The number of cases admitted for the corporate insolvency resolution process (CIRP) has risen 18% year-on-year to 7,325 as of December 2023, from 6,199 cases as of December 2022, according to the latest data from the Insolvency and Bankruptcy Board of India (IBBI). However, there has been a sequential decline in new admissions for the CIRP, with 244 cases being admitted in the third quarter of the current fiscal year, down from 250 cases in the second quarter.
“The number of ongoing CIRPs has declined, indicating that cases have been disposed at a faster pace compared to their admission,” said Sanjay Agarwal, senior director, Care Ratings. “IBC has continued to gain in popularity, with over 7,300 companies being admitted and a significant number of these cases on a cumulative basis being filed by financial creditors (3,300 cases) and operational creditors (3,586 cases).”
The share of the various sectors has largely remained constant in the third quarter compared with the previous quarter. The manufacturing sector accounts for the highest share at 38% of the overall cases, followed by the real estate (21%), construction (12%) and trade (wholesale & retail) (10%) sectors. In the first quarter of the current fiscal, 251 cases were admitted for the CIRP, taking the total cases admitted to 745 in the first nine months. Total ongoing insolvency cases reached 1,899 as of December, while 5,426 cases were closed.
The average time taken for resolution or liquidation continues to increase for operational and financial creditors during the December quarter. Meanwhile, the overall recovery rate till the third quarter was 31.86%, implying a haircut of approximately 68%.
“The cumulative recovery rate has been on a downtrend, decreasing from 43% in the first quarter of FY20 and 32.9% in the fourth quarter of FY22, as larger resolutions have already been executed and a significant number of liquidated cases were either BIFR (Board for Industrial and Financial Reconstruction) cases or defunct with high-resolution time,” noted a recent report by Care Ratings.
The number of cases admitted for the insolvency resolution process has seen a consistent rise since the launch of the Insolvency and Bankruptcy Code (IBC) in 2016, highlighting the rising acceptance of the IBC as an effective debt-resolution mechanism. The number of cases admitted for the insolvency process increased to 1,263 in 2022-23, from 888 in the previous financial year. Experts believe that the number of cases admitted for the insolvency process in 2023-24 is expected to be less than the previous financial year.