Merger & Acquisation

Chapter -1
Research Methodology
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M .H. Gardi School of Management
Research methodology
Content
1.1
Research methodology
1.2
Objective of study
1.3
Method of data collection
1.4
Selection of sample
1.5
Review literature
1.6
Tools of analysis
1.7
Significance of study
1.8
Proposed chapter plan
1.9
Hypothesis of study
1.10
Limitation of study
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1.1
Research Methodology
Banking is the mirror reflection of an economy. The performance of any
economy, to a large extend, is dependent on the performance of its bank.
Banking has undergone a metamorphosis globally as well as in India. Over the
past few decades,36 banks and non banking finance companies have been
merged
The Banking sector which plays a very vital role in the economic
development of india has been witnessing tremendous change. Thevarious
players in the banking are have already begun to feel the hart of intense
competition M&A is one among the various model of restructuring restore by
bank to ensure a better growth prospect.
The Indian banking system has undergone major changes that have affected
both its structure and the nature of the strategic interaction among banking
institutions. The demand of the new operating environment has made
consolidation via merger and acquisitions a strategic necessity. Thats why we
choose the topic,
A Study of Impacts of Merger & Acquisition on financial performance of
Indian Banking Sector
Mergers and acquisitions in banking sector are forms of horizontal merger
because the merging entities are involved in the same kind of business or
commercial activities. Sometimes, non-banking financial institutions are also
merged with other banks if they provide similar type of services.
1.2 Objective of study

Primary objective
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To evaluate the impact of merger and acquisition on the

profitability of the selected Indian banks during the study
period.
To evaluate the impact of merger and acquisition on the

liquidity of the selected Indian banks during the study period.
To compare the overall performance of selected Indian banks

for the pre and past merger.
Secondary objective
To study why the banks are going the merger and acquisitions.
To known the risk in the merger and acquisitions.
To study the benefits of merger and acquisitions
1.3
Method of data collection
The study is based on the secondary data taken from the annual reports of
selected units and other websites. And all the data relating to history, growth
and development of selected Industries, it will be collected mainly from the
books and magazine relating to the industry and published papers, reports,
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articles and from the various newspapers, bulletins and other journals like
Management Account, and Chartered Account.
1.4
selection of sample
Sample size
: - 5 Indian banks are,
ICICI bank
Bank of Baroda
Oriental bank of commerce
IDBI bank
Indian overseas bank
Sampling techniques
: - systematic sampling
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Reason for selecting sample
: - these 5 Indian banks merger took place
during the Year 2004 to 2007 and which is widely accepted in all Over the world.
1.5
Review literature
Authors
Study Period
Objective
Measure Used
Results
Name
Gallet
1996
Examine the
Market power
Results have suggested that
relationship
mergers slightly boost market
between mergers
power in steel industry.
in the U.S. steel

industry and the
Yuce & Ng
2005
market power.
Investigate the
Abnormal return
Results have indicated that both
effect of mergers
the target and the
announcements
acquiring company
of Canadian
shareholders earn significant
firms on the
Positive abnormal returns.
abnormal
Kling
2006
returns.
Investigate the
Total Stock
From 1898 to 1904 mergers
successfulness of
return
affected stock returns
The mergers
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Positively in all industries
wave in
Sun & tang
2000
except for banks.
Germany.
Identify the
Operating
Stockholders of acquiring firms
source of
Margin Ratio,
do not gain from
gains in merger
Net
mergers, while stockholders of
and
Margin Ratio,
acquired firms and
acquisition
Stock Price
Industry counterparts earn
transactions in
Reaction
positive market-adjusted
the railroad
returns.
industry;
market power or
Efficiency
Mazumdar et l
2007
power.
Examine the
Cash Flow, Sales
Cash flows decreased after
effects of
Growth,
mergers. For sales growth, the
mergers of local
Efficiency and
pattern was ambiguous and
exchange firms
Synergy
driven by increased market
in the U.S. on
Measures
presence. The impact of
the financial
mergers on the measures of
performance and
effiy and synergy was negative.
Efficiency level.
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1.6
Tools of analysis
In this study we have used

1. Ratio Analysis
Ratio analysis is an important technique of financial analysis which shows the
arithmetical relationship between any two figures.
A ratio, in general, is a statistical yardstick by means of which the relationship
between the figures can be compared and measured.
2. Statistical Analysis
In this study we have used Mean, Difference and Standard Deviation as tools of
statistical analysis and Paired t-test for judging hypothesis.
3. Paired T-test
Paired t- test is a way to test for comparing two related samples, involving small
values of n that does not require the variances of the two populations to be equal,
but the two populations are normal must continue to apply. For a paired T-test it is
necessary that the observation of two samples be collected in the form of matched
pairs that is i.e,each observation in the one sample must be paired with an
observation in the other sample in such a manner that these observations are
somehow matched or related. Such a test is generally considered appropriate in a
before-and-after-treatment study.
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1.7
Significance of study
The study which we have undertaken is significant and useful as it has given
us an experience and knowledge about the merger and acquisition in Indian
banking sector and what was its impact on the financial performance of the
bank.
1.8
proposed chapter plan

1)
2)
3)
4)
5)
research methodology
History &development of merger &Acquition.
History & development of selected unit
Financial analysis
Summary ,finding ,suggestion.
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1.9
Hypothesis of the study

Null Hypothesis
There would be no significant difference in average percentages of
Liquidity indicators in selected units, before and after merger and
acquisition.
There would be no significant difference in average percentages of
Profitability indicators in selected units, before and after merger
and acquisition.
Alternate Hypothesis
There would be significant difference in average percentages of
Liquidity indicators in selected units, before and after merger and
acquisition.
There would be significant difference in average percentages of
Profitability indicators in selected units, before and after merger
and acquisition.
1.10 Limitation of the study

1) Our study is based on only 5 selected banks.
2) There is a lack of time for the study.
3) We have no so much experience about banking merger and
acquisition.
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4) The banks which we selected for our study may adopt window
dressing which creates effect on our study.
5) There is a lack of primary data in this study.
6) All the limitation of ratio analysis affect our study.
7) All the limitation of secondary data make an impact in our analysis
because our study is based on that data only.
8) For this study we have taken only 3 years data for both before and
after merger and acquisition to compare the performance of
selected units.
Chapter -2
History and Development
Of
Merger and acquisition
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Content
2.1
2.2
2.3
2.4
2.5
2.6
2.7
Introduction
Classification of merger and acquisition
Different between merger and acquisition
Motivation behind merger and acquisition
Merger and acquisition trend
Reason for merger and acquisition
Legal producer for bringing out of merger
2.8
company
Regulation of merger and acquisition
2.8.1
The companies Act 1956
2.8.2
The competitions Act 2010
2.8.3
The other regulation
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2.1 Introductions
We know that the companies together form another company and companies taking over
the existing companies to expand their businesses.
With recession taking toll of many Indian businesses and the feeling of insecurity
surging over our businessmen, it is not surprising when we hear about the immense
number of corporate restructuring taking place, several companies have been taken over
and several have undergone internal restructuring, whereas certain companies in the
same field of business have found it beneficial to merge together into one company.
Corporate Mergers and Acquisitions are something very crucial for any country's
economy. This is so because the Corporate Mergers and Acquisitions can result in
significant restructuring of the industries and can contribute to rapid growth of
industries by generating Economies of Scale.
Remaining small may be beautiful but becoming big would make you powerful is the
underlying principle behind the Merger & Acquisition business strategy. Every business
strives for survival in this growing era of core competence. It is here M&A is looked
upon as an immediate mode for external growth. This phenomena has been prevailing
both in the developed and developing economies. But it is gaining more prominence in
the presentglobalising world. Mergers and acquisitions (M&A) is one of the main part
of the corporate finance world .merger and acquisition are the corporate strategies that
deal with buying, selling or combining different companies with a goal to achieve
rapid growth. However, the decisions on mergers and acquisitions are taken after
considering a few facts like the current business status of the companies, the present
market scenario, and the threats and opportunities etc. In fact, the success of mergers
and acquisitions largely depend upon the merger and acquisition strategies adopted by
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the organizations.
Many big companies continuously look out for potential companies, preferably smaller
ones, for mergers and acquisitions. Some companies may have their core cells, which
concentrate on merger and acquisition
Merger is a tool used by companies for the purpose of expanding their operations often
aiming at an increase of their long term profitability. Mergers and acquisitions are
almost a daily occurrence in the life sciences. Competition is fierce, and
companies
must team up to survive in an industry where specialized knowledge is king. One of the
largest, most critical, and most difficult parts of a business merger is the successful
integration of the enterprise networks of the merger partners. The prime objective of a
firm is to grow profitably. The growth can be achieved either through the process of
introducing or developing new products or by expanding or enlarging the capacity of
existing products.
This wave was driven by globalization, liberalization and technological
changes.
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Merger
A merger occurs when two or more companies combines and the resulting firm
maintains the identity of one of the firms. One or more companies may merger with an
existing company or they may merge to form a new company. Usually the assets and
liabilities of the smaller firms are merged into those of larger firms.
Example: company A + company B = company B
Merger may take two
forms1. Merger through absorption
2. Merger through
consolidation
Absorption
Absorption is a combination of two or more companies into an existing company.
All companies except one loose their identity in a merger through
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absorption.
Consolidation
A consolidation is a combination if two or more combines into a new
company. In this form of merger all companies are legally dissolved and a
new entity is created. In consolidation the acquired company transfers its
assets, liabilities and share of the acquiring company for cash or exchange
of assets.
Acquisition
An acquisition usually refers to a purchase of a smaller firm by a larger one. It is an

attempt or a process by which a company or an individual or group of individual
acquires control on another company called Target Company.
Acquisition also known as takeover or a buyout is the buying of one company by

another. An acquisition may be friendly or hostile.
2.2 Classifications of Mergers and Acquisitions
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1. Horizontal
A merger in which two firms in the same industry combine.
Often in an attempt to achieve economies of scale and/or scope.
2. Vertical
A merger in which one firm acquires a supplier or another firm that is closer to
its existing customers.
Often in an attempt to control supply or distribution channels.
3. Conglomerate
A merger in which two firms in unrelated businesses combine.
Purpose is often to diversify the company by combining uncorrelated assets
and income streams
4. Cross-border (International) M&As

A merger or acquisition involving a Canadian and a foreign firm either the
acquiring or target company.
2.3 Difference between merger and acquisition
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2.4 Motives behind merger and acquisition

To increase profit.
To get benefit of economize of scale.
To get the benefit of centralization.
Access to new markets.
To get the benefit of synergy.
Growth in market share.
Access to new products.
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Redirection of operating expenses.

To enhance reputation.
Access to distribution channels.
Access to additional management or technical talent.
To reduce competition.
To reduce distribution costs.
Access to new brands.
2.5 Merger and Acquisition Trends

Merger and Acquisition Trends give a clear idea about the movements of the market.
Not only the product market or labor market, but also the money market gets
influenced by these Merger and Acquisition Trends.
Merger and Acquisition Trends are important to study in order to judge the market
movements of any particular economy.
So, one can easily understand how determining the Merger and Acquisition Trends
All over the world, in the developed and developing nations, record number of
merger and acquisition deals took place. The reason of this particular Merger and
Acquisition Trend was the emergence and rapid growth of Private Equity Funds.
Moreover, the regulatory environment of the publicly owned companies and the urge
to attain growth of short term earnings were also behind the specific trend of Mergers
and Acquisitions.
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2.1 Merger and Acquisition Trends
(S
ou
rce
Rajesh
Kumar B., 2011, Mergers and Acquisitions Text and Cases) Trend of merger
and acquisition
The above graph represents that in 2003-2004 more no of m&a activity
took place as compared to other years.
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2.6 Reason for merger and acquisition
Following are some of the reasons why corporate go for

mergers and acquisitions.
Through corporate mergers and acquisitions, duplicate departments can be

eliminated in the combined company, which would help to reduce its fixed costs.
As a result, the profit margins would go up.
It helps the organization to increase revenue and market share.
Cross-selling of products/services is possible.
A profitable corporation also buys a loss-making company in order to use the
losses of the target company to lessen its tax liability.
Mergers and acquisitions also let the companies to transfer resources. By this way,
one company may use the specialized skills of the others.
Companies also go for mergers/acquisitions for vertical integration, where the

vertically integrated company can gather one deadweight loss by setting the
output of the upstream company to the competitive level
2.7 Legal Procedure for Bringing About Merger of

Companies.
(1) Examination of object clause:
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The MOA of both the companies should be examined to check the power to amalgamate
is available. Further, the object clause of the merging company should permit it to carry
on the business of the merged company. If such clauses do not exist, necessary approvals
of the share holders, board of directors, and company law board are required.
(2) Intimation to stock exchanges:
The stock exchanges where merging and merged companies are listed should be informed
about the merger proposal. From time to time, copies of all notices, resolutions, and
orders should be mailed to the concerned stock exchanges.
(3) Approval of the draft merger proposal by the respective boards:
The draft merger proposal should be approved by the respective BOD s. The board of
each company should pass a resolution authorizing its directors/executives to pursue the
matter further.
(4) Application to high courts:
Once the drafts of merger proposal is approved by the respective boards, each company
should make an application to the high court of the state where its registered office is
situated so that it can convene the meetings of share holders and creditors for passing the
merger proposal.
(5) Dispatch of notice to share holders and creditors:

In order to convene the meetings of share holders and creditors, a notice and an
explanatory statement of the meeting, as approved by the high court, should be
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dispatched by each company to its shareholders and creditors so that they get 21 days
advance intimation. The notice of the meetings should also be published in two news
papers.
(6) Holding of meetings of share holders and creditors:
A meeting of share holders should be held by each company for passing the scheme of
mergers at least 75% of shareholders who vote either in person or by proxy must approve
the scheme of merger. Same applies to creditors also.
(7) Petition to High Court for confirmation and passing of HC orders:
Once the mergers scheme is passed by the share holders and creditors, the companies
involved in the merger should present a petition to the HC for confirming the scheme of
merger. A notice about the same has to be published in 2 newspapers.
(8) Filing the order with the registrar:
Certified true copies of the high court order must be filed with the registrar of companies
within the time limit specified by the court.
(9) Transfer of assets and liabilities:
After the final orders have been passed by both the HC s, all the assets and liabilities of
the merged company will have to be transferred to the merging company.
(10) Issue of shares and debentures:
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The merging company, after fulfilling the provisions of the law, should issue shares and
debentures of the merging company. The new shares and debentures so issued will then
be listed on the stock exchange.
2.8 Regulations for Mergers & Acquisitions

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Mergers and acquisitions are regulated under various laws in India. The objective of the
laws is to make these deals transparent and protect the interest of all shareholders. They
are regulated through the provisions of:-
2.8.1 The Companies Act, 1956

The Act lays down the legal procedures for mergers or acquisitions:Permission for merger:Two or more companies can amalgamate only when the amalgamation is permitted under
their memorandum of association. Also, the acquiring company should have the
permission in its object clause to carry on the business of the acquired company. In the
absence of these provisions in the memorandum of association, it is necessary to seek the
permission of the shareholders, board of directors and the Company Law Board before
affecting the merger.
Information to the stock exchange:The acquiring and the acquired companies should inform the stock exchanges (where
they are listed) about the merger.
Approval of board of directors:The board of directors of the individual companies should approve the draft proposal for
amalgamation and authorize the management of the companies to further pursue the
proposal.
Application in the High Court:-
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An application for approving the draft amalgamation proposal duly approved by the
board of directors of the individual companies should be made to the High
Shareholders' and creators' meetings:The individual companies should hold separate meetings of their shareholders and
creditors for approving the amalgamation scheme. At least, 75 percent of shareholders
and creditors in separate meeting, voting in person or by proxy, must accord their
approval to the scheme.
Sanction by the High Court:After the approval of the shareholders and creditors, on the petitions of the companies,
the High Court will pass an order, sanctioning the amalgamation scheme after it is
satisfied that the scheme is fair and reasonable. The date of the court's hearing will be
published in two newspapers, and also, the regional director of the Company Law Board
will be intimated.
Filing of the Court order:After the Court order, its certified true copies will be filed with the Registrar of
Companies.
Transfer of assets and liabilities:The assets and liabilities of the acquired company will be transferred to the acquiring
company in accordance with the approved scheme, with effect from the specified date.
Payment by cash or securities:As per the proposal, the acquiring company will exchange shares and debentures and/or
cash for the shares and debentures of the acquired company. These securities will be
listed on the stock exchange.
2.8.2 The Competition Act, 2002

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The Act regulates the various forms of business combinations through Competition
Commission of India. Under the Act, no person or enterprise shall enter into a
combination, in the form of an acquisition, merger or amalgamation, which causes or is
likely to cause an appreciable adverse effect on competition in the relevant market and
such a combination shall be void. Enterprises intending to enter into a combination may
give notice to the Commission, but this notification is voluntary. But, all combinations do
not call for scrutiny unless the resulting combination exceeds the threshold limits in terms
of assets or turnover as specified by the Competition Commission of India. The
Commission while regulating a 'combination' shall consider the following factors :
Actual and potential competition through imports;

Extent of entry barriers into the market;
Level of combination in the market;
Degree of countervailing power in the market;
Possibility of the combination to significantly and substantially increase prices or
profits;
Extent of effective competition likely to sustain in a market;
Availability of substitutes before and after the combination;
Market share of the parties to the combination individually and as a combination;
Possibility of the combination to remove the vigorous and effective competitor or
competition in the market;

Nature and extent of vertical integration in the market;
Nature and extent of innovation;
Whether the benefits of the combinations outweigh the adverse impact of the
combination.
Thus, the Competition Act does not seek to eliminate combinations and only aims
to eliminate their harmful effects.
2.8.3 The other regulations are provided in the:The Foreign Exchange Management Act, 1999 and the Income Tax Act,1961.
Besides, the Securities and Exchange Board of India (SEBI) has issued guidelines
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to regulate mergers and acquisitions. The SEBI (Substantial Acquisition of

Shares and Take-overs) Regulations,1997 and its subsequent amendments aim
at making the take-over process transparent, and also protect the interests of
minority shareholders.
CHAPTER-3
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HISTORY AND
DEVELOPMENT
OF
INDUSRYAND
SELECTED UNIT
CONTENT
3.1 About banking
3.2 Historical background of banking in India
3.3 List of banking in India
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3.4 Major M & A in banking/NBFC Sector in India

3.5 History of Selected Units
1) ICICI Bank
2) BOB
3) IDBI
4) IOB
5) OBC
3.1 About banking

The importance of banks in the modern economy cannot be neglected. They occupy a
very important place in the field of commerce and industry of any country. No country
can achieve commercial and industrial progress in the absence of a sound banking
system.
According to section 5(b) of the Banking Regulation Act the term banking is defined as
accepting for the purpose of lending or investment of deposits of money from the public,
repayable on demand or otherwise and withdraw able by cheque, draft, order or
otherwise.
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3.2 HISTORICAL BACKGROUND OF BANKING IN INDIA

From the early Vedic period the giving and taking of credit in one form or the other have
existed in Indian Society. The bankers are the pillars of the Indian society. Early days
bankers were called as indigenous bankers. The development of modern banking has
started in India since the days of East India Company. These banks mostly had no capital
of their own and depended entirely on deposits in India.
The banking industry worldwide is transformed concomitant with a paradigm shift in the
Indian economy from manufacturing sector to nascent service sector. Indian banking as a
whole in undergoing a change. Indian banks have always proved beyond doubt their
adaptability to mould themselves into agile and resilient organizations.
For the past three decades Indias banking system has several outstanding achievements
to its credit. The most striking is its extensive reach. It is no longer confined to only
metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even
to the remote corners of the country. This is one of the main reasons of Indias growth
process.
Not long ago, an account holder had to wait for hours at the bank counters for getting a
draft or for withdrawing his own money. Today, he has a choice. Gone are days when the
most efficient bank transferred money from one branch to other in two days. Now it is
simple as instant messaging or dials a pizza. Money has become the order of the day.
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3.3 Major M&A in Banking / NBFC sector in India.

Year
1969
1970
1971
1974
1976
1984-85
1984-85
1985
1986
1988
1989-90
1989-90
1989-90
Acquirer
State Bank of Indian
Chartered Bank
Union Bank
Canara Bank
Union Bank
Punjab National Bank
Bank of Baroda
Allahabad Bank
Indian Overseas Bank
Indian Bank
Target
Bank of Behar
National Bank Lahor
Eastern Bank
Krishnaram Baldeo Bank Ltd
Belgaum Bank Ltd
Lakshmi Commercial Bank
Bank of Cochin
Miraj state Bank
Hindustan Commercial Bank
Traders Bank
United Industrial Bank
Bank of Tamil Nadu
Bank of Thanjavur
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1989-90
1990-91
1993-94
1993-94
1995-96
1996
1997
1997
1997
1998
1999
1999
1999
1999
2000
2000
2001
2002
2002
2002
2003
2004
2004
2004
2006
2006
2006
Bank OF India
Central Bank of India
Punjab national bank
Bank of India
State bank of India
ICICI
ICICI
Oriental Bank of commerce
Oriental Bank of commerce
ICICI
Bank of Baroda
Centurion Bank
Parur Central Bank

Purbanchal Bank
New Bank of India
Bank of Karad
Kasinath Seth Bank
SCICI
ITC Classic
Bari Doad Bank
Punjab Cooperation Bank
Anagram Finance
Bareilly Corporation Bank
20th Century Finance
HSBC
Union Bank
HDFC Bank
Standard Chartered Bank
ICICI Bank
ICICI Bank
Bank of Baroda
ING
Punjab National Bank
Bank of Baroda
Oriental bank of Commerce
IDBI
United Western Bank
Centurion Bank
The Federal Bank
Corporation
British Bank of Middle East
Sikkim Bank
Times Bank
Gridleys Bank
Bank of Madura
ICICI
Benares State Bank
Vysya Bank
Nedungadi Bank
South Gujarat Local bank
Global trust Bank
IDBI Bank
IDBI Bank
Lord Krishna Bank
Ganesh Bank of Kurundwad
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3.4 History of Selected Units

1) ICICI BANK
Type
Public NSE:ICICIBANK BSE:532174

NYSE:IBN
Industry
Banking Financial services
Founded
1955
Headquarters
Mumbai, Maharashtra, India
Key people
K.V. Kamath (Chairman),

Chanda Kochhar (MD & CEO)
Mr. N. S.Kannan(CFO)
Products
Retail Banking
Commercial Banking
Mortgages Credit Cards Private Banking,
Asset Management Investment Banking
Websites
www.ICICIBank.com
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History of ICICI Bank

Acquisition of ICICI Bank
2005 - Investitsionno-Kreditny Bank (IKB), a Russian bank
2007 - Sangli Bank , Maharashtra State
2008 - Bank of Rajasthan
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History of merger of ICICI bank with sangli bank.
Date of Merger: - 9th December, 2006

Type of Merger: - voluntary merger
Motive of Merger: - Expansion of size
INTENT
The Board of India's largest private sector lender ICICI Bank approved the merger of The
Sangli Bank Limited with itself - a move that would enhance its presence in rural and
small and medium enterprises banking space ICICI Bank has planned to leverage Sangli
Banks network to expand its base and to roll out of its small enterprise banking
operations in the rural part of the two most developed states in the Country.
BENEFIT OF MERGER
Benefit to Sangli bank
Increase in the value of share of sangli bank.
New opportunity for the employees of sangli bank.
Benefit to ICICI bank
Expansion in geographical area.
Increase in the number of customer.
Increase distribution network in urban area.
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VALUE OF MERGER
According to the merger scheme, the share exchange ratio has been fixed for the
shareholders of the Maharashtra based Sangli Bank. The shareholders of Sangli Bank
with every 925 equity shares will get 100 equity shares of the ICICI Bank.
Further, the ICICI Bank is expected to issue 3.46 million equity shares with the face
value of Rs 10 each against Sangli Bank Limiteds 31.96 million equity shares of the
face value of Rs 10 each.
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2) Bank of Baroda
Type
Industry
Public (BSE: 532134)

Banking Financial services Investment
Founded
Headquarters
services
1908
Bank of Baroda, Baroda Corporate Center,
Plot No - C-26, G - Block, Bandar Kurla
Complex, Mumbai India
Key people
M D Mallya
Products
(Chairman & MD)

Finance and insurance Consumer banking
Corporate banking
Investment banking Investment management
Private banking Private equity Mortgages
Credit cards
Website
www.bankofbaroda.com
1959: BoB acquired Hind Bank.

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1961: BoB merged in New Citizen Bank of India.

1963: BoB acquired Surat Banking Corporation in Surat, Gujarat.
1972: BoB acquired The Bank of Indias operations in Uganda.
2002: BoB acquired Benares State Bank (BSB) at the Reserve Bank of Indias
request.
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History of merger of Bank Of Baroda with South Gujarat Local

Area Bank ltd.
Date of Merger: - 25th June, 2004
Type of Merger: - Forced merger
Motive of Merger: - Restructuring of weak bank
INTENT
According to the RBI, South Gujarat Local Area Bank had suffered net losses in
consecutive years and witnessed a significant decline in its capital and reserves. To tackle
this, RBI first passed a moratorium under Section 45 of the Banking Regulation Act 1949
and then, after extending the moratorium for the maximum permissible limit of six
months, decided that all seven branches of SGLAB function as branches of Bank of
Baroda. At that time the focus interest for BOB was the local area banks depositors.
BENEFIT OF MERGER
The clients of SGLAB were effectively transferred to Bank of Baroda, deriving the
advantage of dealing with a more secure and bigger bank. SGLAB did not benefit much,
except that it was able to merge with a bigger bank and able to retain its branches and
customers, albeit under a different name. Since BoB was a large entity (total assets of Rs.
793.2 billion at the time of merger), addition of a small liability did not affect it much.
Albeit minor, it obtained seven more branches and the existing customers of SGLAB.
This further strengthened its position in rural Gujarat
40 | P a g e
3) IDBI BANK
Type
Public (BSE: )
Industry
Founded
July 1964
Headquarters
Mumbai, India
Key people
Shri R. M. Malla, CMD
Products
Finance and insurance
Employees
8,989
Website
www.idbi.com
History of IDBI Bank

41 | P a g e
Merger and Acquisition of IDBI bank

Sep 2003: IDBI acquires entire shareholding of Tata Finance Limited.
July 2004: Merger of IDBI Bank with the Industrial Development Bank of India
Ltd.
Oct 2006: IDBI Bank also acquired United Western Bank
History of merger of IDBI Bank with United Western Bank
42 | P a g e
43 | P a g e
Date of Merger: - 9th Oct, 2006

Type of Merger: - Forced merger
INTENT
The amalgamation of United Western Bank (UWB) with Industrial Development Bank of
India is likely to change the rules of the game in the banking space on the issue of
valuation of shares.
44 | P a g e
The merger is markedly different from takeover of Global Trust Bank and Nedungadi
Bank by healthier rivals. In both the cases, shareholders went away without any
consideration for the shares surrendered.
Apart from synergies to the participating banks, the IDBI-UWB merger is likely to be a
positive for old private sector banks.
Benefit of merger
The merger is likely to help IDBI expand its retail presence, though its size
The merger would give IDBI immediate access to the 230-branch network of
UWB, thereby widening its deposit franchise.
The merger with UWB is likely to help IDBI diversify its credit profile.
Benefit of an improved deposit mix for IDBI.
.
VALUE OF MERGER
IDBI has offered to pay Rs 28 per share to the UWB shareholders. The purchase
consideration, at this price, works out to about Rs 150 crore.
The price-to-book multiple for the acquisition works out to about 1.9. Although this
appears slightly high, we believe the price factors in the takeover premium attached to
UWB's business. Further, UWB has a positive net worth (about Rs 115 crore). Its
capital adequacy ratio had turned negative mainly because of technical provisions such as
for depreciation in the value of investments.
4) INDIAN OVERSEAS BANK
45 | P a g e
Type
Public
Industry
Banking Capital Markets and allied

industries
Founded
Madras, February 10,1937
Headquarters
Chennai, India
Key People
Chairman & MD
M Narendra
Executive Directors:
Nupur Mitra ,
A.K.Bansal
Products
Loans, Credit Cards, Savings,

Investment vehicles etc.
Website
www.iob.in
History of Indian Overseas Bank

Merger and Acquisition of Indian Overseas Bank
1988-89: IOB acquired Bank of Tamil Nadu in a rescue.
2007: IOB took over Bharat Overseas Bank.
46 | P a g e
2009: IOB took over assets and liabilities of Shree Suvarna Sahakari Bank.
History of merger of Indian Overseas Bank with Bharat Overseas Bank.

Date of Merger: - 31st March, 2007
Type of Merger: - compulsory merger
BENEFIT OF MERGER
For IOB, this acquisition will fit in nicely with its plans to expand abroad. BOB has a
branch in Bangkok that is making profits. The Bangkok branch registered profits of
about Rs 8 crore in the year ended March 2005. BOB is also substantially smaller
than IOB and both are South-based banks. Integration challenges could thus be
expected to be minimal.
5) ORIENTAL BANK OF COMMERCE
47 | P a g e
Type
Industry
Public
Founded
Headquarters
Key people
19 February 1943
New Delhi, Delhi, India
NAGES PAYDAH (Chairman and MD)
Products
Investment Banking Consumer Banking

Commercial Banking Retail Banking
Private Banking Asset Management
Pensions Mortgages Credit Cards
Government of India
www.obcindia.co.in
Owner(s)
Website
History of Oriental Bank of Commerce
Oriental Bank of Commerce Acquires Global Trust Bank Ltd

Date of merger -14th Aug, 2004
48 | P a g e
Types of merger- Forced Merger

Motive of merger- Restructuring of weak bank
INTENT
For Oriental Bank of Commerce there was an apparent synergy post merger as the
weakness of Global Trust Bank had been bad assets and the strength of OBC lay in
recovery In addition, GTB being a south-based bank would give OBC the much-needed
edge in the region apart from tax relief because of the merger. GTB had no choice as the
merger was forced on it, by an RBI ruling, following its bankruptcy.
BENEFIT OF MERGER
OBC gained from the 104 branches and 276 ATMs of GTB, a workforce of 1400
employees and one million customers. Both banks also had a common IT platform. The
merger also filled up OBC's lacunae - computerization and high-end technology. OBC's
presence in southern states increased along with the modern infrastructure of GTB.
As part of the merger proposal, the OBC would get Income Tax exemptions in
transferring the assets of GTB in its book during the merger process, while all the bad
debts of the merged entity would be adjusted against the cash balances and reserves of the
Hyderabad-based bank.
49 | P a g e
CHAPTER- 4
FINANCIAL ANALYSIS
CONTENT
Content
4.1
4.2
4.3
Uses of Accounting Ratio

Ratio Analysis
Profitability Ratio
50 | P a g e
4.1 Ratio Analysis:
Uses of Accounting Ratios
Simplification of accounting data

Helpful in comparative study
Focus on trends
Setting standards
51 | P a g e
Study of financial soundness
In this Study, We used following Liquidity Ratios
Cash Deposit
Deposit to owner Fund
Loan to Deposit
Fixed Ass et to Fixed capital
Debt to Equity
Debt to Asset
Interest coverage
1.
2.
3.
4.
5.
6.
7.
1 ) Cash Deposit Ratio
Table 4.1
CASH DEPOSIT RATIO IN SELECTED UNIT
(Before 3 years and after 3 years of M&A)
Bank Name
ICICI
BOB
IDBI
IOB
OBC
Before M
&A
(x)
6.63
4.53
8.69
7.45
7.33
After M &
A
(y)
11.22
4.01
9.76
7.89
10.10
Difference
(x-y)
-4.59
0.52
-1.07
-0.44
-2.77
(Source: Moneycontrol.com)
52 | P a g e
Square Of
Difference
(X-Y)2
21.0681
0.2704
1.1449
0.1936
7.6729
cash deposit ratio

Before M & A (x)
11.22
9.76
8.69
6.63
After M & A (y)

10.1
7.457.89
7.33
4.534.01
ICICI
BOB
IDBI
IOB
OBC
ANALYSIS:
Table 4.1 showing Cash Deposit Ratio in selected units, before 3 years and
after 3 years of merger and acquisition. In which before merger, IDBI
showing the highest Cash Deposit Ratio (8.69) whereas BOB showing
the lowest ratio (4.53) as compare to other banks and after merger
ICICI showing highest Cash Deposit Ratio (11.22) whereas BOB
showing lowest ratio (4.01) as compare to other banks.
Impact of merger is highest positive in ICICI because it s showing
increasing Cash Deposit Ratio (4.59) whereas BOB showing negative
impact because its ratio (0.52) has been decreased after merger.
53 | P a g e
Test application table

N
Mean
S.D
d.f.
tc
tt
Resul
t
XY
XY
6.926
8.596
-1.67
1.531
2.829
2.0251
8
n-1
5-1
-1.844
2.77
H0
=4
Null Hypothesis: (H0)
There would be no significant difference in mean score of selected units,

before and after merger and acquisition.
54 | P a g e
Alternate Hypothesis: (H1)

There would be significant difference in mean score of selected
units, before and after merger and acquisition.
H o: 1= 2
H o: 1= 2
At 5% level of significance, here, t c = - 1.844 and t t = 2.776
So, t c < t t
As t c is less than t t So Null Hypothesis (H0) is accepted means there is no significant
difference in mean score of selected units, before and after merger & acquisition.
2) Deposit to Owners Fund Ratio

FORMULA:
Table 4.2
DEPOSIT TO OWNERS FUND RATIO IN SELECTED UNIT
(Before 3 years and After 3 years of M&A)
Bank
Name
ICICI
Before M
&A
(x)
8.29
After M
&A
(y)
4.53
Difference Square Of
(x-y)
Difference
(X-Y)2
3.76
14.1376
55 | P a g e
BOB
IDBI
IOB
OBC
15.33
4.93
17.49
15.02
13.95
10.93
17.36
11.84
1.38
-6
0.13
3.18
1.9044
36
0.0169
10.1124
20
18
16
14
12
ratio 10
8
6
4
2
0
ICICI
BOB
IDBI
IOB
OBC
ANALYSIS:
Table 4.2 showing Deposit to owners fund Ratio in selected units, before 3 years and
after 3 years of merger and acquisition. In which before merger, IOB showing the
highest Deposit to owners fund Ratio (17.49) whereas IDBI showing t he lowest
ratio (4.93) as compare to other banks and after merger IOB showing highest
Deposit to owners fund Ratio (17.36) whereas ICICI showing lowest ratio (4.53) as
compare to other banks.
Impact of merger is positive in IDBI because its showing increasing Deposit to
owners fund Ratio (6) whereas ICICI showing highest negative impact because its ratio
(3.76) has been decreased after merger.
56 | P a g e
Mean
S.D
d.f.
tc
tt
n-1
0.281
2.77
Resul
t
XY
XY
12.21
11.72
0.49
5.34
4.72
3.90
5-1
H0
=4

57 | P a g e

H o: 1= 2
H o: 1= 2
At 5% level of significance, here, t c =0.281 and t t = 2.776
So, t c < t t
3) Loan to Deposit Ratio
Table 4.3
LOAN TO DEPOSIT RATIO IN SELECTED UNIT
Bank
Name
ICICI
BOB
IDBI
IOB
OBC
Before M
&A
(x)
0.89
0.52
1.91
0.65
0.53
After M &
A
(y)
0.94
0.61
1.16
0.73
0.63
Difference
(x-y)
-0.05
-0.09
0.75
-0.08
-0.1
58 | P a g e
Square Of
Difference
(X-Y)2
0.0025
0.0081
0.5625
0.0064
0.01
Loan to Deposit Ratio

2
1.8
1.6
1.4
1.2
1
Ratio
0.8
0.6
0.4
0.2
0
ICICI
BOB
IDBI
IOB
OBC
ANALYSIS:
Table 4.3 showing Loan to Deposit Ratio in selected units, before 3 years and after 3
years of merger and acquisition. I n which before merger, IDBI showing the highest
Loan to Deposit
Ratio (1.91)
whereas BOB showing the lowest ratio (0.52) as
compare to other banks and after merger I DBI showing highest Loan to Deposit Ratio
(1.16) whereas BOB showing lowest ratio (0.63) as compare to other banks.
Impact of mer ger is highest positive in OBC because its s howing increasing Loan
to Deposit
Ratio (0.1) whereas IDBI showing negative impact because its ratio
59 | P a g e
Mean
S.D
d.f.
tc
tt
n-1
0.517
2.77
Resul
t
XY
XY
0.9
0.81
0.086
0.58
0.23
0.372
5-1
H0
=4

60 | P a g e

H o: 1= 2
H o: 1= 2
At 5% level of significance, here, t c =0.517 and t t = 2.776
So, t c < t t
4) Debt to Equity Ratio:
Table 4.4
DEBT TO EQUITY RATIO IN SELECTED UNIT
Bank
Name
Before M
&A
(x)
After M
&A
(y)
Differenc
e
(x-y)
ICICI
BOB
IDBI
IOB
OBC
240.20
230.21
93.78
102.63
166.30
267.01
298.84
162.62
194.03
238.03
-26.81
-68. 63
-68.84
-91.4
-71.73
61 | P a g e
Square Of
Differenc
e
(X-Y)2
718.78
4710.08
4738.95
8353.96
5145.19
300
250
200
ratio
150
Before M & A (x)
100
After M & A (y)
50
0
ICICI
BOB
IDBI
IOB
OBC
bank
ANALYSIS:
Table 4.4 showing Debt to Equity Ratio in selected units, before 3 years and after 3 years
of merger and acquisition. I n which before merger, IDBI showing the highest Debt to
Equity Ratio (240.20) whereas ICICI showing the lowest ratio (93.78) as compare to
other banks and after merger BOB showing highest debt to Equity Ratio(298.84) whereas
IDBI showing lowest ratio (162.62) as compare to other banks.
Impact of merger is highest positive in IOB because it s showing increasing Debt to
Equity Ratio (91.4) whereas ICICI showing lowest positive impact because its ratio
62 | P a g e
Mean
S.D
d.f.
tc
tt
Resul
t
166.6
232.11 -
XY
XY
68.66
58.74
23.60
65.48
n-1
5-1
-6.205
2.77
H0
=4

63 | P a g e

H o: 1= 2
H o: 1= 2
At 5% level of significance, here, t c = -6.205 and t t = 2.776
So, t c < t t
5) Debt to Asset:
Table 4.5
DEBT TO ASSET RATIO IN SELECTED UNIT
Bank
Name
ICICI
BOB
IDBI
IOB
OBC
Before M
&A
(x)
0.81
0.88
0.82
0.87
0.90
After M
&A
(y)
0.78
0.88
0.86
0.89
0.88
(x-y)
Difference
(X-Y)2
0.03
0.0009
0
0
-0.04
0.0016
-0.02
0.0004
0.02
0.0004
64 | P a g e
Debt to asset ratio

OBC
IOB
IDBI
BOB
ICICI
0.72 0.74 0.76 0.78
0.8
0.82 0.84 0.86 0.88
0.9
0.92
ANALYSIS:
Table 4.5 showing Debt to Asset Ratio in selected units, be fore 3 years and after 3 year s
of merger and acquisition. In which before merger, OBC showing the highest Debt
to Asset Ratio (0.90) whereas ICICI showing the lowest ratio (0.81) as compare to other
banks and after merger IOB showing highest Debt to Asset Ratio (0.89) whereas
ICICI showing lowest ratio (0.78) as compare to other banks.
Impact of merger is highest positive in IDBI because it s showing increasing Debt to
Asset Ratio
(0.04)whereas ICICI showing highest negative impact because its ratio
65 | P a g e
Mean
X
0.856
S.D
Y
0.858
XY
-
X
0.039
Y
0.045
0.002
XY
0.029
d.f.
tc
tt
Result
n-1
-0.156
2.77
H0
5-1
=4
There would be no significant difference in mean score of selected units, before and after
merger and acquisition.
66 | P a g e
There would be significant difference in mean score of selected units, before and
after merger and acquisition.
H o: 1= 2
H o: 1= 2
So, t c < t t
6)
Fixed Ass et to Fixed Capital
Table 4.6
FIXED ASSET TO FIXED CAPITALRATIO IN SELECTED UNIT
Bank
Name
ICICI
BOB
Before M
&A
(x)
0.020
0.0099
After M
&A
(y)
0.011
0.0088
IDBI
IOB
0.012
0.0079
0.023
0.0112
OBC
0.004
0.004
(x-y)
Difference
(X-Y)2
0.009
0.000081
0.0011
0.0000012
1
-0.011
0.000121
-0.0033
0.0000108
9
0
0
67 | P a g e
Fixed Asset to Fixed Capital

Before M & A (x)
After M & A (y)
0.02
0.02
0.01
0.01
0.01
0.01
0.01
0.01
0
ICICI
BOB
IDBI
IOB
OBC
ANALYSIS:
Table 4.6 showing Fixed Asset to Fixed Capital Ratio in selected units, before 3 years
and after 3 years of merger and acquisition. I n which before merger, I DBI showing the
highest Fixed Asset to Fixed Capital Ratio (0.02) whereas O BC showing the lowest ratio
(0.004) as compare to other banks and after merger IDBI showing highest Fixed Asset to
Fixed Capital Ratio (0.023) whereas OBC showing lowest ratio (0.004) as compare to
other banks.
Impact of merger is highest positive in IDBI because it showing increasing Fixed Asset to
Fixed Capital Ratio
(0.011) whereas ICICI showing highest negative impact
because its ratio (0.009) has been decreased after merger.

68 | P a g e
Mean
S.D
d.f.
tc
tt
Resul
t
XY
0.011
0.012 -
0.006
0.007 0.0072
0.0008
XY
n-1
5-1
-0.259
2.77
H0
=4
There would be no significant difference in mean score of selected units, before and after
merger and acquisition.
69 | P a g e

There would be significant difference in mean score of selected units, before and
after merger and acquisition.
H o: 1= 2
H o: 1= 2
So, t c < t t
7) Interest Coverage Ratio

Interest coverage ratio is also known as debt service ratio or debt
service coverage ratio. This ratio r elates the fixed interest charges to the
income earned by the business. It indicates whether the business has
earned sufficient profits to pay periodically the interest charges.
Table 4.7
INTEREST COVERAGE RATIO IN SELECTED UNIT
Bank
Name
ICICI
BOB
70 | P a g e
IDBI
IOB
OBC
Before M After M Differenc Square Of

&A
&A
e
Difference
(x)
(y)
(x-y)
(X-Y)2
1.39
1.26
0.13
0.0169
1.36
1.47
-0.11
0.0121
1.14of Management
-0.02
0.0004
M 1.12
.H. Gardi School
1.57
1.30
0.27
0.0729
1.49
1.37
0.12
0.0144
Interest Coverage Ratio

1.8
1.6
1.4
1.2
1
Ratio 0.8
0.6
0.4
0.2
0
ICICI
BOB
IDBI
IOB
OBC
ANALYSIS:
Table 4.7 showing Interest Coverage Ratio in selected units, before 3 years and after 3
years of merger and acquisition. In which before merger, IOB showing the highest
Interest Coverage Ratio (1.57) whereas I DBI showing the lowest ratio (1.12) as
compare to other banks and after merger BOB showing highest Interest Coverage Ratio
(1.47) whereas IDBI showing lowest ratio (1.14) as compare to other banks.
Impact of merger is highest positive in BOB because it s showing increasing

Interest Coverage Ratio (0.11) whereas IOB showing highest negative impact
71 | P a g e
Mean
XY
XY
1.386
1.308
0.078
0.170
0.123
0.147
S.D
d.f.
tc
tt
Result
n-1
1.188
2.77
H0
5-1
=4


72 | P a g e

H o: 1= 2
H o: 1= 2
At 5% level of significance, here, t c = 1.188 and t t = 2.776
So, t c < t t
As t c is less than t t So Null Hypothesis (H0) is accepted means there is no
significant difference in mean score of selected units, before and after
merger & acquisition.
4.6 Profitability Ratio

1) Net Profit Ratio (NP Ratio):
Formula:
Net Profit Ratio = (Net profit / Net sales) 100
NET PROFIT RATIO IN SELECTED UNIT
Bank
Name
ICICI
BOB
IDBI
73 | P a g e
IOB
OBC
Before M
&A
(x)
After M
&A
(y)
Differenc
e
(x-y)
13
11
2
10
11
-1
9
8
1
10 of Management
5
M15
.H. Gardi School
12
14
-2
Square
Of
Differenc
e
(X-Y)2
4
1
1
25
4
Net Profit Ratio

16
14
12
10
Ratio
8
6
4
2
0
ICICI
BOB
IDBI
IOB
OBC
ANALYSIS:
Table 4.8 showing Net Profit Ratio in selected units, before 3 years and after 3
years of merger and acquisition. I n which before merger, IOB showing the highest Net
profit Ratio (15) whereas IDBI shows the lowest ratio (9) as compare to other banks and
after merger OBC showing highest Net Profit
Ratio (14) whereas IDBI showing
lowest ratio (8) as compare to other banks.

Impact of merger is highest positive in OBC because it s showing increasing Net
profit Ratio (2) whereas IOB showing highest negative impact because its ratio (5)
has been decreased after merger.
74 | P a g e
Mean
S.D
d.f.
tc
tt
Resul
t
XY
XY
11.8
10.8
2.39
2.15
2.74
n-1
5-1
0.816
2.77
H0
=4

75 | P a g e

H o: 1= 2
H o: 1= 2
So, t c < t t
2) Interest Expense Ratio
INTEREST EXPENSE RATIO IN SELECTED UNIT

Bank
Name
ICICI
BOB
IDBI
IOB
76 | P a g e
OBC
Before M
&A
(x)
After M
&A
(y)
Differenc
e
(x-y)
52
57
-5
53
48
5
7
7
0
47
60
-13
52
58
-6
Square
Of
Differenc
e
(X-Y)2
25
25
0
169
36
Interest Expense Ratio

60
50
40
ratio 30
20
10
0
ICICI
BOB
IDBI
IOB
OBC
ANALYSIS:
Table 4.9 showing Interest Expense Ratio in selected units, before 3 years
and after 3 years of merger and acquisition. In which before merger,
BO B showing the highest Interest Expense Ratio (53) whereas I DBI
showing the lowest ratio (7) as compare to other banks and after merger
IOB showing highest Interest Expense Ratio (60) whereas IDBI showing
lowest ratio (7) as compare to other banks.
Impact of merger is highest positive in OBC because it s showing
increasing Interest Expense Ratio (13) whereas BOB showing lowest
negative impact because its ratio (5) has been decreased after merger.
77 | P a g e
Mean
S.D
d.f.
tc
tt
Resul
t
XY
XY
42.2
46
-3.8
19.82
22.28
6.76
n-1
5-1
-1.257
2.77
H0
=4

78 | P a g e

H o: 1= 2
H o: 1= 2
So, t c < t t
3) Return on Asset
FORMULA:
Table 4.10
RETURN ON ASSET RATIO IN SELECTED UNIT
Bank
Name
Before M
&A
(x)
After M
&A
(y)
Differenc
e
(x-y)
ICICI
BOB
IDBI
1.04
0.97
0.68
1.05
0.79
0.55
-0.01
0.18
0.13
79 | P a g e
Square
Of
Differenc
e
(X-Y)2
0.0001
0.0324
0.0169
IOB
OBC
1.28
1.34
0.94
1.02
0.34
0.32
0.1156
0.1024
Return on Asset
1.4
1.2
1
0.8
ratio
0.6
0.4
0.2
0
ICICI
BOB
IDBI
IOB
OBC
ANALYSIS
Table 4.10 showing Return on Asset Ratio in selected units, before 3 years
and after 3 years of merger and acquisition. In which before merger,
OBC showing the highest Return on Asset Ratio (1.34) whereas IDBI
showing the lowest ratio (0.68) as compare to other banks
and after merger ICICI showing highest Return on As set Ratio
(1.05) whereas IDBI showing lowest ratio (0.55) as compare to other
banks.
Impact of merger is positive in ICICI because its showing increasing
Return on Asset Ratio (0.01) whereas IO B showing highest negative
80 | P a g e
Mean
S.D
d.f.
tc
tt
Resul
t
XY
XY
1.06
0.87
0.19
0.26
0.21
0.14
n-1
5-1
2.979
2.77
H1
=4

81 | P a g e

H o: 1= 2
H o: 1= 2
So, t c > t t
As t c is more than t t So Null Hypothesis (H1) is accepted means there is
4) Interest Expense to Interest Earned Ratio

Table 4.11
INTEREST EXPENSE TO INTEREST EARNED RATIO
IN SELECTED UNIT
Bank
Name
Before M
&A
(x)
After M
&A
(y)
Differenc
e
(x-y)
ICICI
BOB
IDBI
70.20
64.04
96.59
72.60
55.72
90.022
-2.4
8.32
6.57
82 | P a g e
Square
Of
Differenc
e
(X-Y)2
5.76
69.22
43.16
IOB
OBC
62.45
54.07
61.87
69.56
0.58
-15.49
0.3364
239.94
Interest Expense to Interest Earned Ratio

120
100
80
Ratio
60
40
20
0
ICICI
BOB
IDBI
IOB
OBC
ANALYSIS
Table 4.11 showing Interest Expense to Interest Earned Ratio in selected units,
before 3 years and after 3 years of merger and acquisition. I n which before merger, IDBI
showing the highest Interest Expense to Interest Earned Ratio (96.59) whereas OBC
showing the lowest ratio (54.07) as compare to other banks and after merger IDBI
showing highest Interest Expense to Interest Earned Ratio (90.022) whereas BOB
showing lowest ratio (55.72) as compare to other banks.
Impact of merger is highest positive in OBC because it s showing increasing
Interest Expense Ratio (15.49) whereas BO B
showing lowest negative impact

83 | P a g e
Mean
S.D
d.f.
tc
tt
n-1
-0.115
2.77
Resul
t
XY
XY
69.47
69.95
-0.48
16.22
13.02
9.45
5-1
H0
=4

84 | P a g e

H o: 1= 2
H o: 1= 2
At 5% level of significance, here, t c = - and t t = 2.776
So, t c < t t
5) Earning Per Share

Table 4.12
EARNING PER SHARE RATIO IN SELECTED UNIT
Bank
Name
ICICI
BOB
IDBI
IOB
Before M
&A
(x)
30.12
25.84
7.62
12.28
After M
&A
(y)
35.74
26.70
10.20
19.80
(x-y)
Difference
(X-Y)2
-5.62
31.58
-0.86
0.74
-2.58
6.66
-7.52
56.55
85 | P a g e
OBC
25.34
27.71
-2.37
5.62
Earning Per Share

40
35
30
25
Ratio 20
15
10
5
0
ICICI
BOB
IDBI
IOB
OBC
Analysis:
Table 4.12 showing Earning Per Share in selected units, before 3 years and after 3 year s
of merger and acquisition. In which before merger, ICICI showing the highest
Earning Per Share Ratio (30.12) whereas IDBI
showing the lowest ratio (7.62) as
compare to other banks and after merger ICICI showing the highest Earning Per (35.74)
Ratio whereas IDBI showing lowest ratio (10.20) as compare to other banks.
Impact of merger is the highest positive in IOB because it s showing increasing Earning
Per Share Ratio (7.52) whereas BOB showing the lowest positive impact because its ratio
86 | P a g e
Mean
S.D
d.f.
tc
tt
n-1
-3.130
2.77
Resul
t
XY
XY
20.24
24.03
-3.79
4.35
4.28
2.71
5-1
H0
=4

87 | P a g e

H o: 1= 2
H o: 1= 2
So, t c < t t
7) Return on Gross Capital Employed Ratio

Formula:
Gross capital employed = Fixed assets + Investments + Current assets
RETURN ON GROSS CAPITAL EMPLOYED RATIO
IN SELECTED UNIT
Bank
Name
Before M
&A
After M &
A
Difference
(x-y)
88 | P a g e
Square Of
Difference
ICICI
BOB
IDBI
IOB
OBC
(x)
(y)
(X-Y)2
0.086
0.122
0.116
0.097
0.152
0.107
0.084
0.093
0.099
0.088
-0.021
0.038
0.023
-0.002
0.064
0.000441
0.001444
0.000529
0.000004
0.004096
0.16
0.14
0.12
0.1
Ratio 0.08
0.06
Before M & A (x)

After M & A (y)
0.04
0.02
0
ICICI
BOB
IDBI
IOB
OBC
Name of Bank
ANALYSIS:
Table 4.13 showing Return on Gross Capital Employed
Ratio in selected units,
before 3 years and after 3 years of merger and acquisition. I n which before merger, OBC
showing the highest
ICICI
Return on Gross Capital Employed
Ratio (0.152)
whereas
showing the lowest ratio (0.086) as compare to other banks and after
merger ICICI showing highest Return on Gross Capital Employed Ratio whereas BOB
showing lowest ratio as compare to other banks.
89 | P a g e
Impact of merger is the highest positive in ICICI because its showing increasing Return
on Gross Capital Employed Ratio (0.021) whereas OBC showing the highest negative
Mean
S.D
d.f.
tc
tt
Resul
t
XY
XY
0.11
0.09
0.020
0.025
0.009
0.033
n-1
5-1
=4
90 | P a g e
1.370
2.77
6
H0


H o: 1= 2
H o: 1= 2
So, t c < t t
8) Return on Net Capital Employed Ratio

Formula:
Net capital employed = Fixed assets + Investments + Working

capital*.
*Working capital = current as sets - current liabilities
Table 4.14
RETURN ON NET CAPITAL EMPLOYED RATIO
IN SELECTED UNIT
91 | P a g e
Before M
&A
(x)
0.104
0.138
0.14
0.110
0.165
ICICI
BOB
IDBI
IOB
OBC
After M &
A
(y)
0.124
0.093
0.10
0.106
0.094
Difference
(x-y)
-0.02
0.045
0.04
0.004
0.071
Square Of
Difference
(X-Y)2
0.0004
0.002025
0.0016
0.000016
0.005041
Return on Net Capital Employed Ratio

0.2
0.15
Ratio
Before M & A (x)
0.1
After M & A (y)
0.05
0
ICICI
BOB
IDBI
IOB
OBC
Name of Bank
ANALYSIS:
Table 4.14 showing Return on Net Capital Employed Ratio in selected units, before 3
years and after 3 years of merger and acquisition. In which before merger, OBC
showing the highest Return on Net Capital Employed Ratio (0.165) whereas ICICI
showing the lowest ratio (0.104) as compare to other banks and after merger ICICI
showing highest Return on Net Capital Employed Ratio (0.124) whereas BOB showing
lowest ratio (0.093) as compare to other banks.
92 | P a g e
Impact of merger is positive in ICICI because its showing increasing Return on Net
Capital Employed Ratio (0.02) whereas OBC showing highest negative impact
Mean
S.D
d.f.
tc
tt
n-1
1.743
2.77
Resul
t
XY
XY
0.13
0.10
0.028
0.025
0.013
0.036
5-1
H0
=4

93 | P a g e

H o: 1= 2
H o: 1= 2
So, t c < t t
9) Return on Net Worth Ratio:

Table 4.15
RETURN ON NET WORTH RATIO IN SELECTED UNIT
Bank
Name
ICICI
BOB
IDBI
Before M
&A
(x)
0.13
0.19
0.01
After M &
A
(y)
0.08
0.12
0.11
Difference
(x-y)
0.05
0.07
-0.01
94 | P a g e
Square Of
Difference
(X-Y)2
0.0025
0.0049
0.0001
IOB
OBC
0.26
0.23
0.19
0.15
0.07
0.08
0.0049
0.0064
0.3
0.25
0.2
Before M & A (x)
0.15
After M & A (y)

0.1
0.05
0
ICICI
BOB
IDBI
IOB
OBC
ANALYSIS:
Table 4.15 showing Return on Net Worth Ratio in selected units, before 3 years and after
3 years of merger and acquisition. In which before merger, OBC showing the highest
Return on Net Worth Ratio (0.26) whereas I DBI showing the lowest ratio (0.01) as
compare to other banks and after merger IOB showing highest Return on Net Worth
Ratio (0.19) whereas ICICI showing lowest ratio (0.08) as compare to other banks.
Impact of merger is positive in IDBI because its showing increasing Return on Net
Worth Ratio (0.01) whereas OBC showing highest negative impact because its ratio
95 | P a g e
Mean
S.D
d.f.
tc
tt
n-1
1.004
2.77
Resul
t
XY
XY
0.16
0.13
0.034
0.099
0.042
0.076
5-1
H0
=4

96 | P a g e

H o: 1= 2
H o: 1= 2
So, t c < t t
merger
&
acquisition.
97 | P a g e
Findings:
1)
The Liquidity Performance of ICICI Bank has been decreased after

merger but the performance of Profitability has been increased.
2)
There is no Change in Liquidity Performance of BOB Bank because of

merger but the performance of Profitability has been decreased.
98 | P a g e
3)
The Liquidity Performance of IDBI Bank has been increased after

merger but the performance of Profitability has been decreased.
4)
IOB shows the increasing trend after merger in Liquidity Performance and
shows the decreasing Profitability performance.
5)
There is neutral impact of merger in Liquidity Performance as well as

profitability performance in OBC.
6)
In Interest Coverage Ratio, BOB shows the highest positive value in

the year of merger i.e., 2004- 2005 and decrease in next two consecutive
year as compare to the year of merger while the ICICI shows increasing
trend after merger but not with the same growth rate as compare to before
merger year and IOB shows decreasing trend after merger with high
decreasing rate as compare to before merger.
7)
In Cash Deposit Ratio, IOB and OBC give result of decreasing trend in
before merger and highest positive value in the year of merger and again
decreasing trend in next two year of merger.
8)
IOB shows the increasing trend in before and after merger in Debt to Equity
ratio and IDBI also represent the same result but with high increment
in after merger as compare to before.
9)
In fixed asset to fixed capital ratio I DBI shows decreasing trend in before
merger and highest positive value in the year of merger and then again
decrease in next two years after the year of merger while IOB shows
decreasing trend in both before and after merger.
99 | P a g e
10)
BOB shows the negative trend in both before and after merger for Return on
capital employed ratio while IDBI and OBC show the increasing trend.
11)
By this analysis we can say that the overall liquidity performance of

all selected units has been increased while on the other hand the profitability
has been decreased after merger & acquisition.
Recommendations:
1)
The given result shows that ICICI bank s liquidity performance has been
decreased but the profitability performance has been increased after merger &
acquisition
so this bank should maintain balance between the liquidity and
profitability.
2) After
merger
&
acquisition
IDBI s
as
well
as
IOB s
profitability
performance has been decreased due to inefficient utilization of funds and

increase in expenses (Employee cost, misc. Expenses and operating expenses)
so bank should utilize its fund in such way that it can cover all their expenses.
3) So while merging any bank should keep in mind that their liquidity and
100 | P a g e
profitability performance must not decrease either it should increase or it must be

balanced.
4) The bank should not merge with weak unit which created negative impact on
their financial performance.
Chapter-6
Bibliography
References:
Books
1) Rajes h Kumar B., 2011, Mergers and Acquisitions Text and Cases, New Delhi,
Tata McGraw Hill Education Private Limited
2) C.R.Kothari,
2004, Research
Methodology 2nd ED,New
International limited.
101 | P a g e
Delhi,
New Age
3) Gupta R.L., V.K. Gupta, Principle and Practice of Accountancy.

4) Rana T.J.,2007- 2008, Management Accounting 2nd ED, Ahmedabad, B.S.Shah
Prakashan.
Websites
www.google.com
www.yahoo.com
www.icicibank.com
www.bankofbaroda.com
www.idbi.com
www.iob.in
www.obcindia.co.in
www.moneycontrol.com
http://www.eurojournals.com/REFAS_1_06.pdf
http://www.scribd.com/doc/25822832/Merger-and-Acquisition
http://en.wikipedia.org/wiki/Mergers_and_acquisitions
http://www.bank2020.info/banking/bank-mergers-and-acquisitions
http://www.scribed.com
102 | P a g e
Chapter 7 Annexure
LIST OF ABBRIVIATION
BOB
Bank of Baroda
EPS
Earning per Share
ICICI
Industrial Credit and Investment Corporation of India
IDBI
Industrial Development Bank of India
IOB
Indian Overseas Bank
M&A
Merger and Acquisition
NBFC
Non Banking Financial Corporation
103 | P a g e
OBC
Oriental Bank of Commerce
ROE
Return on Equity
ROI
Return on Investment
SGLB
South Gujarat Local area Bank
UWB
United Western Bank
104 | P a g e

Merger & Acquisation

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Merger & Acquisation

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Chapter -1

Method of data collection

Proposed chapter plan

1.2 Objective of study

To evaluate the impact of merger and acquisition on the

To evaluate the impact of merger and acquisition on the

To compare the overall performance of selected Indian banks

Method of data collection

: - 5 Indian banks are,

Reason for selecting sample

: - these 5 Indian banks merger took place

Results have suggested that

mergers slightly boost market

power in steel industry.

in the U.S. steel

Results have indicated that both

the target and the

shareholders earn significant

Positive abnormal returns.

From 1898 to 1904 mergers

affected stock returns

Positively in all industries

except for banks.

Stockholders of acquiring firms

do not gain from

mergers, while stockholders of

acquired firms and

Industry counterparts earn

Cash Flow, Sales

Cash flows decreased after

mergers. For sales growth, the

pattern was ambiguous and

driven by increased market

presence. The impact of

mergers on the measures of

effiy and synergy was negative.

In this study we have used

proposed chapter plan

Hypothesis of the study

1.10 Limitation of the study

The companies Act 1956

The competitions Act 2010

The other regulation

An acquisition usually refers to a purchase of a smaller firm by a larger one. It is an

Acquisition also known as takeover or a buyout is the buying of one company by

2.2 Classifications of Mergers and Acquisitions

4. Cross-border (International) M&As

2.3 Difference between merger and acquisition

2.4 Motives behind merger and acquisition

Redirection of operating expenses.

2.5 Merger and Acquisition Trends

2.1 Merger and Acquisition Trends

2.6 Reason for merger and acquisition

Following are some of the reasons why corporate go for

Through corporate mergers and acquisitions, duplicate departments can be

Companies also go for mergers/acquisitions for vertical integration, where the

2.7 Legal Procedure for Bringing About Merger of

(5) Dispatch of notice to share holders and creditors:

(10) Issue of shares and debentures:

2.8 Regulations for Mergers & Acquisitions

2.8.1 The Companies Act, 1956

2.8.2 The Competition Act, 2002

Actual and potential competition through imports;