VAIKUNTH MEHTA NATIONAL INSTITUTE OF CO-OPERATIVE MANAGEMENT PUNE -

411007
PGDM-ABM 2022-24 BATCH - DIVISION A & B

AGRIFINANCE, MICROFINANCE AND RURAL CREDIT

– Dr. Naveen Kumar
Assignment-I (20 Marks)
(V END TERM) Due Date – 22/12/2023

TOPIC : Assessment of Farmer Producer Companies

Proposal Name: Working Capital Loan Assistance to ABC Farmer Producer Company Limited
(FPO) for commodity trading, seeds trading and electric pump sales.
Loan requested for: Rs.25.00 lakh short term working capital.
Brief description
ABC FPO is registered in 2015 under the Company’s Act, 2013, and comprises 1015 small farmers
of which 940 are women members and 838 are ST members. During the last 6 months, 25 new
farmers have been added and 550 farmers are active members. The FPO has obtained requisite
license for trading in seeds and also the Mandi license from the appropriate authority. The area
of operation of the FPO extends to 72 villages and some non-members also avail of facilities from
the FPO. The FPO is operating from a rented premises and pays a monthly rent of Rs.3100.00.

Activities undertaken/proposed

FPO is going to undertake seed trading business and commodity trading business of Paddy in
Kharif harvesting season and Wheat in the rabi season. The FPO is expected to bring in
higher profits through this business proposition. The FPO facilitated in the purchase of seeds from
the nearby KVK to the member farmers. Organized multiple trainings in the past to the member
farmers with the support of KVK. Jeeraphool is a special variety of rice cultivated in the region.
Backward and forward linkages

Backward linkage

- Purchase of certified seeds from the sister FPOs

- Purchase of commodities from the member farmers
- Purchase of electric pumps from the distributors & supplying/selling to members

Forward linkage

- Sale of certified seeds to the member and non-member farmers

- Sale of commodities to the traders and processors
- Sale of electric pumps to the member farmers in the service area.

1|P age N a t i o n a l I ns t i t u t e o f B a n k M a na g e m e n t P u n e
 Management of FPO

The Company has hired a business facilitator who is acting as the CEO since August, 2019. He is
a B.sc (Biology) and has several years of experience in FPC. He gets a monthly remuneration of
about Rs.40,000/-. The company has 2 external support staff on the roll to assist the CEO in his
day-to-day functioning.
The Board of Directors of the Company consists of 8 members (mostly women) and their
qualification either 10th or 12th standard. The Board meets regularly and takes interest in the
affairs of the Company. However, the Company has not co-opted any professional into the Board.

Financials of the FPO

As per the balance sheet and P/L Account filed with MCA, the following key figures are furnished
(in Rs)

Year Share Reserves Borrowin Revenue Net Profit Activity

Capital gs pursued
2017- 365,240.0 97,399.8 2,241,632.5 122,789.7 Agri-input
18 trading and
commodity
trading
2018- 365,240.0 1,04,679.7 3,429,942.0 7,279.9 Agri-input
19 trading and
commodity
trading
2019- 365,240.0 147,238.0 500,000.0 1,480,058.4 42,559.5 Agri-input
20 (As trading and
on commodity
26.11.2 trading
019)

Observations on audited report for the FY 2018-19:

- Grant received from SFAC to the tune of Rs.1.62 lakh has remained unutilized till 31st
March 2019, hence it has been shown under other current liabilities
- Bonus payable of Rs. 2.65 lakh was the patronage bonus given to the farmers which was
approved by the board of the company
- Personal loans and advances to Mr. XYZ to the tune of Rs. 49,857.0. XYZ is supporting the
operations of the FPO, he incurred some expenses in the transportation, loading and
unloading for which he couldn’t produce suitable bill, hence it has been shown under his
name in the loans and advances
- Loans and advances to sister FPCL –which has now been converted as advance amount to
purchase the seeds from the sister FPCL. Sister FPCL has supplied around 100 qtl of
wheat seeds worth of Rs.2.60 lakh, similarly commodities or seeds shall also be supplied
against the remaining amount. Board resolution available.
- POPI has also given a grant of Rs.2.0 lakh under the project which is being used for
expansion of business operations of FPO

2|P age N a t i o n a l I ns t i t u t e o f B a n k M a na g e m e n t P u n e
Business projections for the next three years

The projections on financial information made for next 3 years is given here under:
(in Rs )
Share Reserves Borrowings Turnover Net Profit/surplus
Capital
365,240.0 404,964.3 3,250,000.0 10,790,000.0 238,083.3
730,480.0 663,451.8 4,500,000.0 11,895,975.0 258,487.5
750,000.0 955,897.5 5,000,000.0 13,115,312.4 292,445.6
Note: The projected turnover is from the seed trading, commodity trading and electric pump
trading.

Business Plan: FPO is going to procure the Black gram and Soybean seeds in the upcoming
Kharif harvesting season. Wheat seeds shall be procured in the next Rabi harvesting season.
Wheat commodity shall also be procured in the next Rabi harvesting season.

Assumptions:

FPO shall procure the Wheat commodity and Jeeraphool paddy from the farmers. Wheat
commodity shall be sold to the ITC and other processors as the sister FPOs have sold to the ITC
in the past. Jeeraphool paddy shall be sold to the Okay foods and they may sell it to the other
processors based on the availability of higher prices.

Particulars Quantity Purchase price Sale price

Wheat 750.0 1,750.0 2,000.0
Jeeraphool Paddy 900.0 2,600.0 3,000.0
Wheat seeds 400.0 2,000.0 2,600.0
Paddy seeds 850.0 2,750.0 3,000.0
Electric Pumps 200.0 13,000.0 15,000.0

Kharif harvesting for FY 2019-20 – Jeeraphool Paddy

Operating cycle start: January 2020
Operating cycle ends: April 2020

Rabi harvesting for FY 2020-21 – Wheat

Operating cycle start: May 2020
Operating cycle ends: July 2020

Paddy seeds
Operating cycle start: June 2020
Operating cycle start: August 2020

Wheat seeds
Operating cycle start: October 2020
Operating cycle ends: December 2020

3|P age N a t i o n a l I ns t i t u t e o f B a n k M a na g e m e n t P u n e
Electric Pumps
Operating cycle start: January 2020
Operating cycle ends: December 2020

Other Information

• FPO has been promoted by a well-known PoPI, which is going to provide them marketing
support for the commodity trading
• FPO has been sanctioned equity matching grant of Rs.3.65 lakh in December 2019 from the
SFAC
• FPO has movable assets like 1 rack, 5 chairs, 1 cupboard and 1 weighing machine & no
immovable asset is available for mortgage
• FPO uses Tally software for managing its accounts
• FPO had availed Rs.5 lakh loan from PoPI for seed processing business for 3 month duration.

Lending Assessment

Q1) What are the various risks in the proposal?

Q2) Whether you will consider sanction of the requested loan to the FPO? Give
Q3) reasons Can you prepare the cashflow statement?
Q4) How much loan can be granted to the FPO?
Q5) What could be the repayment period and security to be taken?

4|P age N a t i o n a l I ns t i t u t e o f B a n k M a na g e m e n t P u n e