Around 41 per cent of the overall cases belong to the manufacturing sector, followed by the real estate (20 per cent), construction (11 per cent) and trading sectors (10 per cent). The sectors have remained constant with the previous quarter, even as the overall percentage number has changed. Within the manufacturing domain, basic metals (7 per cent) and textiles (7 per cent) sectors continue to have the largest cumulative number of cases admitted under the IBC.
Research by CARE Ratings shows that of the 2,542 cases admitted under IBC, 59 per cent of the cases are still in the resolution process. As many as 586 cases have gone into liquidation. Over two-thirds of these cases were under Board for Industrial & Financial Reconstruction (BIFR) or non-operational companies
where the resolution value was less than or equal to the liquidation value. Five per cent of the cases were withdrawn under Section 12 A of IBC- the key reason being either the full settlement with the applicant or other settlement with creditors. Six per cent of the total cases have culminated in approval of resolution plans.
“In past, the recovery rate in India was as low as 26 cents to a $1 (or 26 per cent recovery). Post implementation of the IBC, as can be seen in the above table, the recovery rate till date in India has improved to 42 per cent. However, the recovery for Q2 in FY20 has dipped to 34 per cent, which is still better than 14 per cent reported in the last quarter (Q1 of FY20). Though the IBC process is time
bound, many of the larger cases have witnessed significant delays due to various reasons such as litigation. However, this timeline of 300 days is significantly superior to the earlier legal process where it was not unusual for the entire process to take a better part of a decade to complete”, the report by CARE Ratings noted.
At the initial stage, the Reserve Bank of India (RBI) had directed the initiation of resolution proceedings for 12 large accounts by banks. These 12 companies
had outstanding claims of Rs 3.45 trillion compared to a liquidation value of Rs 73,220 crore. Resolution plans for seven companies have been approved, while liquidation orders were passed against two companies. In case of Amtek Auto, implementation of the resolution plan failed and hence, the process has been restarted.