In the six months ending September 2021, lenders took 285 companies to the National Company Law Tribunal (NCLT) after the year-long moratorium on bankruptcy proceedings was lifted in March 2021. In the July-September quarter, 144 companies were dragged to the bankruptcy tribunal, according to the latest data from the Insolvency and Bankruptcy Board of India (IBBI).

The report reveals 4,708 companies have so far faced bankruptcy proceedings. Of these, 40 percent belong to the manufacturing sector and 20 percent to the estate industry.

An analysis of the data showed that the maximum number of bankruptcy cases (till September end) was initiated by operational creditors (2,397 cases), followed by financial creditors (2,019 cases) and corporate debtors (291 cases). Data indicates the number of cases of lenders who took companies to the regulator for defaults spiked after March 2021, when the year-long moratorium (given in the wake of the COVID-19 pandemic) on bankruptcy action was lifted.

According to experts, the number of distressed companies that have defaulted on their creditors could be much more as lenders are often reluctant to initiate bankruptcy proceedings against the defaulter company until they attract new investors. Another reason that prevents lenders from reporting a defaulter firm is the heavy reduction in the stated value of an asset that many creditors accept as part of bankruptcy resolution. This concern was also voiced by a parliamentary standing committee in August.

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The data also reflects another trend that the companies, which have more physical assets, manage to attract investor bids even if their corporate turnaround effort after acquisition doesn't materialise.

Meanwhile, the IBBI has underscored the need for robust bankruptcy resolution in the country. “With banks reeling under mounting non-performing assets (NPAs), the need of the hour is to have a well-developed distressed assets market to offload these NPAs effectively," the IBBI said.