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ACKNOWLEDGEMENT
Any accomplishment requires the effort of many people and this work is not different. Regardless of the source, I wish to express my gratitude to those who may have contributed to this work, even though anonymously. I extend my sincere thanks to Mr. Aman Partap for providing me this opportunity to undergo summer training in CENTURION BANK OF PUNJAB, Sector 16, PANCHKULA. I have been fortunate enough to get all the support, encouragement and guidance from him needed to explore, think new and initiate. I express my great thanks to Ms Ravinder Kaur (project guide) under whose guidance I was able to complete my project successfully. Her valuable advice and guidance at various stages of the project will always be cherished. Also, I am grateful to the authorities and employees of Centurion Bank of Punjab, who by giving their responses provided the base of my research. My final thanks go to my parents, family members, teachers who encouraged me countless times to persevere through this entire process.
ABSTRACT
The trend toward greater consolidation in Indian Banking industry has squeezed the number of banks but made it stronger. As more banks are becoming larger and fewer in number each entity is becoming more critical, making relationships and services offered are more important than even before. At the same time each customer has a greater impact on the cooperatives bottom line , the competition is also consolidating creating a fierce survival of the fittest in variety of business marketplace .In response, banks are engaging arrangements like mergers. The report has mainly two objectives the first is to examine a whole picture of merger Of CBOP Bank with HDFC bank. The main focus has been thrown on the deal and driving forces that motivated local cooperation to get involved in mergers. The second objective is to examine the relative important factors in the success of the new business arrangements. parameters on customers, movement in share price, employees and shareholders. The basic focus will be on various marketing strategies, impact emerging
CONTENTS
SECTION ONE Chapter 1 - Introduction (a ) Need of study ( b) Objective of study (c)Review of literature Chapter 2 Research Methodology (a) Methods (b) SECTION TWO 13 6 7 8 9
Chapter -3 Overview of Indian Banking Industry (a) (b) Indian Banking system Commercial banks 15 20
Chapter 4- Introduction of companies (a) Centurion Bank of Punjab (b) HDFC Bank Chapter 5 Mergers ( a) Overview of mergers (b ) Highlights of merged entity (CBoP with HDFC Bank ) 25 32 22 24
SECTION FOUR Chapter 7 Main text (a) Effect on share price after merger ( regression test) (b) Effect on employees after merger (annova test) 80 88
(c) Effect on customers saving and investment after the merger (correlation test) 96 4
CHAPTER -1
INTRODUCTION
5
NEED OF STUDY:Studying books and merely passing exams is not worth, the education, knowledge and experience is incomplete without being exposed to what is happening in real.
OBJECTIVE OF STUDY:MERGERS, ACQUISITIONS AND AMALGAMATION are the new trend in every sector .with the upcoming of foreign banks ,Indian banking are also following the same strategy in order to overcome the fear that foreign banks will swallow the small industry. 7
REVIEW OF LITERATURE:Julie Issac , Pushpanjali mikkilineni (2006-2007) Indian Banking Sector Analysis (2006-2007), report provides extensive research and objective analysis on the growing banking industry because of mergers, 8
to analyze the leading- edge Opportunities critical to the success India. Detailed data andanalysis helps an
investor, fina-ncial service providers, and global banking players navigate the evolving market of banks in India. Mainly the stress is given on the key products like deposits , retail credit , credit cards etc Wealth management products are also analyzed supported by the facts like revenue and market share. This section provides an overview , key facts and several number of players like Andhra Pradesh ,State bank of Mysore HDFC Bank , Citi Bank .Analysis has been with various research methodology Ratio Analysis, Historical Trend Analysis, Linear regression Analysis using software tools, Judgmental Forecasting and Cause and Effect Analysis. The thatIinvestments has key findings of the report is this been increasing due to rapid growth of banks .it
shows a positive result of merger on banking sector. Vivek Gupta,s.s george (2004 ) Has given a overview of the banking sector which includes banking ,capital markets,insurance ,mutual funds etc .He examined that within a decade ,there is a lot of transformation its banking sector .The sector has relinquished its grip on the financial sector .Its a competition which has been unleashed in the financial banking sector on a scale sufficient to produce visible benefits in terms of efficiency ,innovation and customer services. The article makes a critical review of the financial sector in key areas ,it shows an impact that these reforms have had on the corporate sector and retail investors .Further article gives a recent trend of mergers which says that its an warns of emerging threat of monopolies .The article further focus on unfinished agenda which talks about upcoming of foreign markets information through papers, Industry Books, portals, . The technique which is used is gathering Trade associations. Newspapers , Trade Journals, and White
Government
Agencies,
Monitoring Industry News and developments, Access to more than 3000 paid
Institutions must equip themselves with the necessary power, skill and financial muscle. What's more important, though, is that Indian banks fare very poorly in comparison with others globally. India's best and brightest, the SBI, is roughly one-tenth the size of the world's biggest bank -- Citigroup -on the basis of Tier I capital. Citigroup's consolidated Tier I capital last year was $79 billion. For SBI, it was just $7.9 billion. On this basis, State Bank of India's global position is 72. It is not even within the first 10 big banks in Asia where the first three slots have been occupied by Chinese banks with each of them having a capital base of over $30 billion. In fact, six Chinese banks feature among the top 25 Asian banks while India has only two representatives -- SBI and ICICI Bank. The global Top 10 features three banks each from the United States and Japan, two from the United Kingdom, and one each from France and Spain. China's biggest bank, China Construction Bank Corporation, is the world's 11th largest bank with a capital base of $35.6 billion. An innovative idea can be the merger of two giant Indian Banks i.e. the State Bank of India and ICICI Bank ripples in the Indian . With the technological and has created financial innovation, and its marketing aggressiveness, ICICI
10
CHAPTER -2
METHODOLOGY:12
The secondary data as it has always been important for the completion of any report provides a reliable, suitable, equate and specific knowledge. The data is collected from various magazines, fact 13
(3) Sampling technique: The study proposed to use random sampling the data
was taken as random out of whole population. Data was picked randomly also as project took as data complete last year to make comparison in share price and to evaluate it.
(4) Sample area: In order to make a financial overview of both the banks after
the merger. It is necessary to pick segments so study become easily assessable. Financial analysis of study will be undertaken, the data will be collected through survey and detailed study
CHAPTER -3
14
Today the Indian Banking system is among the best in the world and the years tie come may see them taking on the global belmoths. Banks are among the main participants of the financial system in India. Banking offers several facilities & Opportunities. Banking in India originated in the first decade of the 18th century with The General Bank of India coming into existence in 1786. The first Banking institution in India was Bank of Bengal. In the year 1921, the government of India started the imperial Bank of India, which is presently known as State Bank of India .SBI continues to be the government bank handling the major chunk of government business. Till date, SBI continues to be the largest Bank in India in terms of deposits and credit size. By the 1990s the market expanded with the establishment of banks such as Punjab National Bank .The Reserve Bank of India formally took on the responsibility of regulating the Indian Banking sector .After Indias independence in 1947, the Reserve bank was nationalized and given broader powers.
NATIONALIZATION
The Indian Banking industry has become an important tool to facilitate the development of Indian Banking .At the same time ,it has emerged as a large employer , and a debate was ensued about the possibility to nationalize 15
LIBERALISATION
There was second phase of financial reforms and liberalization of this sector. In the early 1990s the then Narsimha Rao government embarked on a policy of liberalization and gave licenses to a small number of private banks, which came to be known as New Generation tech-savvy banks, which included banks such as Global Trust Bank (the first of such new generation banks to be set up)which later amalgamated with Oriental Bank of Commerce, UTI Bank(now re-named as Axis Bank), ICICI Bank and HDFC Bank. The Public Sector Banks (PSB) s found it extremely difficult to compete with the new private sector banks and the foreign banks. The new private sector banks first made their appearance after the guidelines permitting them were issued in January 1993. Eight new private sector banks are presently in operation. These banks due to their late start have access to state-of-the-art technology, which in turn helps them to save on manpower costs and provide better services. This move, along with the rapid growth in the economy of India, kickstarted the banking sector in India, 16
Current situation
Currently (2007), banking in India is generally fairly mature in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly been true. With the growth in the Indian economy expected to be strong for quite some time-especially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. One may also expect M&As, takeovers, and asset sales. The industry is currently in a transition phase. On the one hand, the PSBs, which are the mainstay of the Indian Banking system are in the 17
COMMERCIAL BANKS
Commercial banks are those, which were established for meeting the financial needs of commerce, trade and industry .These can e mainly divided into various categories namely Indian Banks and foreign banks. Indian banks include nationalized Banks (including State Bank and group), Private sector banks, Regional Rural banks and Cooperative Banks.
19
processing of payments by way of telegraphic transfer, EFTPOS, internet banking or other means
issuing bank drafts and bank cheques accepting money on term deposit lending money by way of overdraft, installment loan or otherwise providing documentary and standby letter of credit, guarantees, performance bonds, securities underwriting commitments and other forms of off balance sheet exposures
safekeeping of documents and other items in safe deposit boxes currency exchange sale, distribution or brokerage, with or without advice, of insurance, unit trusts and similar financial products as a financial supermarkets.
20
CHAPTER -4
INTRODUCTION OF COMPANIES
1994 : The company was incorporated on 30th June, 1994 and the certificate of Commencement of Business on July 20th. It is promoted as a joint venture between 20th Century Finance Corporation Ltd, and its associates and Keppel Group of Singapore. It has got a network of ten branches. The main equity of the Bank was provided by the promoters, 20th Century Finance Corporation Ltd. & its associates and Keppel Bank of Singapore (now Keppel TatLee Bank Ltd.) through Kephinance Investment (Mauritius) Pte. Ltd.
1995
amalgamated with Centurion Bank Limited. The Bank, set up in a fully computerized environment with ATM facility at every branch and Computer networking between branches can indeed claim to be a `Bank with a difference'. The Bank has introduced, for the first time in the country, the concept of `anywhere banking' which enables to operate the account from any other branch of the Bank.
2005 Boards of Directors of Centurion Bank and Bank of Punjab Ltd on June 29, 2005 approves merger of two banks. The combined bank will be called Centurion Bank of Punjab.
Centurion Bank of Punjab is one of the fastest growing and leading new generation private sector banks in India. The bank serves an individual consumer, small and medium businesses and large corporations with full range of financial products and services for investing, lending and advice on financial planning. The bank offers its customers an array of wealth management, products such as mutual funds, life and general insurance and 22
Promoted in 1995 by housing development finance Corporation (HDFC),Indias leading housing finance Company. HDFC bank is one of the Indias premier Banks provising a wide range of products and services to its over 10 million customers across 100 of Indian cities using multiple distribution channels including a pan- India network of branches, ATMs, phone banking, banking, net banking and mobile banking. With a relatively 23
FUNCTIONS
OF
HOUSING
DEVELOPMENT
FINANCE
CHAPTER -5
MERGERS
Impact of Merger of HDFC Bank and Centurion Bank Of Punjab The phrase mergers and) refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling and combining of different companies that can aid, finance, or help a growing company in a given industry grow rapidly without having to create another business entity.
A merger is a tool used by companies for the purpose of expanding their operations often aiming at an increase of their long term profitability. Usually mergers occur in a consens-usual(occurring by mutual consent) setting where executives from the target company help those from the purchaser in a due diligence process to ensure that the deal is beneficial to both parties .Acquisitions can also happen through a hostile takeover by purchasing the majority of outstanding shares of a company in the open market against the wishes of the target's board. In business or economics a merger is a combination of two
companies into one larger company. Such actions are commonly voluntary and involve stock swap or cash payment to the target. Stock swap is often used as it allows the shareholders of the two companies to share the risk involved in the deal. A merger can resemble a takeover but result in a new company name (often combining the names of the original companies) than an acquisition is done purely for political or marketing reasons. and in new branding; in some cases, terming the combination a "merger" rather
Business valuation
asset valuation, historical earnings valuation, future maintainable earnings valuation, relative valuation (comparable company & comparable transactions), 25
discounted cash flow (DCF) valuation Professionals who valuate businesses generally do not use just one of these methods but a combination of some of them, as well as possibly others that are not mentioned above, in order to obtain a more accurate value. These values are determined for the most part by looking at a company's balance sheet and /or income statement and withdrawing the appropriate information. The information in the balance sheet or income statement is obtained by one of three accounting measures: a Notice to Reader, a Review Engagement or an Audit. Accurate business valuation is one of the most important aspects of M&A valuations like these will have a major impact on the price that a business will be sold for. Most often this information is expressed in a Letter of Opinion of Value (LOV) when the business is being evaluated for interests sake. There are other, more detailed ways of expressing the value of a business. These the case as there are many reports generally get more detailed and expensive as the size of a company increases , however , this is not always complicated industries which require more attention to detail, regardless of size.
FINANCING MERGERS
Mergers are generally differentiated from acquisitions partly by the way in which they are financed and partly by the relative size of the companies. Various methods of financing an MERGER deal exist:
26
rather than mergers because the shareholders control of the only bidder's shareholders
Another advantage of using cash for an acquisition is that there tends to lesser chances of EPS dilution for the acquiring company. But a caveat in using cash is that it places constraints on the cash flow of the company.
Financing Financing capital may be borrowed from a bank, or raised by an issue of consideration.
offered as
Acquisitions financed through debt are known as leveraged buyouts if they take the target private, and the debt will often be moved down onto the balance sheet of the acquired company.
Hybrids
An acquisition can involve a combination of cash and debt, or a combination of cash and stock of the purchasing entity.
Factoring Factoring can provide the necessary extra to make a merger or sale work.
Synergy:
This
reduce Duplicate departments or operations, lowering the costs of the company relative to the same revenue stream, thus increasing profit.
the company will be absorbing a major competitor and thus increase its power (by capturing increased market share) to set prices.
broker's customers
broker can sign up the bank's customers for brokerage accounts. Or, a manufacturer can acquire and sell complementary products.
For example, managerial economies such as the of managerial specialization. Another example are
purchasing Economies due to increased order size and associated bulkTaxes: A profitable company can buy a loss maker to use the target's loss as their advantage by reducing their tax liability. In the United States and many other countries, rules are in place to limit the ability of profitable companies to "shop" for loss making companies , limiting the tax motive of an
acquiring
Geographical or other diversification: This is designed to smoothen the earnings results of a company, which over the long investing in the company. stock price of a company, giving conservative investors more confidence in
28
negative reactions a company's employees, bankers, suppliers, customers and others might have if the effort or interest to seek a transaction were to become known . This need for secrecy has thus far thwarted the emergence of a public forum or marketplace to serve as a clearinghouse for this large volume of business. At present, the process by which a company is bought or sold can prove difficult, slow and expensive. A transaction nine months and involves many steps. typically requires six to Locating parties with whom to
conduct a transaction forms one step in the overall process and perhaps the most difficult one. Qualified and interested buyers of multimillion dollar corporations are hard to find. Even more difficulties attend bringing a number of potential buyers forward simultaneously during negotiations . Potential acquirers in an industry simply cannot effectively "monitor" the economy at large for acquisition opportunities even though some may fit well within their company's operations or plans. An industry of professional middlemen" (known variously as intermediaries business brokers, and bankers) exists to facilitate M&A transactions. These professionals do not provide their services cheaply and generally resort to previously-established personal contacts, direct-calling campaigns, and placing advertisements in various media . In servicing their clients they attempt to create a one-time market for a one-time transaction .Certain types of merger and acquisitions require that these "middlemen" both sides .Despite transactions involve securities and may be securities licensed in order to be (investment
compensated. Many but not all, transactions use intermediaries on one or best intentions, intermediaries can operate inefficiently limiting nature of having to rely heavily on because of the slow and
30
HDFC-CBoP MERGER
CONSOLIDATE TO CONQUER
In February .HDFC which is Indias largest second largest private bank after ICICI, sealed The largest ever merger in Indian financial history with CBoP for Rs 9510 crores. This has set up a new trend because ,earlier , bank mergers in India were largely bailout ,with the stronger banks 31
merger ,both the healthy banks and so it cant be dubbed as a merger of unequals or a larger bank gobbling up a smaller or weaker one ; rather it is akin to a merger of strength . However given the post of 2009 scenario , when foreign banks are likely to be on a par with domestic banks , despite some regulatory hitches , the merger of two strong banks heralds a new era of consolidation in the Indian banking industry as a whole.
FLASHBACK
Both these new generation banks were incorporated and licensed by the reserve bank of India (RBI) in the post liberalization era of the mid 1990s , and both of them had sipped merger waters beforehand . In fact, HDFC bank had orchestrated the first merger in private sector banking by taking over the troubled Times Bank from media giant Bennett, Coleman & co in 1999.CBoP is also no stranger to mergers. In fact ,it began its existence as Centurion Bank had merged with North India based Bank of Punjab , and last year ,CBoP took over Kochi based Lord Krishna Bank.
A number of parameters were taken into consideration while finalizing the value of the deal .Among the ,the most important parameter was price /book value .Besides this, other factors considered for valuing the deal were geographical reach of size of the balance sheet, composition of the bank, management style,
loan book, asset quality ,etc .Judging all the pros and cons a swap ratio of 1:29
32
DEAL LOGIC
The proposed merger is believed to have a positive impact on HDFC banks business profile over the medium term. The merger will give HDFC bank access to a wider ranch network, beating ICICI bank well over 100 ranches, and post merger, the branch size of the bank will increase by 52 % . According to a leading rating agency , Crisil , the branches , especially Punjab and kerala ,will extend HDFC Bank reach geographies where it had limited presence The total asset size of the bank will increase by 19 % and loan book and deposits by 21% each. HDFC banks robust risk control systems and emphasis on keeping high current and savings account (CASA) levels will ensure that the merged entity will maintain its asset quality and resource profile at levels significantly better than other banks over the medium-term . Valuation is another important issue .HDFC Bank is shelling out around onethird for CBoP branches ,it should have a long term positive impact on 33
Rival ICICI Bank has already initiated its foreign odyssey. Now it is present in 18 countries and its overseas operations accounted for around 23 % of the consolidated banking assets as on December 31, 2007. Axis bank, the third largest private sector bank, boasts of having three international branches in Singapore, Hong Kong and Dubai and a respective office in Shanghai swayed . This might have HDFCs bank thinking. It has already acquired a license for a branch in
Behrain, which will be opened very soon. it is also planning to raise $1billion through medium term note issuance program . Thats where CBoP may come in Handy. The bank is already present in Canada. Moreover what could be immense help to bank , going forward ,in its international foray is the presence of Rana Talwar, the former CEO of Standard Chartered Bank , on Sabre On the capital , board who , through a fund which has Spearheaded along with other partners , Puri has
has gained immense experience in international banking as well in M&A activities . issue of overseas expansion , HDFC Bank MD Aditya commented , we could .Rana Talwar is coming provide global range of on board and he has got lot of want to 34
experience. The motive is not to challenge the Citigroups of the world .They want to products for Non Resident Indians (NRI) and
Although this merger is the largest of its kind in the history of Indian Banking, it may not be free from loopholes .The merged entity will definitely have to yank for operational efficiencies in its line of business .Moreover ,it is anticipated that there will be a dilution of profits ,at least in the short term. the challenge could be that CBoP is more about low cost distributes more low - cost products while HDFC s operations and products are higher up
the value chain .It will take CBoP team to gel with HDFC products and this are more universal and sophisticated and could be an area of challenge . At the time of finalizing network surpassing as an the deal HDFC bank had considered branch important parameter and savored the moment of
branches .Although ICICI had 955 branches as on the date of merger, it has 425 in the pipeline, which are in the process of implementation by mid-2008. So post mid -2008 , as usual , the ICICI Bank would be the largest private sector bank in terms of branch network also .Moreover on the basis of pro forma consolidation as on December 31,2007, the gross Non Performing CBoP s comparatively weak resource Asset ( NPA)of the merged bank would be higher than current gross( NPA ) asset of HDFC bank . Also, given profile ,the proportion of current and saving account (CASA )for the merged entity is likely to go lower than current CASA for HDFC bank . The 35
will complicate the situation .Moreover , platform will take considerable time and that customers do not agency Crisil believes that and wider
geographical coverage will more than offset the negative impact of a sligh-tly weakened asset quality and other integration snags in the short term. Besides this, the merger of CBoP with HDFC Bank Will be a big low to their bancassurance partners. (banc assurance is the sale of life pension and Investment products through the branch network of a bank ). This merger will adversely impact the business of Aviva Life insurance co. Centurion Bank is the banc assurance partner for these two insurers, while HDFC Bank sells insurance for group company HDFC standard life .Post merger distribution deal between Aviva Life Insurance and ICICI because as per the existing law of the Lombard will be scrapped Insurance Regulatory and
Development authority IRDA, a bank cant sell products for more than one insurance company . Moreover, the merger may lead to a clash with HDFC Ltd. which provides home loans to customers and has a large customer base in this segment. CBoP also has a strong presence in home loans .Now the merged entity may not sell home loans as this may lead to conflict of interests with HDFC Ltd . But given the phenomenal progress HDFC Bank has made in recent times through its technology-driven and customer centric
36
EMERGING TRENDS
This HDFC CBoP merger is a precursor to what lies ahead in the post -2009 scenario when the banking sector will be opened up .Cut throat competition and RBIs stingy branch licensing policy mean that the scale and geographical reach have become critical for the survival of bank .So it is better to grow inorganically rather than through slow organic process .Through merger, banks will manage the costs better and enjoy economies of scale .Moreover,retail lending will also get a boost . But despite the discernible synergies ,the truth is that except for Those negotiated by the RBI , including the banks in financial trouble , M & As in the Indian Banking sector have been few and far between. But the trigger should come from the government owned Public Sector Banks (PSBs) .These PSBs, though not quite occupying the commanding heights once envisioned for them, still are in a position of some strength to initiate consolidation moves .But these PSBs suffer from these political and institutional compulsions that come in the way of the merging of these banks despite having distinct operational synergies. The foreign banks which are operating in India see themselves more as predators in the M & A game and are not willing to be a target of acquisition by domestic banks. so the only private setor banks, both old and newly licensed ,are left for acquisition target. The new-age private banks which successfully battled their turbulent initial days, have every reason to be optimistic and so would be looking for acquisition rather than being the target of one. Finally the older private sector banks, though did not grow much, have a history of independent operations .Unless their operations suffer a dramatic downturn; they are unlikely to offer themselves as prospective candidates for acquisition.
37
Whats hot, and whats not The HDFC Bank-CBoP merger brings both advantages and downsides to the postmerger HDFC Bank. HDFC Punjab.
Bank
gets of
the
top
class of
management
Centurion
Bank
Share
of
low-cost
deposits
to
decline marginally as CBoP has a Strong two-wheeler, commercial much lower portfolio of such deposits 38
than HDFC Bank. vehicle total and construction assets equipment home
portfolio. About 40 per cent of CBoP's retail comprise loans, car loans and personal loans.
of 1.31 per cent. This will affect HDFC Bank's asset quality.
Small
and
medium base of
(SME)
client
Technology
integration
to
take
time and also cost a packet as the two Gets 394 branches and licenses banks operate on different platforms.
for 350 more when RBI is being very stingy on doling out branch licenses.
Bank promoter HDFC will have to Gains geographical spread, pump in close to Rs 4,000 crore to maintain its stake at a little over 23 per cent. especially in Punjab and Kerala.
CHAPTER -6
CONCEPTUAL FRAMEWORK
MERGERS! MERGERS!
Its been a latest strategy which actually every company is trying to follow.Its very important to understand that Are mergers are giving positive results to industry or not ? The private players however cannot match the PSBs great reach , great size and access to low cost deposits. Therefore one of the means for them to combat the PSBs has been through the merger and acquisition (M& A) route.
39
SHAREHOLDERS
The term stakeholder, as traditionally used in the English language in law and notably gambling, is a third party who temporarily holds money or property while its owner is still being determined. More recently a very 40
41
Through long hour debate and judging all the prons and cons , the ratio is settled at 1 : 29.
The valuation is fair which means that CBoP shareholders will get one HDFC Bank share for every 29 shares they hold . Given the swap ratio HDFC Bank has valued CBoP at around RS 9500 crore .The valuation has been done on the basis of share price of last two years . The values measures both the entities considering the fundamental and technical analysis where theyalso evaluate the profitability , branches, deposits and advances of the bank. HDFC Bank is likely to issue preference shares to promote HDFC bank to enable the mortgage company to retain its shares holding above 20% after the merger.
The data of (
has also collected the value , HDFC price) of the dataAfter the news announcement.
42
Considering the above graph the project observes that share price of HDFC Bank and CBoP are remarkably similar .The graph determines the data of last year and evaluates the share price of both the entities are is almost similar .so project has evaluated the share price after the merger using different methodology.
EMPLOYEES
Employment is a contract between two parties, one being the employer and the other being the employee. An employee may be defined as: "A person in the
43
Branch Officer
Operational Trainee
After the merger the herirarchy level at HDFC bank will be as follows HDFC Bank Heriarchy
46
Branch Officer
Teller Authorizer
PB Desk
Operational trainee -
Relationship manager:Minimum revenue benchmark at 3 lacs/ RM Minimum products benchmark at 100 products/RM
47
Minimum revenue benchmark at 1 lacs /PFC Minimum products benchmark at 50 products /PFC
Product targets
50 saving accounts 25 fixed deposit (average 3 lakhs ) 20 mutual funds (unique customer ) 5 insurance policy (unique customer ) 4 asset conversion
CUSTOMERS
A customer refers to individuals or households that purchase goods and services generated within the economy. shop , who made it a habit The word historically derives someone who from " custom ," whom the meaning " habit "; a customer was frequented a particular
shopkeeper had to maintain a relationship to keep his or her "custom," meaning expected purchases in the future.Customer needs may be defined as the goods or 48
to the customer . Customer expectations are influenced by and other communications, both with other clear
the supplier and with other sources.Both customer needs and expectations may be determined through interviews, surveys, conversations, data mining or methods of collecting information . Customers at times do not have a
understanding of their needs. Assisting in determining needs can be a valuable service to the customer. In the process, expectations may be set or adjusted to correspond to known product capabilities or service. Customers are the paramount important source for any
organization. A company always try to provide efficient services to its customers . In an emerging scenario, bank must be endeavouring to maintain the customer loyalty and retention .The customer loyalty is recognized as the influencing factor in every aspect right from product designing to technology adaptation .while managing the change it should work on different prospectives. The project will analyze that after the merger HDFC bank have to analyze the culture of merged entities, branch/ service ambience ,influence factors in customers loyalty, the emotional frequencies of customers ,expectations and aspiration levels of customers from the new entity ,the counter moves by the peers to delink such loyalty. so it is very important to know the dilemma of customers after hearing the news of merger of two entities.The project evaluates the views of the customer The customers feel that merger is a win win situation and it will be interesting development in the Indian Banking Scenario because it has made the combined entity the largest private sector bank in terms of branch network. They feel that new institute will bring faster customer services at a lower cost ,so its a need for banking sector to expand their vistas . The customers are having confidence that they can have bigger deal in the market .customers are smart enough to understand that M&A and consolidation in the banking sector is a need of the hour which may drive valuations of the bank .The project further evaluates the customer investment decision after hearing the news of CBoP with HDFC bank 49
MARKETING STRATEGY
A marketing strategy is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales and achieve a sustainable compet- itive advantage. A marketing strategy is most effective when it is an integral component of corporate strategy,defining how the organization will successfully engage customers,prospects, and competitors in the market arena . It is partially derived from broader corporate strategies , corporate missions , and 50
revenue , marketing strategy is closely linked with sales . A key component of marketing strategy is often to keep marketing in line with a company's overarching mission statement.
Basic theory: 1) Target Audience 2) Proposition/Key Element 3) Call to Action A strategy consists of a well thought out series of tactic to make a marketing planmore effective. Marketing strategies serve as the fundamental underpinning of marketing plans designed to fill market needs and reach marketing objectives . Plans and object-ives are generally tested for measurable results.A marketing strategy of often integrates an organization'smarketing goals, policies , and action sequences (tactics) into a cohesive whole. Similarly, the various strands might include advertising, promotion and that then channel marketing , public relations the strategy , which internet marketing , tactics
can be orchestrated. Many companies for the next level or group. Each one
group is expected to take that strategy goal and develop a set of tactics to achieve that goal. This is why it is important to make each strategy goal measurable.
Impact of Merger of HDFC Bank and Centurion Bank Of Punjab Anywhere banking Cash Management Services Wealth Management Services
MINIMUM BALANCE Individuals can open a Saving Account with Rs. 10000\- . In the eventuality of the average minimum balance falling below the stipulated levels a charge of Rs. 660 Is levied.
INTEREST
account between the 10th and the last day of the month, credited quarterly into your account.
52
MINIMUM BALANCE Corporate houses can open a current account with Rs. 20000 .
FIXED DEPOSIT ACCOUNT Fixed deposit accounts include deposits with the bank for a fixed
period, which is specified at the time of making the deposit. A fixed deposit is repayable on the expiry of a specified period chosen by the depositor to suit his purpose and to enable him to get back the money as and when he needs it. These deposits constitute more than half of total bank deposits. In order to avail the Fixed Deposit facility customer need to fill in the account form and provide introduction documentation. The account could either be
53
Period
of For to citizen
senior
term deposit
5.50 %
7 days
days-14
to from time to
180 6.75 %
ANYWHERE BANKING The new concept of anywhere banking allows customer of one branch of a bank to transit their business at premises of another branch of the bank. This essentially means that the customers are treated as being the customer of a bank not of a branch.
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CASH
MANAGEMENT
SERVICE
Cash Management Service at Centurion Bank of Punjab and HDFC is an efficient, technology-supported system of fast realization/ collection of cheques, drafts etc and / or making payments at any centre of choice in a fully secure manner. Centurion Bank of Punjab and HDFC bank Cash management Service works on the principle of Time value of money. Faster collection of funds ensures savings on high interest cost on borrowings, reduction of operating cycle and thereby reduction of borrowal needs, higher liquidity, opportunity to earn from deployment of surplus funds, tracking of funds through MIS and minimizing cost and risk associated with funds management.
CASH AND TRANSACTION SERVICES CENTURION BANK OF PUNJAB and HDFC bank offers Cash
management Services under the name "'Cash & Transaction Services'' (CATS) a service specially designed to suit your every business need, whether it is for Cheque collection or making payments at various locations.
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Benefits
Quick realization of your cheques saving on interest costs & efficient management of treasury.
MIS reports via E-mail. Interface with customer ERP also possible. Prompt query resolution at any of our branches enabling better control over your receivables.
Regular Support for efficient reconciliation. Low charges, even nil charges in some categories
ONLINE BROKING Centurion Bank of Punjab and HDFC bank offers one-stopsolutions for all your Capital Market needs. The services include E-Broking, Savings Bank Account and Demat. As a Centurion Bank of Punjab customer, you'll get an array of customized online trading products offered by IL&FS
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57
WEALTH MANAGEMENT Wealth Management is a type of financial planning that provides high net worth individuals and families with private banking, estate planning, legal resources, and investment management, with the goal of sustaining and growing long-term wealth. Whereas financial planning can be helpful for individuals who have accumulated wealth or are just starting to accumulate wealth, you must already have accumulated a significant amount of wealth for the wealth management process to be effective. Examples of wealth managers include independent advisors large
corporate entities like Citibank's Citigold and other extensions of retail banking services designed to focus on high-net worth retail customers. Such customers would be called internally in a bank 'mass affluent' or 'upper retail' clients because of their net worth, the number of potential products they own from the bank, their assets under management and other methods of segmentation. The banks create separate branches, services and other 'benefits' to retain or attract these customers who are typically more profitable than other retail banking customers. However, wealth management clients are not Private Banking clients because they simply do not have the Net Worth or Assets under management to justify the level of banking services that Private Banks provide
Products
Products could include the following:
Stocks and Stock Trading Equity Linked Investments Structure Savings Products Structured Investment Products and Derivatives Foreign Exchange 58
The merger of both strong entities CBoP and HDFC Bank will be a win win situation Both the organization will undergone a completed transformation .The main focus will be to provide be only done if HDFC Bank strategies. excellent services to customers . It can will maintain high standards of products
in the market. It will add brand name,value added services in their marketing
The project will give a detailed study about the above products and their strategies of both banks before and after the merger.
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MUTUAL FUNDS
A Mutual fund is an organization that invests in a diversified portfolio of financial securities on behalf of a pool of subscribers to its schemes. These securities can be in the form of equity, debt instruments, money market instruments etc., or a mix of these securities, depending on the scheme objectives. A mutual fund pools the money of people with similar investment goals. The money in turn is invested in various securities depending on the objectives of the mutual fund scheme, and the profits (loss) are shared among the investors in proportion to their investments.
normally priced at Rs.10 during offer. Thus , the number of units you own against the total number of units issued by the mutual fund scheme determines your share in the profit or loss of a scheme. In the case of open end schemes, units can be purchased from or sold back to the fund at a net asset value (NAV) based price on all business days. The NAV is the actual value of a unit of the fund on a given day. Thus, when you invest in a mutual fund scheme, you normally get an account statement mentioning the number of units that have been allotted to you and the NAV based price at which the units have been allotted. When you buy more units or redeem your units in part or full, you get an updated account statement, reflecting your transaction. ADVANTAGES OF INVESTING IN MUTUAL FUNDS
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61
Balanced Funds:
62
INSURANCE
64
KINDS OF INSURANCE
65
Impact of Merger of HDFC Bank and Centurion Bank Of Punjab Insurance can be mainly classified into two categories.
LIFE INSURANCE According to sec 2 (ii) of Insurance Act 1938 , Life insurance is the business of effecting contracts of insurance upon human life including any contract, whereby the payment of money is assured on death except death by accident on the happening of any contingency dependent on human life and any contract which is subject to the payment of premium for a term dependent on human life and any contract which is subject to the payment of premium for a term dependent on human life. At present the life insurance enjoys maximum scope because life is the most important property of the society or an individual. Each and every person requires insurance up to a specific level. The insurance is not only the protection but is an investment because a certain sum is returnable to the insured at the death or at the expiry of the period. It includes-
Term Life Insurance Under a term life contract, the insurance company pays a specific lump sum to the designated beneficiary in case of death of the insured. These policies are usually for 5,10,15,20 years etc. The premium payable on these policies is low as they do not carry any cash value. If one survives the period of policy, he or she do not get any money at the end of the policy. The premium on such policies keeps on increasing with age mainly because the risk of death of older people is more. Over the age of 60, these policies become difficult to afford.
66
67
Bajaj Allianz Life Insurance Corporation Birla Sun Life Insurance Co. Ltd. (BSLI) HDFC Standard Life Insurance Co. Ltd. (HDFC STD LIFE) ICICI Prudential Life Insurance Co. Ltd. (ICICI PRU) ING Vysya Life Insurance Co. Pvt. Ltd. (ING VYSYA) Max New York Life Insurance Co. Ltd. (MNYL) MetLife India Insurance Co. Pvt. Ltd. (METLIFE) Kotak Mahindra Old Mutual Life Insurance Co. Ltd. SBI Life Insurance Co. Ltd. (SBI LIFE) TATA AIG Life Insurance Co. Ltd. (TATA AIG) Aviva Life Insurance Co. Pvt. Ltd. (AVIVA) Sahara India Life Insurance Co. Ltd. (SAHARA LIFE)
GENERAL INSURANCE
68
5. Motor Insurance:
69
Bajaj Allianz General Insurance Co. Ltd. (BAJAJ ALLIANZ) ICICI Lombard General Insurance Co. Ltd. (ICICI LOMBARD) IFFCO Tokyo General Insurance Co. Ltd. (IFFCO TOKIO) Reliance General Insurance Co. Ltd. (RELIANCE) Royal Sundaram Alliance Insurance Co. Ltd. TATA AIG General Insurance Co. Ltd. (TATA AIG) HDFC Chubb General Insurance Co. Ltd. (HDFC CHUBB)
LOANS
70
Types of loans
Secured A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan. A mortgage loan is a very common type of debt instrument, used by many indivi-duals to purchase housing. In this arrangement, the money is used to purchase the property. The financial institution, however, is given security a lien on the title to the house until the mortgage is paid off in full. If the borrower defaults on the loan, the bank would have the legal right to repossess the house and sell it, to recover sums owing to it. In some instances, a loan taken out to purchase a new or used car may be secured by the car, in much the same way as a mortgage is secured by housing. The duration of the loan period is considerably shorter often corresponding to the useful life of the car. There are two types of auto loans, direct and indirect. A direct auto loan is where a bank gives the loan directly 71
credit card debt personal loans bank overdrafts credit facilities or lines of credit corporate bonds The interest rates applicable to these different forms may vary depending on the lender and the borrower. These may or may not be regulated by law.
72
Mutual funds HDFC Mutual Fund has been one of the best performing mutual funds in the last few years. HDFC Asset Management Company Limited (AMC) functions as an Asset Management Company for the HDFC Mutual Fund. AMC is a joint venture between housing finance giant HDFC and British investment firm Standard Life Investments Limited. It conducts the operations of the Mutual Fund and manages assets of the schemes, including the schemes launched from time to time. HDFC mutual funds sells equity funds, balanced funds and debt funds.The different Kinds of mutual funds which comes under HDFC are HDFC arbitrage fund ,HDFC Balanced fund ,HDFC capital builder fund, HDFC cash management fund etc. CBoP dont have its on asset management company .It sells all the listed mutual funds Of all companies.
Insurance
73
LIFE INSURANCE Aviva is one of the leading providers of life and pensions products to Europe and has substantial businesses elsewhere around the world. With a history dating back to 1696, Aviva has a 35 million-customer base worldwide. It has more than US$ 485.4 billion of assets under management. Aviva India is a 74:26 per cent joint venture between the Dabur group and Aviva Life Plc of the UK. LIFE LONG-
age of entry- 18-60 policy term- whole life minimum premium- 6000/- Rs Flexibility in cover levels Protects the value of investment Tax Benefits
SAFE GUARD Entry age- 18-50 yrs No medical check up Choice of three funds: SaveGuard offers three Unit Linked investment fund options of Secure Fund, Growth Fund and Balanced Fund.
Flexiblity of withdrawal: You can make partial withdrawals from your policy after ten policy years. The sum insured will be reduced by the amount of partial withdrawal.
Tax benefits 74
Entry age- 0-60yrs Minimum premium- 15000Rs Minimum SA- 0.5*10*15000 Maximum SA- 1.5*10*15000 Flexibility is there
EASY LIFE PLUS Entry age- 18-50 yrs No partial withdrawals No medicals required Tax benefit
HDFC Bank sells its own insurance which is commonly known as HDFC standard life insurance .
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Development Insurance Plan Group Term Insurance Gratuity Plan Leave Encashment Plan
Term Insurance Policy Loan Cover Term Assurance Term Assurance Plan
Pension Plan
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Impact of Merger of HDFC Bank and Centurion Bank Of Punjab Personal Pension Plan Unit Linked Pension Plan
Special Plan
Loans
Lending of funds to constituents, mainly traders, business and industrial enterprises, constitutes the main business of the banking company. 77
It is one of the primary functions without which an institution cannot be called bank. The bank lends a certain per
CHAPTER 7
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79
Impact of Merger of HDFC Bank and Centurion Bank Of Punjab THE ESTIMATION OF RETURN WILL BE DONE USING REGREESION METHOD WHERE WE WILL MEASURE HISTORICAL (EX-POST) RETURNS AND EXPECTED RETURN (EX-ANTE) OF A SECURITY.
The N . This annual can rate of return done merely depends upon merely two
observation namely share Price on period and then on the period be only using a regression procedure It is essential to study the ex-post returns because it will properly measure the return generated by an investment ,it will account both the price change and the cash flow derived from the asset during the period the asset was held . Ex-ante (expected return) is also required in our project to study because it gives overall assessment of the investors. The evaluation will be further be done on risk because investors as to make choices based on two consideration expected return and riskiness of return The total risk of a security is measured in terms of the variance and standard deviation of its returns as risk comprises of both systematic and unsystematic components. To evaluate risk it is necessary to measure the returns for shareholders first. The project will undergo complete procedure to check the returns. The main focus will be on riskiness of security as its vulnerability to market risk. The vulnerability is measured by the sensitivity of the return of the security vis a-vis the market return and its denoted by the letter beta . Higher the riskiness of a security, the higher the value of its beta. The beta of a portfolio is nothing but the weighted average of the beta of the securities that constitute the portfolio, the weights being the proportions of investments in the respective securities. Beta is the slope of the regression and is calculated as co- variance of ri and rm divided by the Variance of rm. The project has stressed on beta value because it referred to as the measure of a security systematic risk or market risk, since it indicates the manner in which a security return changes systematically with changes in markets return The beta value 80
The statistical method of estimating the kind of dependence of one variable on other is known as simple linear regression .Typically, the regression specification takes the following general form Y = a + bX +e Where Y = dependent variable X = independent variable e = error term
Accordingly, is estimated from the following regression specification : ri = + rm +e ri is the dependent variable representing the return on the security rm is the independent variable representing the return on the market portfolio e is the error term
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82
= =
In similar way returns were finding of all the days. It is analyzed that there is fluctuations in market trend. Expected return was found with the help of regression line by using the equation . = -0.00767 = 0.78538 expected return = + ( xn) ( xn ) = actual returns = -0.00767 + 0.7854 (1.9674 ) = 1.57368
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Abnormal returns = 5.275591 1.537568 = 3.738022 As we analyze the later data, returns at initial stage were quite attractive but it goes on decreasing. The result shows that merger has no significant impact on the returns as results were quite fluctuating. The next step is to find the riskiness of security .The project has implemented the standard deviation to determine the risk. t = actual return/ standard deviation of current period
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As we check the returns of HDFC Bank and Sensex are constant and decreasing.
graph interperts there is no change in returns, Returns are most of the time
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This above graph interperates the data of abnormal returns which shows that retrns were bit positive .within due course of time it is going negative and then sustain its positions . the results are very fluctuating. ANALYSISThe project interprets that merger has no significant impact on shareholders and riskiness of security. its an clear cut indication that that situation will remain same till CBoP shares will be list on sensex. Stock prices of HDFC Bank and CBoP Bank which have been languishing in the past , spurt in the wake of an imminent takeover , which can be prove hostile or friendly too. We conclude that share prices were expected to fall, since markets of prices were out of line with mergers. The analysis shows an indication that investors believe that the premium valuation attached to HDFC Bank may not be justifiable after a merger with weaker Bank.
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ANALYZATION ON EMPLOYEES
The next interpretation has been done on employees where project evaluates that what will be the changing conditions in the functioning of employees after the merger. Here we are talking about merger between HDFC and CBOP. Specially here data is given related with employee perception about what they think. is this positive or negative for them? This data depends upon employee to employee what is their perception about given factors. All these factors we can take as working environment. Here before taking this theory we are considering hypothesis to be null. Here we are thinking both sides equal as this is positive as well as this is negative. If hypothesis is accepted is means this positive for the employees or if hypothesis is rejected so it means this is negative for the employees.
ANOVA
This is a statistical technique specially designed to test whether the means of more than two quantitative populations are equal or not. Basically it consists of classifying and cross classifying statistical results and testing whether the means of a specified classification differ significantly. If in any situation more than two samples are given than on that place we have to use at that vary place.
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Note:- the above data is classified according to criteria i. ii. Working environment Employees
In order to simplify calculations we code the data by subtracting data by 1.54 from each figure. The data in coded form is given below. Substracting value:The total of all the numbers Total no.
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125 81 1.54
In retention 1.46 0.46 0.46 (0.54) 1.46 1.46 0.46 (0.54) 0.46 5.14 benefits (0.54) (0.54) (0.54) (0.54) (0.54) (0.54) 0.46 (0.54) (0.54) (3.86) ranking 0.46 (0.54) (0.54) (0.54) (0.54) (0.54) 0.46 (0.54) (0.54) (2.86) financialproducts (0.54) (0.54) (0.54) 1.46 1.46 (0.54) (0.54) (0.54) (0.54) (0.86) up's (0.54) (0.54) (0.54) (0.54) (0.54) (0.54) (0.54) (0.54) (0.54) (4.86) total (1.86) 2.14 2.14 1.14 0.14 0.14 1.14 (2.86) (1.86) 0.26
branches (0.54) 1.46 1.46 (0.54) 0.46 0.46 1.46 0.46 (0.54) 4.14
Correction of factor
T2 N
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(4.86)2+(4.14)2+(1.86)2+(1.14)2+(4.14)2+(5.14)2+(3.86)2+(2.86)2+(.86)2 - 0 8 8 8 8 8 8 8 8 8
14.11
And
V = = = (C-1) (9-1) 8
90
T2 8 8 8 8 8 8 8 8 8 N
(1.86)2+(2.14)2+(2.14)2+(1.14)2+(.14)2+(.14)2+(1.14)2+(2.86)2+(1.86)2-
0 8 = 8 8 3.36 8 8 8 8 8 8
And
V = = = Total sum of squares This will be obtained by adding the squares of all the items in the table and subtracting the correction factor there from. Thus:= (0.54)2+ (0.54)2+ (0.54)2+ (0.54)2+ (1.46)2+ (0.54)2+ (0.46)2+ (0.54)2+ (0.54)2+ (1.46)2+ (0.54)2+ (1.46)2+ (1.46)2+ (0.46)2+ (0.54)2+ (0.54)2+ (0.54)2+ (0.54)2+ (0.46)2+ (0.46)2+ (1.46)2+ (1.46)2+ (0.46)2+ (0.54)2+ (0.54)2+ (0.54)2+ (0.54)2+ (1.46)2+ (0.54)2+ 91 (R-1) (9-1) 8
= ( 0.54)2+ (0.54)2+ (0.54)2+ (0.54)2+ (1.46)2+ (0.54)2+ (0.46)2+ (0.54)2+ (0.54)2+ (1.46)2+ (0.54)2+ (1.46)2+ (1.46)2+ (0.46)2+ (0.54)2+ (0.54)2+ (0.54)2+ (0.54)2+ (0.46)2+ (0.46)2+ (1.46)2+ (1.46)2+ (0.46)2+ (0.54)2+ (0.54)2+ (0.54)2+ (0.54)2+ (1.46)2+ (0.54)2+ (1.46)2+ (0.54)2+ (0.54)2+ (0.54)2+ (0.54)2+ (1.46)2+ (0.54)2+ (0.54)2+ (0.54)2+ (0.54)2+ (0.46)2+ (1.46)2+ (0.54)2+ (0.54)2+ (1.46)2+ (0.54)2+ (0.54)2+ (1.46)2+ (0.54)2+ (0.46)2+ (1.46)2+ (0.54))2+ (0.54))2+ (0.54))2+ (0.54))2+ (0.46)2+ (0.54)2+ (0.54)2+ (1.46)2+ (0.46)2+ (0.46)2+ (0.46)2+ (0.54)2+ (0.54)2+ (0.46)2+ (0.54)2+ (0.54)2+ (0.46)2+ (0.54)2+ (0.54)2+ (0.54)2+ (0.54)2+ (0.54)2+(1.46)2+ (0.54)2+ (0.54)2+ (0.54)2+ (0.46)2+ (0.54)2+ (0.54)2+ (0.54)2+ (0.54)2- 0 = 50.10 The above information will be presented in the following table of analysis of variance:-
Sources of Sum of square variation Between factors Between employees Residual error Total 14.11 3.36 32.63 50.10
Degree freedom 8 8 64 80
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Thus
F = 1.76 .51 = 3.46
Conclusion:The table value of F for V1= 8 and V2= 64 at 5% level of significance is 2.63. And the tabulated value is less than the calculated value and we conclude that the factors are not making them happy. If we talk only about merger so we will find that employees are not happy with this. According to 93
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questionnaire. Deciding where to survey requires that the whole universe of the market from which data is sought to be defined so that appropriate sample can be selected. Sample profile signifies the type of respondents chosen. Since, the present study was related to difference in the perception and preference towards various investment schemes with merger So the sample taken here was all types of investors i.e different age-groups, different profession, gender etc. so that the data could be made conclusive and can be presented for whole of the population and accuracy of the results can be obtained. The size of the sample depends upon the size of the budget and the degree of the confidence that the markets want to place in the findings. It is difficult for the organization to have stability in market after the merger, they have to take crucial steps for retention of customers .the project will check the customers has positive or negative views on investment after the merger. A sample design not only seeks to determine the size of the sample Taken but also sampling unit . For study all the individuals in the project is considered to be universe. But population under the study was individuals who have invested their surplus money in some or the other venture. Sample Size is 60.
INCOME
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In co m e Level P er ann u m
45 40 35 30 25 20 15 10 5 0 Les s than 1-3 lak h 1 lak h 3-5 lak h > 5 lak h
Incom e
AGE
NO. OF RESPONDENTS 11 17 24 8
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respondent chart
60-75, 8, 13%
less than 30, 11, 18% less than 30 30-45 45-60 30-45, 17, 28% 60-75
PORTFOLIO OF INVESTMENT
INVESTMENT BEHAVIOUR investment pattern MF PO Insurance bank deposit real estate Shares any other no. of respondents 20 9 26 49 15 17 9 %age 33.33% 15% 43.33% 81.60% 25% 28.33% 15%
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investment portfolio
90.00% 80.00% 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00%
PO in su ra nc e ba nk de po sit re al es ta te F sh ar es ot he r M
%age
investment avenues
PURPOSE OF INVESTMENT
PURPOSE OF INVESTMENT Risk cover Tax Benefits Retirement Benefits Wealth Creation/ Growth NO. OF RESPONDENTS 36 17 9 30 PERCENTAGE 60% 28.33% 15% 50%
an y
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en tB
Ri s
Ta x
Purpose of investment
TYPE OF INVESTMENT
Re tir e
NO. OF RESPONDENTS 15 14 31
W ea lth
100
PREFERNCE OF INVESTMENT
RANK 2 5 1 6 4 3
101
MF MF, 15.87% bonds, 12.22% bank deposits, 22.64% bonds bank deposits PO shares real estate others
0-
10-
20-
30-
fdy
fd
Fdxdy
103
10
m.p 5
20
15 0
30
25 1
40
35 2
y2
Y
0-25 2550 5075 75100 F Fdx Fdx2 Fdxd y
m.p x dy 12.5 -2
d -1
16 3
2 10
24 3
0 1
42 17
-84 -17
16 8 17
-16 -2
37.5
-1
62.5
0 0
0 0
0 0
1 0
1 0
0 0
0 0
0 0
87.5
19 -19 19 35
12 0 0 0
27 27 27 -51
2 4 8 -2
N=60
-101 18 5
-18
12 16 -18
r=
Nfdxdy-fdxdy
104
Nfdx2-(fdx)2Nfdy2-(fdy)2
132/856.32
r=
0.154
There is positive correlation between savings & investments. it shows that it does not affect customers savings and investment with the merger as it shows positive relation between savings and investments.
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ANALYZATION OF MARKETING STRATEGIES AFTER THE MERGER Products offered by HDFC bank after the merger
The working of HDFC bank will be completely changed with the marketing strategies .The merger is are between two banks and both the banks excellent and outperforming in their field. The proposed merger of Centurion Bank of Punjab with HDFC Bank will be a big blow to Aviva Life Insurance, as the distribution deal between the two will now be scrapped. Besides this, the merger of CBoP with HDFC Bank Will be a big low to their banc assurance partners. (bancassurance is the sale of life pension and Investment products through the branch network of a bank ). This merger will adversely impact the business of Aviva Life insurance co. Centurion Bank is the bancassurance partner for these two insurers , while HDFC Bank sells insurance for group company HDFC standard life .Post merger distribution deal between Aviva Life Insurance and ICICI Lombard will be scrapped because as per the existing law of the Insurance Regulatory and Development authority IRDA, a bank cant sell products for more than one insurance company .the management of both the entities has to check when Centurion Bank of Punjabs contracts with their insurance partners expire. The bank currently has a tie-up with Aviva for life insurance and ICICI Lombard for general insurance. Industry sources said the bancassurance tie-up between Aviva and CBoP had a three-year lock-in and was due to come up for renewal in September this year. However, both were expected to renew the tie-up given the level of revenues it has generated. Also, insurance commission has contributed substantially to CBoPs profits. Although officials did not divulge the commissions earned from Aviva, they
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lead to a clash with HDFC Ltd. which provides home loans to customers and has a large customer base in this segment . CBoP also has a strong presence in home loans .Now the merged entity may not sell home loans as this may lead to conflict of interests with HDFC Ltd. But given the phenomenal progress HDFC Bank has made in recent times through its technology-driven and customer centric business model, intertwined with smart and dedicated workforce and able to tackle the post merger challenges and optimize the synergies.
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CONCLUSIONS
The project has gathered ample amount of data to study on Mergers and Acquisitions The data is well utilized for its analyzation and interpretations. The project evaluates that big merger in banking sector will be a win win deal. The merged entity will give a strong Competition to other banks. The merged entity will discover a vast network all over the India and will step ahead to capture the foreign market. The entity will be the largest private sector bank, will gain the maximum market share before the sector opens up for the foreign players. The merged entity will give positive results because total asset size will increase. The larger entity will now have greater eligibility for bigger deals in market. The way the market is heading it would appear that larger players have advantage over the parameters like operation, marketing, working environment etc. Studying the four ingredients was the most important. We conclude that share prices were expected to fall, since market prices were out of line with merger ratio. Both the ratio cannot be unfavorable for both banks and the fact that HDFC Bank , scrip too has come under a pressure is an indication that the investors believe that the premium valuation attached to HDFC Bank may not be justifiable after a merger as share price show negative or no significant movement. The most pertinent thing in this merger is that there will be no management integration issues as this will be a fair, professional and clean merger. Moreover, there will be no downsizing of staffs and the merged entity would be large enough to accommodate everyone.
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There is lot of behind the scene activity that goes with merged entity .Every strategic move that is made can have far reaching impact for the players involves. The working environment will b well Diversified and healthy culture will be provided. The strategy of marketing the products will be entirely changed. The conclusion is All said and done at the final beneficiaries are the person who are involved in merger can make good amount of money if opportunity is encashed at right time.
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LIMITATIONS OF STUDY
Time and Cost The time and cost play an important role where one goes for a particular study. Both of these factors become constraints especially when a study is conducted at academic level. Sample size Due to time and cost constraints the large sample was not taken. Since the study conducted was with a small sample hence the exact picture cannot be revealed and the findings cannot be generalized. Choice of populationThe population selected was limited to the places in Panchkula and Chandigarh. Hence results would have altered if some other population had been selected. Inherent Discrepancies in the QuestionnaireThe questionnaire might be having some undetectable errors and limitations , which could shape the responses into a particular fashion . No pre-test was done before the circulation of the questionnaire. Bias in ResponseThe data is entirely based on responses given by respondents which may be biased one due to their personal bias in replying the questions. They may not be very serious or interested in replying the questions and make it very lightly, due to which data may not be very accurate. Not implemented The decision to take this project was in February considering the merger will be happened within time , but due to delay with RBI approval merger is not actually implemented .so project was analyzed mainly on complete observation and studying the changes within the organization .
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References
www.businessworld.com www.bseindia.com www.centurioncbop.com case studies on mergers and acquisitions by P.S Sharma Cultural integration in Mergers and Acquisitions Indian financial market by T R Venkatesh www.google.com www.hdfc.co.in Mergers and acquisitions by Julie issac Mergers and Acquisitions by Amit Singh Sisodia Mergers and acquisitions (ICFAI ) www.moneycontrol.com www.newseum.com Research methodology by C.R.Kothari Security analysis (ICFAI )
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APPENDICES
QUESTIONAIRE
Question 1) what do you think about the merger of CBOP and HDFC Bank as a whole? Positive Negative Question 2) Now you are going to employee of HDFC bank so will it have any changes in your carrier level and Designation? Yes No Cant Say Question 3) Is there any chance to change in your salary package? Yes No Cant Say 112
Question 6) Are you planning to continue with this job or to shift? Yes No Cant Say
Question 7) According to you, what benefit will give to you after the employee of HDFC Bank? Brand Name Quality Products 113
Questions 8) If we talk about the range of financial products of HDFC Bank then will it give any benefits to you? Yes No Cant Say Question 9) As CBOP is having tie ups with AVIVA Life Insaurance, ICICI Lombard, etc. but HDFC Bank is having its own products so how do you feels that whether will AVIVA and ICICI products be remained tie ups or not? Yes No Cant Say
Question 10) After the merger, there will be excessive branches of HDFC banks in one city so will there any reduction in branches and employees? Yes No Cant Say
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QUESTIONAIRE
Govt.
Priv
Less than 1lac 1lac 3 lac 3lac 5 lac More than 5lac
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Que
How much percentage of your total savings do you invest? Not at all Less than 25% 25 % - 50 % 50 % - 70% Above 70%
Que
Long term
Sh short term
Que
Secure future Tax benefits Retirement benefits Wealth creation & Growt
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Savings Bank account FDs Shares and bonds Mutual funds Property Insurance Que : Please rank each of the following investment avenues in decreasing order will invest with the news of merger
the way u
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Personal Details:
Name
Age
Gender
Address
Contact No
118
119