Project Report

(Submitted for the degree of B. Com (H) in Accounting & finance under the
university of Calcutta)

Title of the project

MERGERS & ACQUISATION – with a case study on ICICI

bank and bank of Rajasthan

Submitted by: -
Name of the candidate: - Ashish sharma
Registration No: - 017-1121-0353-15
Name of the college: - The Bhawanipur Education Society College
CU roll no: -1017-61-0200
College Roll no: - 0101151295

Supervised by
Name of the supervisor: Prof. Trupti Upadhyay
Name of the College: The Bhawanipur Education Society
College

Month $ year of submission

February, 2018

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 Supervisor’s Certificate

This is to certify that Ashish sharma, a student of B. Com (H) in Accounting & Finance of The
Bhawanipur Education Society College under the University of Calcutta has worked under my
supervision and guidance for his project work and prepared a Project Report with the title Mergers
& Acquisitions- with a case study on ICICI bank and Bank of Rajasthan which is submitting, is
his genuine and original work to the best of my knowledge.

Place: - Kolkata Signature: -

Date: - Name: -
Designation: -
Name of the college:

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 Student’s declaration

I hereby declare that the project work with the title MERGERS & ACQUISATION – WITH A CASE
STUDY ON ICICI BANK AND BANK OF RAJASATHAN submitted by me for the partial fulfilment
of the degree of B.com(H) in accounting and finance under the University of Calcutta is my original
work and has not been submitted earlier to any other university/Institution for the fulfilment of the
requirement for any course of study.

I also declare that no chapter of this manuscript in whole or in part has been incorporated in the
project from any earlier work done by others or by me. However, extracts of any literature which has
been used for this report has been duly acknowledge providing details of such literature in the
references.

Place: - Kolkata Signature: -

Date: - Name: - Ashish Sharma
Address: - AD-201/202, Rabindra ally,
kestopur, Kolkata-700101.
Registration no: - 017-1121-0353-15
Phone no: - 8420731736

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 Acknowledgement

In order to complete a project like this one needs intellectual nourishment, professional help and
consent encouragement from many quarters. First of all, I would like to express my sincere gratitude
to The Bhawanipur Education Society College for giving me the platform and opportunity to do a
project and providing me with an enriching experience, with the right blend of theoretical as well as
practical exposure.
I would like to extend my sincere thanks to my college guide, professor Trupti Upadhyay for not only
facilitating me to take a meaningful project but also, providing the necessary academic and professional
guidance right from the “definition of the work content” till the “project completion”. He has been very
kind and co-operative during the entire duration of my completion of this project.
Last, but not the least, I would like to thank all others who, in one way or another have helped me so
much along the way.

Date: - Name: - Ashish sharma

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MERGERS AND
ACQUISATIONS

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 TABLE OF CONTENTS
SERIAL NO. PARTICULARS PAGE NO
1. INTRODUCTION 7-11
1.1 ➢ Background

1.2 ➢ Objectives

1.3 ➢ literature Review

1.4 ➢ Methodology

1.5 ➢ Limitations of the study

1.6 ➢ Chapter planning

2 CONCEPTUAL FRAMEWORK 12-17

2.1 ➢ Definitions, advantages& disadvantages

2.2 ➢ Reasons for merger fails

2.3 ➢ Regulatory framework

2.4 ➢ National & international scenario

3 FINDINGS AND ANALYSIS 18-31

3.1 Why bank of Rajasthan?

3.2 Merger highlights

3.3 Pre-&Post-Merger Performance measurement through

different ratios

3.4 Pre-& post-merger challenges

4 CONCLUSION & RECOMMENDATIONS 32-33

5 REFERENCES 34

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INTRODUCTION

7
 1.INTRODUCTION
1.1 BACKGROUND:
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.
Merger and acquisition 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 economics of scale and also to combat the unhealthy
competition within the sector besides emerging as a competition force to reckon within 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 rapidly growing industries in India. It has transformed itself from a sluggish business
entity to a dynamic industry. The growth rate in the sector is remarkable and therefore, it has become
the most preferred banking destinations for international investor’s. in the last two decades, 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
shareholders.

1.1.1 WHY MERGERS AND ACQUISITIONS?

2. Procurement of supplies:
➢ To safeguard the sources of supplies of raw material or intermediary product.
➢ To share the benefits of supplier’s economic by standardizing the material.
➢ To obtain economics of purchase in the form of discount, saving in transportations
costs, overhead costs in buying department etc.
3. Market expansion and strategy:
➢ To eliminate competition and protect existing market
➢ To obtain a new market outlet in possession of the offeree.
➢ To reduce advertising cost and improve public image of the offeree company.
➢ To strengthening retain outlets and sale of goods to rationalize distribution.
4. Financial strength:
➢ To improve liquidity and have direct access to cash resources.
➢ To avail tax benefits.
➢ To improve earnings per share (EPS).
➢ To enhance gearing capacity, borrow on better strength and the greater assets
backing.

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 5. Revamping production facilities:
➢ To achieve economies of scale by amalgamating production facilities through more
intensive utilization of plant and resources.
➢ To standardize product specifications, improvement of quality of product,
expanding.
➢ To reduce cost, improve quality and produce competitive products to retain and
improve market share.
➢

1.2 OBJECTIVES OF STUDY TOPIC:

➢ To analyse the financial position of the company before and after acquisition.
➢ To study the benefits of merger and acquisitions.
➢ To determine whether the acquisition was a success for the company or not in terms of
future benefits.
➢ To find out why the Bank of Rajasthan had been taken over by ICICI Bank.
➢ To study the events in stages of merger and acquisitions. &
➢ To study the pre-merger and post- merger challenges.

1.3 LITERATURE REVIEW

The lot of research has been conducted on pre-and post-merger financial performance of ICICI
bank Ltd from last few decades.

Tiwari (2011), these studies was conducted on mergers of banks some issues and challenges
us. This paper attempt to some important dimensions and issues in the post-merger regime of
banking system in India. These issues may vary from financial restructuring to human resource
to IT consolidation etc. This paper main objective is synergy operations and bringing financial
strength. There are some issues, questions and challenges which need to be addressed in an
inevitable environment of imminent reality of banking mergers in India and also this study
recommends Narasimha Committee and BASEL conventions have also propagated the need
of mergers and consolidations of banking industry to bring synergic consequences in India.
Goyal (2012), this study was undertaken on merger and acquisition in banking industry : A
case study of ICICI bank Ltd. The main objective of this article is to study the growth of ICICI
Bank Ltd. through mergers, acquisitions, and amalgamation. This article is divided into four
parts. The first part includes introduction and conceptual framework of mergers and acquisition.
The second part discusses the historical background of ICICI Bank Ltd. and followed by review
of literature. The third part discusses all the mergers, acquisitions, and amalgamations in detail.
Finally, the article concludes that a firm must devise a strategy in three phases such as, pre-
merger phase, acquisition phase and post-merger phase etc

9
 Fakhruddin (2014), this study was undertaken on effects of mergers and acquisitions on
revenue efficiency and the potential determinants: evidence from Malaysian banks. This
paper discusses on identifying the effects of regulators-guided mergers on production efficiency
gains of Malaysian banks as measured by revenue efficiency ratio and capital gearing ratio etc.
The paper also examines the potential bank-specific and macroeconomics determinants
correlated with revenue efficiency. The study sample consisted of banks that were engaged in
mergers during 2002-2009. This study results the revenue efficiency did not improve after the
merger, meanwhile, size, market power and management quality were shown to be correlated
with revenue efficiency of Malaysian banks.

Singh (2015), this study was conducted on mergers in service sectors: post-merger financial
analysis of ICICI bank. This paper evaluates the performance of the ICICI bank, after buy the
Sangli Bank in April 2007 and Bank of Rajasthan in May 2010.This study mainly focused on pre
and post amalgamation performance was analysed based on financial statements of ICICI bank
from (2004- 2014) by using various financial ratios such as, net profit margin, ROA, ROE, ROI,
return on advances, debt/equity ratio, current Ratio, quick ratio and EPS.T-test was applied to
the various financial ratios for before and after merger data. The results show that, out of total
performance ratios of ICICI Bank half of ratios have significantly changed after mergers in both
sample cases.
Tamragundi (2016), this study was focused on impact of mergers on Indian banking sector:
A comparative study of public and private sector merged banks. This paper examines the impact
of mergers on performance of selected commercial banks in India and also merger of public
sector banks with private sector banks and data have been collected from CMIE data base at
IIM, Bangalore and Bank’s annual reports and to test reliability of data used Statistical tool such
as, Mean, Standard deviation and T-Test etc. Finally, the study concludes that, Merger is a
useful strategy, through this Banks can expand their operations, serve larger customer base,
increases profitability, liquidity and efficiency but the overall growth and financial illness of the
bank can’t be solved from mergers of public and private sector banks.

1.4 METHODOLOGY:
Research is considered as journey from unknown to the known. Methodology is the way to solve
the research problem systematically. The required secondary data constitutes the main source
of information, suitable for the purpose of the present study. In this study we have selected ICICI
bank for analysis of data. The sources of secondary data were collected from Annual reports of
ICICI bank. The information for this study is gathered for the time of 2007-08 to 2016-17. And
also, various national and international journals, periodic publications, working papers, books,
articles, thesis, dissertation work on pre-and post-financial performance of Indian banking
sector. For the purpose data analyse applied group or descriptive statistics, independent sample
T-test to known the significant relationship between two variables and also to prove the
hypotheses of the study to measure the reliability of data.

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1.5 LIMITATIONS OF THE STUDY:
Though researchers have made a humble attempt to encompass the pre-and post-merger
performance of the selected sample merger case, it is difficult to narrate all incidents and
changes brought up due to mergers and acquisitions and Secondly, the study is based purely
on secondary data which are taken from financial statements of the case through internet only
and therefore can’t be denied for any ambiguity in data used for the analysis.

1.6 CHAPTER PLANNING: -

The dissertation is structured as follows: -
 The first chapter serves as an introduction to the dissertation including background, rationale,
literature review, objective of the study and methodology.
 The chapter two refers to conceptual framework which includes definition, types of mergers
and acquisitions, advantages of mergers and acquisitions, disadvantages of mergers and
acquisitions, regulatory framework, national and international scenario of M&A.
 Chapter three looks at case study (merger of bank of bank of Rajasthan with icici bank) to
study the motives behind the M&A, as well as evaluating the financial performance before
and after the M&A and to see the affect the company’s financial performance. In this chapter
I have also discussed the stages of M&A and also the challenges which were faced before
mergers and after mergers.
 And the last chapter i.e. chapter four deals with the conclusion of the M&A of the case and
recommendations or suggestions for the further study.

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CONCEPTUAL FRAMEWORK

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2. CONCEPTUAL FRAMEWORK
2.I SOME IMPORTANT TERMINOLOGIES:
Though M&A are synonymous as per Companies Act, 1956 but there are certain differences the so
both the terms have been defined separately.
Merger-In merger, one of the two existing companies merges its identity into another
existing company or one or more existing companies may form a new company and merge
their identities into the new company by transferring their business and undertakings
including all other assets and liabilities to the new company.

TYPES OF MERGERS: -
i. VERTICAL MERGER: A vertical merger is a merger between companies that produce
different goods or offer different services for one common finished product. The
companies operate at different levels in the supply chain of the same industry. The
motivation behind such mergers is cost efficiency, operational efficiency, increased
margins and more control over the production or the distribution process.

❖ There are two types of vertical mergers.

• Backward integration: A vertical integration where a company

acquires the suppliers of its raw materials.

• Forward integration: A vertical integration where a company acquires
the distribution channels of its products.

❖ The following main benefits accrue from vertical merger:

• It gains a strong position because of imperfect market of the intermediary
products, scarcity of resources and purchased products.
• Has control over products specifications.
ii) Horizontal merger: This is where two companies in the same industry merge. They
are often competitors, and the aim of such a merger is to reduce costs and to gain a
greater share of the market.
iii) Conglomerate merger: A conglomerate merger is where two companies that have
nothing in common with each other merge in order to share assets or to reduce their
business risk.

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iv) Market extension merger: Market extension mergers are when two companies in the
same industry but in separate markets merge, with the aim of creating a larger
customer base.
v) Product extension merger: This is where two companies in the same industry but
producing different products merge in order to increase profits by grouping their
products together to access a bigger.

Acquisition: Acquisition is the process through which one company takes over the
controlling interest of another company. Acquisition includes obtaining supplies or services
by contract or purchase order with appropriated or non-appropriated funds, for the use of
Federal agencies purchase or lease.

TYPES OF ACQUISATIONS:
i) VALUE CREATING: Value creating is where a company acquires another
company, improves its performance and then sells it again for a profit.
ii) CONSOLIDATING: This is where a company acquires another company to
remove competition from an over-supplied market.
iii) ACCELERATING: Accelerating is when a larger company acquires a smaller
company and uses its greater resources to accelerate market access for the
smaller company’s products.
iv) RESOURCE ACQUIRING: This is where a company acquires other companies
to gain resources, skills, intellectual property, technologies or market
positioning they need, because it is more cost effective than developing their
own.
v) SPECULATING: Speculating is when a larger company acquires a smaller
company with a new product, with the aim of cashing in on its future growth
potential.

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 2.1.2 ADVANTAGES OF MERGERS & ACQUISATIONS
i) DIVERSIFICATION: -
For rapid diversification of the products a merger with an existing company can be used instead of the
time-consuming process of internal growth. It is less costly, avoids many risks associated with
designing manufacture and sale of new products as well as removes potential competitors.
ii) SYNERGISM:
Synergism exists whenever the value of the combination is greater than the sum of the values of its
parts. The incremental value may derive from increase in either operational or financial efficiency.
iii) INCOME TAX ADVANTAGES:
In some cases, income tax consideration may provide the financial synergy motivating a merger. The
carried forward loss of a firm after merger is utilized by a profit-making firm so as to reduce net tax
amount.
iv) SHAREHOLDER WEALTH: -
An M&A transaction may enhance shareholders value by Value creation-a long term phenomenon
which results from the synergy generated from a transaction or Value capture-a one-time phenomenon,
wherein the acquiring company's shareholders gain the value of the existing shareholders of the
acquired company.
v) CORE COMPETENCE: -
Co-generic merger increases a firm's competitiveness in an existing market which is closely aligned
with the motive of fortifying a company's business domain and warding off competition.
vi) INCREASED DEBT CAPACITY: -
A merged entity would enjoy higher debt capacity because benefits of combination of two or more firms
provide greater stability to the earnings level. This is an important consideration for the lenders.

2.1.3 DISADVANTAGES OF MERGER AND ACQUISITIONS:

Loss of experienced workers aside from workers in leadership positions. This kind of loss
inevitably involves loss of business understand and on the other hand that will be worrying to
exchange or will exclusively get replaced at nice value.
As a result of M&A, employees of the small merging firm may require exhaustive re-skilling.
Company will face major difficulties thanks to frictions and internal competition that may occur
among the staff of the united companies. There is conjointly risk of getting surplus employees
in some departments.
Merging two firms that are doing similar activities may mean duplication and over capability
within the company that may need retrenchments.
Increase in costs might result if the right management of modification and also the
implementation of the merger and acquisition dealing are delayed.
The uncertainty with respect to the approval of the merger by proper assurances.
In many events, the return of the share of the company that caused buyouts of other company
was less than the return of the sector as a whole.

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2.2 REASONS FOR MERGER FAILS:
1. Ignorance: - While the parties to a merger or acquisition cannot exchange commercially
sensitive information prior to being under common ownership, there is enough crucially
important and legally permissible preparation work to keep an integration team busy for
several months before day one. Most chief executives don’t know this and they waste the
time that could be put to good use while they await clearance from the regulatory
authorities. Good preparation means the integration can kick off on day one. Speed
matters.
2. No common vision: - In the absence of a clear statement of what the merged company
will stand for, how the organisation will operate, what it will feel like, and what will be
different compared to how things are today, there is no point of the convergence on the
horizon and the organisations will never blend.
3. Nasty surprises resulting from poor due diligence: - This sounds basic, but happens
so often.
4. Team resourcing: - Resource requirements are very often underestimated. It can take
two or three months to release the best players from daily business to join the integration
team(s), find a backfill for them, sign up contractors to fill the gaps and set up the team’s
infrastructure. Most companies start too late and are not ready on once the deal is
completed.
5. Poor governance: - Lack of clarity as to who decides what, and no clear issue resolution
process. Integrating organisations brings up a myriad of issues that need fast resolution
or else the project comes to a stand-still. Again: speed matters, but with a sound decision-
making process.
6. Poor communication: - Messages too frequently lack relevance to their audience and
often hover at the strategic level when what employees want to know is why the
organisation is merging, why a merger is the best course action it could take, in what way
the company will be better after the merger, how it will “feel”, how the merger will affect
their work and what support they will receive if they are adversely impacted.
7. Poor programme management: - Insufficiently detailed implementation plans and failure
to identify key interdependencies between the many workstreams brings the project to a
halt, or requires costly rework, extends the integration timeline and causes frustration.

2.3 REGULATORY FRAMEWORK OF MERGERS AND ACQUISITIONS:

Banking Regulation Act, 1949: - Section 44A of the Banking Regulation Act, 1949 requires
that the draft scheme of amalgamation has to be approved by the shareholders of each
banking company by a resolution passed by a majority in number representing two-thirds in
value of the shareholders, present in person or by proxy at a meeting called for the purpose.
Income Tax Act, 1961: - Section 2(1B) of Income-tax Act, 1961 means merger of either one
or more companies with another company or merger of two or more companies to form one
company in such a manner that: All the property/liability of the amalgamating
company/companies becomes the property/liability of amalgamated company.
The companies Act, 2013: Section 230 to 234 of the The Companies Act, 2013 deals with

the mergers and acquisitions of the companies.

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2.4.1 NATIONAL SCENARIO:
Some important M&A that took place in India are given below:

Tata acquired Corus in 2007 for $12.02 billion.

Tata Motors acquired luxury car maker Jaguar Land Rover for $2.3
Billion.
Vodafone acquired Hutchison essar in 2007 for $10 Billion.
Hindalco – novels for $6 Billion.
Reliance industries taking over reliance petroleum ltd. For $1.6 B.
Sun pharmaceuticals acquired Ranbaxy for $4 billion.
Flipkart acquired myntra for $300 million.
HDFC bank acquisition of Centurion Bank of Punjab for $2.4 Billion
Ola cabs acquired TaxiforSure in march 2015 for $ 200 million.
NIT DoCoMo – Tata tele services deal for $2.7 billion.
Food panda acquires food ordering portal Just Eat India.

2.4.2 INTERNATIONAL SCENARIO:

Some the largest M&A deals are given below:
Warner – Lambert in 2000 for $89 billion.
RFS holding bank acquired ABN Amro for $98 billion.
Verizon Wireless – Verizon communication for $129 billion.
Vodafone merged with Mannesmann for a whopping $ 180 billion.
Facebook acquires Instagram and WhatsApp in the year 2012 and 2014. Acquisition
Price: SI billion and S19 billion.
SmithKline Beecham was taken over by GlaxoWellcome Plc. In 2000 with S75,961
involved.
In 2004 Royal Dutch Petroleum Co took over Shell Transport & Trading Co with 74,559
involved in the merger.
AT&T Inc. took over BellSouth Incorporation in 2006 for $86 billion.
Bank One Corporation merged with JPMorgan Chase & Co. in 2004

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PRESENTATIONS OF
DATA, ANALYSIS
AND FINDINGS

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3. PRESENTATIONS OF DATA, ANALYSIS & FINDINGS
3.1.1 ICICI BANK

Sl.no Key Rationalise ICICI bank

1. Type Private sector
2. Industry Banking financial services
3. Year of incorporation 1994 (promoted by ICICI)
4. Traded as NSE: ICICIBANK
BSE: 532174

NYSE: IBN
NYSDAQ: IBN
5. Products Finance and insurance
Retail banking
Commercial banking
mortgages
credit cards
private banking
asset management
investment banking

6. Business presence 19 countries

7. Number of offices 4850
8. Number of ATM 14,404
9. Number of employees 84096
10. Total income ₹ 58,905.70
11. Profit ₹ 9801.08
12. Total assets ₹ 737,546.29
13. CRAR (capital to risk asset ratio) 17.39 %
14. Net NPA percentage 5.43 %

(source- annual report of icici bank 2017.)

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3.1.2 Bank of Rajasthan

(Before merger)
Sl.no Key Rationalise Bank of Rajasthan
1. Type Private sector
2. Industry Banking, loan, Capital market and allied industries
3. Year of incorporation 1943, Udaipur
4. Traded as NSE: BANKRAJAS
BSE: 500019
5. Products Corporate or wholesale banking
Personal banking
Commercial banking
Retail banking
Finance and insurance
Investment banking
Auxiliary banking
Merchant banking
Trust and custodial services
6. Business presence All over India
7. Number of offices 478
8. Total income ₹ 1489,48
9. Profit ₹ (102,13)
11. Total asset ₹ 17,300.06
12. CRAR (capital to risk asset 7.52
ratio)
13 Net NPO ratio 1.60

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 3.1.3 WHY BANK OF RAJASTHAN:
ICICI Bank Ltd, India's largest private sector bank, said agreed to acquire smaller rival Bank of
Rajasthan Lid to strengthen its presence in northern and western India.
Deal would substantially enhance its branch network and it would combine Bank of Rajasthan
branch franchise with its strong capital base.
This acquisition would be ICICI Bank's third one after Bank of Madura in 2000-01 and Sangli
Bank in 2006-07.
In February 2010, RBI imposed ₹25 lakh penalties on BOR for various violations. It also ordered
a special audit of the books of the bank, after it found lapses in corporate governance and
disclosure norms.
The deal which will give ICICI a sizeable presence in the north-western desert state of
Rajasthan, values the small bank at about 2.9 times its book value, compared with an Indian
banking sector average of 1.84.
ICICI Bank may be killing two birds with one stone through its proposed merger of the Bank of
Rajasthan Besides getting 408 branches, India's largest private sector bank will also get control
of 58 branches of a regional rural bank sponsored by BoR.
The board approved the merger after considering the results of the due diligence covering
advances, investments, deposits, properties and branches and employee-related liabilities, and
the valuation report of Hari bhakti and Co, Chartered Accountants.
Post-merger ICICI Bank's branch network would go up to 2,463

3.1.3 MERGER WITH KEY HIGHLIGHTS:

The Bank of Rajasthan Limited (Bank of Rajasthan), a banking company incorporated within the
meaning of Companies Act,1956 and licenced by Reserve Bank of India (RBI) under the Banking
Regulation Act, 1949 was amalgamated with ICICI Bank Limited (ICICI Bank\the Bank) with effect from
close of business on August 12, 2010 in terms of the Scheme of Amalgamation (the Scheme) approved
by RBI vide its order DBOD No. PSBD 2599/16.01.056/2010-11 dated August 12, 2010 under sub
section (4) of section 44A of the Banking Regulation Act, 1949. The consideration for the amalgamation
was 25 equity shares of ICICI Bank of the face value of ₹10 each fully paid-up for every 118 equity
shares of the ₹10 each of Bank of Rajasthan. According, ICICI Bank allotted 31,323,951 equity shares
to the shareholders of Bank of Rajasthan on August 26, 2010 and 2,860,170 equity shares, which were
earlier kept in abeyance pending civil appeal on November 25, 2010.

➢ Hari bhakti & Co was appointed jointly by both the banks to assess the valuation.
➢ Swap ration of 25:118 (25 shares of ICICI for 118 shares of Bank of Rajasthan) i.e. one ICICI
Bank shares for 4.72 Bank of Rajasthan shares.
➢ Post-merger, ICICI Bank’s branch network would go up to 2463 from 2000.
➢ The deal, according to Ms Kochhar, would not increase ICICI Bank’s bad loan ratio.
➢ Analysis was done at the loans and advances, investments, properties and the deposit profile
of Bank of Rajasthan.
➢ The merger will be through an all-share deal, valued at about 30.41 billion INR.
➢ The NPAs record for Bank of Rajasthan is better than ICICI Bank. For the quarter ended Dec
09, Bank of Rajasthan recorded 1.05 percent of advances as NPA’s, which is far better than 2.1
percent recorded by ICICI Bank.
➢ The deal, entered into after the due diligence by Deloitte, was found satisfactory in maintenance
of accounts and no carry on of bad loans.

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 ➢ The move to merge Bank of Rajasthan with ICICI Bank comes in wake of regulatory pressure
mounted on the Tayal’s.
➢ According to SEBI, Tayal’s hold nearby 55% stake in the bank.
➢ RBI slapped a fine of ₹25 lakhs on Bank of Rajasthan following violations related to KYC
guidelines, acquisitions of immovable property, deletion of records in the bank’s IT system,
irregularities in the conduct of accounts for certain companies and for failure to present
documents to the regulator.

3.1.4 PRESENTATION OF NUMERIC DATAS PARAMETER WISE

3.2.1 ANLYSIS OF THE FINANCIAL RESULTS: -

7.1% increase in Profit after tax to ₹4024.98 crore for the year ended March 31, 2010 from
₹3758.13 crore for the year ended March 31, 2009.
Net non-performing assets decreased to ₹3841.11 crore at March 31, 2010 from ₹4553.94 crore
at March 31, 2009.
Strong capital adequacy ratio of 19.14% and Tier-1 (Equity Capital and disclosed reserves)
capital adequacy of 13.48%.
The shareholders also enjoying the dividend of approximately ₹12 per share proposed.
The Big Deal The deal, which would give ICICI a sizeable presence in the north-western desert
state of Rajasthan, valued the small bank at about 2.9 times its book value, compared with an
Indian banking sector average of 1.84. Bank of Rajasthan had a network of 463 branches and
a loan book of 77.81 billion rupees ($1.7 billion).
In the context of net profit margin ratio, the overall pre-merger performance was recorded 110.30
billion and post-merger performance was recorded 546.77 billion this shows the post-merger
performance was high compared to pre-merger performance in ICICI bank.
3.1.5 Pre-and Post-Merger Performance Measurement Though Profitability Ratios
PROFITABILITY NET PROFIT MARGIN RETURN ON ASSETS RETURN ON EQUITY
RATIOS
PRE-MERGER
2007-08 31.10 1.10 13.4
2008-09 41.58 1.10 11.1
2009-10 37.58 1.00 7.70
TOTAL [A] 110.30 3.2 32.2
POST-MERGER
2010-11 40.25 1.1 7.90
2011-12 51.51 1.34 9.58
2012-13 64.65 1.50 11.09
2013-14 89.25 1.66 12.94
2014-15 98.10 1.76 13.73
2015-16 111.75 1.86 14.3
2016-17 97.26 1.49 11.32
TOTAL [B] 546.77 10.71 69.54

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 Chart Title
600

500

400

300

200

100

Net Profit Margin Return on Assets

Return on Equity 2 per. Mov. Avg. (Net Profit Margin)
2 per. Mov. Avg. (Return on Assets) 2 per. Mov. Avg. (Return on Equity)

Above Table indicates the profitability ratio analysis of pre-and post-merger financial performance of
ICICI bank Ltd. The profitability ratio is further divided into three types such as, net profit margin, return
on assets, return on equity etc. In the context of net profit margin ratio, the overall pre-merger
performance was recorded 110.30 billion and post-merger performance was recorded 546.77 billion
this shows the post-merger performance was high compared to pre-merger performance in ICICI bank.
In the context of pre-merger financial performance, the highest net profit margin was recorded 41.58
billion in the year 2008-09 as against lowest net profit margin was recorded 31.10 billion in the year
2007-08. Further the post-merger performance the highest net profit margin was recorded 111.75
billion in the year 2015-16 as against lowest net profit margin was recorded 40.25 billion in the year
2010-11. In the context of return on assets the overall pre-merger and post-merger performance was
recorded 3.2 times and 10.71 times respectively. The highest pre-merger performance on return on
assets was recorded 1.10 times in the year 2008-09 as against lowest return on assets was recorded
1.10 times in the year 2009-10. Further the post-merger performance, the highest return on assets was
recorded 1.86 times in the year 2015-16, as against the lowest return on assets was recorded 1.1 times
in the year 2010-11. In the context of return on equity the overall pre-merger and post-merger
performance was recorded 32.2:1 and 69.54:1 respectively. The highest pre-merger performance of
return on equity was recorded 13.4:1 in the year 2007-08 as against lowest return on equity was
recorded 7.70:1 in the year 2009-10. Further the post-merger performance, the highest return on equity
was recorded 13.73:1 in the year 2014-15. As against lowest return on equity was recorded 7.90:1 in
the year 2010-11. To be conclude that post-merger financial performance is high or better compared
to the pre-merger financial performance of profitability ratios in ICICI Bank Ltd.

23
3.1.6 Pre-and Post-Merger Performance Measurement Through Liquidity Ratios.
LIQUIDITY RATIOS CURRENT RATIO ACID TEST RATIO CASH RATIO
PRE-MERGER
2007-08 0.90 6.04 0.107
2008-09 0.11 6.42 0.095
2009-10 0.13 5.94 0.079
TOTAL [A] 1.14 18.4 0.281
POST-MERGER
2010-11 0.14 14.7 0.016
2011-12 0.07 15.86 0.083
2012-13 0.12 9.37 0.074
2013-14 0.90 10.53 0.077
2014-15 0.09 11.31 0.069
2015-16 0.06 13.81 0.065
2016-17 1.33 8.7 0.082
TOTAL [B] 2.71 84.28 0.557

Chart Title
90
80
70
60
50
40
30
20
10
0

Current Ratio Acid Test Ratio Cash Ratio

2 per. Mov. Avg. (Current Ratio) 2 per. Mov. Avg. (Acid Test Ratio) 2 per. Mov. Avg. (Cash Ratio)

24
Above table represents that liquidity ratio analysis of pre-and post-merger financial performance of
ICICI bank Ltd. The liquidity ratio is further divided into three types such as, current ratio, acid test ratio
and cash ratio etc. In the context of current ratio, the overall pre-merger performance was recorded
1.14 times and post-merger performance was recorded 2.71 times this shows the post-merger
performance was high compared to pre-merger performance in ICICI bank. In the context of pre-merger
financial performance the highest current ratio was recorded 0.90 times in the year 2007-08 as against
lowest current ratio was recorded 0.11 times in the year 2008-09.Further the post-merger performance
the highest current ratio was recorded 1.33 times in the year 2016-17, As against lowest current ratio
was recorded 0.06 times in the year 2015-16.In the context of acid test ratio the overall pre-merger and
post-merger performance was recorded 18.4 times and 84.28 times respectively. The highest pre-
merger performance of acid test ratio was recorded 6.42 times in the year 2008-09 as against lowest
acid test ratio was recorded 5.94 times in the year 2009-10. Further the post-merger performance, the
highest acid test ratio was recorded 15.86 times in the year 2011-12, as against the lowest acid test
ratio was recorded 8.7 times in the year 2016-17. In the context of cash ratio, the overall pre-merger
and post-merger performance was recorded 0.281 times and 0.557 times respectively. The highest
pre-merger performance of cash ratio was recorded 0.107 times in the year 2007-08 as against cash
ratio was recorded 0.079 times in the year 2009-10. Further the post-merger performance, the highest
cash ratio was recorded 0.106 times in the year 2010-11. As against lowest cash ratio was recorded
0.065 times in the year 2015-16. To be conclude that post-merger financial performance is high or
better compared to the pre-merger financial performance of liquidity ratios in ICICI Bank Ltd.

3.1.7 Pre-and Post-Merger measurement through Leverage Ratios

Leverage Ratios Debt Ratio Debt-Equity Ratio Interest Coverage
Ratio
Pre-Merger
2007-08 2.75 11.42 13.47
2008-09 3.27 6.62 12.80
2009-10 3.12 5.72 12.69
Total [A] 9.14 23.76 38.96
Post-Merger
2010-11 5.92 5.74 13.48
2011-12 7.36 6.08 13.97
2012-13 6.45 6.55 14.96
2013-14 7.14 6.56 14.96
2014-15 7.53 6.64 16.19
2015-16 8.99 6.63 13.81
2016-17 4.70 7.27 12.62
Total [B] 57.23 69.23 139.26

25
 Chart Title
160

140

120

100

80

60

40

20

Debt Ratio Debt-Equity Ratio

Interest Coverage Ratio 2 per. Mov. Avg. (Debt Ratio)
2 per. Mov. Avg. (Debt-Equity Ratio) 2 per. Mov. Avg. (Interest Coverage Ratio)

Above table shows that leverage ratio analysis of pre-and post-merger financial performance of ICICI
bank Ltd. The leverage ratios are further divided into three types such as, debt ratio, debt-equity ratio
and interest coverage ratio etc. In the context of debt ratio, the overall pre-merger performance was
recorded 9.14 times and post-merger performance was recorded 48.09 times this shows the post-
merger performance was high compared to pre-merger performance in ICICI bank. In the context of
pre-merger financial performance, the highest debt ratio was recorded 3.27 times in the year 2008-09
as against lowest debt ratio was recorded 2.75 times in the year 2007-08. Further the post-merger
performance the highest debt ratio was recorded 8.99 times in the year 2015-16, as against lowest
debt ratio was recorded 4.70 times in the year 2016-17. In the context of debt equity ratio, the overall
pre-merger and post-merger performance was recorded 23.76:1 and 45.47:1 respectively. The highest
pre-merger performance of debt equity ratio was recorded 11.42:1 in the year 2007-08 as against
lowest debt equity ratio was recorded 5.72:1 in the year 2009-10. Further the post-merger performance,
the highest debt equity ratio was recorded 7.27:1 in the year 2016-17, as against the lowest debt equity
ratio was recorded 5.74:1 in the year 2010-11. In the context of interest coverage ratio, the overall pre-
merger and post-merger performance was recorded 38.96:1 and 100.03:1 respectively. The highest
pre-merger performance of interest coverage ratio was recorded 13.47:1 in the year 2007-08 as against
lowest interest coverage ratio was recorded 12.69:1 in the year 2009-10. Further the post-merger
performance, the highest interest coverage ratio was recorded 16.19:1 in the year 2014-15. As against
lowest interest coverage ratio was recorded 12.62:1 in the year 2016-17. To be conclude that post-
merger financial performance is high or better compared to the pre-merger financial performance of
leverage ratios of ICICI Bank Ltd.

26
3.1.8 Pre-and Post-Merger Performance Through Growth Ratios.
Growth Ratios Earnings Per Share (EPS) Dividend Per Share (DPS)

Pre-Merger
2007-08 34.84 10.00
2008-09 39.40 11.00
2009-10 33.80 11.00
Total [A] 108.04 32.00
Post-Merger
2010-11 36.10 12.00
2011-12 45.27 14.00
2012-13 56.11 16.50
2013-14 72.20 20.00
2014-15 84.99 23.00
2015-16 19.32 5.00
2016-17 16.75 5.00
Total [B] 330.74 95.50
Chart Title
350

300

250

200

150

100

50

Earnings Per Share (EPS) Dividend Per Share (DPS)

2 per. Mov. Avg. (Earnings Per Share (EPS)) 2 per. Mov. Avg. (Dividend Per Share (DPS))

27
Above table depicts that growth ratio analysis of pre-and post-merger financial performance of ICICI
bank Ltd. The growth ratios are further divided into two types such as, Earning Per Share (EPS) and
Dividend Per Share (DPS) etc. In the context of earning per share the overall pre-merger performance
was recorded 108.04 Rs and post-merger performance was recorded 330.74 Rs, this shows the post-
merger performance was high compared to pre-merger performance in ICICI bank. In the context of
pre-merger financial performance the highest earning per share amounts to Rs.39.4 in the year 2008-
09 as against lowest earning per share amounts to Rs.33.8 in the year 2009-10.Further the post-merger
performance the highest earning per share amounts to Rs.84.99 in the year 2014-15.as against lowest
earning per share amounts to Rs.16.75 in the year 2016- 17.In the context of Dividend Per Share (DPS)
the overall pre-merger and post-merger performance amounts to Rs.32.00 and Rs.95.50 respectively.
The highest pre-merger performance of dividend per share amounts to Rs.11.00 in the year 2008-09
as against lowest dividend per share amounts to Rs.10.00 in the year 2009- 10.Further the post-merger
performance, the highest dividend per share amounts to Rs.23.00 in the year 2014-15, as against the
lowest dividend per share amounts to Rs.5.00 in the year 2016-17.To be conclude that post-merger
financial performance are high or better compared to the pre-merger financial performance of growth
ratios of ICICI Bank Ltd.

3.1.9 WRITING OF FINDING PARAMETERS

EVENTS IN STAGES
STAGE 1
On 25Th 2010, Reserve Bank of India has imposed a pecuniary penalty of ₹25 lakhs on The Bank of
Rajasthan Ltd. In exert of powers enthroned under the provisions of section 47A (1) b of the Banking
Regulation Act, 1949. On the following grounds the penalty was imposed: -
➢ Acquisitions of immovable properties- violation of the RBI’s guidelines/directions issued under
sec 35A of the banking regulations act, 1949.
➢ Blue-pencilled the records of bank’s IT system.
➢ Non-adherence of guidelines related to Know Your Customers and anti-money laundering in
opening and conduct of accounts.
➢ Irregular account’s conduct of a corporate group.
➢ Misrepresentations of facts- unable to produce documents sought by the Reserve Bank of India.
STAGE 2;
On May 18th 2010, Bank of Rajasthan's closing price amounted 52-weeks high at 99.30 while the
benchmark SENSEX grew only by 0.24 percent whereas ICICI Bank closed at 1.45 percent lower at
889.35. Along with Share prices the ADR trading of ICICI bank has also fell down by 2.18 percent at $
38.61 on the New York Stock Exchange (NYSE).
After consideration of share prices, the swap deal indicated that 90 percent premium has been given
by ICICI bank to Bank of Rajasthan.
The Bank of Rajasthan cost to ICICI bank at nearly ₹3041 crores on the basis of internal valuation. In
elaborated form, ICICI bank have to pay about 6.6 crore* for each of the BOR Branch.
*valuation= ₹ 3041/463 branches (6.6 crore at an average rate).

In line with market capitalization of the BOR's branches, an implied valuation by the exchange ratio
scheduled to be decided but due diligence, freelance valuation and approvals will be considered as the
finale valuation.

28
Although valuation in monetary terms does have a strong impact in any merger but without
consideration of about 30 lakh customers and approx. 4000 employees, the deal might have turned to
a big failure.
Hari bhakti& co. has been appointed as an independent valour by both the banks to evaluate the
valuation.
STAGE 3
On 12th August 2010, Alpanakillawala, CGM, department of communication, RBI has published a press
release that "All branches of Bank of Rajasthan Ltd. will function as branches of ICICI Bank Ltd. with
effect from August 13, 2010. This is consequent upon the Reserve Bank of India sanctioning the
Scheme of Amalgamation of Bank of Rajasthan Ltd. with ICICI Bank Ltd. The Scheme has been
sanctioned in exercise of the powers contained in Sub-section (4) of Section 44A of the Banking
Regulation Act, 1949. The Scheme will come into force with effect from close of business on August
12, 2010”.

A merger can be distinguished in the following phases:

PRE-MERGER PHASE ACQUISITIONS PHASE

POST MERGER PHASE

➢ ➢ Cost of merger
Financial position ➢ Corporate
of transferor &acquisitions
culture
company ➢ Maintenance of
customer ➢ Existing value
➢ Market value
relationship during systems.
➢ Brand value
integration phase. ➢ Staff
➢ Communication
issue ➢ Knowledge qualification
➢ Shareholder’s & transfer among ➢ Stress
other stake units that are to be management
holder’s view integrated. ➢ Salary
➢ Overcoming of
➢ Assets & liabilities ➢ Technology
staff’s suspicious
➢ HR policy
of the other
➢ Leadership style
organisation (Us vs
Them syndrome) ➢ Post integration

29
3.1.10 PRE-MERGING CHALLENGES.
REGULATORY CONCERNS
Lots of litigation was charged on Bank of Rajasthan related to misrepresentation of promoter’s stake
which was unveiled by SEBI on the pointers of Reserve Bank of India. Others were distortion of
documents and violation of regulatory norms pertaining to accounts of the corporate group. For these
regulatory proceedings, RBl had imposed 25 lacs as a penalty on BOR for concealing the necessary
facts.

ASSET OUALITY MANAGEMENT

In a merger asset quality always being a major concern for both the parties as the factor can turn out
the profitability or synergy. The ICICI bank raised its quarterly profit 44% by showing a downfall in bad
loans provisions and in the retail lending. It infers that ICICI bank’s Non-Performing Assets (NPA) Ratio
improved to 0.945 from 1.87% in previous year in contrast the NPA ratio in Bank of Rajasthan has been
showed increasing trend since from 2007.

Before amalgamation ICICI bank has assess the risk by Bor's loan portfolio, Deposit base staff liabilities
and Investments. In the deal Amarchand&Mangaldask&Suresh A Shroff& Co were acting as the legal
advisors whereas ICICI securities and JM Financials were the Financial Advisors for valuation purpose.

LEGAL ISSUES RELATED TO EGM

The issue rose of legal binding of Shareholder's decision on the BOR. The Extraordinary General
Meeting was cancelled by Kolkata court as the shareholders of BOR got the stay order against the
meeting. The reason behind the merger was that the employees at BoR filed a complaint against the
holding of EGM as they were opposed of the amalgamation.

UNION STRIKE AND VIOLATION OF COMPANY LAW

Around 4300 employees of BOR in all 463 branches across the country announced union strike to
protest against the proposed deal. The three major employee’s union participants were All India Bank
of Rajasthan Employees Federation (AIBOREP), All India Bank of Rajasthan officers Association
(AIBOROA) and Akhil Bhartiya Bank of Rajasthan Karamchari Sangha (ABBORKS), The act performed
by the employees in fear of thousands of job losses and incompatible work cultures.

According to companies Act 1956, 10% of the shareholders can requisition a meeting with the
permission of the Co.’s Board. After that the board has to hold the meeting within 3 weeks of the
requisition. The decision of appointment of own chairman by the shareholders of Boor was continued
after knowing the fact of void as per company Act 1956.

30
3.1.11 POST-MERGING CHALLENGES
Rajasthan High Court
The Rajasthan High Court issued notices to the Reserve Bank of India, Bank of Rajasthan (BOR), ICICI
Bank and others on a petition filed by an employee’s union of the Udaipur-based Boor against its
proposed merger with ICICI Bank, the country's largest private sector lender.

"The High Court issued notices to all respondents -the Union of India, Reserve Bank Sebi, BoR, ICICI
Bank, P K Tayal and S K Tayal (BOR promoters)," who filed the petition on behalf of the Akhil Bhartiya
bank of Rajasthan Karamchari Sangha.

The petition claims that the BOR board decision on 18 May 2010 to merge with ICICI Bank was illegal
as the Securities and Exchange Board of India had found out that the Tayals had acquired 55.I percent
equity in the bank in violation of its regulations.

31
CONCLUSION AND
RECOMMENDATION

32
4.1 CONCLUSION
Banking sector is one of the faster growing areas in the Indian economy. Mergers and acquisitions
considered as one of the most useful strategy for expansion. M&A in Indian banking sector has
provided evidence that it is useful tools for survival of weak banks by merging in to larger banks. The
present study focused on overall ten years of years of performance data out that three years considered
as pre-merger performance (2007-2010) and remaining seven years considered as post-merger
performance (2010-2016), for the purposes of measure the performance of ICICI bank they used
different ratios such as, profitability ratio, liquidity ratio, leverage ratio and growth ratios, this result
shows banks are able to performance better after merger with other banks. Finally, in this study post-
merger performance standards are better compared to the pre-merger performance standards
therefore post- merger movement as well as impact of merger on acquiring entity i.e. ICICI Bank Ltd.

4.2 Recommendations
The following are the recommendations for the study

• Government of India and RBI to liberalize their policies in connection with Mergers and Acquisitions
to increase number of deals between the banks, it leads to increasing profitability of the banks.

• Banks should be creating awareness relates to merger and acquisition, intensify training and
retraining programmes for all staff, particularly the management staff, to improve management
efficiency.

• Insure banks post-merger legal battles in India. Even mergers happen between two entities or banks
can attract Income tax in India if there is a remote link with Indian entities before or after mergers.

• The banks should be concentrate on liquid management competencies after the pre-merger and post-
merger acquisition make out the proper strategies to maintain liquidity position of the banks.

• The risk of bad loan constitutes the greatest threat to the existence of a banking institution. so, the
banks should analyse pre-merger and post-merger financial performance of the banks.

33
References
➢ https://www.icicibank.com/managed-assets/docs/investor/annual-reports/2017/annual-report-
fy2017.pdf
➢ https://www.icicibank.com/aboutus
➢ https://en.wikipedia.org/wiki/ICICI_Bank
➢ https://www.ukessays.com/essays/economics/advantages-and-disadvantages-of-mergers-and-
acquisition-economics-essay.php
➢ http://www.legalserviceindia.com/article/l463-Laws-Regulating-Mergers-&-Acquisition-In-
India.html
➢ Annual Report of ICICI bank.
➢ Annual Report of Bank of Rajasthan.
➢ Sanjay, Tiwari, (2011). Mergers of banks some issues and challenges us, International Journal of
Multidisciplinary Research, 2231 5780, 1(4).
➢ Goyal, K.A. (2012). Merger and Acquisition in banking industry: A case study of ICICI bank Ltd,
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Determinants: Evidence from Malaysian Banks, Journal of Social Science and Humanities, ISSN: 0128-
7702, 22 (S): pp. 55 – 76.
➢ Simranjeet, Singh, (2015). Mergers in Service Sectors: Post Merger Financial Analysis of ICICI bank,
International Journal of Applied Research, ISSN Print: 2394-7500, ISSN Online: 2394–5869.
➢ Tamragundi, A.N. (2016). Impact of mergers on Indian banking sector: A comparative study of public
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