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The creditors of companies that have been rescued from liquidation as of March 2019 have been able to realise 195 per cent of the ‘liquidation value’, said IBBI Chairman MS Sahoo. “If you get anything above liquidation value, then it is actually a bonus. This bonus has come because of Insolvency and Bankruptcy Code,” Sahoo told reporters on the sidelines of an Assocham event in New Delhi.
The correct way, according to Sahoo, to see if creditors have got a good deal or not in a company that is faced with liquidation, is to compare the actual value realised with both the value of claim made and also the liquidation value. Then only a true picture would emerge.
“For instance, let’s say my claim as a financial creditor is ₹100 and I get only ₹10. Then my haircut will look 90 per cent. However, when I get ₹10 for a company whose liquidation value today is only ₹1, then I am getting ten times the realisable value,” said Sahoo.
Sahoo highlighted that 370-380 companies have till March-end been referred for liquidation – 80 per cent of them being BIFR cases or nothing to realise. “So, you have to do haircuts in the case of such companies,” he said.
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