Financial performance and efficiency of cotton textile companies - An DEA approach

Abstract

The cotton textile industry is one of the oldest among the manufacturing industries, which contributes 4 percent to the nation's GDP and generate employment amounts to 45 million people. There are 1,227 textile mills with a spinning capacity of about 29 million spindles. Currently, Mumbai and Ahmadabad are the major centers of cotton textile industry in India. It is also known fact that Solapur, Nagpur, Kolkata, and Indore are other important centers of production. About, 27 percent of foreign earning is accounted by a way of textile industry. The current study attempted to evaluate the financial performance and efficiency of 15 selected cotton textile companies in India for the period from 2014-15 to 2018-19. Further, data is analysed by employing tools like financial ratios, 'Z'-Score and Data Envelopment Analysis. The study reveals that out of fifteen companies under study consideration 11 companies overall financial performance as per 'Z'-Score grading is classified as very good, performance of two companies are classified as average whereas performance of two companies are ranked as below average. Analysis of DEA reveals that four companies under study have maintained its scale efficiency and other eleven companies have failed to maintain its efficiency during the study period under study.