While the number of insolvency cases are expected to pile up over the next few quarters, timely conclusion of cases within the law mandated 180-270 days can free up as much as Rs 67,000 crore to the system, said a report.
Since the bankruptcy law came into being from May 2016, close to 3,000 companies have been sent to various NCLTs for resolutions of which only 586 have been closed so far while 63 have been withdrawn after the law was amended last year under which Section 12A has been inserted into the original law.
According to ICRA, as of December 2018, as many as 898 corporate insolvency cases are awaiting a resolution as against 768 cases as in September 2018. Up to December 2018, only 79 cases have yielded a resolution while 302 cases have entered into liquidation which is a very high proportion.
According to an estimate by the agency, “the timely conclusion of pending entities can bring in additional Rs 65-67,000 crore to the financial creditors, which is equivalent to about 6.5 per cent of gross NPAs in the system”.
This is a sizeable figure considering 79 resolved cases so far have helped the financial creditors realise close to Rs 65,000 crore, either upfront or in a staggered manner, notes the report.
“Almost 68 per cent of the NCLT cases have already exceeded the 270-day timeline allowed under the law. Moreover, those cases already resolved as of the December quarter have taken an average 354 days compared to 340 days taken in the September quarter. In fact, over the past one year, the resolution time has gone up,” it said in a note on Tuesday.
The report further said that the haircuts taken by the financial creditors have also seen a mixed trend depending on the relative health of the corporate debtor’s assets, the willingness of the resolution applicant to enter particular geography among others.