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