Assessing Financial Distress in Electricity Distribution Companies: An Altman Z-Score Analysis of Karnataka ESCOMs

Manu R V; AC Pramila

doi:10.36948/ijfmr.2025.v07i06.65367

Assessing Financial Distress in Electricity Distribution Companies: An Altman Z-Score Analysis of Karnataka ESCOMs

Author(s)	Mr. Manu R V, Dr. AC Pramila
Country	India
Abstract	Electricity distribution companies (ESCOMs) play a critical role in ensuring power sector sustainability; however, persistent financial distress among state-owned utilities remains a major challenge in India. This study examines the financial health of Electricity Supply Companies (ESCOMs) in Karnataka using a modified Altman Z-Score framework tailored to utility-sector characteristics. By integrating key liquidity, profitability, leverage, and efficiency indicators, the study provides a systematic assessment of financial distress over the period 2014–15 to 2023–24.Using secondary financial data compiled from audited annual reports, the analysis classifies ESCOM-year observations into distress, grey, and safe financial zones. The results reveal that a dominant proportion of observations fall within the distress zone, while the remaining observations are confined to the grey zone. Notably, none of the ESCOMs consistently achieve the safe zone during the study period, indicating the persistence of structural financial weaknesses despite multiple reform initiatives. The findings highlight chronic liquidity constraints, high leverage, and weak operating margins as key contributors to financial distress in electricity distribution utilities. The study underscores the limited effectiveness of existing reform measures, including tariff rationalization and debt restructuring schemes, in restoring long-term financial sustainability. From a policy perspective, the results emphasize the need to institutionalize early warning systems based on Z-Score diagnostics, ensure timely subsidy reimbursement, and strengthen governance and accountability mechanisms within state-owned utilities. By providing an empirically grounded distress classification framework, this study contributes to the literature on utility financial performance and offers actionable insights for regulators, policymakers, and utility managers. The proposed approach can be extended to other Indian states or emerging economies to support comparative assessments and evidence-based power sector reforms.
Keywords	Electricity distribution utilities; Financial distress; Altman Z-Score; Power sector reforms; ESCOMs; India; Utility financial performance.
Field	Business Administration
Published In	Volume 7, Issue 6, November-December 2025
Published On	2025-12-31
DOI	https://doi.org/10.36948/ijfmr.2025.v07i06.65367

View / Download PDF File

E-ISSN 2582-2160

doi

CrossRef DOI is assigned to each research paper published in our journal.

IJFMR DOI prefix is
10.36948/ijfmr

Downloads

Research Paper Format Copyright Permission Form and Undertaking Form Cover Page Vol 8 Isu 2 Cover Page Vol 8 Isu 1 Cover Page Vol 7 Isu 6

All research papers published on this website are licensed under Creative Commons Attribution-ShareAlike 4.0 International License, and all rights belong to their respective authors/researchers.

CC-BY-SA

About IJFMR Fees & Payment Current Issue Publication Archive	Submit Research Paper Track Submission Status Publication Guidelines Publication Ethics Peer Review & Plagiarism	Join as a Reviewer Editors & Reviewers Reviewer Referral Program Get Reviewer Membership Certi.	Website/Journal Policies Usage Policy Content Policies Privacy Policy

Contact Us		+91-9687-828-838	editor@ijfmr.com

International Journal For Multidisciplinary Research

A Widely Indexed Open Access Peer Reviewed Multidisciplinary Bi-monthly Scholarly International Journal

Assessing Financial Distress in Electricity Distribution Companies: An Altman Z-Score Analysis of Karnataka ESCOMs

Share this