NEW DELHI: The total market capitalisation of stressed companies that have been rescued under the ten-year-old insolvency law has more than tripped to Rs 9 lakh crore from about Rs 2.8 lakh crore in five years after resolution, according to a study by IIM-Ahmedabad.
It reflects “improved investor confidence and growth prospects following successful resolution with creditors”, the Insolvency and Bankruptcy Board of India (IBBI) said in a statement, citing the study commissioned by it.
The study showed average sales of the resolved firms have surged 89% in the five years post-resolution and their asset turnover ratio has climbed 131%, suggesting enhanced operational efficiency.
The study on the effectiveness of the Insolvency and Bankruptcy Code (IBC) covered 1,194 rescued firms. The latest study builds on the findings of a 2023 study conducted by IIM-Ahmedabad on the IBC.
The latest data showed capital expenditure of insolvent companies has risen by about 106% in five years after resolution, “reflecting renewed investment activity and improved economic viability of the firms”.
Average assets of these companies have grown 11.5% from Rs 228.33 crore in the rescue year to Rs 254.60 crore in the fifth-year of resolution.
Similarly, the average employee expenses have increased by close to 72% for firms after five years of resolution, “indicating greater employment intensity and a possible expansion in workforce-related expenditure during the post-resolution phase”, the regulator said.
“In the post-resolution period, the average employee strength per unit of total assets has increased by approximately 200% over five years,” it added.
Liquidity of the rescued firms, the study showed, has improved considerably in the post-resolution period, with a 106% increase over the five-year period following resolution.
"The findings of this study highlight the effectiveness of the resolution process in restoring the financial and operational health of distressed firms," the regulator said.
The improvements witnessed across key indicators, including sales, capital expenditure, asset utilisation, liquidity, employment intensity, and market valuation, suggest the resolution framework has played a significant role in reviving economic activity and strengthening the long-term viability of resolved firms, it said.
"These trends demonstrate the capacity of the resolution mechanism under IBC in supporting business recovery, encouraging renewed investment, and contributing to broader economic value creation in the post-resolution phase," the IBBI said.
It reflects “improved investor confidence and growth prospects following successful resolution with creditors”, the Insolvency and Bankruptcy Board of India (IBBI) said in a statement, citing the study commissioned by it.
The study showed average sales of the resolved firms have surged 89% in the five years post-resolution and their asset turnover ratio has climbed 131%, suggesting enhanced operational efficiency.
The study on the effectiveness of the Insolvency and Bankruptcy Code (IBC) covered 1,194 rescued firms. The latest study builds on the findings of a 2023 study conducted by IIM-Ahmedabad on the IBC.
The latest data showed capital expenditure of insolvent companies has risen by about 106% in five years after resolution, “reflecting renewed investment activity and improved economic viability of the firms”.
Average assets of these companies have grown 11.5% from Rs 228.33 crore in the rescue year to Rs 254.60 crore in the fifth-year of resolution.
Similarly, the average employee expenses have increased by close to 72% for firms after five years of resolution, “indicating greater employment intensity and a possible expansion in workforce-related expenditure during the post-resolution phase”, the regulator said.
“In the post-resolution period, the average employee strength per unit of total assets has increased by approximately 200% over five years,” it added.
Liquidity of the rescued firms, the study showed, has improved considerably in the post-resolution period, with a 106% increase over the five-year period following resolution.
"The findings of this study highlight the effectiveness of the resolution process in restoring the financial and operational health of distressed firms," the regulator said.
The improvements witnessed across key indicators, including sales, capital expenditure, asset utilisation, liquidity, employment intensity, and market valuation, suggest the resolution framework has played a significant role in reviving economic activity and strengthening the long-term viability of resolved firms, it said.
"These trends demonstrate the capacity of the resolution mechanism under IBC in supporting business recovery, encouraging renewed investment, and contributing to broader economic value creation in the post-resolution phase," the IBBI said.
