Performance Analysis of the Farmer Producer Companies in Western Tamil Nadu, India using Altman’s Z-score

Dhineshwari S,Amarnath J S,Selvam S,Prabakaran K

doi:10.29321/maj.10.000534

Abstract

The agriculture sector is undergoing a revolution, owing to several initiatives by Government of India aimed at increasing farmers’ income by 2022-23. These efforts should not be implemented in a traditional manner, but rather with farmers as partners in the process. Farmer producer Companies (FPCs) could serve as a ground-level implementation entity. As a result, FPCs may be at the lead of the economic opportunities that these reforms will generate. The financial viability or health of a Farmer Producer Companies is an important factor because many small and marginal farmers depend on it. Therefore, this study evaluated the financial performance of Farmer Producer Companies of the Western agro-climatic zone of Tamil Nadu utilizing Altman Z’ score model and sustainable growth rate for the period 2015 to 2020. This analysis utilized secondary data gathered from the Ministry of Corporate Affairs, India. According to the results, it is concluded that the majority of the sample Farmer Producer Companies are in distress zone and if the present circumstance proceeded, these organizations will be bankrupt, within next two years and all of the companies have negative sustainable growth rate, indicating that they would be unable to operate without external funding. As a result, there is an urgent need to concentrate on these companies in order to ensure their sustainable growth.

Highlights

India is witnessing a strategic policy shift from increasing productivity to increasing profitability
This study evaluated the financial performance of Farmer Producer Companies of the Western agro-climatic zone of Tamil Nadu utilizing Altman Z’ score model and sustainable growth rate for the period 2015 to 2020
It is concluded that the majority of the sample Farmer Producer Companies are in distress zone and if the present circumstance proceeded, these organizations will be bankrupt, within two years and all of the companies have negative sustainable growth rate, indicating that they would be unable to operate without external funding

Summary

Introduction

India is witnessing a strategic policy shift from increasing productivity to increasing profitability. Doubling Farmers’ Income (DFI) by 2022-23 is the important policy thrust of Government of India (GOI). There have been a number of models for group approaches were practiced in the forms of farmer cooperatives, farmer interest groups, farmer producer companies, commodity based organizations, etc. These experiments were plagued with issues and outcomes were short-lived. The concept of farmer’s collectives has regained attention across the states. Both union and state governments are providing special support for the promotion and formation of producer collectives (Farmer Producer Companies (FPCs)). To assess the possibility of a company’s failure, Altman (1968) utilized multiple discriminant analysis (MDA) with five ratios, and this method became one of the first and most extensively used models for predicting financial distress

Objectives

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Conclusion