the NCLT since the second half of FY21.
Since the implementation of the IBC in 2016, close to 5,893 companies have been admitted by various NCLT benches.
Out of those cases, operational creditors filed 3,008 cases, a little over 50%, and financial creditors filed 2,531 cases or around 45%.
The share of corporate debtors has continued to remain the lowest at around 3% as of September 2022.
The share of the various sectors has largely remained constant compared with the previous period, with the manufacturing sector accounting for the highest at 39% of the overall cases, followed by real estate (21%), construction (11%) and trading (10%).
The status of the cases has largely remained constant compared with the previous period. Of the total 5,893 cases admitted as of September 2022, only 9% ended in resolution. Of the total admitted cases, as much as 1,807 ended in liquidation (31%), according to the study.
Around 14% or 846 cases closed on appeal/review/settled, while 11% were withdrawn. In terms of the cumulative value, total admitted claims of financial creditors stood at Rs 7,90,626.2 crore as of Q2 FY23, up from Rs 6,84,901.3 crore in March 2022.
The incremental addition during Q2 of this fiscal was Rs 10,121.5 crore.
The cumulative money recovered by financial creditors stood at Rs 2,43,452.5 crore as of September 2022, up from Rs 2,25,293.8 crore in March 2022. The Q2 addition stood at Rs 3,054.4 crore.
The delay in resolution, which has been plaguing the process from the very beginning, still remains a challenge. Of the 1,944 ongoing cases, as much as 63% were delayed by more than 270 days as of September 2022, down from 73% in September 2021.