Corporate insolvency cases fall 28% to 724 in FY2025; recoveries still low: ICRA

New Delhi [India], May 28 (ANI): Fewer companies went through the insolvency process under the Insolvency and Bankruptcy Code (IBC) in financial year (FY) 2025, according to the credit rating firm ICRA.
As per the ICRA, only 724 companies were admitted for insolvency, a sharp 28 per cent drop from 1,003 in the previous year.
The number of approved resolution plans also dipped slightly to 259 from 263 last year.
Under the IBC, introduced in 2015, authorities try to streamline the process of resolving financial distress and insolvency of companies and individuals. The IBC offers a framework for prompt and effective resolution with the dual goals of protecting creditors and encouraging entrepreneurship.
In the last quarter of FY2025, lenders recovered about 70 per cent of the admitted claims in some cases, registering the highest levels so far, said the ICRA.
However, ICRA noted that recoveries still remain low overall, with lenders facing a 67 per cent haircut on average.
Since IBC began in 2016, a total of 8,308 companies have entered the process. About 61 per cent of these cases have been resolved, but the actual recovery through successful resolution plans remains low at just 33 per cent.
Manushree Saggar, Senior Vice President and Group Head, Structured Finance Ratings, at ICRA, said: "Historically, resolutions from the IBC have been plagued by long resolution timeframes, a high share of liquidations and sizeable haircuts. While FY2025 was a positive with improved realisations, the overall resolution time remains a cause for concern."
He further added, "Almost 78 per cent of the ongoing CIRP cases have exceeded 270 days post admission by the NCLT, as of March 31, 2025. Nevertheless, some of the recent judgements reinforce the need for timely and transparent resolution, thereby putting greater onus on the Committee of Creditors (CoC) and NCLT."
Empirical data suggests that recoveries in the case of successful resolution plans (33 per cent recovery) have been higher than liquidation (4 per cent recovery).
This supported the higher recoveries in Q4 FY2025, as resolutions outpaced liquidation orders during this period.
The record recovery in Q4 FY2025 was led by a few large cases (admitted claims > Rs 1,000 crore) where a 77 per cent recovery was achieved against the admitted claims.
These large cases had a 90 per cent share in recovery but only a 10 per cent share in approved resolution plans. Thus, ICRA believes that improvement in recovery of large cases would be critical to the overall success of the code.
The firm added that to improve the efficiency of NCLT, which usually gets blocked in the resolution of small-value cases, a focus on the special mechanism to resolve smaller cases like the Pre-packaged Insolvency Resolution Process (PPIRP) is critical, though it has seen limited success so far.
It further added that while the ratio of resolution to liquidation rose to a high of 0.9 in FY2025 (1.9 in Q4 FY2025) from 0.6 in FY2024, the average resolution time worsened to 713 days as of March 31, 2025, from 679 days as of March 31, 2024, significantly higher than the deadline provided by the IBC.
The credit agency said in order to improve the CIRP process, the Insolvency and Bankruptcy Board of India (IBBI) introduced amendments to the IBC code in Q4 FY2025 that will improve the efficiency of the auction process and the liquidation process. (ANI)