Explain It Clearly

  India had learned how to rescue an industrial company. But then a far stranger problem arrived: what happens when the company that needs rescuing is itself part of the financial system? There was something fundamentally different about the crisis that engulfed Dewan Housing Finance Corporation Limited. When Essar Steel entered insolvency, the problem could be understood in physical terms. There was a steel plant, industrial capacity, workers, suppliers, customers and a mountain of debt attached to an operating business. The central question was whether that enterprise was worth more alive than dismantled. DHFL presented a less visible and, in some ways, more complicated problem. Its most important assets were not factories or machinery but financial relationships—loans extended to households, money raised from institutions and markets, deposits accepted from savers, securities issued to investors and streams of future repayments dependent on thousands of individual borrowers. W...

  There was a number at the centre of the Essar Steel bankruptcy that seemed to explain everything: ₹49,473 crore. It explained the size of the hole. It did not explain the size of the prize. That was the amount of admitted financial-creditor claims in the insolvency process. It was an extraordinary figure, large enough to make Essar Steel look like another monument to India's era of corporate over-borrowing. Yet the number concealed the more interesting story. The company was not simply a pile of unpaid loans. It was an operating industrial enterprise whose value could change dramatically depending on whether it was dismantled or kept alive. IBBI records put Essar Steel's liquidation value at approximately ₹15,838 crore. Financial creditors ultimately realised about ₹41,017.71 crore, while operational creditors realised approximately ₹1,214.07 crore. In other words, the resolution process generated a recovery dramatically greater than the value that had been estimated if t...

  The Ruchi Soya–Patanjali story and the extraordinary economics of India's IBC reset THE COMPANY, THE BIDDING WAR AND THE RESET The most revealing way to begin the Ruchi Soya story is not with its bankruptcy. It is with the extraordinary financial distance between the company that entered insolvency and the company that emerged from it. In April 2022, the business then known as Ruchi Soya Industries—by that point renamed Patanjali Foods—completed a ₹4,300-crore follow-on public offering and entered a new phase as a listed company. The company's own corporate history records a market capitalisation of ₹33,479 crore after the FPO shares were listed. A few years earlier, however, the same enterprise had carried ₹12,146.33 crore of admitted claims , including ₹9,384.75 crore of financial-creditor claims , against a liquidation value of only ₹2,391.16 crore . Financial creditors eventually realised ₹4,093.19 crore . The numbers do not accuse anyone of wrongdoing. They do someth...