Stressed assets that are going through liquidation under the insolvency law will now be listed and auctioned through a centralised electronic platform owned by a consortium of a dozen state-run banks to maximise recovery for creditors.
The Insolvency and Bankruptcy Board of India (IBBI) has tied up with the Indian Banks’ Association to facilitate the auction of stressed assets through the eBKray platform run by PSB Alliance, the regulator said in a circular.
eBKray has been conducting auctions for assets, mortgaged to state-run banks, under the SARFAESI Act for the past five years.
At present, assets of firms undergoing liquidation as per the IBC are auctioned via multiple platforms and the details of a company’s assets are typically made public at the time of the auction notice.
“This practice leads to information asymmetry, as potential buyers have limited time to assess the value of the assets, often resulting in lower recovery rates,” the IBBI said in the order.
A centralised listing and auction platform where details of all assets under liquidation are continuously available to the public “provides an effective solution to these problems”, the regulator said.
As of June 2024, of the 7,813 insolvency cases admitted by the adjudicating authority since the IBC came into being in late 2016, liquidation orders have been passed in 2,547 cases due to the absence of rescue plans, while 1,005 resulted in resolutions.
The recovery from liquidations was just 6.3% of the creditors’ admitted claims, against that of 32.1% in resolved cases, the IBBI data showed. It took an average of 499 days to liquidate a bankrupt firm.
The proposed move will “lead to a wider market for prospective buyers and also ensure better price discovery and higher recovery”, said Jyoti Prakash Gadia, managing director at Resurgent India.
“The mechanism has already been tried and tested under the operation of IBA and is expected to bring better transparency and clarity,” he said.
Proposed mechanism
A module within the eBKray platform has been created to facilitate both the listing and auction of assets under the IBC.
It will be a single listing platform to host all assets being sold in liquidation cases.
This platform will offer detailed information on the assets to be liquidated, including photographs, videos, and geographical coordinates.
“By enhancing transparency and efficiency through advanced technology, eBKray aims to increase bidder participation, streamline operations, and maximise returns for creditors while improving outcomes for bidders,” the insolvency regulator said.