April 4, 2024: Recovery in key infrastructure sectors has cast a positive impact even on the stressed assets in these industries as is reflected in marked improvement in realisation of such assets in real estate, roads, power and steel, according to a study by the Associated Chambers of Commerce (Assocham) and rating agency CRISIL Ratings.
“Recoveries in real estate topped the list, followed by the road sector, thanks to several policy interventions, turnaround in these industries as also an overall positive macroeconomic.” Real estate is seen to recover 77-82% of the acquired debt (by asset reconstruction companies) over eight years followed by highway tolling with a recovery of 58-63%,” the study noted.
As a result of high recoveries, the debt under the real estate sector is being bought at a very low discount amidst rising investor interest due to the boom in the sector.
“Along with several macro positives, the factors leading to a substantial improvement in recoveries in vital infrastructure sectors include a transformative role played by the Insolvency and Bankruptcy Code, though a lot of ground needs to be covered in terms of speeding up the judicial process for the IBC cases,” Assocham secretary-general Deepak Sood said.
Commenting on the report, Sood said the recoveries in the stressed assets resulted in a marked improvement in the banks’ balance sheets with the non-performing assets, touching decadal lows in several banks.
As in the real estate industry, the stressed sectors in the power sector have the potential to recover 43-48% of the total debt acquired by the ARCs. “The positive trajectory can be attributed to escalating demand for power, favourable regulatory changes such as coal auctions through the Shakti scheme, ongoing restructuring initiatives and strategic investments,” the paper pointed out.
Likewise in the roads including highways, the improvement is taking place due to several measures by the government to develop the public infrastructure ecosystem. These include extension of concession period for build-operate–transfers-toll operators, release of retention money to the extent of work done etc. According to the study, stressed road assets have the potential to recover 58-63% of the total debt acquired.
Referring to the journey of the IBC, the report said the insolvency and bankruptcy law has transformed the credit culture from the ‘debtor in control’ to ‘creditor in control’ paradigm. It has undoubtedly tilted the power equation in favour of creditors from debtors and improved the credit culture.
Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at [email protected] |
An alumna of the Indian Institute of Mass Communication, Dhenkanal, Sunita Mishra brings over 16 years of expertise to the fields of legal matters, financial insights, and property market trends. Recognised for her ability to elucidate complex topics, her articles serve as a go-to resource for home buyers navigating intricate subjects. Through her extensive career, she has been associated with esteemed organisations like the Financial Express, Hindustan Times, Network18, All India Radio, and Business Standard.
In addition to her professional accomplishments, Sunita holds an MA degree in Sanskrit, with a specialisation in Indian Philosophy, from Delhi University. Outside of her work schedule, she likes to unwind by practising Yoga, and pursues her passion for travel.
[email protected]