Tracing the clean-up so far

The Insolvency and Bankruptcy Code, 2016 (IBC) has made good progress by resolving the cases of ~94 companieswith stressed liability of Rs 1.7 lakh crore as of March 2019. The recovery amounted to ~Rs 0.7 lakh crore, translatinginto a haircut of ~58% for financial and operational creditors.

The disaggregation of these numbers throws up an interesting aspect: Just 16 steel assets had more than half – Rs0.9 lakh crore to be exact – of the overall stressed debt, and the haircut required was 47%.

The balance stressed debt worth Rs 0.8 lakh crore involved 78 assets spanning textiles, construction, and autocomponents, among others. The haircut here was around 69%.

Further, if we consider two steel assets from the National Company Law Tribunal-I (NCLT-I) list that are inchingtowards resolution / closure, the total liability resolved in the steel sector will double to Rs 1.9 lakh crore. Here, asmuch as Rs 1.1 lakh crore would be recovered, which translates into a haircut of 42%.

The hair cut would be significantly lower than any other sector’s debt that got resolved under IBC as of March 2019.