IBC CIRP • Plant & Machinery Valuation

Your Factory Machinery in IBC CIRP — What Happens and What It Means

When a manufacturing company enters the Insolvency and Bankruptcy Code’s Corporate Insolvency Resolution Process (CIRP), the Resolution Professional (RP) immediately commences the asset listing and valuation process.

The factory’s plant and machinery is among the primary assets that the RP must value and include in the Information Memorandum (IM) for potential Resolution Applicants.

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CIRP Corporate Insolvency Resolution Process

P&M Plant & Machinery Asset Class

IM Information Memorandum

Why the Valuation Matters

Understanding Your Factory’s P&M Value in CIRP

Understanding what Fair Value and Liquidation Value mean for your factory’s equipment, and how the IBBI-appointed P&M Registered Valuer’s certificate affects the resolution plan, is critical for both the RP and for the company’s management.

Two Values. Two Different Situations.

The CIRP valuation distinguishes between machinery operating as part of a going concern and machinery considered for individual sale.

CIRP Valuation Process

What Happens to Machinery in CIRP

Independent P&M Valuation

Within the first 75 days of CIRP, the Resolution Professional appoints two independent IBBI Registered Valuers in the P&M asset class to independently determine Fair Value and Liquidation Value.

A2Z Valuers holds the IBBI P&M Registered Valuer credential. The RP commissions the two valuers simultaneously; their independent certificates are averaged to produce the final values used in the Information Memorandum (IM).

Independent Valuer 01 P&M Asset Class

Independent Valuer 02 P&M Asset Class

Final Values Used in the IM

Two Valuation Perspectives

Fair Value vs Liquidation Value — In Plain Terms

The same factory machinery can carry different values depending on whether the factory continues as a going concern or the equipment is considered for individual sale.

Going Concern

Fair Value

Fair Value is the value of the machinery on the assumption that the factory continues as a going concern — each machine valued as operational in its current installed position (in-situ), contributing to the factory’s production capacity.

Used by Resolution Applicants evaluating acquisition of the company as a going-concern manufacturing business.

Ex-Situ Scenario

Liquidation Value

Liquidation Value is the value of the machinery if the factory is shut down and each piece of equipment is removed, transported and sold individually on the secondary market (ex-situ).

The Liquidation Value is the floor for the Committee of Creditors (CoC).

Standard Industrial Machinery

60–75%

Typical Liquidation Value relative to Fair Value

For specialised equipment, the gap between Fair Value and Liquidation Value is wider.

Resolution Plan Implications

How the Valuation Affects the Resolution Plan

Illustrative P&M Valuation

Fair Value ₹12 Crore Factory P&M

Liquidation Value ₹7.5 Crore P&M Component

If the Fair Value of the factory’s P&M is ₹12 crore and the Liquidation Value is ₹7.5 crore, the CoC will not accept a resolution plan that offers them less than ₹7.5 crore from the P&M component.

A Resolution Applicant who plans to acquire the factory as a going concern will base their bid on a value between the Fair Value and the Liquidation Value — the machinery’s contribution to the business’s enterprise value.

Condition & Documentation

The Maintenance Effect on Factory Machinery Value

A well-maintained factory with documented equipment condition and maintenance history typically produces a higher Fair Value — and a higher Liquidation Value — than a factory with deferred maintenance and undocumented equipment history.

Equipment Condition

Documented machinery condition supports the valuation assessment.

Maintenance History

Maintenance records provide evidence of the equipment’s history and upkeep.

Deferred Maintenance

Undocumented equipment history can affect the resulting valuation assessment.

IBC CIRP • P&M Valuation

Need a Clear View of Your Factory Machinery Value?

Whether you are dealing with CIRP, resolution planning or factory asset valuation, discuss your P&M valuation requirement with A2Z Valuers.

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