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International Journal of Management (IJM) Volume 12, Issue 3, March 2021, pp. 568-577, Article ID: IJM_12_03_054 Available online at ttp://iaeme.com/Home/issue/IJM?Volume=12&Issue=3 hISSN Print: 0976-6502 and ISSN Online: 0976-6510 DOI 10.34218/IJM.12.3.2021.054 :

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A STUDY ON FINANCIAL PERFORMANCE ANALYSIS OF SMALL SCALE AGRO

PROCESSING UNITS IN PUNE DISTRICT Dr. Rohini Suresh Sawalkar

Assistant Professor, Dr. Vishwanath Karad MIT World Peace University Kothrud, Pune, Maharashtra, India

Dr. Vimal Deep Saxena Assistant Professor, Sinhgad Business School

Erandwane, Pune, Maharashtra, India

Dr. Atul A. Pise Assistant Professor, Sinhgad Business School

Erandwane, Pune, Maharashtra, India

ABSTRACT Agriculture, with its kindred sectors, is indisputably the largest employment

provider in India. It also contributes significantly to the gross domestic product of India. Agro food processing sector is one of the significant sector catching attraction from

varied areas. It is developing its new face with multiple aspects like technological advancements, customer satisfaction, promotional efforts and fund management etc.

The tiny steps on different strategies have helped these small scale units to achieve a great reach in terms of financial performance.

The present paper analyses the financial performance of small scale agro processing units in Pune district of Maharashtra state. Descriptive research

methodology is used for achieving the objectives of the study. Key words: nsumer Behaviour, Online shopping, (B2C) e-shopping portal, Cash CoOn Delivery (CoD).

Cite this Article: Rohini Suresh Sawalkar, Vimal Deep Saxena and Atul A. Pise, A Study on Financial Performance Analysis of Small Scale Agro Processing Units in Pune District, , 12(3), 2021, pp. 568-577. International Journal of Management (IJM)ttp://iaeme.com/Home/issue/IJM?Volume=12&Issue=3 h

A Study on Financial Performance Analysis of Small Scale Agro Processing Units in Pune District


1. INTRODUCTION Agriculture and industry are two complimentary components of Indian economy. Agriculture provides input to industry and since constitutes significant part in development of economy. Momentous steps for improvement of both industry and agriculture along with allied sectors will surely result in the sustainable development of the economy. Alone industry or agriculture cannot contribute to development of economy.

Agricultural development in recent decades is interesting due to changes implemented in agriculture earnings, few crop areas are specialized and total productivity has also increased. This reality attracts researchers and policy makers towards it.

Agriculture and industry are two vital sectors of Indian economy. The future of these two segments is closely associated. Agriculture provides raw materials to industry and industry provides industrial inputs to agriculture for betterment of segment. Industry will not progress well without the strong support of agriculture. These two sectors are associated with each other due to production and demand linkage. Green revolution has noticed a positive shift in increment of rural income and hence a demand for industrial goods is increased. On the other side urbanization has increased the demand for vegetables and fruits.

The demand for food and agricultural products is increasing day by day. Increase in income, urbanization and growing number of women employees in diverse sectors is resulting growing demand for processed and ready agricultural products. The forecast for continuous growth in demand of agricultural and processed foods compose a motivation to concentrate on agro based industries for betterment of an economy.

Agro based industries in developing countries are progressing rapidly due to its distinct characteristics. These enterprises lead to rural development of the country. Agricultural

products are perishable and bulky in nature. Hence agro processing industries choose to set up their plant near source of raw material. This results in extension of rural areas its growth. Agro industrialization is not promoted much yet. Hence there is a vast door opening in terms of business opportunities, employment and social growth.

Speedy growth of agro industries in developing countries is a bit risky in terms of sustainability, earning capacity, extensiveness. This industry will be more sustainable if it concentrates to gain competitive advantage. It needs to more competent In terms of cost, price, quality, services etc. this is very challenging for small scale firms. Though an industry has potential to provide agricultural products, competitive advantage demands better quantity and quality of products consistently. Thus a need occurs for strategies that consideration of issues

of competitiveness, extensiveness and equity forms significance while encouraging agro industry.

2. LITERATURE REVIEW According to FAO (1997), agro processing industry is a subset of manufacturing that processes raw materials and intermediate products derived from the agricultural sector. Agro processing industry thus means transforming products originating from agriculture, forestry and fisheries.

Norman Mhazo, Brighton M. Mvumi, Elijah Nyakudya and Raymond M. Nazare defined gro processing as a set of techno economic activities carried out on an agricultural commodity for the purposes of making it usable as food, feed, fiber, fuel or industrial raw material. The agro processing value chain encompasses all subsequent operations after the stage of harvest till the produce reaches the final consumer in the desired form, packaging, quantity, quality and

price. Such activities comprise two major categories; primary and secondary processing operations.

Rohini Suresh Sawalkar, Vimal Deep Saxena and Atul A. Pise


An Indian researcher R. P. Kachru also has done a study. His research paper Agro-Processing Industries in India Growth, Status and Prospects tried to cover broad three areas —related to the industry. He explained that Agro processing is defined as set of techno-economic

activities, applied to all the produces, originating from agricultural farm, livestock, aqua-cultural sources and forests for their conservation, handling and value-addition to make them usable as food, feed, fibre, fuel or industrial raw materials. Agro processing sector has experienced expansion during last 5 decades, starting with a handful of facilities which were mainly operating at domestic/cottage level. The paper provides a summary of the growth history of the sector covering role of R&D, recent trends vis-a-vis crop-wise status of agro processing industrialization and problems, export trends, SWOT analysis and thrust areas for future for achieving greater role of this sector in the national economy.

C.Lakshmi kantha reddy and Prof S.Rathna kumara have done a critical analysis of the performance of agro based industries in India in their research paper. They observed that

gricultural policy focus in India across decades has been on self-sufficiency and self-reliance in food grains production. Considerable progress has been made on this front. Food grains production rose from 52 million tonnes in 1951-52 to 244.78 million tonnes in 2010-11. The share of agriculture in real GDP has fallen given its lower growth rate relative to industry and services. However, what is of concern is that growth in the agricultural sector has quite often fallen short of the Plan targets. During the period 1960-61 to 2010-11, food grains production grew at a compounded annual growth rate (CAGR) of around 2 per cent. In fact, the Ninth and Tenth Five Year Plans witnessed agricultural sectoral growth rate of 2.44 per cent and 2.30 per cent respectively compared to 4.72 per cent during Eighth Five Year Plan. During the current Five Year plan, agriculture growth is estimated at 3.28 per cent against a target of 4 per cent. The Approach Paper to the Twelfth Five Year Plan emphasizes the need to “redouble our efforts to ensure that 4.0 per cent average growth” is achieved during the Plan if not more. Without incremental productivity gains and technology diffusion across regions, achieving this higher growth may not be feasible and has implications for the macroeconomic stability given the rising demand of the 1.2 billion people for food. Achieving minimum agricultural growth is a pre-requisite for inclusive growth, reduction of poverty levels, development of the rural economy and enhancing of farm incomes.

To understand the condition of agro processing industry in nearby region, the study of Malkar Vinod Ramchandra helped a lot as his research work, Study of working of small scale agro-base industries with special reference to Ahmednagar district, Maharashtra, India, was a real eye opener as its near to Pune (the research area of mine). He said that Agro-base industries in rural areas of India create more employment opportunities in rural areas as well as it helps to get good prices to farmers for their agriculture produce, which reduces the farmers suicides and improves agriculture GDP. To establish and run economically viable small scale agro-base industries and to utilize available agriculture resources there was need to do research in this area. He thrown light on working of small scale agro-base industries which includes average number of employees working, Average number of hours, average number of days in a year, qualification of entrepreneur, average age of entrepreneur and organization structure of small scale agro-base industries.

3 RESEARCH GAP . It is been observed from the literature review that

• Many efforts are made to study challenges of small scale agro processing industry,

• food processing industry is studies at majority,

• North region of India has many studies conducted related to agriculture and allied industries.



• Many studies are conducted for large scale industries.

Hence a need is felt to study small scale agro processing units with its unique characteristics and analyzing the financial performance on different parameters.

4. OBJECTIVES OF THE STUDY • To understand demographic profile of agro processing units in Pune district

• To analyze financial performance of small scale agro processing units in Pune district

5. SCOPE OF THE STUDY • The present study is applicable to small scale agro processing units permanently registered.

• The study covers Pune district with fourteen tehsil constituents to it.

• Small scale units as per MSME act 2008 are considered for the study.

6. RESEARCH DESIGN 6.1. Type of Data Both Primary & Secondary data are used in this research. The primary data is collected in order to fulfill the information requirements of certain objectives. Thus primary data is collected to describe the present strategic practices followed by small scale agro processing enterprises, to identify the financial performance of small scale agro processing enterprises. The secondary data is collected to fulfill the information requirements of few objectives.

6.2. Sources of Data The data is collected from following sources. Primary Data Source: Primary data is collected from small scale agro processing enterprises in Pune district.

Secondary Data Source: Secondary data is collected from following sources. • Newspapers

• Magazines

• Research Journals

• Internet

• Association of industries

• Government Agencies/Departments/Ministries: Reports of various government ministries/departments like,

• District Industries Centre (DIC)

• District Statistical Department

• Maharashtra Industrial Development Corporation (MIDC)

• Maharashtra Centre for Entrepreneurship Development (MCED)



6.3. Method of Data Collection Survey method is used to collect primary data. The primary data is collected from the small scale agro processing enterprises. The personal interviews of the managers and owners of micro and small enterprises are conducted.

6.4. Research Instrument: Questionnaire A questionnaire is used as a research instrument to collect the primary data. Using questionnaire data related to demographic profile is collected for selected samples. Aspects like classification of enterprise, category of enterprise, area of enterprise scale of operation and woman enterprise are covered in demographic profile.

In addition to above, information about financial components is collected from books of accounts.

Sampling Design Sampling design is prepared so as to draw a representative sample from the population and reach reliable conclusions.

Sampling Unit The sampling unit is considered as the manufacturing micro and small scale agro processing enterprise.

Sampling Method A ‘Proportionate Stratified Random Sampling Method’ is used in order to draw a representative

sample from population. It is one of the types of the ‘Probability Sampling Method’. The following steps are carried out in order to draw a representative sample.

The population is divided into homogeneous groups. Each such group is called as ‘Stratum’.

Each Tehsil is considered as a stratum here. A two table is prepared to understand population distribution over 14 tehsils.

Sample Size Data of 204 sample enterprises is collected to test and analyze results.

The sample size estimation is based on following formula. z2 * p*q*N n = ________________ e2 (N-1) + z2 * p*q

7. DATA COLLECTION, ANALYSIS AND PRESENTATIONS Demographic profile of small scale agro processing units in Pune district.



7.1. Classification/categorization of Enterprises

Table 1

Sub Category of Enterprise

Frequency Percent Valid Percent Cumulative

Percent Food Sector

Processing & Preserving of Fruit & Vegetables 15 7.4 7.4 7.4

Manufacture of Vegetable Oils 3 1.5 1.5 8.8 Manufacture of Dairy Products 20 9.8 9.8 18.6 Manufacture of Grain Mill Product 15 7.4 7.4 26.0 Manufacture of Other Food Products 68 33.3 33.3 59.3 Manufacture of Prepared Animal Feed 2 1.0 1.0 60.3

Non –Food Sector

Manufacture of Textile 1 .5 .5 60.8 Manufacture of Leather & Related Products 5 2.5 2.5 63.2

Manufacture of Wood & Wood Related Products 19 9.3 9.3 72.5

Manufacture of Paper & Paper Products 46 22.5 22.5 95.1 Manufacture of Rubber Products 10 4.9 4.9 100.0 Total 204 100.0 100.0

Above table shows the classification of enterprises as food processing or non-food processing which is dominated by food processing enterprises with 60.3% of capture. Further the enterprises are classified into subcategories as per the NIC classification 2008. Food sector

is dominated by sub category Manufacture of Other Food Products and non-food sector is dominated by sub category Manufacture of Paper & Paper Products.

7.2. Area of Enterprise

Table 2

Area of Enterprise Frequency Percent Valid Percent

Cumulative Percent

Valid Rural 94 45.6 45.8 45.8 Urban 110 53.9 54.2 100.0 Total 203 99.5 100.0

Total 204 100.0 Above table shows that for small scale agro processing units, urban area of Pune district has

set up and functioning of majority of enterprises.

7.3. Scale of Operation and Women Enterprise

Table 3

Scale of Operation Women Enterprise Frequency Percent Frequency Percentage

Valid

Micro 167 81.9 Valid

Yes 178 87.3 Small 37 18.1 No 26 12.7 Total 204 100.0 Total 204 100.0



The data from above table shows that sample heavily dominated by micro enterprises. The startup requirement of funds and other resources are limited hence more registrations are in micro category. The number of enterprises started by women are very low in proportion.

7.4. Financial Performance of Small Scale Agro Processing Units in Pune District Analysis of financial performance of small scale agro processing units in Pune district is carried out with a view to understand financial and overall efficiency of the industry. The data analysis

is based on the primary data collected from small scale agro-processing units in the Pune district. Technique of ratio analysis is used to analyze financial performance. Financial analysis of agro processing units is based on data of 94 units who follow booking and accountancy methods to maintain financial records. This is done with a purpose to make findings more reliable and valid.

Liquidity ratios, and profitability ratios are calculated analyzing the financial performanc e.In liquidity ratios Current ratio and liquid ratio are calculated where as in profitability ratios

gross profit ratio, and net profit ratio are considered for evaluation. Calculated ratios are compared against standard ratios to interpret results.

Table 4 Product Category wise Results of Liquidity Ratios

Sr. No.

Product Category Avg. Current

Ratio

Variance std. 2

Average Liquid Ratio

Variance Std. 1

1 Processing & Preserving of Fruit & Vegetables 1.41 -0.588 0.644 -0.356 2 Manufacture of Vegetable Oils 1.524 -0.476 0.75 -0.25 3 Manufacture of Dairy Products 2.408 0.408 1.306 0.306 4 Manufacture of Grain Mill Product 1.748 -0.252 0.602 -0.398 5 Manufacture of Other Food Products 2.438 0.438 1.75 0.75 6 Manufacture of Prepared Animal Feed 1.6 -0.4 0.658 -0.342 7 Manufacture of starches & starch Product Nil Nil Nil Nil 8 Manufacture of Tobacco Products Nil Nil Nil Nil 9 Manufacture of Textile 2.228 0.228 0.506 -0.494

10 Manufacture of Wearing Apparel Nil Nil Nil Nil 11 Manufacture of Leather & Related Products 1.654 -0.346 0.792 -0.208 12 Manufacture of Wood & Wood Related Products 2.188 0.188 1.118 0.118 13 Manufacture of Paper & Paper Products 1.69 -0.31 1.352 0.352 14 Manufacture of Rubber Products 1.334 -0.666 0.532 -0.468

7.5. Current Ratio It is observed that average current ratio of industry is 1.84 which is less than conventional standard ratio i.e. 2. Banks accept standard current ratio of 1.33. Industry average is higher than bank standard which indicates satisfactory liquidity position of small scale agro processing units. Current assets are more than current liabilities. Industry has maintained higher average current ratio than bank standards. This is a good signal for industry for financial healthiness. Food Product category i.e. manufacturing of other food products has the highest average current ratio 2.43 which is greater than conventional standard ratio of 2. Manufacture of milk and milk

also follows satisfactory trend by maintaining average current ratio to 2.40. These two categories of small scale agro processing industry have healthy position of current assets against the position of current liabilities. Non-food product category of textiles and wood and wood products has average current ratio more than 2. This means these two product categories have satisfactory short term liquidity position for meeting its current obligations. Product category of processing & preserving of fruits and vegetables, manufacture of vegetable oils, manufacture



of grain mill product and prepared animal feed have average current ratio less than conventional standard but more than bank standards. All these categories have average current ratio more 1.33 that means current assets are more than current liabilities. Product category of manufacture of paper and paper product, manufacture of rubber and related product, leather and leather related products, have average current ratio less than conventional standard but greater than bank standards indicating satisfactory liquidity position. Data for manufacture of starches and starch, manufacture of tobacco related products and manufacture of wearing apparels is not available hence average current ratio for these categories is zero.

7.6. Liquid Ratio It is observed that industry average liquid ratio is 0.88 which is less than conventional standard ratio of 1. Banks accept 0.66 as standard liquid ratio, hence industry average is greater than 0.66 and indicates satisfactory position in terms of average liquid ratio. Food product category of Milk and Milk products and manufacturing of other food products have liquid ratio more than 1 indicating strong position of liquid assets in comparison of liquid liabilities. Non-food product category of wood and wood products and paper and paper products have average liquid ratio higher than 1 indicating satisfactory liquid position. All other product categories from both food and non-food sector resulted with less liquid ratio and may face difficulties in meeting their short term obligations. Data for manufacture of starches and starch, manufacture of tobacco related products and manufacture of wearing apparels is not available hence average liquid ratio for these categories is zero.

Table 5 Product Category wise Profitability Ratios

Sr. No. Product Category Avg. Gross Profit Ratio

Variance std. 22.58

Avg. Net Profit Ratio

Variance Std. 12.73

1 Processing & Preserving of Fruit & Vegetables 25.516 2.936 16.162 3.432 2 Manufacture of Vegetable Oils 22.036 - 0.55 16.072 3.342 3 Manufacture of Dairy Products 11.314 - 11.27 6.924 -5.806 4 Manufacture of Grain Mill Product 22.164 - 0.42 9.12 -3.61 5 Manufacture of Other Food Products 27.404 4.824 14.398 1.668 6 Manufacture of Prepared Animal Feed 21.954 - 0.626 13.96 1.23 7 Manufacture of starches & starch Product 8 Manufacture of Tobacco Produc ts 9 Manufacture of Textile 23.656 1.076 10.254 -2.476

10 Manufacture of Wearing Apparel 11 Manufacture of Leather & Related Products 25.456 2.876 13.082 0.29 12 Manufacture of Wood & Wood Related Products 17.946 -4.634 14.088 1.358 13 Manufacture of Paper & Paper Products 25.966 3.386 13.142 0.412 14 Manufacture of Rubber Products 25.062 3 12.88 0.15

Industry Average 22.5885 0 12.73473 0

7.7. Gross Profit Ratio It is observed that industry average gross profit ratio is 22.58% indicating satisfactory

profitability position of the industry. It means that cost of goods sold ratio for industry is 81.42%. Moderate gross profit ratio provides moderate margin for interest, taxes and operating

expenses. Average gross profit ratio of industry is moderately satisfactory. Industry has maintained average gross profit ratio around 22% throughout the study period. Product category of Processing and preserving of fruits and vegetables, manufacture of other food products,



manufacture of leather and related products, manufacture of paper and paper products have average gross profit ratio more than 25% indicating strong financial productivity. Manufacture of dairy products has the lowest average gross profit i.e. 11.31%. This category of industry works on lower profit margin. Positive gross profit ratio is acceptable with less margin for

operating expenses, interest and taxes. Product category of manufacture of vegetable oils, manufacture of grain mills, manufacture of prepared animal feed, manufacture of textiles,

manufacture of wood and wood products have moderate average gross profit ratio in between of 10% - 15%. Financial position of these categories is moderate, satisfactory and acceptable.

7.8. Net Profit Ratio It is observed that industry average net profit ratio for small scale agro processing units is

12.73%. Food sector categories, processing and preserving of fruits and vegetables and manufacture of vegetable oils have produced higher average net profit ratio with 16.16% and

16.07% respectively. Non-food sector product category manufacture of wood and wood products dominates other product categories with higher average net profit ratio i.e. 14.08% Product category manufacture of dairy products works on low profit high volume principle and

hence even though the average net profit ratio is lower it is maintaining satisfactory performance. Manufacture of grain mill product due to its huge maintenance expenses

generating lower average net profit ratio. Overall performance of small scale agro processing units is satisfactory.

8. FINDINGS 8.1. Findings Related to Demographic Profile Small scale agro processing industry in Pune district is spread over 14 tehsils. Distribution of industry is not even over all tehsils. Regional imbalance is noticed in composition of industry in the district. Haveli tehsil dominates industry with 61% share whereas Velha tehsil has lowest share of 0.09% only. The share of food sector is dominating with 61%. Share of non-food sector is 39%. The composition of product category is not even. Share of processing and preserving

of fruit and vegetables, manufacture of vegetable oils, manufacture of dairy products, manufacture of grain mill product, manufacture of other food product, manufacture of prepared animal feed products, manufacture of starches and starch product and manufacture is tobacco products is 4.95%, 1.13%, 7.99%, 9.21%, 35.79%, 1.91%, 0%, 0.08%, respectively. Product category manufacture of other food products dominates food sector with 35.79% share. Product categories manufacture of textiles, manufacture of wearing apparel, manufacture of leather and related products, manufacture of wood and wood products, manufacture of paper and paper

products and manufacture of rubber products have share of 1.13%, 0.78%, 1.65%, 9.47%, 21.72% and 4.17% respectively. Product category manufacture of paper and paper products dominates non-food sector with 21.72% share.

8.2. Findings related to Financial Performance Liquidity position of both sectors is satisfactory. Liquidity position of food sector is better than non-food sector. Liquidity position of product categories is satisfactory. Trend analysis shows improvement in liquidity position of industry. Trend analysis shows fluctuations in liquidity position of product categories. Trend analysis for product category of processing and preserving

of fruit and vegetables, manufacture of vegetable oils, manufacture of dairy products, manufacture of grain mill product, manufacture of other food products, manufacture of prepared

animal feed are fluctuating with satisfactory average liquidity position. Trend analysis of product categories manufacture of textiles and manufacture of rubber products shows upward

trend in liquidity position. Trend analysis of manufacture of leather & related products,



manufacture of wood & wood related products, manufacture of paper & paper products shows downward trend but concluding liquidity position is satisfactory.

Profitability ratios for industry shows satisfactory position as gross profit ratio, and net profit ratio show satisfactory position of industry. Profitability position of food sector as well as non- od sector is satisfactory. Profitability position of non-food sector is better than food fosector. Profitability position of product categories is satisfactory.

REFERENCES

[1] C.Lakshmi kantha reddy and Prof S.Rathna kumara, Performance of Agro-Based Industries in India: A Critical Analysis, IOSR Journal of Economics and Finance (IOSR-JEF) e-ISSN: 2321-5933, p-ISSN: 2321-5925.Volume 2, Issue 4 (Jan. 2014), PP 15-25 www.iosrjournals.org

[2] Government of India, Ministry of Finance, Economic Survey 2015-16 Highlights, p. 4.

[3] Government of India, Ministry of Finance, Economic Survey 2015-16, New Delhi 2016, ch 5, p. 98.

[4] India Brand Equity Foundation, New Delhi, India, Agriculture in India: Information About Indian Agriculture & It’s Importance accessed from https://www.ibef.org/industry/agriculture-india.aspx as on 10th March 2017.

[5] India Brand Equity Foundation, New Delhi, India, Agriculture in India: Information About Indian Agriculture & It’s Importance accessed from https://www.ibef.org/industry/agriculture-india.aspx as on 10th March 2017.

[6] Malkar Vinod Ramchandra, Study of working of small scale agro-base industries with special reference to Ahmednagar district, Maharashtra, India, International Journal of Research in

Management, Science & Technology (E-ISSN: 2321-3264) Vol. 2, No. 3, December 2014, www.ijrmst.org

[7] R. P. Kachru, Agro-Processing Industries in India Growth, Status and Prospects, —

https://pdfs.semanticscholar.org/e7ae/6958f6c7d4f4cccf46d31f82d515f777df19.pdf

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