Insolvency and Bankruptcy Code: At 61%, IL&FS recovery may beat IBC’s 39% | India Business News – Times of India

MUMBAI: The estimated recovery from the IL&FS resolution process at around 61% of overall group debt is better than the average 39% recovery by lenders under the Insolvency and Bankruptcy Code (IBC) process.
According to C S Rajan, MD of IL&FS, the company has managed this through a combination of court-approved sales and settlements. Given that there is no legislative or regulatory regime to deal with group insolvency, the board adopted a multipronged approach — depending on the type of asset — by focusing on resolution, restructuring and recovery.
In its April 2021 update, the new board enhanced its estimates of aggregate debt recovery to Rs 61,000 crore. This was an increase of Rs 5,000 crore over previous estimates, and represented a resolution of over 61% of (overall fund-based and non-fund based) group debt of approximately Rs 99,000 crore, as of October 2018.

This includes the debt addressed through resolution, restructuring and liquidation across 347 IL&FS companies. As of end-March 2021, of the 347 entities, 186 have been resolved with Rs 43,000 crore of debt addressed.
The quarterly newsletter of the Insolvency and Bankruptcy Board of India for March 2021 reveals that recovery through resolution amounted to about 39%. And recovery through liquidation is around 4%. According to bankers, recovery in the IBC process has had extreme outcomes.
There have been cases like Essar Steel and Bhushan Steel where the lenders got all their money back, and others like Videocon and Jet Airways, which were pretty close to liquidation value.
What the IBC data does not show is the one-time settlement cases that are happening outside the insolvency process. In many of these cases, the promoters know that they can lose everything should their company go into bankruptcy, which is prompting them to come forward for a settlement.
The IL&FS board had the advantage of all options, and they were not pushed into a ‘sale or liquidation’ situation. For instance, in the case of road projects, where conventional investors were spoilt for choice given the road projects on sale, the board decided to go for the alternative option of setting up an infrastructure investment trust (InvIT).
According to Rajan, the resolution framework — approved by the National Company Law Tribunal — has been devised to optimise recovery for various classes of creditors, including for those at the holding company levels, where most of the total group debt lies.
Industry sources say that while the new board has addressed a major chunk of the debt, the challenge is resolving IL&FS Financial Services and the remaining cases of dozens of companies where the amounts involved are relatively small. In the case of I-FIN, the board is understood to have dropped the plan to sell Rs 5,000 crore worth of loans after bids came in the range of 5%.