presentation for mba finance

7/30/2019 Presentation for mba finance

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A STUDY ONMERGER AND ACQUISITIONS

IN INDIAN BANKING INDUSTRY

By: MEGHA AGRAWAL

01611403911

IV Semester

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INTRODUCTION

WHAT IS A BANK?

Bank in general terminology is referred to as

an financial institute or a corporation which isauthorized by the state or centralgovernment to deal with money by acceptingdeposits, giving out loan and investing insecurities.

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SOME TERMS DEFINEDMerger

Merger is a combination of two or more companies into onecompany. In India, we call mergers as amalgamations, in legalparlance. The acquiring company, (also referred to as theamalgamated company or the merged company) acquires

the assets and the liabilities of the target company (oramalgamating company).

Takeover

Takeover can be defined as the acquisition of controllinginterest in a company by another company. It does not leadto the dissolution of the company whose shares are beingacquired. It simply means a change in the controlling interest

in a company through the acquisition of its share by anothergroup. 15 May 2013 3


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Horizontal merger

A horizontal merger involves merger of two firmsoperating and competing in the same kind of businessactivity. Forming a larger firm may have the benefit ofeconomies of scale.

Vertical mergers

Vertical mergers occur between firms in different stagesof production operation. In oil industry, for example,

distinctions are made between exploration, andproduction, refining and marketing to ultimate customer.

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MOTIVES BEHIND MERGER

To Utilize under-utilized market power As a response to shrinking growth and / or profit

opportunities in ones own industry

A desire to diversify.

Economics of scale; a firm can increase its income with lessthan proportionate investment

Establishing a transnational bridgehead without excessivestartup costs to gain access to a foreign market.

A desire to utilize fully the particular resources or personnelthat are controlled by the firm, particularly in context ofmanagerial skills.

A desire to displace existing management.

To circumvent government regulations. 15 May 2013 5


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OBJECTIVES OF THE STUDY

To evaluate the banks performance in terms of netprofitability.

To analyze the performance of banks after merger in

terms of return on capital employed. To find out the impact of merger on companys debt

equity ratio.

To examine the effects of merger on equity share

holders.

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RESEARCH METHODOLOGY

Research Design

Being the study exploratory in nature, it has gonethrough collection of data from past records andanalyzing the same using various statistical tools.

Data Collection

The financial and accounting data of banks is collectedfrom companies Annual Report to examine the impact ofM&As on the performance of sample banks. Financialdata has been collected from Bombay Stock Exchange(BSE), National Stock Exchange (NSE), Securities andExchange Board of India (SEBI) & money control for the

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Sampling Unit

Four banks have been taken to carry on the study.

Research methodResearch is based on data collected from secondarysources and not census based.

Sampling TypeConvenience sampling method was adopted.

Analyzing Tools UsedDifferent tools like tables, graphs, histograms are used toanalyze the data.

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ORGANISATON PROFILE

HDFC BANKDate of Establishment: Aug 1994

Background:

The HDFC Bank was incorporated on August 1994 by the name

of 'HDFC Bank Limited', with its registered office in Mumbai,India. HDFC Bank commenced operations as a ScheduledCommercial Bank in January 1995. The Housing DevelopmentFinance Corporation (HDFC) was amongst the first to receive an'in principle' approval from the Reserve Bank of India (RBI) to set

up a bank in the private sector.

Company Secretary: Sanjay Dongre

Auditors: Haribhakti & Co

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CENTURION BANK OF PUNJAB LTD.

Date of Establishment: 1994Management Details:

Chairperson - Atul Kumar ShuklaMD - Vinay MehtaDirectors - Abdul Razak Ali Issa, Ahmed Mohamed Ali Abri,

Amar Singh Anand, Atul Kumar Shukla, Chee Jin Kiong, J SGeorge, Jagdeep Singh, K K Abdul Razak , Kamlesh Vikamsey,Krishan Lall Khetarpaul, Krishna Kumar Gupta, N EVenkitakrishnan, Navjeet Singh Sobti, Qais Mm Al Yousef, RajivLochan Jha, Rajiv Maliwal, Rana Talwar, S K Jain, S K Soni, SVenkiteswaran, Shailendra Bhandari, Sita Ram Bansal, Tejbir

Singh, Vinay Mehta, Y K ModiCompany Secretary: Rajiv Lochan Jha

Auditors: BSR & Co

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PUNJAB NATIONAL BANK

Date of Establishment: 1895Background:

Established in 1895 in Lahore, Punjab National Bank is oneof the oldest banks in India having a virtual presence in every

important center of the country. The bank has over 35million customers through 4540 offices including 421extension counters, out of which 2/3 of its branches in ruraland semi rural areas-the largest among nationalized banks.

Company Secretary: A GopinathanAuditors: V Sankar Aiyar & Co, NC Rajagopal & Co, Gupta &Gupta, P Jain & Co, Kalani & Co, Anjaneyulu & Co, Phillipos & Co,KN Gutgutia & Co, CVK & Associates, Ramesh Kapoor & Co

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NEDUNGADI BANK

Date of Establishment: 1913

Overview:

Nedungadi Bank Ltd. has been taken over by Punjab National Bank.

The bank deals in foreign exchange, credit card, etc. It collaboratedwith Stock Holding Corporation of India Ltd. (SHCIL) for theinitiation of new schemes. It also worked with Canara Bank for themarketing of VISA cards. In an attempt to improve efficiency, thebank had automated its process. The bank encouraged career

growth and supported training institutes for training of itsemployees. It used the self appraisal system for the careeradvancement of its people.

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DATA ANALYSIS AND INTERPRETATION+3 / -3 YEARS

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74.17

71.12

69.94

55.86

53.42

69.57

0 20 40 60 80

2004-05

2005-06

2006-07

Pre-Merger

Centurian Bank of Punjab

HDFC Bank Ltd.

74.76

74.66

76.29

72 73 74 75 76 77

2008-09

2009-10

2010-11

Post Merger

HDFC Bank Ltd.

HDFC BANK LTD. AND CENTURION BANK OF PUNJABMERGER (2008)

Gross Profit Margin

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21.51

19.46

16.57

8.71

15.25

9.57

0 5 10 15 20 25

2004-05

2005-06

2006-07

Pre-Merger


HDFC Bank Ltd.

13.75

18.23

19.7

0 5 10 15 20 25

2008-09

2009-10

2010-11

Post Merger

HDFC Bank Ltd.

Net Profit Margin

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53.12

46.01

47.93

37.23

22.43

37.61

0 20 40 60

2004-05

2005-06

2006-07

Pre-Merger


HDFC Bank Ltd.

54.61

51.12

54.54

49 50 51 52 53 54 55

2008-09

2009-10

2010-11

Post Merger

HDFC Bank Ltd.

Operating Profit Margin

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1.29

1.18

1.25

0.65

1.08

0.66

0 0.5 1 1.5

2004-05

2005-06

2006-07

Pre-Merger


HDFC Bank Ltd.

1.22

1.32

1.42

1.1 1.2 1.3 1.4 1.5

2008-09

2009-10

2010-11

Post Merger

HDFC Bank Ltd.

Return on Capital Employed

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214.78

278.08

357.38

29.76

86.97

77.47

0 100 200 300 400

2004-05

2005-06

2006-07

Pre-Merger


HDFC Bank Ltd.

527.75

644.18

843.97

0 200 400 600 800 1000

2008-09

2009-10

2010-11

Post Merger

HDFC Bank Ltd.

Return on Equity

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134.39

192.75

222.65

35.78

67.11

100.81

0 50 100 150 200 250

2004-05

2005-06

2006-07

Pre-Merger


HDFC Bank Ltd.

342.04

393.94

479.29

0 100 200 300 400 500 600

2008-09

2009-10

2010-11

Post Merger

HDFC Bank Ltd.

Debt Equity Ratio

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PUNJAB NATIONAL BANK AND NEDUNGADI BANKMERGER (2003)

Gross Profit Margin

76.56

75.03

76.91

89.67

52.94

94.39

0 20 40 60 80 100

1999-00

2000-01

2001-02

Pre-Merger

Nedungadi Bank

Punjab National Bank

76.16

75.16

72.54

72 73 74 75 76 77

2003-04

2004-05

2005-06

Post Merger


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Net Profit Margin

7.92

7.91

8.46

9.01

-38.26

0.82

-60 -40 -20 0 20

1999-00

2000-01

2001-02

Pre-Merger

Nedungadi Bank


14.25

16.67

15.01

13 14 15 16 17

2003-04

2004-05

2005-06

Post Merger


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Operating Profit Margin

62.44

61.76

62.21

67.79

36.61

49.31

0 20 40 60 80

1999-00

2000-01

2001-02

Pre-Merger

Nedungadi Bank


52.15

55.36

59.69

45 50 55 60 65

2003-04

2004-05

2005-06

Post Merger


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Return on Capital Employed

0.75

0.73

0.77

0.84

-3.57

0.08

-4 -3 -2 -1 0 1 2

1999-00

2000-01

2001-02

Pre-Merger

Nedungadi Bank


1.08

1.11

0.99

0.9 0.95 1 1.05 1.1 1.15

2003-04

2004-05

2005-06

Post Merger


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Return on Equity

192.31

218.45

264.98

143.43

-664.71

12.45

-800 -600 -400 -200 0 200 400

1999-00

2000-01

2001-02

Pre-Merger

Nedungadi Bank


417.91

447.23

456.49

380 400 420 440 460

2003-04

2004-05

2005-06

Post Merger


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Debt Equity Ratio

226.85

267.64

304.05

157.82

172.54

141.59

0 100 200 300 400

1999-00

2000-01

2001-02

Pre-Merger

Nedungadi Bank


336.24

335.82

400.79

300 350 400 450

2003-04

2004-05

2005-06

Post Merger


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CONCLUSION AND SUGGESTIONS

CONCLUSION

The merger has led to increase in the Gross profit margin of thebank

The merger has increased the Net profit margin of the banks

significantly After merger, the Operating profit margin of the banks has

increased The Return on capital employed has increased significantly after

the mergers of the banks

The Return on equity has increased highly after the mergers ofthe banks, which is a very positive result of the synergy effect The Debt-equity ratio has increased on a large scale after

merger. This is a sign of growth but it should be maintained soas to avoid any problems during hard times

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SUGGESTIONS

The organizations which wish to go for merger shouldconsider and involve people at all levels i.e. top level,middle level and lower level

It should consider all the aspects and consequences

before entering any such contract. It should consult all important related stakeholders for

their expert advice. Advice of eminent people must also be taken before

entering into merger or acquisition contract. An analysis should also be carried out regarding what was

aimed at and what is achieved.

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LIMITATIONS

The study ignores the impact of possible differences inthe accounting methods adopted by companies undermerger and acquisitions.

The factors which effect the M & A performance may notbe same for all companies.

The cost of acquisition for mergers is not considered inthe methodology and it should be given due weight-age.

Time frame for completing merger and acquisition is alsonot considered.

Impact of organization structure is also not considered inthis study.

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THANK YOU

M

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