IFCI: An Arduous Start to Insolvency Resolution

Name: IFCI: An Arduous Start to Insolvency Resolution (English version)
SKU: HK1383

Tapasvi, S.K.; Gautam, Sanjiv

Product #:HK1383

Supplier:The University of Hong Kong

Discipline:Finance

Setting:India

Details:Case (PDF) • 12 pages • 2022-09-08

Subjects:

Insolvency Debt management Investment management Bankruptcy Corporate finance Finance and investing Finance and investing

Geography:

India Asia

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$12.40

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The case highlights the significance of Non-Banking Financial Companies (NBFCs) in credit provisioning for companies and related problems. It revolves around Dr. Emandi Sankara Rao, who takes over as the CEO of Industrial Finance Corporation of India (IFCI), an NBFC at a time when IFCI has had a sudden and sharp downturn in its performance due to high levels of non-performing assets (NPA). While mulling over various strategic choices for debt resolution, Dr. Rao decides to use the Insolvency & Bankruptcy Code (IBC), a new legislation enacted by the government to address the issues of insolvency resolution in the corporate sector. Since the IBC provides for a creditor-led process of insolvency resolution and in a time-bound manner, Dr. Rao chooses to apply this to a powerful corporate group to which IFCI has a total exposure of INR12.97bn, with INR5.88bn under stress. The case details the challenges that Dr. Rao faces in this journey to resolve the issue of corporate insolvency.

Learning Objectives

1. The students will be able to understand the structure, business model, and relevance of NBFCs in corporate finance. 2. The students will be able to understand the legal and financial frameworks under which corporate insolvency is resolved. 3. The students will be able to learn how strategic choices get derailed due to influential corporate stakeholders.