Legacy stressed assets are dragging down recoveries under the insolvency and bankruptcy code (IBC) as companies that were already defunct or under rehabilitation before entering insolvency have recorded much lower recoveries, according to India Ratings.
The rating agency said around 42% of insolvency cases that yielded resolution plans were previously with the Board for Industrial and Financial Reconstruction (BIFR) or were defunct before the insolvency process began. Creditors recovered only 17.5% of admitted claims in these cases compared with 33.3% for companies that were operational when they entered insolvency, the report said.
“Ind-Ra believes this divergence highlights the importance of asset quality in determining recoveries. Going concern businesses continue to demonstrate materially superior outcomes relative to defunct or asset-light entities, suggesting that aggregate recovery metrics may continue to be weighed down by resolution of legacy distressed assets,” the report said.
The agency also highlighted that approval of a resolution plan does not necessarily mean that creditors receive their money immediately. Cash recoveries can be delayed even after a plan has received approval because of implementation requirements, pending applications, litigation and other procedural matters.
“The timing of recovery realisation can differ from the timing of plan approval, making execution risk a key monitorable in insolvency-linked SR (security receipts) transactions,” the report said.
The average time taken to approve a resolution plan rose to 931 days in the first quarter of FY27, compared with 619 days for cases resolved in FY26. The agency attributed the increase partly to the composition of cases resolved during the quarter. The 931-day average is far above the 330-day outer limit under the IBC, which includes the initial 180-day period, a possible 90-day extension and time taken in legal proceedings.
The report also flagged the large number of cases that remain unresolved beyond the prescribed timelines. As of June 2026, 76% of ongoing corporate insolvency resolution processes had crossed 270 days, indicating that a substantial share of cases continue to remain pending for extended periods.
Even though recent changes to insolvency laws and regulations have strengthened the framework, the improvement expected by the market is yet to show up clearly in the available data.
“However, available data does not yet indicate a meaningful acceleration in recovery timelines or a material improvement in recovery outcomes,” the report noted.