Archive · 27 Jun 2025
Shareholder Hope: Rallies in Bankrupt Company Stocks
Sometimes, companies get into big money trouble and can't pay their debts, which is called bankruptcy.
When this happens, a new company can buy the troubled one through a special process.
Shareholders of the old company might get a surprise.
Sometimes, the old shares get combined, and shareholders may see their stock's value increase.
This has happened with companies like Indosolar, Ruchi Soya, and Orchid Pharma.
A change in the rules made this easier.
It's like a fresh start, but it's important to be careful and not just follow what everyone else is doing, as not all companies have such positive outcomes after the process.
Indosolar's stock rose after Waaree Energies acquired it through CIRP, following capital reduction.
SEBI amendments in 2018 allowed acquirers to hold over 75% of share capital in CIRP cases.
Ruchi Soya and Orchid Pharma also saw significant stock rallies post-CIRP.
New promoters often own over 95% of equity, leading to low float and potential price volatility.
Shareholders of bankrupt companies have seen varied outcomes, with some experiencing losses and others gains.
- Who
- Shareholders of bankrupt companies, new promoters acquiring companies through CIRP, and regulatory bodies like SEBI.
- What
- Stock rallies and shareholder outcomes in companies emerging from the Corporate Insolvency Resolution Process (CIRP).
- When
- Since 2016 when the Insolvency and Bankruptcy Code (IBC) was introduced, and specifically, in recent cases.
- Where
- Focusing on the Indian stock market.
- Why
- To highlight the potential for positive outcomes for shareholders of bankrupt companies, and to explain market dynamics following CIRP.
Shareholder Loss
Shareholder Gain
Equity Value
Shareholder Loss
Shareholders equity may be extinguished at zero value. Such as in Essar Steel.
Shareholder Gain
Shareholders may see stock appreciation. Such as in Indosolar, Ruchi Soya, and Orchid Pharma.
- Indosolar Acquisition
- Acquired by Waaree Energies through CIRP
- Indosolar Debt
- ₹2,138 crore
- Waaree Energies Resolution Plan
- ₹189.79 crore
- Ruchi Soya Acquirer
- Patanjali Foods
- Orchid Pharma Acquirer
- Dhanuka Labs
- SEBI Amendment (2018)
- Allowed acquirers to hold over 75% share capital
- WaareeIndo Promoter Holding
- 96.15%