The idea is to expedite the resolution process and generate greater interests for the assets by making key information available to a wider pool of investors at the earliest so that they place bids quickly.
India is planning to have a comprehensive online marketplace for stressed assets where potential investors, both domestic and foreign, will be able to not just submit their interests for an insolvent company but also view crucial details about the assets available for both resolution and liquidation under the insolvency and bankruptcy code (IBC).
The idea is to expedite the resolution process and generate greater interests for the assets by making key information available to a wider pool of investors at the earliest so that they place bids quickly. Under the extant framework, bidders can have access to critical details about a toxic asset only after the resolution professional floats the expression of interest (typically after 45 days of the admission of a case by NCLT) and the potential suitors are selected.
A source told FE that once an insolvency application is admitted by the NCLT, the details — including of default amount, size of various assets, and time-line of various processes for resolution — of the stressed company will likely be made available on the e-platform. Serious investors can view sensitive information about the assets, for which they have to sign a non-disclosure agreement. They can then start due diligence early and choose the stressed companies for submitting their resolution plans accordingly. Serious suitors can have access to various layers of information about stressed companies, while not-so-serious ones will get basic inputs on the assets on the platform.
When contacted, Insolvency and Bankruptcy Board of India (IBBI) chairman MS Sahoo told FE the regulator had already invited proposals from only regulated entities (like those running stock depositories, information utilities etc) to operate such a marketplace.
According to the source, these entities will have the flexibility of generating revenues for their operations by way of a fee from interested investors for the information and other services provided through this platform, and the government doesn’t have to bear the financial burden. These entities will come under the regulatory glare of IBBI.
The proposal comes at a time when the resolution of many large default cases, including Essar Steel and Bhushan Power and Steel, has dragged on for ages due to litigations, much beyond the maximum of 270 days that the IBC used to allow to resolve a case. In fact, the resolution of as many as 34% of the 1,292 ongoing cases in the bankruptcy courts until June 30 were delayed beyond 270 days, up from 26% a year ago and 31% in the March quarter. Five of the 12 large non-performing asset (NPA) accounts recommended by RBI in 2017 for resolution under the IBC are yet to see finality in resolution.
Of course, the government has now stipulated that all insolvency cases must be resolved with 330 days, including the time spent on litigations. This, as corporate affairs secretary Injeti Srinivas emphasised last week, will help expedite resolution under the IBC. The move to set up the online marketplace is yet another attempt to speed up the process.
Analysts have pointed out that while the government and the regulator have been responding to the changing insolvency landscape swiftly with regular changes/additions to the Code and regulations, the adjudicating and appellate mechanisms must pick up pace and stop unscrupulous element from hijacking the IBC process through frivolous litigation.