Advances in Research

Background: Agriculture in India is predominantly characterized by small and marginal farmers, whose limited landholdings and low marketable surplus constrain income and bargaining power, often leading to distress sales. Although Farmer Producer Organizations (FPOs) have been promoted to enhance collective strength and market access, concerns regarding their financial performance and operational sustainability necessitate systematic large-scale evaluation.

Aims: The study aims to measure the financial performance of Farmer Produce Organizations (FPOs) in Tamil Nadu, India.

Study Design: Analytical research method with the usage of primary and secondary data

Place and Duration of Study: The study was conducted among twenty sample farmer producer organizations by collecting information from financial reports of FY2019 and FY2024    

Methodology: Twenty farmer producer organizations were selected and financial ratio analysis was used to study the financial performance of farmer producer organizations in two time period viz., FY2019 and FY2024. Altman Z score model was used to assess the financial stability and bankruptcy risk of the organization. Regression analysis was used to identify the critical factors influencing the profitability of FPOs.

Results: The results of financial performance analysis showed that nearly 50 per cent of the sample farmer producer organization improved their performance during the study period. However, nearly 20 per cent of organization achieved more than 10 per cent of return on equity (RoE). Further, about 15 per cent of sample FPOs achieved above 5 per cent of return on Assets (RoA). The Altman Z Score analysis revealed that 45 per cent of sample FPOs maintained financially robust positions with low bankruptcy risks. In contrast, 40 per cent of sample FPOs were in grey zone reflected uncertain financial future and 15 per cent FPOs were under distress zone. The regression analysis indicated that the retailing of farm inputs and outputs were significantly influencing the profitability of FPOs. Further, income from non-core business was also significantly influencing the profitability of FPOs.

Conclusion: The results of the study revealed that nearly 50 percent of the FPOs improved their performance. However, about 15 per cent of FPOs were in the distress zone and 40 per cent of FPOs were in the grey zone. Retailing of farm inputs and outputs, and income from non-core business had positively influenced the financial performance of FPOs in the study area.