Project Title
Acquisition on
Performance
: A Study of Impacts of Merger &
Financial
of
Indian
Banking
Sector
Submitted To : GUJARAT TECHNOLOGICAL
UNIVERSITY,AHEMDABAD.
.
Developed At
Rajkot
: M.H.Gardi School of Management ,
Academic Year : 2011- 2012
(MBA Sem-4 ).
Prepared By
Guided by
: korat Ankit .G.
:prof. Niraj vyas
CONTENT
1)
2)
3)
4)
5)
Introduction
Research Methodology
Findings
Suggestions
Conclusion
INTRODUCTION
Merger
A merger occurs when two or more companies combines and the
resulting firm maintains the identity of one of the firms.
Example:Company A + Company B = Company B
Acquisition
An acquisition usually refers to a purchase of a smaller firm by a
larger one.
Types of Merger and Acquisition
1.
2.
3.
4.
Horizontal
Vertical
Conglomerate
Crossborder
Motives behind Merger and
Acquisition
.
.
.
.
.
.
.
.
To increase profit
To get benefit of economize of scale
To get the benefit of synergy
Growth in market share.
To enhance reputation
Access to additional management or technical talent.
To reduce competition
To reduce distribution costs
RESEARCH METHODOLOGY
Statement of the problem :To know the impacts of Merger and Acquisition on financial
performance of Indian banking sector
Objective of the study
Primary objective
To evaluate the impacts of merger and acquisition on the profitability of the selected
Indian banks during the study period
To evaluate the impacts 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 pre and
merger
Secondary objective
To study why the banks are going towards merger and acquisition
To know the risk involved in merger and acquisition
To study the benefits of merger and acquisition for banks
post
Method of Data Collection
Secondary Data
o Website
o News paper
o Magazine
Selection of sample
Sample size
:-5
Sample Unit
:- Indian banks .
Sampling Technique
: - Systematic Sampling
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.
Tools of analysis
Ratio analysis
o Liquidity ratio
o Profitability ratio
Statistical analysis
o Mean
o Differences
o Standard deviation
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.
Testing of Hypothesis :- paired T-test
Limitations of the study
Our study is based on only 5 selected banks
There is a lack of Time for the study.
We have no so much Experience about banking mergers and acquisition.
The banks which we selected for our study may adopt Window Dressing
which creates effect on our study.
There is a lack of primary data in this study.
All the limitations of ratio analysis affect our study.
All the limitations of secondary data make an impact in our analysis
because our study is based on that data only.
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.
Ratio Analysis
Ratio
Before
M&A
After
M&A
tc
tt
Result
Cash Deposit
6.926
8.596
-1.844
2.776
H0
Deposit to owners Fund
12.21
11.72
0.28
2.776
H0
0.9
0.81
0.517
2.776
H0
Debt to Equity
166.62
232.11
-6.205
2.776
H0
Debt to Asset
0.856
0.858
-0.156
2.776
H0
Fixed Asset to Fixed
Capital
0.011
0.012
-0.259
2.776
H0
Interest Coverage
1.386
1.308
1.188
2.776
H0
Liquidity
Loan to Deposit
Cont
Profitability
Net Profit
11.8
10.8
0.816
2.776
H0
Interest Expense
42.2
46
-1.257
2.776
H0
Return on Asset
1.06
0.87
2.979
2.776
H1
Interest Expense to Interest
Earned
69.47
69.95
-0.115
2.776
H0
Earning per Share
20.24
24.03
-3.130
2.776
H0
ROGCE
0.11
0.09
1.370
2.776
H0
RONCE
0.13
0.10
1.743
2.776
H0
Return on Net Worth
0.16
0.13
1.004
2.776
H0
Return on Equity Share Capital
128.03
146.05
-1.695
2.776
H0
Return on investment
19.18
22.35
-3.265
2.776
H0
FINDINGS
The Liquidity Performance of ICICI Bank has been decreased after
merger but the performance of Profitability has been increased.
The Liquidity Performance of IDBI Bank has been increased after
merger but the performance of Profitability has been decreased.
IOB shows the increasing trend after merger in Liquidity
Performance and shows the decreasing Profitability performance.
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.
Cont
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.
In fixed asset to fixed capital ratio IDBI 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.
SUGGESTIONS
The given result shows that ICICI banks 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.
After merger & acquisition IDBIs as well as IOBs 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.
Cont
So while merging any bank should keep in mind that their
liquidity and profitability performance must not decrease either it
should increase or it must be balanced.
The bank should not merge with weak unit which created negative
impact on their financial performance.
CONCLUSION
The activity of merger and acquisition is a very rational as well as
risky as it create an adverse effect on the financial performance if
wrong selection of unit is there.
THAN
K Y OU
