285 firms faced insolvency proceedings in April-September

In the September quarter alone, 144 companies were taken to the National Company Law Tribunal (NCLT) benches for defaults, according to the Insolvency and Bankruptcy Board of India (IBBI) data, accepted for bankruptcy proceedings so far. The total number of companies incorporated has gone up to 4,708. ,

The number of admissions in the first half of the fiscal year is almost half of the total number of cases that ended up in the tribunal in FY2011, when bankruptcy proceedings were suspended for fresh defaults, and cases were taken up only in the pre-pandemic period. Could have started for omissions. ,

The fact that there has been no spike in admissions for two quarters after the suspension on bankruptcy proceedings for defaults during the pandemic in March this year provides relief to policymakers.

However, given the gap in cases being admitted to the Tribunal, the actual number of distressed companies against which creditors may have moved the Tribunal may be much higher.

Also, experts say lenders may be reluctant to initiate bankruptcy proceedings against defaulters if they are unsure about being able to attract new investors.

In its quarterly update, the Insolvency and Bankruptcy Board said it is important to develop a market for stressed assets for an emerging economy like India, where the corporate bond market lacks depth and liquidity, and market participants are heavily burdened with loans from banks. are more dependent.

“Banks are grappling with rising Non-Performing Assets (NPAs), requiring a well-developed distressed asset market to effectively liquidate these NPAs,” IBBI said.

One reason that prompted lenders to take second thoughts about initiating bankruptcy proceedings is the heavy haircuts taken by several creditors as part of the bankruptcy resolution, a concern that a parliamentary standing committee also voiced in August. Was.

Furthermore, the data shows that companies with more physical assets have managed to attract bids from investors because it gives them the confidence to recover some of their investments, even if there is no post-acquisition corporate turnaround effort.

IBBI data showed that the largest segment of people initiating insolvency cases by the end of September are operational creditors such as vendors.

Operating creditors initiated 2,397 cases, financial creditors initiated 2,019 cases, and corporate debtors referred 291 cases.

Of all the cases closed so far, resolution plans have been approved in 14%, and 46% have received liquidation orders. Of all the cases acknowledged so far, 40% are in the manufacturing sector, and 20% are in the real estate industry.