Insolvency Code: How Deloitte Is Forging Ahead

Deloitte, a global professional services firm and part of the Big 4, wants to emerge as the “go to” firm for all corporate insolvency cases in India, a top official said.

The professional services firm is handling, or has already handled, the most complex cases under the Insolvency and Bankruptcy Code, Uday Bhansali, President, Financial Advisory, Deloitte Touche Tohmatsu India, told BusinessLine here.

Bhansali sees insolvency as a “steady area” of practice for Deloitte in the immediate future, while time would tell whether it sustains as a “growth area”.

“We have achieved probably some of the most successful resolutions in marketplace. Bhushan Steel and Binani Cement were two high-profile cases where we were the RP. Several smaller cases have also been handled by us. The debt that Deloitte has been able to address is approximately $30 billion, assisting the banking system and creditors recover approximately ₹50,000 crore in the last 2-3 years,” Bhansali said.

Now, Deloitte is also handling big cases like RCom and Videocon Industries.

A 3-year journey

Bhansali described Deloitte’s journey over the last three years since the enactment of the IBC as “reasonably successful one”. Of the first set of cases — popularly referred as “dirty dozen” — that was referred by RBI to banks for insolvency action, Deloitte has been involved in some capacity or the other in half a dozen of them, he said.

Asked what are the typical roles that Deloitte takes in the insolvency cases, Bhansali said that its role is predominantly that of a resolution professional (RP). “We also provide support services for the RPs and creditors. We also provide valuation services, forensic services for undervalued or preferential transactions besides financial due diligence,” he said.

The experience in handling the larger/high-profile cases has provided the bandwidth to offer range of services across the spectrum (insolvency value chain), he noted.

“It’s the practical experience of handling the promoters, NCLT, navigating the whole spectrum is where we have been effective, shown by the results. We have dealt with small companies too”, he said.

Secret sauce

So what explains this success or are there some special steps that Deloitte takes to ensure success?

“We have been successful — predominantly as we take our role professionally. There is no question of us having any cozy relationship with the promoters. We have a mind of our own and operate on our own. We are not guided by what others ask us to do. The outcome may not please everybody,” Bhansali said.

The entire effort from Deloitte is to run the IBC process independently, and driving towards outcome viz a resolution of the debt as quickly as practical, he said.

Also, where there is need to have industry experts, Deloitte does not hesitate to hire such industry experts depending on the sector. This will help in ensuring that the whole process is carried out independently by the resolution professional, he said.

Another interesting aspect of Deloitte’s working on IBC is that it insists on the bidders showing proof of funds. “We advise the lenders to insist on the prospective resolution applicants demonstrating proof of funds, together with a timeline,” Bhansali said.

Personal guarantees

Bhansali also said that it would be important for the government and regulator Insolvency and Bankruptcy Board of India (IBBI) to quickly resolve the open issue around personal guarantees given by promoters, where the debt of the company is resolved.