Synopsis
• The recovery rate from personal guarantors currently stands at 5.22%. This rate is anticipated to rise following the Supreme Court’s recent ruling affirming the constitutionality of the IBC provisions regarding Personal Guarantors’ Insolvency Resolution. This ruling implies that the personal assets of guarantors can now be utilised to settle outstanding debts owed to creditors.
• The average time taken for resolution or liquidation continues to increase for operational creditors (OCs) and financial creditors (FCs) during the September quarter. Meanwhile, the overall recovery rate till Q2FY24 was 31.85% implying a haircut of approximately 68%. The cumulative recovery rate has been on a downtrend, decreasing from 43% in Q1FY20 and 32.9% in Q4FY22 as larger resolutions have already been executed and a significant number of liquidated cases were either BIFR cases and/or defunct with high-resolution time.
• After slowing in the pandemic period of FY21 and FY22, the number of insolvency cases referred has increased by around 19% y-o-y in Q2FY24. However, despite the increase, the number of cases admitted to the insolvency process continued to be lower compared to earlier quarters in FY20. The distribution of cases across sectors remains broadly similar, compared to earlier periods given the extended resolution timelines.
