Sectoral insights into corporate insolvency: a comprehensive analysis of Corporate Insolvency Resolution Process (CIRP) outcomes in India

Nishanthini Ravichandra Rao and Jayendra Kasture

International Journal of Law and Management, 2024, vol. 68, issue 2, 345-369

Abstract: PurposeThis study aims to analyse the Corporate Insolvency Resolution Process (CIRP) in India, emphasizing the unique challenges faced by different sectors. It highlights that 45.23% of admitted cases result in liquidation or resolution, underscoring the need for sector-specific provisions in the Insolvency and Bankruptcy Code (IBC). The current framework’s limitations lead to higher haircuts and lower recovery rates. Sector operates under general provisions of IBC, which do not include specific clauses designed to address their particular requirements. The implementation of sector-specific strategies is essential for improving outcomes for both distress companies and their creditors. This approach will significantly enhance the efficacy of the insolvency resolution process.Design/methodology/approachThis study uses data from the Insolvency and Bankruptcy Board of India (IBBI) through March 2024. It analyses 7,567 cases admitted under the Insolvency and Bankruptcy Code (IBC), 2016, focusing on sectoral insolvency across various industries such as manufacturing, real estate, constructions, hotels and restaurants, wholesale and retail trade, electricity, transport, storage, communications and others. It analyses data-driven decision-making approach by using formulas to calculate the key metrics such as insolvency rate, recovery rate and haircut rate from a large data set.FindingsThe overall insolvency rate is recorded at 45.23% with nearly half of the cases resulting in either liquidation or resolution plans. Out of the total cases, 2,476 resulted in liquidation, while 947 were resolved through approved plans. The recovery rate is 32.08%, indicating that less than one-third of admitted cases have been recovered. The average haircut rate is 67.89%, indicating substantial reductions in claims to facilitate resolutions. This sectoral analysis reveals that certain industries such as real estate and manufacturing are disproportionately affected, emphasizing the necessity for targeted interventions.Originality/valueThis study’s lies in its sector analysis and use of comprehensive data, from March 2016 to March 2024 from the IBBI. This paper caters to a unique sector and brings a novel viewpoint and valuable insights to the existing literature on insolvency processes in India.

Keywords: Corporate Insolvency Resolution Process (CIRP); Insolvency Bankruptcy Board of India (IBBI); Insolvency Bankruptcy Code (IBC); Sectoral insolvency; Insolvency rate; Recovery rate; Haircut rate (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijlmap:ijlma-08-2024-0291

DOI: 10.1108/IJLMA-08-2024-0291

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