Published on 3/06/2020 3:43:06 PM | Source: IANS

Realisations for financial creditors via IBC to take a hit in FY21

Posted in Economy News| #Economy #Industry #ICRA #COVID-19

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The Covid-19 pandemic along with suspension of new proceedings under IBC is expected to result in "significantly lower realisations" for financial creditors in FY21.

Accordingly, these factors are expected to result in lower realisations by 30-40 per cent in FY20-21 and pose new challenges.

"ICRA expects the resolution of corporate insolvency resolution proceedings (CIRPs) would be impacted during FY2021 due to a decline in the number of CIRPs yielding a resolution plan as well as an increase in haircuts that lenders would have to take," ICRA said in a statement.

"The financial creditors could realise about Rs 600-700 billion in FY2021 through successful resolution plans from the IBC as compared to about Rs 1,000 billion realised in FY2020."

As per the statement, the resolution amount would also be lower in FY2021 as the previous year witnessed large-size non-performing assets successfully concluding the CIRPs.

"In the current fiscal, successful resolution of a large housing finance company is going to be the key determinant of the extent of amount the financial creditors would realise during the year," the statement said.

In addition, the ratings agency noted that realisations from resolution plans could further suffer in FY2022 as fresh insolvency proceedings have been suspended for one-year period.

"New insolvency proceedings initiated in FY2022 are unlikely to get resolved in the same fiscal, given the typical average time period seen for CIRPs to conclude with a resolution plan is quite high," the statement added.