New Delhi: Firms resolved under the Insolvency and Bankruptcy Code (IBC) have witnessed improvement in their financial and operational performance, with strong gains in sales & asset turnover, according to a study by IIM Ahmedabad.
The research study builds upon an earlier study undertaken in 2023, which analysed firms in the post-resolution period for the years 2013–2022.
The study seeks to update and broaden the analysis by extending the coverage up to 2025 to capture the most recent developments. A total of 1194 firms that underwent the resolution process were part of this study, according to a release.
The study found that average sales of resolved firms increased by 89 per cent in the five years after resolution, indicating a substantial revival in business activities. Asset utilisation also improved significantly, with the asset turnover ratio rising by about 131 per cent during the same period.
According to the study, capital expenditure (capex) by these firms saw a notable rise of around 106 per cent over five years, reflecting renewed investment activity and improved economic viability. The average asset base also expanded, growing from Rs 228.33 crore in the resolution year to Rs 254.60 crore in the fifth-year post-resolution, marking an increase of around 11.5 per cent, the Insolvency and Bankruptcy Board of India (IBBI) said.
Market capitalisation of resolved firms also recorded a sharp recovery. The aggregate market valuation rose from around Rs 2.8 lakh crore to Rs 9 lakh crore during a five-year period, reflecting improved investor confidence and growth prospects, following successful resolution with creditors, it added.
Further, liquidity levels improved considerably with an increase of approximately 106 per cent, signalling improved financial health and short-term solvency of the resolved firms, the board said. The study noted that the improvements across key financial and operational indicators under the effectiveness of the IBC framework in reviving distressed firms.
The resolution process has enabled firms to restore long-term viability, attract fresh investments, and enhance overall productivity. The findings also assume significance as the IBC completes a decade since its enactment, offering empirical insights on its role in strengthening the corporate insolvency resolution process, it added.