Creditors have witnessed a higher recovery rate of 32.6% from the resolution of larger stressed firms since the inception of IBC in 2016, according to the Insolvency and Bankruptcy Board of India (IBBI) data. On the other hand, recovery from all insolvent firms resolved until June stood at 31.6%, indicating that lenders have gained more from the larger stressed entities.Large debtors
The aggregate recovery from large cases, each with admitted creditor claims exceeding Rs 1,000 crore, reached Rs 2.67 lakh crore out of admitted claims totalling Rs 8.18 lakh crore. This translates to 174% of their liquidation value, which was assessed at Rs 1.53 lakh crore. However, these figures do not include potential future realisations from equity holdings, resolution of personal guarantors, or avoidance transaction applications post-rescue.
Among the 720 companies salvaged through IBC up to June, 127 were considered large debtors. These cases demonstrated that stressed entities with substantial assets displayed a more significant rate of recovery. Out of 2,120 corporate debtors that underwent liquidation, 181 held claims exceeding Rs 1,000 crore individually. While the aggregate claim stood at Rs 7.84 lakh crore, the actual assets available were a mere Rs 42,000 crore when IBC proceedings were initiated.
Why the difference
Industry experts noted that the difference in recovery rates is partially attributed to the asset-heavy nature of larger companies compared to smaller ones. This discrepancy influences recovery rates when these firms face insolvency. Despite this trend, the disparity between recovery rates for large and small companies remains moderate.
There is inadequate quality data on financials and operations in smaller firms, alongside regional presence that deters strategic investors.
Blame for extended recovery periods and subsequently higher haircuts for both large and small firms has also been directed at prolonged litigation, causing delays in asset resolution. According to IBBI data, over 65% of ongoing resolution processes have exceeded the IBC-set 270-day deadline, resulting in implications for creditors.
