Latest news with #MohitMakhija
&w=3840&q=100)
Business Standard
22-07-2025
- Business
- Business Standard
IBC helps to resolve total bad debt worth ₹26 trillion in nine years
The introduction of the Insolvency and Bankruptcy Code (IBC) in 2016 has enabled the resolution of total debt worth Rs 26 trillion to date, reflecting its deterrent effect on defaulting borrowers. The direct resolution of approximately Rs 12 trillion of debt for about 1,200 cases of stressed borrowers, according to CRISIL Ratings' analysis. More importantly, it has also created significant deterrence among borrowers, leading to the settlement of around 30,000 cases with approximately Rs 14 trillion of debt, even before applications made to the National Company Law Tribunal (NCLT) were admitted, it said. CRISIL, in a statement, said IBC brought a change in the debt resolution approach by shifting from a "debtor-in-control" model to a "creditor-in-control" framework. This distinguishes IBC from other debt resolution mechanisms existing prior to it, such as the Debt Recovery Tribunal (DRT), Lok Adalat, and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (SARFAESI). Since 2016, the total debt of around Rs 48 trillion has been resolved across different debt resolution mechanisms. The average recovery rate under the IBC has been the highest at 30-35 per cent, compared to around 22 per cent for SARFAESI, about 7 per cent for DRT, and just 3 per cent for Lok Adalat. The relative success of the IBC compared to other debt resolution mechanisms has been due to factors like the flexibility accorded to creditors to change the management of viable assets on a going-concern basis and to right-size debt. These, coupled with the improved economic environment over the past three fiscals, have boosted investor interest, especially in the infrastructure and manufacturing sectors, CRISIL said. Mohit Makhija, Senior Director, Crisil Ratings, said, 'Aided by its deterrence effect, IBC will remain the preferred route for debt resolution in the days ahead. The improved economic viability of infrastructure and manufacturing assets makes them lucrative for investors to acquire and turn around under the IBC. Further, small- to mid-sized assets, which form around 85 per cent of the IBC's unresolved pipeline, are likely to attract investors with varied risk appetites,' he added. The IBC also enabled the resolution of numerous small- to mid-sized distressed assets in recent years. This is exemplified by the fact that while the past three fiscals accounted for 60 per cent of all resolution approvals since the IBC's introduction, they represented only 40 per cent of the total debt. A higher number of eligible investors, who qualify to participate in bids, will keep the demand for these small- to mid-sized distressed assets intact. While IBC has been periodically amended to further enhance its efficiency, stretched timelines and limited success in implementation for certain sectors may require some additional interventions, it added.
New Indian Express
22-07-2025
- Business
- New Indian Express
Nine years of IBC: Over Rs 26 trillion stressed debt resolved
MUMBAI: The Insolvency and Bankruptcy Code (IBC), introduced nine years ago in May 2016, has enabled direct resolution of Rs 12 trillion (excluding cases under liquidation) of debt across 1,200 cases of stressed borrowers but when the indirect resolutions are considered, the number tops Rs 26 trillion and another Rs 22 trillion of debt have been resolved through other mechanisms. While the IBC has directly resolved Rs 12 trillion worth of stressed loans, it has also created significant deterrence amongst borrowers leading to the settlement of 30,000 cases with Rs 14 trillion of debt even before insolvency applications were admitted by the various benches of the national company law tribunals (NCLTs), shows and analysis by Cirisil Ratings. When the number of resolutions through the pre-IBC mechanisms like the debt recovery tribunals (DRTs), the lok adalats and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi), the total resolved debt tops Rs 48 trillion since 2016. While the IBC has been periodically amended to further enhance its efficiency, stretched timelines and limited success in implementation for certain sectors may need some more interventions, the report primary changes in debt resolution approach that IBC brought in has been the shift from a debtor-in-control model to a creditor-in-control framework that distinguishes it from other debt resolution mechanisms existing prior to IBC such as the debt recovery tribunals (DRTs), the lok adalats and the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act (Sarfaesi). This has meant that since 2016, of the total resolved debt of Rs 48 trillion across different debt resolution mechanisms, the average recovery rate under the IBC has been the highest at around 35%, versus 22% for Sarfaesi, 7% for DRTs and 3% for lok adalats. Other reasons for the relative success of the IBC over other debt resolution mechanisms include the flexibility accorded to creditors to change the managements of viable assets on a going-concern basis and to right-size debt. These, coupled with the improved economic environment over the past three fiscals, have boosted investor interest, especially in the infrastructure and manufacturing sectors. The IBC has also enabled the resolution of numerous small-to-mid sized (up to Rs 500 crore) distressed assets--while the past three fiscals accounted for 60% of all resolution approvals since the IBC, it represented only 40% of the total debt. According to Mohit Makhija, a senior director with Crisil, one-fourth of total debt resolved since 2016 has been through the IBC, contributing to 50% of total recovery. Aided by its deterrent effect, the IBC will remain the preferred route for debt resolution going ahead as well. Further, small-to mid-sized assets, which form 85% of the IBC's unresolved pipeline, are likely to attract investors with varied risk appetites. That said, the key challenge, according to him that IBC faces, has been the high backlog of cases at the NCLTs, primarily due to procedural delays at various stages and cross-litigation by stakeholders stretching the resolution timelines beyond what was earlier envisaged (713 days as of last fiscal vs the regulatory prescribed 330 days).To address this, the Insolvency and Bankruptcy Board of India (IBBI) has increased the bench strength of NCLTs, allowed routine submissions by resolution professionals online, and enabled part-wise resolution of corporate debt.
Hans India
22-07-2025
- Business
- Hans India
IBC helps resolve over Rs 26 lakh crore debt in India in 9 years: Report
Mumbai: Nine years after the launch of the Insolvency and Bankruptcy Code (IBC), India has managed to resolve debt worth more than Rs 26 lakh crore, either directly or indirectly, a new report said on Tuesday. Out of the total amount, around Rs 12 lakh crore of debt was resolved through about 1,200 cases of stressed borrowers after they were admitted to the National Company Law Tribunal (NCLT), as per data compiled by Crisil Ratings. However, a bigger impact of the IBC has been in creating fear among defaulting borrowers, which helped settle nearly 30,000 cases involving Rs 14 lakh crore of debt even before these cases could be formally admitted by the NCLT. Since its launch in 2016, the IBC has replaced the earlier debtor-friendly system with a creditor-in-control approach. This major shift has made IBC more successful compared to earlier debt recovery methods like the Debt Recovery Tribunal (DRT), Lok Adalats, and SARFAESI. Data shows that the average recovery under the IBC has been 30-35 per cent, which is much higher than 22 per cent under SARFAESI, 7 per cent under DRT, and just 3 per cent through Lok Adalats. Experts say that the flexibility given to creditors under IBC -- including the power to replace managements and restructure loans -- has helped resolve even smaller and mid-sized distressed assets in recent years. In fact, about 60 per cent of all IBC resolution approvals in the last three years were for smaller cases, although they accounted for only 40 per cent of the total debt. According to Mohit Makhija, Senior Director at Crisil Ratings, about one-fourth of the total resolved debt since 2016 was handled under IBC. He said IBC has not only given the highest recovery rates but also contributed to almost half of the total recoveries. With growing investor interest in infrastructure and manufacturing assets, Makhija believes IBC will continue to be the preferred route for lenders.
Time of India
16-06-2025
- Business
- Time of India
Debt recovery in stressed realty projects to rise 1,600 bps this fiscal: Crisil Ratings
For asset reconstruction companies (ARCs), the cumulative recovery rate of security receipts (SRs) issued towards stressed real estate projects will increase by 16 percentage points to 38% this fiscal, as per rating agency Crisil. The improvement will ride on robust sales of new units in these projects, backed by steady demand in the residential real estate sector, on the back of strategic debt restructuring facilitated by the ARCs . These findings are based on a Crisil Ratings analysis of 70 stressed real estate projects located in NCR, MMR and Bangalore micro-markets, with SRs issued worth Rs 10,800 crore. Majority of these projects were trapped in a spiralling debt cycle due to falling sales, slow collections and lack of funds to complete construction — most of which are addressed today. Increase in real estate prices and rising demand in the above micro-markets post-pandemic resulting in ramping up of sales have turned these projects viable for funding by external investors, the rating agency said in a note. As per Crisil, demand growth of 7-9% expected in fiscal 2026 for residential real estate in the three micro-markets mentioned above will support the sales for these stressed projects as well. About two-thirds of the rated projects are in the mid-premium segment and above, which are expected to contribute up to 80% of recovery for ARCs driven by stable demand in fiscal 2026. The remaining projects are in the affordable segment which is likely to see modest demand and will contribute lower to recoveries this fiscal. 'Overall, ARCs are expected to see recoveries in stressed real estate projects surge as developers aim to add 2.5 million square feet of inventory this fiscal," said Mohit Makhija, Senior Director, Crisil Ratings. "With 40% of rated projects nearing completion, there is renewed investor interest in at least one-fourth of these projects for last-mile funding, particularly in the premium segment. Incentivising sales at marginally below market prices of near-completion inventory is expected to accelerate sales in these projects.' Crisil says that restructuring of debt has emerged as the preferred resolution strategy for stressed real estate projects, because ARCs can bring down the debt to sustainable levels with an initial moratorium on payments, allowing developers to redirect project cash flow towards construction of units in these projects. Another reason is that restructuring is also favoured by ARCs due to inherent issues in the real estate sector such as two-fold ownership of land and development rights, multiple special purpose vehicle structures with cross-collateralisation and several layers of approval from state authorities, as per Crisil. While restructuring ensures promoters have skin in the game and resolutions are faster, these issues make other strategies such as the Insolvency & Bankruptcy Code (IBC), enforcement and liquidation more time-consuming and thus leading to lower recovery. About 40% of the stressed real estate projects in the Crisil Ratings SR portfolio has undergone restructuring as the primary mode of resolution, resulting in expected nominal recoveries of up to the full principal amount of debt acquired over an 8- year trust life. 'Debt restructuring of stressed projects has significantly improved the viability of projects by right-sizing debt to sustainable levels," said Sushant Sarode, Director, Crisil Ratings. "Construction progress for the stalled projects rated by us is estimated at 80-85% on average within 2.5 years of restructuring. This construction is largely funded by project cash flow, thereby indicating strong sales velocity. The right balance of sustainable debt and steady demand momentum will help fructify efforts of ARCs to turn around some of these stressed projects.'
&w=3840&q=100)
Business Standard
16-06-2025
- Business
- Business Standard
Debt recovery in stressed realty assets to improve to 38% in FY26: Crisil
The cumulative debt recovery rate in stressed real estate projects is expected to improve substantially from 22 per cent in FY25 to 38 per cent in FY26, driven by robust new sales and steady housing demand, according to rating agency Crisil. These projects have benefited from strategic debt restructuring facilitated by Asset Reconstruction Companies (ARCs). 'Overall, ARCs are expected to see recoveries in stressed real estate projects surge as developers aim to add approximately 2.5 million square feet of inventory this fiscal. With around 40 per cent of rated projects nearing completion, there is renewed investor interest in at least one-fourth of these projects for last-mile funding, particularly in the premium segment. Incentivising sales at marginally below market prices of near-completion inventory is expected to accelerate sales in these projects,' said Mohit Makhija, Senior Director, Crisil Ratings. The projections are based on Crisil's analysis of around 70 stressed real estate projects located in the National Capital Region (NCR), Mumbai Metropolitan Region (MMR) and Bengaluru micro-markets, with security receipts (SRs) issued worth ₹10,800 crore. Estimated demand growth of 7–9 per cent in FY26 for residential real estate across these micro-markets is likely to support sales in the stressed projects. Around two-thirds of the projects are in the mid-premium segment and above, which are expected to contribute up to 80 per cent of recoveries for ARCs, driven by stable demand in FY26. The remaining projects are in the affordable segment, which is likely to see modest demand and will contribute less to overall recoveries. Most of these projects were previously trapped in a spiralling debt cycle due to falling sales, slow collections and a lack of funds to complete construction—challenges that are now largely addressed, Crisil noted. Rising real estate prices and growing demand in these micro-markets post-pandemic have enabled a ramp-up in sales, making the projects more viable for external investor funding. About 40 per cent of the stressed real estate projects in the Crisil Ratings SR portfolio have undergone restructuring as the primary mode of resolution, resulting in expected nominal recoveries of up to the full principal amount of debt acquired over an eight-year trust life. 'Debt restructuring of stressed projects has significantly improved their viability by right-sizing debt to sustainable levels. The right balance of sustainable debt and steady demand momentum will help fructify the efforts of ARCs to turn around some of these stressed projects,' said Sushant Sarode, Director, Crisil Ratings. Going forward, the sustenance of healthy residential real estate demand and the effective implementation of ARC-led restructuring efforts will be key to watch, Crisil added.
