IBC recovery on companies' fair values up, claims down
insolvency law improved sequentially in the September quarter. However, creditors still took larger haircuts as the recovery against their admitted claims moderated further.
Recovery rose to nearly 97% of the fair value of companies derived after they were admitted for bankruptcy resolutions from just over 84% in the June quarter, beating the historical average of 86%. However, recovery against creditors' admitted claims eased to 28.33% from 31.12%, showed data from the Insolvency and Bankruptcy Board of India (IBBI).
The substantial gap in recovery against fair value and creditors' claims suggests stressed firms had already lost much of their worth by the time creditors tapped the Insolvency and Bankruptcy Code (IBC), experts said. This disparity reflects the double whammy of late filing as well as admission of insolvency cases, said Manoj Kumar, head of insolvency resolution and M&A at consultancy firm Corporate Professionals Capital.
«After insolvency cases are filed, stressed companies often see value erosion due to factors, including uncertainties about growth prospects and further loans for working capital, etc,» Kumar said.
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