A Project On
A study on mergers and acquisitions in the
Indian banking sector
By
GROUP: PR5F06
SOUMYA SNIGDHA BANIK (12020003005174 )
RITTIK MAHATO (12020003005183)
ROHINI CHAKRABORY (12020003005063 )
SAYANI CHAKRABORTY (12020003005080)
PALAK BARANWAL (12020003005057)
Under The Supervision Of
Prof. Arkaprava Chakrabarty
Date of Submission:
01 December 2022
BBA DEPARTMENT
INSTITUTE OF ENGINEERING & MANAGEMENT, ASHRAM CAMPUS
MAULANA ABUL KALAM AZAD UNIVERSITY OF TECHNOLOGY
KOLKATA
P a g e 1 | 18
ACKNOWLEDGEMENT
I would like to express my special thanks to our mentor Mr. Arkaprava
Chakrabarty for his time and efforts he provided throughout the year.
His useful advice and suggestions were helpful to us during the project’s
completion. In this aspect, I am eternally grateful to Sir and Institute of
Engineering and Management, Salt Lake for giving us the opportunity to work
on this project titled A STUDY ON MERGERS AND ACQUISITIONS IN
THE INDIAN BANKING SECTOR.
I would like to acknowledge that this project was completed entirely by our
project team members with utmost honesty and accuracy.
P a g e 2 | 18
INDEX
SL No CONTENTS PAGE NUMBER
1 ACKNOWLEDGEMENT 02
2 ABSTRACT 04
3 INTRODUCTION 05
4 OBJECTIVE 06
5 LITERATURE REVIEW 07
6 RESEARCH METHODOLOGY 09
7 DEMOGRAPHICS 09
8 ANALYSIS & FINDINGS 11
9 FINDINGS 14
10 LIMITATIONS 15
11 CONCLUSION 16
12 REFERENCE 17
13 ANNEXURE 18
P a g e 3 | 18
ABSTRACT
The project aims to understand the behavior of various “Mergers and Acquisitions in Indian
Banking Sector”. Many international and domestic banks all over the world are engaged in
merger and acquisition activities. One of the principal objectives behind the mergers and
acquisitions in the banking sector is to reap the benefits of economies of scale. In the recent
times, there have been numerous reports in the media on the Indian Banking Industry Reports
have been on a variety of topics.
The topics have been ranging from issues such as user friendliness of Indian banks,
preparedness of banks to meet the fast-approaching Basel II deadline, increasing foray of
Indian banks in the overseas markets targeting inorganic growth. Mergers and Acquisitions is
the only way for gaining competitive advantage domestically and internationally and as such
the whole range of industries are looking to strategic acquisitions within India and abroad. In
order to attain the economies of scale and also to combat the unhealthy competition within the
sector besides emerging as a competitive force to reckon with in the international economy.
Consolidation of Indian banking sector through mergers and acquisitions on commercial
considerations and business strategies – is the essential pre-requisite.
Today, the banking industry is counted among the rapidly growing industries in India. It has
transformed itself from a sluggish business entity to a dynamic industry. The growth rate in
this sector is remarkable and therefore, it has become the most preferred banking destinations
for international investors‟. In the last two decade, there have been paradigm shift in Indian
banking industries. The Indian banking sector is growing at an astonishing pace. A relatively
new dimension in the Indian banking industry is accelerated through mergers and acquisitions.
It will enable banks to achieve world class status and throw greater value to the stakeholders.
P a g e 4 | 18
INTRODUCTION
The process of mergers and acquisitions has gained substantial importance in today's
corporate world. This process is extensively used for restructuring the business organizations.
In India, the concept of mergers and acquisitions was initiated by the government bodies.
Some well-known financial organizations also took the necessary initiatives to restructure the
corporate sector of India by adopting the mergers and acquisitions policies.
The Indian economic reform since 1991 has opened up a whole lot of challenges both in the
domestic and international spheres. The increased competition in the global market has
prompted the Indian companies to go for mergers and acquisitions as an important strategic
choice.
The trends of mergers and acquisitions in India have changed over the years. The immediate
effects of the mergers and acquisitions have also been diverse across the various sectors of
the Indian economy.
India has emerged as one of the top countries with respect to merger and acquisition deals. In
2007, the first two months alone accounted for merger and acquisition deals worth $40 billion
in India.
P a g e 5 | 18
OBJECTIVES
• To find out if people are satisfied about Mergers and Acquisitions in Banking Sector.
• To find out if mergers were also helpful for the Banking Sectors in whole.
• To understand if Mergers and Acquisitions increase customer base.
• To know the positive effect of Mergers and Acquisitions in Banking Sector.
• To study the positive effect of Mergers and Acquisitions in Economic Scale.
P a g e 6 | 18
LITERATURE REVIEW
After going through the available relevant literature on M&A’s and it comes to know that most
of the work done high lightened the impact of M&As on different aspects of the companies. A
firm can achieve growth both internally and externally. Internal growth may be achieved by
expanding its operation or by establishing new units, and external growth may be in the form
of Merger and Acquisitions (M&A’s), Takeover, Joint venture, Amalgamation etc. Many
studies have investigated the various reasons for Merger and Acquisitions (M&A’s) to take
place, just to look the effects of Merger and Acquisitions on Indian financial services sector.
The work of Rao and Rao (1987) is one of the earlier attempts to analyse mergers in India
from a sample of 94 mergers orders passed during 1970-86 by the MRTP Act 1969. In the post
1991 period, several researchers have attempted to study M&As in India. Some of these
prominent studies are Beena (1998), Roy (1999), Das (2000), Saple (2000), Basant (2000),
Kumar (2000), Pawaskar (2001) and Mantravedi and Reddy (2008).
Sinha Pankaj & Gupta Sushant (2011) studied a pre and post analysis of firms and concluded
that it had positive effect as their profitability, in most of the cases deteriorated liquidity. After
the period of few years of Merger and Acquisitions (M&As) it came to the point that companies
may have been able to leverage the synergies arising out of the merger and Acquisition that
have not been able to manage their liquidity. Study showed the comparison of pre and post
analysis of the firms. It also indicated the positive effects on the basis of some financial
parameter like Earnings before Interest and Tax (EBIT), Return on shareholder funds, Profit
margin, Interest Coverage, Current Ratio and Cost Efficiency etc.
Kuriakose Sony & Gireesh Kumar G. S (2010) in their paper, they assessed the strategic and
financial similarities of merged Banks, and relevant financial variables of respective Banks
were considered to assess their relatedness. The result of the study found that only private
sector banks are in favor of the voluntary merger wave in the Indian Banking Sector and public
sector Bank are reluctant toward their type of restructuring. Target Banks are more leverage
(dissimilarity) than bidder Banks, so the merger lead to attain optimum capital Structure for
the bidders and asset quality of target firms is very poor.
P a g e 7 | 18
Anand Manoj & Singh Jagandeep (2008) studied the impact of merger announcements of five
banks in the Indian Banking Sector on the shareholder bank. These mergers were the Times
Bank merged with the HDFC Bank, the Bank of Madurai with the ICICI Bank, the ICICI Ltd
with the ICICI Bank, the Global Trust Bank merged with the Oriental Bank of commerce and
the Bank of Punjab merged with the centurion Bank. The announcement of merger of Bank
had positive and significant impact on shareholder’s wealth.
Mantravadi Pramod & Reddy A. Vidyadhar (2007) evaluated that the impact of merger on the
operating performance of acquiring firms in different industries by using pre and post financial
ratio to examine the effect of merger on firms. They selected all mergers involved in public
limited and traded companies in India between 1991 and 2003, result suggested that there was
little variation in terms of impact as operating performance after merger.
P a g e 8 | 18
RESEARCH METHODOLOGY
For the purpose of evaluation, we distributed a Google Form to acquire the views of the people
regarding “Mergers and Acquisitions” and for the same we received a total of 50 responses.
The respondents shared their views and also filled the form to portray about their thoughts,
both good and bad about the “M&As” of Banking Sector.
The data received was put together in excel and we analyzed the data of the respondents to get
an overall view of the public opinions about this Mergers of Bank in India.
DEMOGRAPHICS:
Chart 1:
Out of the total 50 respondents that chose to ventilate their views on this Mergers -
13 were Female and 37 were Male.
GENDER FEMALE MALE
RESPONDENTS 13 37
PERCENTAGE 26% 74%
P a g e 9 | 18
Chart 2:
Out of the total 50 respondents that chose to ventilate their views on this Mergers -
the following table shows the Age Range Demographics.
AGE RANGE < 18 18 – 23 23 - 30 30 - 40 40 and more
RESPONDENTS 1 39 7 1 2
PERCENTAGE 2% 78% 14% 2% 4%
P a g e 10 | 18
ANALYSIS & FINDINGS
Chart 3:
Chart 4:
Chart 5:
P a g e 11 | 18
Chart 6:
Chart 7:
Chart 8:
P a g e 12 | 18
Chart 9:
Chart 10:
Chart 11:
P a g e 13 | 18
Chart 12:
FINDINGS
• Merger & Acquisitions have greatly benefited the common public.
• It has been seen that; mergers are also helpful for employees to work faster.
• It effects banking shares in a positive way.
• The weaker banks can get help from the greater ones to keep functioning properly.
• Affects the economic scale in a positive way.
• Improve balance sheet and cash flow statements.
• Gain competitive advantage internationally.
• One bank does the work of many banks under one roof.
P a g e 14 | 18
LIMITATIONS
• Limited number of respondents chose at a random (50 Respondents).
• Problems with study sample selection and analysis.
• Inadequate sample size for statistical analysis.
• The procedures, tools, and strategies employed to get the data.
• Data access restrictions.
• Time limitations.
P a g e 15 | 18
CONCLUSIONS
The above data concludes that today, the banking industry is counted among the rapidly
growing industries in India.
Since the banking sector is very competitive, with almost all banks offering similar deposit
and lending services, the key distinguishing element is often the add-on services such as
priority lending, access to facilities at home, high rates of interest and flexibility on fixed
deposits etc. A merger of two banks helps the customers of both banks access more services
and benefit from a larger bouquet of offerings
The trends of mergers and acquisitions in India have changed over the years.
Studies indicate also the positive effects on the basis of some financial parameter like Earnings
before Interest and Tax (EBIT)
Return on shareholder funds
Profit margin
Interest Coverage
Current Ratio and
Cost Efficiency etc.
A Merger of two banks makes it possible to reap the advantages of economies of scale. Since
the resource and asset base is combined, the merged entity finds it easier to target new
customers and offer better and customized services, owing to its large base of finances. The
administrative and operating expenses also reduce since the same costs are now spread over
many customers.
So, from our survey we can conclude that:
Bank mergers will result in improved scale efficiency due to increased customer base and
market reach. A broader range of products and services for customers would result in lower
lending capital risk.
P a g e 16 | 18
REFERENCES
• Acharya, V., Pedersen, L., Philippon, T., & Richardson, M.,(2010). Measuring
Systemic Risk, FRB of Cleveland
• Working Paper No. 10-02. Available at SSRN:http://ssrn.com/abstract=1595075
• Aktas, N., Bodt, E., & Roll, R., (2012). Learning from repetitive acquisitions:
Evidence from the time between deals,
• Journal of Financial Economics, 108(1). 99-117.
• Aktas, N., Bodt, E., & Roll, R., (2013). MicroHoo: Deal failure, industry rivalry, and
sources of overbidding, Journal of
• Corporate Finance, 19. 20-35.
• Anand, M. & Singh, J.,(2008). Impact of Merger Announcements on Shareholders'
Wealth: Evidence from Indian
• Private Sector Banks, Vikalpa, 33, 35-54
• Andrade, G., Mitchell, M., and Stafford, E., (2001). New evidence and perspectives
on mergers? Journal of
• Economic Perspectives, 15, 103–120.
• Appadu, N., Faelten, A., Moeller, S. & Vitkova, V.,(2015). ,European Journal of
Finance, Advance Access,
• http://dx.doi.org/10.1080/1351847X.2014.888362.
• Arslan, A., & Dikova, D.,(2015). Influences of Institutional Distance and MNEs’ Host
Country Experience on the
• Ownership Strategy in Cross-Border M&As in Emerging Economies, Journal of
Transnational Management,
• 20(4).
• Brouthers, K., & Dikova, D.,(2010). Acquisitions and real options: The greenfield
alternative, Journal of
• Management Studies, 47(6), 1048–1071.
• Baker, M., Pan, X., & Wurgler, J.,(2012). The effect of reference prices on mergers
and acquisitions, Journal of
• Financial Economics, 106, 49-71.
• Bastie, F., Cieply, S., Cussy, P.,(2013). The entrepreneur’s mode of entry: the effect
of social and financial Capital,
P a g e 17 | 18
ANNEXURE
GOOGLE FORM LINK :
https://docs.google.com/forms/d/e/1FAIpQLSexMaoT8j462lDqSsEhE7NjRvAqEN9HFQpq5
Z7d-RV37P6kdQ/viewform
DATA COLLECTED EXCEL SHEET :
https://docs.google.com/spreadsheets/d/11EVcLgL0FuNIXSujKef999HPwmCWGbyoaL0tO
YYyKAI/edit?resourcekey#gid=1382135974
P a g e 18 | 18
