Recently, in a study, the Indian Institute of Management Ahmedabad found that the build-up of tangible assets and average sales of companies have surged into the outcomes of the companies that were resolved under the IBC (Insolvency and Bankruptcy Code). IIM Ahmedabad claimed that the average sales of the companies surged 76 percent after three years of the resolution while the build-up of tangible assets rose 50 percent. The study of IIM Ahmedabad also emphasized that hotels and restaurants have the highest chances of recovery than electricity, gas, and water supply companies that have the lowest recovery rates. You should gather more details about what IIM Ahmedabad found in its study about the recoveries of companies following three years resolution. Delve deep into the details and find out more information.
The study found that hotels and restaurants have had the highest recovery rate for creditors under the Insolvency Bankruptcy Code while electricity, gas, and water supply firms have the lowest recovery rates. According to IIM Ahmedabad’s study, the average recovery rate in the Insolvency Bankruptcy Code is 33.2 percent. Post-resolution, the study was conveyed to 550 firms which noted, “The highest recovery rates are not for asset-heavy industries but for asset-light industries with substantial intangible assets. It also highlights the importance of an auction to realize the going concern value of an entity,”
While considering the post-IBC results, IIM Ahmedabad found that the resolved companies have operationally broken even in the post-resolution period while the net margins remained negative. An increase of 50 percent was seen in the average employee expenses. Post resolution, the study of IIM Ahmedabad further found a higher employment intensity in the resolved firms in the listed category. Hinting at the build-up of tangible assets in the balance sheet increased 50 percent in the average total assets.
IIM Ahmedabad further added, “Overall the results suggest that the market has priced and acknowledged the potential of these firms in the post-resolution period,” IBBI said, “The report also validates the vision behind prioritizing financial creditors over the rights of central and state government, which would ultimately boost the availability of financing, lower capital costs, foster entrepreneurship, and accelerate economic growth. Thus yielding better gains for the government in the long run,” IIM Ahmedabad also explained how these companies improved their performance following the resolution significantly. Stay tuned to this website for more details and further updates.