Case: Distressed Company Turnaround
After Case: IPO Pricing - Setting the Price Band, the finance case lens shifts from pricing growth capital to rescuing a company that cannot service debt. InfraCorpXYZ has ₹8,000 Cr debt, EBITDA of ₹600 Cr, 13.3x leverage, and ICR = 0.75x, so the interview problem is not only valuation - it is a distressed-debt turnaround. In interviews, this matters because the candidate must combine operating fixes, financial restructuring, ownership change, and the Indian IBC/NCLT resolution process.
- InfraCorpXYZ has ₹8,000 Cr debt, EBITDA of ₹600 Cr, 13.3x leverage, and cannot service interest with ICR = 0.75x.
- The restructuring approach has three core levers: Operating Restructuring, Financial Restructuring, and Ownership Change.
- Operating Restructuring uses cost reduction, asset sales, and mgmt change, including selling 3 non-core assets for ₹1,200 Cr and reducing headcount 15%.
- Financial Restructuring uses haircut, debt-equity swap, and rescheduling, with lenders accepting 40% haircut and ₹3,200 Cr written off.
- Ownership Change happens through an IBC resolution plan and new promoter, with a strategic investor bidding ₹2,500 Cr for 70% stake.
- IBC/NCLT process requires NCLT admission, IRP appointment, 180 days plus 90 extension, CoC vote with 66% approval, and liquidation if no resolution.
- Key metric to know: Haircut % = (Admitted claims - Recovery) / Admitted claims.
Big Picture: Distressed Company Turnaround
A distressed company turnaround starts with the fact pattern: InfraCorpXYZ has ₹8,000 Cr debt, EBITDA of ₹600 Cr, 13.3x leverage, and cannot service interest because ICR = 0.75x. Since it has entered IBC proceedings, the restructuring answer should connect operational recovery, debt reduction, ownership change, and NCLT approval.
IBC / NCLT Framework (India)
IBC is the Insolvency and Bankruptcy Code process used when a default triggers formal resolution. NCLT is the National Company Law Tribunal, which admits the case and approval is required for the resolution outcome.
Haircut % = (Admitted claims - Recovery) / Admitted claims. RBI data shows average haircut in IBC cases ~53%.
Applying the Turnaround to InfraCorpXYZ
The situation is that InfraCorpXYZ has ₹8,000 Cr debt, EBITDA of ₹600 Cr, 13.3x leverage, and cannot service interest with ICR = 0.75x. It has entered IBC proceedings, so the answer should not stop at operational improvement.
The operating restructuring lever is cost reduction, asset sales, and mgmt change. In the InfraCorpXYZ application, the company sells 3 non-core assets for ₹1,200 Cr and reduces headcount 15%.
The financial restructuring lever is haircut, debt-equity swap, and rescheduling. In this case, lenders accept 40% haircut, which means ₹3,200 Cr written off.
The ownership change lever is an IBC resolution plan and new promoter. A strategic investor bids ₹2,500 Cr for 70% stake, and NCLT approval is required.
The outcome is that ₹4,800 Cr debt becomes ₹2,300 Cr post-restructuring, with ICR ~2x. The learning is to move from diagnosis to quantified restructuring: reduce debt, bring in recovery capital, and ensure the IBC/NCLT path is viable.
Priority Waterfall
In a restructuring interview, know the priority waterfall: secured financial creditors - unsecured creditors - operational creditors - promoters. If there is no resolution, liquidation happens at the waterfall of secured, unsecured, and equity.
Structuring a Case Interview Answer
"InfraCorpXYZ has ₹8,000 Cr debt, EBITDA of ₹600 Cr (13.3x leverage), and cannot service interest (ICR = 0.75x). It has entered IBC proceedings. How would you approach the restructuring?"
Do not treat restructuring as only cost cutting. In this case, the strongest answer connects cost reduction and asset sales with haircut %, ownership change, NCLT approval, and the priority waterfall.
The most frequent error is stopping after Operating Restructuring and missing Financial Restructuring, Ownership Change, and the IBC/NCLT process. That costs points because InfraCorpXYZ has entered IBC proceedings and cannot service interest, so the answer must address haircut %, CoC approval, NCLT approval, and the recovery waterfall.
Conclusion
A distressed company turnaround case is solved by combining operating fixes, financial restructuring, ownership change, and the IBC/NCLT resolution process. For InfraCorpXYZ, the core takeaway is to quantify the debt reset and show how the company moves from ₹8,000 Cr debt and ICR = 0.75x to post-restructuring debt of ₹2,300 Cr and ICR ~2x.