A FINAL PROJECT REPORT ON Merger and acquisition in Indian banking sector

Dissertation submitted in partial fulfilment of the requirements for the award ofthe Degree of MASTER IN MANAGEMENT STUDIES (MMS) OF MUMBAI UNIVERSITY (2013-14) SUBMITTED TO, SHIVAJIRAO S. JONDHLE INSTITUTE OF MANAGEMENT SCIENCE & RESEARCH ASANGAON UNDER THE GUIDANCE OF Prof. RENUKA MORANI SUBMITTED BY, Prof. MAHESH KHEBADE (Roll no. 1217) FINANCE.

DECLARATION

I hereby declare that this dissertation titled Merger and acquisition in Indian banking sector submitted by me to SHIVAJIRAO S. JONDHLE INSTITUTE OF MANAGEMENT SCIENCE & RESEARCH, MUMBAI UNIVERSITY in partial fulfilment of requirements of MMS Programme is bonafied work carried me under Professors. This has not been submitted to any other University or institution for any degree/ diploma/ certificate or published any time before.

Date:

(Mahesh Khebade)

CERTIFICATE

This is to certify that Mr Mahesh Ranganath Khebade, Roll No. 1217 student of Second year Master in Management Studies has successfully completed the Project, work title Merger and acquisition in Indian banking sector in partial fulfilment for the degree of Master in Management Studies (MMS) Of Mumbai University. This project report is the record of authentic work carried out during the academic year 2013-14.

Faculty Guide

Principal

ACKNOWLEDGEMENT

Apart from my efforts, the success of this project depends largely on the encouragement and guidelines provided to me by honourable Marketing Manager at Larson & Toubro, E & A, from time to time. I took this opportunity to express my gratitude to the person who has been instrumental in the successful completion of this project. I would like to shower our greatest appreciation to Miss Renuka Morani under the guidance of whom, I felt motivated and encouraged to undertake this project. Without her encouragement and guidance this project would not have materialized. I cant say thank enough for her tremendous support and help. I would also grateful for every small effort she has put in to see to it that my project is a grand success. I would also like to thank my colleagues who encouraged and gave me great help in preparing this successful project. Thanking you all, for your kind anticipation in my project.

INDEX

Sr. No.

Title

Page No.

1.

Executive Summary

1-2

2.

Objective of Study

3-4

3.

Limitation of Study

5-6

4.

Company Profile

7-15

5.

Literature Review

16-17

6.

Research Methodology

18-19

7.

Data Analysis

20-28

8.

Recommendations

29-30

9.

Conclusion

31-32

10.

Appendix

33-35

11.

Bibliography

36-37

EXECUTIVE SUMMARY

The project aims to understand the various Mergers and Acquisitions in Indian Banking Sector A large number of international and domestic banks all over the world are engaged in merger and acquisition activities. One of the principal objectives behind the mergers and acquisitions in the banking sector is to reap the benefits of economies of scale. In the recent times, there have been numerous reports in the media on the Indian Banking Industry Reports have been on a variety of topics. The topics have been ranging from issues such as user friendliness of Indian banks, preparedness of banks to meet the fast approaching Basel II deadline, increasing foray of Indian banks in the overseas markets targeting inorganic growth. Mergers and Acquisitions is the only way for gaining competitive advantage domestically and internationally and as such the whole range of industries are looking to strategic acquisitions within India and abroad. In order to attain the economies of scale and also to combat the unhealthy competition within the sector besides emerging as a competitive force to reckon with in the International economy. Consolidation of Indian banking sector through mergers and acquisitions on commercial considerations and business strategies is the essential pre-requisite. Today, the banking industry is counted among the rapidly growing industries in India. It has transformed itself from a sluggish business entity to a dynamic industry. The growth rate in this sector is remarkable and therefore, it has become the most preferred banking destinations for international investors. In the last two decade, there have been paradigm shift in Indian banking industries. The Indian banking sector is growing at an astonishing pace. A relatively new dimension in the Indian banking industry is accelerated through mergers and acquisitions. It will enable banks to achieve world class status and throw greater value to the stakeholders.

OBJECTIVE OF STUDY

 To study the impact of mergers an acquisitions on the financial performance of the banks To study the performance of banks before merger and after merger To find out the reasons for merger and acquisition in banking sector

LITERATURE REVIEW Under this study various researchers reviewed research papers for the purpose of providing an insight into the work related to Merger and Acquisitions (M&As). After going through the available relevant literature on M&As and it comes to know that most of the work done high lightened the impact of M&As on different aspects of the companies. A firm can achieve growth both internally and externally. Internal growth may be achieved by expanding its operation or by establishing new units, and external growth may be in the form of Merger and Acquisitions (M&As), Takeover, Joint venture, Amalgamation etc. Many studies have investigated the various reasons for Merger and Acquisitions (M&As) to take place, Just to look the effects of Merger and Acquisitions on Indian financial services sector. The work of Rao and Rao (1987) is one of the earlier attempts to analyse mergers in India from a sample of 94 mergers orders passed during 1970-86 by the MRTP Act 1969. In the post 1991 period, several researchers have attempted to study M&As in India. Some of these prominent studies are; Beena (1998), Roy (1999), Das (2000), Saple (2000), Basant (2000), Kumar (2000), Pawaskar (2001) and Mantravedi and Reddy (2008). Sinha Pankaj & Gupta Sushant (2011) studied a pre and post analysis of firms and concluded that it had positive effect as their profitability, in most of the cases deteriorated liquidity. After the period of few years of Merger and Acquisitions (M&As) it came to the point that companies may have been able to leverage the synergies arising out of the merger and Acquisition that have not been able to manage their liquidity. Study showed the comparison of pre and post analysis of the firms. It also indicated the positive effects on the basis of some financial parameter like Earnings before Interest and Tax (EBIT), Return on share holder funds, Profit margin, Interest Coverage, Current Ratio and Cost Efficiency etc. Kuriakose Sony & Gireesh Kumar G. S (2010) in their paper, they assessed the strategic and financial similarities of merged Banks, and relevant financial variables of respective Banks were considered to assess their relatedness. The result of the study found that only private sector banks are in favor of the voluntary merger wave in the Indian Banking Sector and public sector Bank are reluctant toward their type of restructuring. Target Banks are more leverage (dissimilarity) than bidder Banks, so the merger lead to

attain optimum capital Structure for the bidders and asset quality of target firms is very

poor. Anand Manoj & Singh Jagandeep (2008) studied the impact of merger announcements of five banks in the Indian Banking Sector on the share holder bank. These mergers were the Times Bank merged with the HDFC Bank, the Bank of Madurai with the ICICI Bank, the ICICI Ltd with the ICICI Bank, the Global Trust Bank merged with the Oriental Bank of commerce and the Bank of Punjab merged with the centurion Bank. The announcement of merger of Bank had positive and significant impact on share holders wealth. Mantravadi Pramod & Reddy A. Vidyadhar (2007) evaluated that the impact of merger on the operating performance of acquiring firms in different industries by using pre and post financial ratio to examine the effect of merger on firms. They selected all mergers involved in public limited and traded companies in India between 1991 and 2003, result suggested that there were little variation in terms of impact as operating performance after merger.

BIBLIOGRAPHY

http://www.mergersandacquisitions.in http://www.mergersindia.com/mergeronline/ http://rspublication.com/ijrm/march%2012/3.pdf www.mergerdigest.com www.banknetindia.com www.icici.com www.bankofrajasthan.com