Assessing financial solvency and bankruptcy risk of farmer producer companies in India: A study from the Eastern India perspective

Abstract

This study examines the crucial role of Farmer Producer Companies (FPCs) in ensuring sustainable livelihoods and aligning with the government’s goal of doubling farmers' incomes by 2024-25. It assesses the financial health of FPCs, evaluates their solvency and bankruptcy risk using Altman’s Z-score model and determines their sustainable growth rates. The research employs secondary data, utilizing audited financial reports of FPCs filed with the Ministry of Corporate Affairs (MCA) from 2016–17 to 2022–23. These reports were obtained via Form No. AOC-4 with XBRL. The study focuses on 48 FPCs from eastern India that have submitted financial statements for at least three years. The findings indicate that 18 FPCs fall into the red zone, signalling severe financial distress while 15 are in the grey zone suggesting moderate risk. Only 13 FPCs are in the green zone, exhibiting financial stability but often reporting negative growth rates. These insights highlight the pressing need for improved financial strategies, operational efficiencies and possible external support to ensure long-term viability. This research aids in the early detection of financial challenges, fostering proactive decision-making, and reinforcing public confidence in FPCs through the formulation of effective regulatory policies.