Business metrics of companies improve post insolvency process: IIM Study

economictimes.indiatimes.com:

insolvency process exhibit a significant increase in business metrics, but their new owners encounter difficulties when interacting with tax officials, banks, and even the RBI, said a study by Indian Institute of Management, Ahmedabad.

For instance, several of the companies claimed that banks made it difficult for them to acquire loans by refusing to remove the "defaulter" tag even after resolution. The conditions were a little tough wherever loans were offered, reported TOI.

“A lack of general awareness about the new resolution process by all stakeholders has been pointed out by the respondents.

This has led to delays in getting necessary clearances from these departments and an overall delay in the resolution process. A transparent online mechanism was proposed to issue no dues/claims once the process is completed as a step to solve the issue.

This will enable firms to engage freely with banks on a clean slate,” the report said.

The companies participating in the resolution exercise have also flagged concerns over the performance of some of the resolution professionals as well as repeated attempts by litigants to delay the process and called for mechanisms to stop unnecessary litigation. But financial performance of the companies that were taken up for action under IBC has improved, the study showed.

There was a 76% jump in average sales of companies three years after resolution. Staff strength went up, which was indicated by an increase in average wage bill by around 50%.