Rs 8.44 Lakh Crore NPA by Top 100 Defaulters: RTI Reply

An investigation by The Indian Express reveals that 82 out of the top 100 corporate defaulters in 2019, including prominent companies led by industrialists, underwent proceedings in the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC), 2016. Over the years, nearly one-third of these companies were liquidated, leading to negligible recoveries for banks.

Key Findings from the Investigation

Overview of Defaulters and Debts

• Total Debt: ₹8.44 lakh crore owed by these 100 companies in 2019.
• NPAs: ₹4.02 lakh crore (about 50%) of this debt was classified as non-performing assets (NPAs) as of March 2019.
• Liquidated Companies: 28 companies with a combined debt of ₹1.23 lakh crore.
• Recovery Rate: Creditors recovered an average of 3.17% of admitted claims in liquidation cases.

The data for these companies was sourced from annual reports, audit findings, filings with stock exchanges, Registrar of Companies (RoC) submissions, and NCLT orders. The list of defaulters was accessed through the Right to Information (RTI) Act after years of appeals and hearings before the Central Information Commission (CIC).

Sectoral Analysis

• Major Contributors to Debt:
  • 15 companies in manufacturing, energy, and construction accounted for over 50% of the total debt (₹4.58 lakh crore).
  • 34 companies from energy, 32 from manufacturing, 20 from construction/real estate, and 5 from telecom made up the majority of defaulters.
• Top Defaulters:
  • Bhushan Power & Steel Limited: ₹41,400 crore (acquired by JSW Steel).
  • Essar Steel India Limited: ₹69,360 crore (acquired by ArcelorMittal-Nippon Steel).
  • Other major defaulters include Videocon Industries, Reliance Communications, Jaiprakash Associates, and Prayagraj Power.

Outcomes of Insolvency Proceedings

Resolution Plans and Recoveries

• Total CIRPs: 74 companies underwent Corporate Insolvency Resolution Processes (CIRPs).
• Resolution Plans Approved: 33 companies saw resolution plans approved by NCLT.
  • Banks recovered ₹82,961 crore out of admitted claims worth ₹2.25 lakh crore.
  • Average recovery rate: 36.84% of claims.
• Poor Recovery Cases: Recovery rates ranged from 9% to 20% for companies like MCNALLY Bharat Engineering, ACIL Limited, and GVK Power (Goindwal Sahib).

Liquidation Cases

• Companies Liquidated: 28 companies referred for liquidation.
• Average Realization: Creditors recovered just 3.17% of admitted claims in liquidation cases.

Unresolved Cases

• 13 cases remain unresolved, with proceedings still underway.
• 5 additional companies await the initiation of CIRPs.

Timelines and Delays

• Average Duration: Resolution plans took 960 days on average, far exceeding the 330-day timeline under IBC.
• Impact of Delays: Cases resolved within 330 days had higher recovery rates (49.22%) compared to those exceeding 600 days (26.11%).

Major Acquisitions Under IBC

• JSW Steel acquiring Bhushan Power & Steel.
• ArcelorMittal-Nippon Steel acquiring Essar Steel.
• Adani Power acquiring three energy companies.

Broader Implications and Sectoral Trends

IIM Study on Recovery Rates

An IIM study highlighted that asset-light industries like hospitality had higher recovery rates, while asset-heavy sectors like manufacturing and energy fared poorly.

Insolvency and Bankruptcy Board of India (IBBI) Insights

• The IBBI reports an average recovery of 32.30% for cases with approved resolution plans.

Conclusion

The findings reveal systemic challenges in India’s insolvency framework. High haircuts, delays, and limited recoveries underscore the need for reforms to streamline processes and enhance creditor returns.