One of the biggest criticisms of the bankruptcy code introduced last year was the lack of experience of the insolvency resolution professionals (RPs), mandated under the bankruptcy code, to manage distressed companies. Resolution professionals actually have a dual role; manage the ailing company as a going concern and also find a resolution in a time bound manner through restructuring or other means.
The criticism was justified as the promoters who nurtured the company since inception were out from managing the day to day affairs. The board of directors, whose wisdom the companies enjoy, was also suspended. Resolution professional, almost a defacto CEO, was all alone in a new set up to make things work.
The performance has been mixed if one look at the large 12 cases there referred to bankruptcy in June last year. These companies are indeed operating as a going concern.
Let's look at the financial numbers.
In the case of Bhushan Steel, the revenues are up from Rs 4,176 crore in June quarter to Rs 4,324 crore in September quarter of 2017-18. The losses in the same period reduced from Rs 1,486 crore to Rs 467 crore. Similarly, Electrosteel Steels has seen rise in its revenues from Rs 773 crore in June quarter to Rs 762 crore in September and Rs 848 crore in December quarter. The losses, however, moved up slightly from Rs 242 crore in June to Rs 296 crore in September and Rs 327 crore in December. Monnet Ispat has managed to cut its losses from Rs 400 crore in June quarter to Rs 353 crore in September quarter. Many say the upturn in the steel cycle is helping in rising revenues of steel company. That may be true, but these companies haven't seen any drastic drop in the performance. Currently, the main reason for losses is the unsustainable debt in the books.
In case of Jaypee Infratech , the losses have actually zoomed from Rs 44 crore in June quarter to Rs 931 crore in September quarter. Similarly, Alok Industries is on a downhill journey. The revenues have crashed from Rs 2,793 crore in June quarter to Rs 794 crore in September quarter. The losses are huge with Rs 6,638 crore in June and Rs 5507 crore in September.
Some companies like Amtek Auto and Jyoti Structures haven't submitted their results to the stock exchanges. Another big company Essar Steel is not listed on the bourses.
While it is too early to pass a verdict on the performance of the resolution professionals, they are in an unfamiliar terrain as they lack operational experience. There are also restrictions on raising interim finances as these companies urgently need working capital loans. Most of the time of a resolution professional is spent on the resolution exercise as he has to initiate all documentations, convening a meeting of committee of creditors, inviting bids, rebids and also compliance with the stock exchanges.