Audyogik Shikshan Mandal’s

Institute of Management & Computer Studies, Thane.

MMS 2nd Year (Finance)

Sub : - Mergers & Acquisitions

Submitted by : Shashank Bijagare

(07) Rajesh More

(34)

What is Merger?

• A merger is when you integrate the business with another and share control of the combined businesses with other owner. A merger involves the mutual decision of two companies to combine and become one entity. i.e. a + b = c

Merger: 2 firms combine all Assets and Liabilities

Acquirer Target Usually take a new name

What is Acquisition?

• Acquisition may be defined as an act of acquiring effective control over assets or management of a company by another company without any combination of businesses or companies. i.e. a + b = a

Global Trust Bank

• GTB opened its first branch in Secunderabad Andra-pradesh on October 30,1994

• Collected Rs. 100crores of deposits on the first day of its operations

• Promoters – Ramesh Gelli, Jayanta Madhab, Sridhar Subasri

• August 14, 2004, GTB was amalgamated with Oriental Bank of Commerce

Rapid Rise of GTB

• Initial Public Issue of RS 1040mn received subscriptions of Rs 62.40bn from over 1 mn investors

• Received Rs 1bn of deposits on day 1, Rs 10bn by the end of first year and Rs 27bn at the end of 3 years

• GTB won Best Export Performance Award from the Gem and Jewelry industry

• Established more than 500,000 client relationships

• Present in all major cities, systematically spreading coverage in smaller cities

• Rated first amongst India Best Banks by Financial Express

Business Model of GTB

• Adopted a simple expedient of offering high deposit rates to investors

• Loans given mainly on the basis of personal guarantee without any collateral security

• GTB has spread its higher deposit rates over its lending rates

• GTB focused its lending to the small and medium companies, which could be charged higher rate of interest

• Within SMEs, GTB focused on exporters of garments, diamonds, IT, pharmaceuticals etc and give loans at higher interest rates

First Sign of Trouble

• Credit decision process.• In 2000, bank fell short of capital• Lend to capital market (Ketan

Parekh) • 2001-02, it suffered a nearly 60

per cent fall in net profits• Share price- 2001- 25.70

2004 - 3.60

0

10

20

30

40

50

60

70

80

Share price of GTB

share price

1995 96 97 98 99 2000 01 02 03

Oriental Bank of Commerce (OBC)

• Profile – Established in Feb 1943 in Lahore– After partition shifted to Amritsar – Nationalized on April 1980– Nationwide network of 1323 Branches– The merger allows OBC to expand its operations

in the south which is Global Trust Bank’s operational territory." B.D. Narang, , CMD, Oriental Bank of Commerce

Oriental Bank of Commerce

• Chairman : T.Y.Prabhu• Ex Director : Ratnakar Hegde S.C Sinha• Head-office: New Delhi • Directors : V Vijay Sai Reddy U K Khaitan R S Maharishi Sumita Dawra

Achievement

• OBC crosses business of Rs 2 lac crore• NP Rs 1000 crs reaches 1134.68 crs

growth 25.32 %• Operating profit Rs 2412.50 crore• Branch Network1500• ATM Network 1000• Client Base 13.5 million• Dividend for the year @ 91%

Products of OBC

Credit Schemes Social Banking Corporate Banking Business Sector Flexi Fixed Deposit Scheme

Awards and Recognition

Ranked among top 50 companies by the leading financial daily, Economic Times.

Ranked as 323rd biggest bank in the world by Bankers Almanac (January 2006), London.

Earned 9th place among India's Most Trusted top 50 service brands in Economic Times- A.C Nielson Survey.

Included in the top 1000 banks in the world according to The Banker, London.

GTB & OBC results for 2003-04

Particulars GTB OBC Combined

Advances 32.76 156.77 189.53

Investments 26.5 147.8 174.3

Deposits 69.21 298.09 367.3

Net profit -2.73 4.57 ----

Gross NPA 9.16 11.46 20.62

Net NPA 6.48 2.25 8.73

Gross NPA (per cent)

25.8 6.9 10.8

Net NPA (per cent)

19.8 1.4 4.6

Branches (nos)

87 989 1076

Staff (nos) 1,314 13,507 -----

Capital adequacy ratio

0.0 14.0 12.2

Benefits to OBC • Additional104 branches• Additional 275 ATMs • And a workforce of over 1400 employees• GTB’s shareholders would not get OBC

shares• Tax benefits• The face value of GTB shares from Rs 10

to Re 1• Willing to pay a 6:1 swap value

Benefits to GTB

• Equally beneficial for GTB depositors• Enjoy the trust of a public sector

bank.• Immense success of public sector

banks in India.• The interests of GTB's depositors

were safeguarded, its shareholders (51 per cent of its equity is held by small investors)

THANK YOU……