Merger of Sbi & Sbin

8/8/2019 Merger of Sbi & Sbin

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MERGER OF MERGER OF

STATE BANK OF INDORE

WITH

STATE BANK OF INDIA

PRESENTED BY:

GROUP 3



Present StatusPresent Status

STATE BANK OF INDIASTATE BANK OF INDIAy State Bank of India is the largest state-owned banking and

financial services company in India, by almost every parameter -

revenues, profits, assets, market capitalization, etc.

y SBI has 21000 ATM·s , 26500 branches including the branches of its associate banks.

y The bank has 131 overseas offices spread over 32 countries. It hasbranches of the parent in Colombo, Dhaka, Frankfurt, Hong Kong, Johannesburg, London and environs, Los Angeles, Male in

the Maldives, Muscat, New York, Osaka, Sydney, and Tokyo



HistoryHistory

STATE BANK OF INDIASTATE BANK OF INDIAy The evolution of State Bank of India can be traced back to the

first decade of the 19th century.

y It began with the establishment of the Bank of Calcutta inCalcutta, on 2 June 1806. The bank was redesigned as the Bank of

Bengal, three years later, on 2 January 1809.

y Subsequently, the Bank of Bombay (established on 15 April 1840)and the Bank of Madras (established on 1 July 1843) followed the

Bank of Bengal. These three banks dominated the modern banking scenario in India, until when they were amalgamated to form theImperial Bank of India, on 27 January 1921.



Financial PerformanceFinancial Performance

STATE BANK OF INDIASTATE BANK OF INDIARATIOS Mar '06 Mar '07 Mar '08 Mar '09 Mar '10

Net Profit Margin 11.21 10.12 11.65 12.03 10.54

Return on Net

Worth(%)15.94 14.50 13.72 15.74 13.89

Net Interest

Income/Total Funds 3.71 3.85 3.87 3.79 3.82

Asset Turnover Ratio5.10 5.44 6.32 7.20 7.26

Interest expended/

Interest earned 56.32 59.35 65.23 67.28 66.66

Capital Adequacy Ratio11.88 12.34 13.47 14.25 13.39

Advances/totalfunds(%)

65.66 76.16 78.31 78.34 74.22

Credit Deposit Ratio 62.11 73.44 77.51 74.97 75.96



STATE BANK OF INDORESTATE BANK OF INDORE

y On August 26, 2010, State Bank of Indore was officially merged with State Bank of India.

y State Bank of Indore was formerly named as Bank of Indore Ltd.

It was established under a special charter of His HighnessMaharaja Tukojirao Holker-III, the then ruler of Malwa region.

y It became a subsidiary of State Bank of India on 1 January 1960,

under the State Bank of India Subsidiary Banks Act, 1959.

y In the following year (1962), State Bank of Indore took over the

business of The Bank of Dewas Ltd



Financial Performance (Financial Performance (Balance Sheet)Balance Sheet)

STATE BANK OF INDORESTATE BANK OF INDORE

CAPIT AL &

LI A BILITIESMar·10 Mar·09 Mar·08 Mar·07 Mar·06

Owners' Fund

Equity Share Capital 17.50 17.50 17.50 17.50 17.50

Share ApplicationMoney 0.00 0.00 0.00 0.00 0.00

Peference Share Capital 0.00 0.00 0.00 0.00 0.00

Reserves & Surplus 1,546.99 1,298.78 1,159.47 1,000.23 886.06

Loan Funds

Deposits 28,331.98 24,698.81 19,976.48 16,660.71 13,807.07

Borrowings made by the bank

903.06 955.32 1,499.34 728.02 874.28

Other Liabilities &

Provisions2,276.37 2,305.57 1,874.00 2,304.35 1,313.45

Total 33,075.90 29,275.98 24,526.79 20,710.81 16,898.36



A SSETS Mar·10 Mar·09 Mar·08 Mar·07 Mar·06

Cash & Balances with

R BI1,750.09 1,678.81 1,340.33 1,146.57 566.69

Money at call and Short

Notice567.93 346.36 832.58 902.30 633.36

Investments 8,050.62 7,681.08 5,992.44 5,111.98 5,898.15

Advances 0.00 0.00 15,351.38 11,875.97 9,040.65

Fixed A ssets

Gross Block 104.58 102.47 286.59 259.84 77.07

Net Block 104.58 102.47 104.53 112.76 77.07

Other Assets 22,602.67 19,467.26 905.51 1,561.23 682.45

Total 33,075.89 29,275.98 24,526.78 20,710.81 16,898.37

Note

Contingent liabilities 3,821.56 3,268.83 22,624.31 17,122.07 9,743.83



The MergerThe Merger



y The SBI with the sanction of Govt. of India entered into negotiations

with State Bank of Indore for the acquisition on Oct 8, 2009.

y The Board of Directors of State Bank of Indore On October 31, 2009,

approved the Scheme of A cquisition of State Bank of Indore

(SBIN) by SBI, under Section 35 of the SBI Act, 1955.

ySBI has already announced a share swap ratio of 34:100 for the merger.

That means, SBI would give its 34 shares for every 100 shares of State

Bank of Indore held by minority shareholders.

y For this purpose, SBI would issue up to over 1.16 lakh shares of face

value Rs 10 each to minority shareholders of State Bank of Indore.



y After the merger, the issued capital of SBI would increase from Rs

634.96 crore up to a maximum of Rs 635.08 crore.

y Both the banks separately and independently appointed M/s

Haribhakti & company (qualified chartered accountants and M/s Axis

Bank ltd. (Category 1 merchant bankers) as the independent valuers.

y M/s Kotak Mahindra capital company ltd.(Category 1 merchantbankers) was appointed by both the banks independently to provide a

fairness opinion to valuation of the independent valuers.

y After the merger, SBI will be left with five associate banks, State Bank

of Bikaner and Jaipur, State Bank of Travancore, State Bank of Patiala,

State Bank of Mysore and State Bank of Hyderabad. Among these, the

State Banks of Bikaner and Jaipur, Mysore and Travancore are listedcompanies.



Purpose of the mergerPurpose of the merger



y The merger would avoid competition between the two entities

and lead to easier access to funds at competitive rates,compared to what State Bank of Indore would have managedfor its growing balance sheet.

y Acquisition of State Bank of Indore by SBI would allow economies of scale in terms of footprint, manpower andother resources.

y State Bank of Indore has a large number of branches outside

Madhya Pradesh and Chhattisgarh and all of them would becontrolled conveniently from SBI's local head offices in

various states leading to substantial cost savings.



Limitations of a mergerLimitations of a mergery Technology Integration: According to Price water house

Coopers' recent survey nearly three out of four companiesreported problems integrating information systems after amerger.

y

OrganizationalCulture: Combining merged cultures requires afocus on one new vision and one new mission, developed by across-section team of representatives from both organizations.Problems typically occur when the larger or stronger of the twoorganizations try to significantly influence the integration.

y Pro merger period should be a period of action. Time shouldbe done in strategy making on how to bring two companiestogether successfully and whether their cultures are conducive toa successful merger at all.



THANK YOU!BY: GROUP NO. 3

Manish A

lawa IM2K635Minakshi Sinha IM2K636

Mudit Dubey IM2K638

Nishant Srivastava IM2K641

Pradeep Sirsat IM2K644

Shraddha Chapekar IM2K645

Paridhi A grawal IM2K646

Merger of Sbi & Sbin

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