Banks Recover 40% Of Dues From Top 12 Insolvency Accounts

Lenders to the 12 largest accounts, referred for insolvency proceedings in June 2017, have managed to recover about 40 percent of their outstanding dues. So far, 11 cases out of the 12 have reached some form of resolution, while one case is still pending.

According to data compiled by BloombergQuint, lenders have recovered Rs 1.16 lakh crore out of the Rs 2.96 lakh crore in claims admitted by financial creditors in these cases. These 12 accounts, identified by the Reserve Bank of India, represented about 25 percent of the banking system's gross non-performing assets as of March 2016.

The recoveries come from 10 of the top 12 cases. Assessing recovery in the case of NBCC Ltd's resolution plan for Jaypee Infratech Ltd is difficult due to a number of non-cash elements involved. The resolution for Era Infra & Engineering Ltd. is still pending. In the case of ABG Shipyard Ltd., Lanco Infratech Ltd., IVRCL Ltd. and Jyoti Structures Ltd., various benches of the National Company Law Tribunal have ordered liquidation. For purposes of calculating recovery, the data consists of liquidation value for these four companies.

Overall recoveries were largely pushed up by three steel sector cases—Essar Steel Ltd., Bhushan Steel Ltd. and Bhushan Power & Steel Ltd.

ArcelorMittal and Nippon Steel & Sumitomo Metal Corporation Ltd repaid Rs 42,000 crore to lenders to Essar Steel as part of their resolution plan. Tata Steel Ltd. repaid Rs 35,200 crore out of Rs 56,000 crore that Bhushan Steel owed to financial creditors. JSW Steel Ltd.'s Rs 19,600 crore bid for Bhushan Power was approved by the National Company Law Appellate Tribunal on Monday.

For companies such as Alok Industries Ltd., Amtek Auto Ltd. and Jaypee Infratech Ltd., legal delays and restarting bidding processes caused a drop in recoveries. Amtek Auto and Alok Industries saw the lowest recoveries among cases that got resolved.

Lanco Infratech, IVRCL, ABG Shipyards and Jyoti Structures ended up finding no buyers and are in liquidation.

The haircut taken by banks on these top accounts cumulatively is better than the overall recovery performance so far.

According to a report by Kotak Institutional Equities, released on Friday, banks have seen an average haircut of 88 percent in the cases which were resolved in the October-December 2019 period. This is the highest percentage of haircut that lenders have taken in a single quarter since the introduction of the IBC in 2016, the report said.

“Barring a few cases, almost all resolutions in Q3 FY20 had a haircut of >60 percent. The average premium to liquidation value was 120 percent for accounts resolved in Q3 FY20. While some accounts have shown superior results, the overall haircut scenario is dismal,” analysts at Kotak Institutional Equities said in their report.

As of Dec. 31, 2019, various benches of the NCLT had a total of 1,961 cases in which insolvency proceedings were ongoing. Liquidation had commenced for 780 cases, while resolution plans were approved for 190 companies. Promoters had managed to settle their debt and withdraw insolvency proceedings against their companies under Section 12A of the IBC in 135 cases.