Research Project on Merger of Hdfc

8/7/2019 Research Project on Merger of Hdfc

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A

RESEARCH REPORT

On

MERGER OF TWO BANKS INTO ONE

SUBMITTED TO:-

KURUKSHETRA UNIVERSITY

KURUKSHETRA

In partial fulfillment for the degree of

M.B.A.

Session 2009-2011

UNDER THE GUIDANCE OF: - SUBMITTED BY:-

Mrs. ANIKA GUPTA RAJEEV KUMAR

Assistant Prof. MBA MBA Final

Roll No.

SWAMI DEVI DAYAL INSTITUTE OF ENGINEERING AND TECHONOLOGY

BARWALA (PANCHKULA) HARYANA


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DECLERATION

I do here by declare that the training report entitled Merger of two Banks into One

has been prepared under the guidance of Mrs.Anika gupta, (Assistant Professor)

submitted by me in the partial fulfillment of the requirement for the degree of Master of

business administration (MBA) from kurukshetra university, Kurukshetra is my original

work and the data & facts provided in report are authentic to the best of my knowledge.

I have not submitted this Research project report for the award of my any other degree,

diploma, fellowship, or any other similar title or prizes.

Rajeev kumar


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ACKNOWLEDGEMENT

All successful work needs large number of hands to accomplish any work. I acquire this

opportunity with much pleasure to thank all the people who have helped me through the

course of my journey towards this report. This research report required hard work,

sincerity and devotion which I tried my best to put in this report and in turn gained a lot

of knowledge and confidence from this report.

I would like to thankMrs. Anika Gupta for her assistance and useful comments. Hercaring and supportive attitude gives me a lot of support in doing my research report.

Finally, this report would not have been possible without the confidence, endurance and

support of my family. My family has always been a source of inspiration and

encouragement. I wish to thank my family, whose love, teachings and support have

brought me this far.

Rajeev kumar


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PREFACE

The research studies are of a great help in enhancing the knowledge of a person.

Practical knowledge is a suffix to theoretical knowledge. Classroom lectures clarify the

fundamental concepts of management. But classroom lectures must be correlated with

the practical research situation. It is in this sense that the research project is made

compulsory for the curriculum and has a significant role to play in the field of business

management. Though this type of project one can understand the application of theory

into practical. But it is only difficulties, which makes the success dears. In this report I

have put a lot of effort to make it a success.


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TABLE OF CONTENTS

Chapter 1 Introduction PAGE NO.

A) Introduction to the Banking sector. 1-48

B) Introduction of the Project 49-51

Chapter 2 Review of literature 52-55

Chapter 3 Research Methodology 56-62

a. Research design 58b. Data collection techniques 59c. Statistical tools 60-61d. Objective of study 62e. Limitation of study 62

Chapter 4 Analysis & Interpretation 63-72

Chapter 5 Findings & Suggestions

a. Finding of the study 73-74

b. Suggestions 75-76

Chapter 6 Conclusion 77

Bibliography 78


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CHAPTER 1

INTRODUCTION


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STATEMENT OF PROBLEMS

In todays scenario customer is king. So, for any organization to achieve goals has tomaintain customer satisfaction level. For this purpose many surveys are being conducted

for measuring customer satisfaction level and the ways to improve customer services.

Some of my batch mates too had conducted survey for measuring customer measuring

customer service level from customer point of view. Are they satisfied with the services

provided to them by the bank employees? Bank employees behave as intermediary

between the customer and top management. They play a vital role in any organization, as

they are the personnel who actually interact with the customer and the top management.

Policies are framed by the top management and implemented at the bank employees

level.

Therefore, they deal with the customer and tell their problem to higher authority. So,

keeping this aspect in mind, we had planned to conduct a survey related to customer

satisfaction level from the bank employees point of view.


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Introduction to the industry

A bank is a concern, which carries on the business of keeping the money of some people

and leading money to other people. Banking signifies some form of dealing in money and

securities. It is essentially the business of playing go-between the lenders and borrowers.

It is the middling or intermediation function between the savings surplus and saving

deficit economic units within a society.

Definition of Bank

It is very difficult to give a precise definition of a bank due to the fact

that a modern bank performs a variety of functions. Different

economists have given different definitions of a bank. Some of the

definitions are as under:-

A bank collects money from those who have it to spare or who are saving it out of

their incomes, and it lends this money to those who require it.

G.Crowther

Under section 5(b) Banking means the accepting after the purpose of Indian

companies lending or investment, of deposits of money from the public, repayable on

demand or otherwise, and withdrawals by cheque, draft or otherwise.


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The banking companies (Regulation) Act, 1949

Under Section 5(c) A Banking Company is defined as any

company which transacts the business of banking in India.

The banking companies

(Regulation) Act, 1949

Evolution of Banking:

Indian banking system, over the years has gone through various phases after

establishment of reserve Bank of India in 1935 during the British Rule, to function as

Central Bank of country.

Indian banking system has become a powerful instrument for economic development

today. As we all know about the economic development programs, which started from

1950 in India, at that time government was really conscious was about rural development.During the 1950s in India, banks were very conservative and inward looking, concerned

with their profits. As a matter of fact, competition was not in existence. On the one side

of the fence was State Bank of India alone, enjoying Govt. patronage and on the other

side were private commercial banks, local by orientation, primarily serving the interests

of the controlling business houses. Therefore, neither State Bank of India nor others cared

much for the public they had limited range of services which included, current accounts,

Terms Deposit Accounts and Savings Bank Accounts in deposits area.

In the area of advances, limit were sanctioned on the basis of security by way of lock and

key accounts and bills purchased limits; their miscellaneous services included issuance of

drafts, collection of outstation cheques, executing standing instructions and lockers


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By 1947, the environment became more demanding with the emphasis on mass banking

and canalisation of credit into priority areas and lendings at differential rates of interest

to the weaker sections of the society.

It was in early 1980, banks realized that marketing is more than that. They started

thinking in terms of product development market penetration and market development.

More importantly, banks also accelerated the process of equipping their staff with the

marketing capabilities, in terms of both skills and attitudes through internal and external

training interventions.

Bank is an institute which deals with the money and credit in such a manner that it

accepts deposits from the public and makes the surplus funds available to those who need

them, and helps in remitting money from one place to another safely.

The banking industry which started in the olden days with merchants lending money has

today developed to a very great extent.

The nationalization of banks in 1969 led to the identification of banking institutions as

organizations that they are meant to take the country towards development. Today banks

are not mere suppliers of money but they have become providers of services such as

selling insurance, mutual funds, investment opportunities etc. Today is the age of

specialization and they can find specialization in all fields including banking.


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BANKING IN INDIA

Banking in India has its origin as early as the Vedic period. It is believed that the

transition from money lending to banking must have occurred even before Manu, the

great Hindu jurist, who has devoted a section of his work to deposits and advances & laid

down rules regarding too rate of interest.

During the days of east India Company, it was the turn of the agency houses to carry on

the banking business. The general bank of India was the first joint stock bank to be

established in the year 1786. From 1786 till today, the journey of Indian banking system

can be segregated into three distinct phases. They are as mentioned below:

Early phase from 1786 to 1969 of Indian banks.

Nationalization of Indian banks and up to 1991 prior to Indian banking sector

reforms.

New phase of Indian banking system with the advent of Indian financial &

banking sector reforms after 1991.

Today, the journey of Indian banking system can be segregated into

three distinct phases.

PHASE 1:


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1971: creation of credit guarantee corporation.

1975: creation of regional rural banks.

1980: Nationalization of 7 banks with deposits over 200 crore.

PHASE 3:

This phase has introduced many more products & facilities in the banking sector. In

1991, under the chairmanship of M. Narasimham, a committee was set up his name

which worked for the liberalization of banking practices.

The country is flooded with foreign banks & their ATM stations. Efforts are being put to

give satisfactory services to customers.

The financial system of India has shown a great deal of resilience. It is sheltered from any

crisis triggered by any external macro economics shock as other East Asian Countries.

The name of bank was borrowed in Middle English from Middle French banque, from

Old Italian banca, from Old High German banc, bank "bench, counter". Benches were

used as desks or exchange counters during the Renaissance by Florentine bankers, who

used to make their transactions atop desks covered by green tablecloths.

In fact, the word traces its origins back to the Ancient Roman Empire, where

moneylenders would set up their stalls in the middle of enclosed courtyards

calledmacella on a long bench called a banco, from which the words banco and bankare

derived.

Without a sound and effective banking system in India it cannot have a healthy economy.

The banking system of India should not only be hassle free but it should be able to meet

new challenges posed by the technology and any other external and internal factors.


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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.

The government regular policy for Indian bank since 1969 has paid rich dividends with

the nationalization of 14 major banks in India. Long ago most efficient banks were taking

two days to transfer money from one branch to another but now it is as simple as ordering

a pizza. The first bank in India, though conservative, was established in 1786. From 1786

till today, the journey of Indian banking system can be segregated into three distinct

phases.

In India the banks are being segregated in different groups. Each group has its own

benefits, limitations, target market. Few of the working only in rural sector while others

in both rural and urban sector.

Major Banks in India

Allahabad bank

Bank of India

Bank of Punjab

Dena bank

Bank of Baroda

Federal bank

Indian overseas bank

Oriental bank of commerce

State bank of Indore

Syndicate bank.


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Bank of Rajasthan

Bank of Maharashtra

CITI bank

Corporation bank

Punjab & Sind bank

INTRODUCTION


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We have been learning about the companies coming together to from another company

and companies taking over the existing companies to expand their business.

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 numbers of

corporate restructurings taking place, especially in the last couple of years. 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.

In this context, it would be essential for us to understand what corporate restructuring and

mergers and acquisitions are all about.

All our daily newspapers are filled with cases of mergers, acquisitions, spin- offs, tender

offers, & other forms of corporate restructuring. Thus important issues both for business

decision and public policy formulation have been raised. No firm is regarded safe from a

takeover possibility. On the more positive side Mergers & Acquisitions may be critical

for the healthy expansion and growth of the firm. Successful entry into new product and

geographical markets may require Mergers & Acquisitions at some stage in the firm's

development. Successful competition in international markets may depend on capabilities

obtained in a timely and efficient fashion through Mergers & Acquisition's. Many have

argued that mergers increase value and efficiency and move resources to their highest and

best uses, thereby increasing shareholder value.

To opt for a merger or not is a complex affair, especially in terms of the technicalities

involved. We have discussed almost all factors that the management may have to look

into. Before going for merger, Considerable amount of brainstorming would be required

by the managements to reach a conclusion. E.g. A due diligence report would clearly

identify the status of the company in respect of the financial position along with the net

worth and pending legal matters and details about various contingent liabilities. Decision

has to be taken after having discussed the pros & cons of the proposed merger & the


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impact of the same on the business, administrative costs benefits, addition to

shareholders' value, tax implications including stamp duty and last but not the least also

on the employees of the Transferor or Transferee Company.

WHAT IS MERGER?

Merger is defined as combination of two or more companies into a single company

where one survives and the others lose their corporate existence. The survivor acquires all

the assets as well as liabilities of the merged company or companies. Generally, the

surviving company is the buyer, which retains its identity, and the extinguished company

is the seller.

Merger is also defined as amalgamation. Merger is the fusion of two or more existing

companies. All assets, liabilities and the stock of one company stand transferred to

Transferee Company in consideration of payment in the form of:

Equity shares in the transferee company,

Debentures in the transferee company,

Cash, or

A mix of the above modes.

PURPOSE OF MERGERS


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The purpose for an offeror company for acquiring another company shall be reflected in

the corporate objectives. It has to decide the specific objectives to be achieved through

acquisition. The basic purpose of merger or business combination is to achieve faster

growth of the corporate business. Faster growth may be had through product

improvement and competitive position.

Other possible purposes for acquisition are short listed below:

(1) Procurement of supplies:

a. To safeguard the source of supplies of raw materials or intermediary product;

b. To obtain economies of purchase in the form of discount, savings in transportationcosts, overhead costs in buying department, etc.

c. To share the benefits of suppliers economies by standardizing the materials.

(2) Revamping production facilities:

a. To achieve economies of scale by amalgamating production facilities through more

intensive utilization of plant and resources;

b. To standardize product specifications, improvement of quality of product, expanding

c. Market and aiming at consumers satisfaction through strengthening after sale Services;

d. To obtain improved production technology and know-how from the offered company

e. To reduce cost, improve quality and produce competitive products to retain and

Improve market share.

(3) Market expansion and strategy

a. To eliminate competition and protect existing market;


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etc. But might feel resource constraints with limitations of funds and lack of skill

managerial personnels. It has to aim at suitable combination where it could have

opportunities to supplement its funds by issuance of securities, secure additional financial

facilities, eliminate competition and strengthen its market position.

(7) Strategic purpose:

The Acquirer Company view the merger to achieve strategic objectives through

alternative type of combinations which may be horizontal, vertical, product expansion,

market extensional or other specified unrelated objectives depending upon the corporate

strategies. Thus, various types of combinations distinct with each other in nature are

adopted to pursue this objective like vertical or horizontal combination.

(8) Corporate friendliness:

Although it is rare but it is true that business houses exhibit degrees of cooperative spirit

despite competitiveness in providing rescues to each other from hostile takeovers and

cultivate situations of collaborations sharing goodwill of each other to achieve

performance heights through business combinations. The combining corporate aim at

circular combinations by pursuing this objective

.

(9) Desired level of integration:


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Mergers and acquisition are pursued to obtain the desired level of integration between the

two combining business houses. Such integration could be operational or financial. This

gives birth to conglomerate combinations. The purpose and the requirements of the

offeror company go a long way in selecting a suitable partner for merger or acquisition in

business


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TYPES OF MERGERS

Merger or acquisition depends upon the purpose of the offeror company it wants to

achieve. Based on the offerors objectives profile, combinations could be vertical,

horizontal, circular and conglomeratic as precisely described below with reference to the

purpose in view of the offeror company.

(A) Vertical combination

A company would like to takeover another company or seek its merger with that

company to expand espousing backward integration to assimilate the resources of supply

and forward integration towards market outlets. The acquiring company through merger

of another unit attempts on reduction of inventories of raw material and finished goods,

implements its production plans as per the objectives and economizes on working capital

investments. In other words, in vertical combinations, the merging undertaking would be

either a supplier or a buyer using its product as intermediary material for final production.

The following main benefits accrue from the vertical combination to the acquirer

company i.e.

1. It gains a strong position because of imperfect market of the intermediary products,

scarcity of resources and purchased products;

2. Has control over products specifications.

(B) Horizontal combination:


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It is a merger of two competing firms which are at the same stage of industrial

process. The acquiring firm belongs to the same industry as the target company. The mail

purpose of such mergers is to obtain economies of scale in production by eliminating

duplication of facilities and the operations and broadening the product line, reduction in

investment in working capital, elimination in competition concentration in product,

reduction in advertising costs, increase in market segments and exercise better control on

market.

(C) Circular combination:

Companies producing distinct products seek amalgamation to share common

distribution and research facilities to obtain economies by elimination of cost on

duplication and promoting market enlargement. The acquiring company obtains benefits

in the form of economies of resource sharing and diversification.

(D) Conglomerate combination:

It is amalgamation of two companies engaged in unrelated industries like DCM and

Modi Industries. The basic purpose of such amalgamations remains utilization of

financial resources and enlarges debt capacity through re-organizing their financial

structure so as to service the shareholders by increased leveraging and EPS, lowering

average cost of capital and thereby raising present worth of the outstanding shares.

Merger enhances the overall stability of the acquirer company and creates balance in the

companys total portfolio of diverse products and production processes.


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ADVANTAGES OF MERGERS

Mergers and takeovers are permanent form of combinations which vest in management

complete control and provide centralized administration which are not available in

combinations of holding company and its partly owned subsidiary. Shareholders in the

selling company gain from the merger and takeovers as the premium offered to induce

acceptance of the merger or takeover offers much more price than the book value of

shares. Shareholders in the buying company gain in the long run with the growth of the

company not only due to synergy but also due to boots trapping earnings.

Mergers and acquisitions are caused with the support of shareholders, managers ad

promoters of the combing companies. The factors, which motivate the shareholders and

managers to lend support to these combinations and the resultant consequences they have

to bear, are briefly noted below based on the research work by various scholars globally.

(1) From the standpoint of shareholders

Investment made by shareholders in the companies subject to merger should enhance in

value. The sale of shares from one companys shareholders to another and holding

investment in shares should give rise to greater values i.e. The opportunity gains in


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alternative investments. Shareholders may gain from merger in different ways viz. From

the gains and achievements of the company i.e. Through:

(a) Realization of monopoly profits;

(b) Economies of scales;

(c) Diversification of product line;

(d) Acquisition of human assets and other resources not available otherwise;

(e) Better investment opportunity in combinations

.One or more features would generally be available in each merger where shareholders

may have attraction and favour merger.

(2) From the standpoint of managers.

Managers are concerned with improving operations of the company, managing the affairs

of the company effectively for all round gains and growth of the company which will

provide them better deals in raising their status, perks and fringe benefits. Mergers where

all these things are the guaranteed outcome get support from the managers. At the same

time, where managers have fear of displacement at the hands of new management in

amalgamated company and also resultant depreciation from the merger then support from

them becomes difficult.

(3) Promoters gains

Mergers do offer to company promoters the advantage of increasing the size of their

company and the financial structure and strength. They can convert a closely held and

private limited company into a public company without contributing much wealth and

without losing control.


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(4) Benefits to general public

Impact of mergers on general public could be viewed as aspect of benefits and costs to:

(a) Consumer of the product or services;

(b) Workers of the companies under combination;

(c) General public affected in general having not been user or consumer or the worker in

the companies under merger plan

.

(a) Consumers

The economic gains realized from mergers are passed on to consumers in the form of

lower prices and better quality of the product which directly raise their standard of living

and quality of life. The balance of benefits in favour of consumers will depend upon the

fact whether or not the mergers increase or decrease competitive economic and

productive activity which directly affects the degree of welfare of the consumers through

changes in price level, quality of products, after sales service, etc.

(b) Workers community

The merger or acquisition of a company by a conglomerate or other acquiring company

may have the effect on both the sides of increasing the welfare in the form of purchasing

power and other miseries of life. Two sides of the impact as discussed by the researchers

and academicians are:fir stly, mergers with cash payment to shareholders provide

opportunities for them to invest this money in other companies which will generatefurther employment and growth to uplift of the economy in general.Secondly, any

restrictions placed on such mergers will decrease the growth and investment activity with

corresponding decrease in employment. Both workers and communities will suffer on

lessening job Opportunities, preventing the distribution of benefits resulting from

diversification of production activity.


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(c) General public

monopolists affect social and political environment to tilt everything in their favour to

Mergers result into centralized concentration of power. Economic power is to be

understood as the ability to control prices and industries output as monopolists. Such

maintain their power ad expand their business empire. These advances result into

economic exploitation. But in a free economy a monopolist does not stay for a longer

period as other companies enter into the field to reap the benefits of higher prices set in

by the monopolist. This enforces competition in the market as consumers are free to

substitute the alternative products. Therefore, it is difficult to generalize that mergers

affect the welfare of general public adversely or favorably. Every merger of two or more

companies has to be viewed from different angles in the business practices which protectsthe interest of the shareholders in the merging company and also serves the national

purpose to add to the welfare of the employees, consumers and does not create hindrance

in administration of the Government polices.


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Procedure of Mergers

Public announcement:

To make a public announcement an acquirer shall follow the following procedure:

1. Appointment of merchant banker:


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Once the scheme is finalized, it is tabled in the meeting of Board of

directors of respective banks. The board discusses the scheme thread bare and

accords its approval if the proposal is found to be financially viable and

beneficial in long run.

After the Board approval of the merger proposal, an extra ordinary general

meeting of the shareholders of the respective banks is convened to discuss the

proposal and seek their approval. After the board approval of the merger

proposal, a registered valuer is appointed to valuate both the banks. The valuer

valuates the banks on the basis of its share capital,market capital, assets and

liabilities, its reach and anticipated growth and sends its report to the respective

banks.

Once the valuation is accepted by the respective banks , they send the

proposal along with all relevant documents such as Board approval, shareholders

approval, valuation report etc to Reserve Bank of India and other regulatory

bodiessuch Security & exchange board of India(SEBI) for their approval.

After obtaining approvals from all the concerned institutions, authorized

officials of both the banks sit together and discuss and finalize share allocation

proportion by the acquiring bank to the shareholders of the merging bank

After completion of the above procedures , a merger and acquisition

agreement is signed by the bank

Other motives For Merger

Merger may be motivated by other factors that should not be classified

under synergism. These are the opportunities for acquiring firm to

obtain assets at bargain price and the desire of shareholders of the

acquired firm to increase the liquidity of their holdings.


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1. Purchase of Assets at Bargain Prices

Mergers may be explained by opportunity to acquire assets, particularly land

mineral rights, plant and equipment, at lower cost than would be incurred if

they were purchased or constructed at the current market prices. If the

market price of many socks have been considerably below the replacement

cost of the assets they represent, expanding firm considering construction

plants, developing mines or buying equipments often have found that the

desired assets could be obtained where by heaper by acquiring a firm that

already owned and operated that asset. Risk could be reduced because the

assets were already in place and an organization of people knew how to

operate them and market their products. Many of the mergers can be

financed by cash tender offers to the acquired firms shareholders at price

substantially above the current market. Even so, the assets can be acquired

for less than their current casts of construction. The basic factor underlying

this apparently is that inflation in construction costs not fully rejected in stock

prices because of high interest rates and limited optimism by stock investors

regarding future economic conditions.

2.Increased Managerial Skills or Technology

Occasionally a firm will have good potential that is finds it unable to develop

fully because of deficiencies in certain areas of management or an absence

of needed product or production technology. If the firm cannot hire the

management or the technology it needs, it might combine with a compatible

firm that has needed managerial, personnel or technical expertise. Of course,

any merger, regardless of specific motive for it, should contribute to the

maximization of owners wealth.

3. Acquiring new technology


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To stay competitive, companies need to stay on top of technological

developments and their business applications. By buying a smaller company

with unique technologies, a large company can maintain or develop a

competitive edge.

i. Economy of scale:This refers to the fact that the combined

company can often reduce its fixed costs by removing duplicate

departments or operations, lowering the costs of the company relative

to the same revenue stream, thus increasing profit margins.

ii. Operating economies:-arise because, a combination of two or

more firms may result in cost reduction due to operating economies. In

other words, a combined firm may avoid or reduce over-lapping

functions and consolidate its management functions such as

manufacturing, marketing, R&D and thus reduce operating costs. For

example, a combined firm may eliminate duplicate channels of

distribution, or crate a centralized training center, or introduce an

integrated planning and control system

iii. Increased revenue or market share: This assumes that

the buyer will be absorbing a major competitor and thus increase its

market power (by capturing increased market share) to set prices.

iv. Cross-selling: For example, a bank buying a stock broker could

then sell its banking products to the stock broker's customers, while

the broker can sign up the bank's customers for brokerage accounts.

Or, a manufacturer can acquire and sell complementary products.
http://en.wikipedia.org/wiki/Economy_of_scalehttp://en.wikipedia.org/wiki/Revenuehttp://en.wikipedia.org/wiki/Market_sharehttp://en.wikipedia.org/wiki/Cross-sellinghttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Stock_brokerhttp://en.wikipedia.org/wiki/Economy_of_scalehttp://en.wikipedia.org/wiki/Revenuehttp://en.wikipedia.org/wiki/Market_sharehttp://en.wikipedia.org/wiki/Cross-sellinghttp://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Stock_broker


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1.4 Procedure for evaluating the decision for

mergers and acquisitions

The three important steps involved in the analysis of mergers and

acquisitions are:-

1. Planning:-of acquisition will require the analysis of industry-

specific and firm-specific information. The acquiring firm should review

its objective of acquisition in the context of its strengths and

weaknesses and corporate goals. It will need industry data on market

growth, nature of competition, ease of entry, capital and labour

intensity, etc. This will help in indicating the product-market strategies

that are appropriate for the company. It will also help the firm in

identifying the business units that should be dropped or added. On the

other hand, the target firm will need information about quality ofmanagement, market share and size, capital structure, profitability,

production and marketing capabilities, etc.

2. Search and Screening:- Search focuses on how and where to

look for suitable candidates for acquisition. Screening process short-


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lists a few candidates from many available and obtains detailed

information about each of them.

3. Financial Evaluation:-a merger is needed to determine the

earnings and cash flows, areas of risk, the maximum price payable to

the target company and the best way to finance the merger. In a

competitive market situation, the current market value is the correct

and fair value of the share of the target firm. The target firm will not

accept any offer below thecurrent market value of its share. The

target firm may, in fact, expect the offer price to be more than the

current market value of its share since it may expect that merger

benefits will accrue to the acquiring firm.

3.NEED FOR MERGER AND ACQUISITION

The South East Asian crisis and the earlier economic turmoil in several

developing nations demonstrated that strong banking system is critical.

Throughout the world, banking industry has been transformed from highly

protected and regulated to competitive and deregulated. Globalization

coupled with technological development has shrinked the boundaries. Trade

has become transactional from international. Due to this, there is no

difference between domestic and foreign currency. As a result innovations

and improvement assumed greatest significance in institutional performance.

This trend of global banking has been marked by twin phenomena of

consolidation and convergence. The trend towards consolidation has been

driven by the need to attain meaningful balance sheet size and market share

in the face of intensified competition. The trend towards convergence is


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driven by a move across industry to provide most of the financial services

under one roof.

Indian banking experienced wide ranging reforms in the last decade and

these reforms have contributed to a great extent in enhancing their

competitiveness. The issue of bank restructuring assumes significance from

the point of view of making Indian banking strong and sound apart its growth

and development to become suitable.

International evidence also strongly indicates greater gains to banking

industries after the restructuring process. With the impending capital account

convertibility, cross border movement of financial capital would become a

reality. If we cannot consolidate our size, it is rather difficult to find reasons

that could prevent Indian banks from being swallowed by the powerful

foreign banks in the long run, under the free for all environments. The core

objective of restructuring is to maintain long term profitability and strengthen

the competitive edge of banking business in the context of changes in the

fundamental market scenario. Restructuring can have both internal and

external dimensions.

The pace of change in the financial market world over and in the external

economic environment, in which we work, shows no sign of slowing down.Commercial banks now have to think global to service the requirements of

the highly sophisticated multinationals that are increasingly dominated the

industrial world.

Bank mergers would be the rule rather than exception in times to come and

there is a need for banks to check their premises before embanking on their

future plans. There are synergies to be leveraged through consolidation

where factors such as size, spread, technology, human resource and capital

can be reconciled. We could hence think of a situation where we have 4-5

global players which are really large, a handful of regional banks which will

gradually set to merger and some other players which will get to acquire

special niche to serve limited market. But it involves the sorting of various

issues such as legal, regulatory, procedural etc. This is statement of SH. V.

Leeladhar, chairman, IBA on 28th aug, 2004.


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History has improved beyond doubt that strong banking systems are critical

for sound economic growth. It is important to improve the

comprehensiveness and quality of the banking system to bring efficiency in

the performance of the real sector in India. Throughout the world, banking

industry has been transferred from a highly protected and regulated situation

to competitive and deregulated. Globalization coupled with technological

development has shrinked the boundaries. Financial services and products

are being provided to the customers across the length and breadth of the

globe.

Due to this, domestic and foreign currency, banking and non banking

financial services are getting closer. Correspondingly innovations and

improvements assumed greater significance in institutional performance. Thistrend of global banking has been marked by twin phenomena of consolidation

and convergence. The trend towards consolidation has been driven by the

need to attain meaningful balance sheet size and market share in the face of

intensified competition. The trend towards convergence is driven by a move

across industry to provide most of the financial service viz., banking,

insurance, investment etc, to the customers in

one roof. Consolidation of banking industry is critical from several aspects.

The factors inducing mergers and acquisition include technological progress,

excess capacity, emerging opportunities and deregulation of geographic,

functional and product restrictions. It may also bring the performance of

public sector banks to a remarkable level without variation between banks in

public sector.

The following are the important aspects for staying in the market:

1) Competition from global majors.

2) Competition from new Indian banks.

3) Disinter mediation and competition resulting into pressure or spread.

4) Qualitative change in the banking paradigm.

5) The competencies required from a banker would be sharper information

technology and knowledge centric.


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In order to compete with the new entrants effectively, Indian commercial

banks need to posses matching financial muscle, as a fair competition is

possible only among the equals. Size has therefore, assumed critically. A

banks size is really to be determined by the size of its balance sheet. The

question before major commercial banks, therefore, is how to acquire a

competitive size. Mergers and acquisition route provides a quick step forward

in this direction offering opportunities to share synergies and reduce the cost

of product development and delivery. Different type of banks, even through

they themselves belong to the public sector, spend considerable time

competing themselves without increasing commensurate benefits to the

system as a whole. As a result, the focus on banks has shifted away from the

areas of real productivity. The present system is not ideal for simultaneously

retaining separate identities as well as preserving the very characteristics of

competitiveness. Our banks are really small in terms of business size or

capital when compared with banks in the west or even China.. The lesson

here is to think of consolidation of our efficient banks to build up global scale

institutions. Consolidations would also enable us to go for global technologies

benefiting the customers and efficiency of our banks.

If Indian banks are to be made more effective, efficiency and comparable

with their counterparts from abroad, they would need to be more capitalized,automated and technology oriented, even while strengthening their internal

operations and systems. Further in order to make them comparable with their

competitors from abroad with regard to the size of their capital and asset

base, it would be necessary to structure these banks. Merger and acquisitions

are considered useful to achieve the requisite size in the short run.

MERGER IN INDIAN BANKING SECTOR

Mergers and acquisitions encourage banks to gain global reach and better

synergy and allow large banks to acquire the stressed assets of weaker

banks. Merger in India between weak/unviable banks should grow faster so


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As the entire Indian banking industry is witnessing a paradigm shift in

systems, processes, strategies, it would warrant creation of new

competencies andcapabilities on an on going basis for which an environment

of continuous learning would have to be created so as to enhance knowledge

and skills.

There is every reason to welcome the process of creating globally strong and

competitive banks and let big Indian banks create big thunders

internationally in the days to come.

In order to achieve the INDIAN VISION 2020 as envisaged by Honble

president of India Sh. A.P.J.Addul Kalam much requires to be done by bankingindustry in this regard. It is expected that the Indian banking and finance

system will be globally competitive. For this the market players will have to

be financially strong and operationally efficient. Capital would be key factor in

the building asuccessful institution. The Banking and finance system will

improve competitiveness through a process of consolidation either through

mergers and acquisitions or through strategic alliances. There is need to

restructure the banking sector in India through merger and amalgamation in

order top makes them more capitalized, automated and technology orientedso as to provide environment more competitive and customer friendly

RISKS ASSOCIATED WITH MERGER

There are several risks associated with consolidation and few of

them are as follows: -

1) When two banks merge into one then there is an inevitable increase in

the size of the organization. Big size may not always be better. The

size may get too widely and go beyond the control of the

management. The increased size may become a drug rather than an

asset.


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2) Consolidation does not lead to instant results and there is an

incubation period before the results arrive. Mergers and

acquisitions are sometimes followed by losses and tough

intervening periods before the eventual profits pour in. Patience,

forbearance and resilience are required in ample measure to

make any merger a success story. All may not be up to the plan,

which explains why there are high rate of failures in mergers.

3) Consolidation mainly comes due to the decision taken at the top.

It is a top-heavy decision and willingness of the rank and file of

both entities may not be forthcoming. This leads to problems of

industrialrelations, deprivation, depression and demotivation

among the employees. Such a work force can never churn out

good results. Therefore, personal management at the highest

order with humane touch alone can pave the way.

4) The structure, systems and the procedures followed in two banks

may be vastly different, for example, a PSU bank or an old

generation bank and that of a technologically superior foreign

bank. The erstwhile structures, systems and procedures may not

be conducive in the new milieu. A thorough overhauling and

systems analysis has to be done to assimilateboth the

organizations. This is a time consuming process and requires lot

of cautions approaches to reduce the frictions.

5) There is a problem of valuation associated with all mergers. The

shareholder of existing entities has to be given new shares. Till

now a foolproof valuation system for transfer and compensation

is yet to emerge.

6) Further, there is also a problem of brand projection. This

becomes more complicated when existing brands themselves

have a good appeal. Question arises whether the earlier brands

should continue to be projected or should they be submerged in


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favour of a new comprehensive identity. Goodwill is often

towards a brand and its sub-merger is usually not taken kindly.

MERGER STORY SO FAR

YEAR BANK MERGED WITH

1969 Bank Of Bihar State Bank Of India

1970 National Bank Of Lahore State Bank Of India

1971 Eastern Bank Ltd. Chartered Bank

1974 Krishnaram Baldeo Bank

Ltd.

State Bank Of India

1976 Belgaum Bank Ltd. Union Bank Of India

1984-85 Lakshmi Commercial Bank Canara Bank

1984-85 Bank Of Cochin State Bank Of India

1985 Miraj State Bank Union Bank Of India

1986 Hindustan Commercial

Bank

Punjab National Bank

1988 Traders Bank Ltd. Bank Of Baroda

1989-90 United Industrial Bank Allahabad Bank

1989-90 Bank Of Tamilnad Indian Overseas Bank

1989-90 Bank Of Thanjavur Indian Bank

1989-90 Parur Central Bank Bank Of India

1990-91 Purbanchal Bank Central Bank Of India

1993-94 New Bank Of India Punjab National Bank

1993-94 Bank Of Karad Bank Of India


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1995-96 Kasinath Seth Bank State Bank Of India

1996 SCICI ICICI

1997 ITC Classic ICICI

1997 BARI Doab Bank Oriental Bank of Commerce

1998 Punjab Co-operative Bank Oriental Bank of Commerce

1998 Anagram Fianance ICICI

1999 Bareilly Corporation Bank Bank of Baroda

1999 Sikkim Bank ltd. Union Bank

2000 Times bank HDFC Bank

2001 Bank of Madura ICICI

2002 Benaras state bank Bank of Baroda

2003 Nedungadi Bank Punjab national Bank

2004 South Gujarat Local Area

Bank

Bank of Baroda

2004 Global Trust Bank Oriental Bank of Commerce

2005 Bank of Punjab Centurion bank

2005 IDBI bank IDBI

2008 HDFC bank Centurion bank of punjab

8.BANK MERGER/AMALGAMATION UNDER

VARIOUS ACTS

The relevant provisions regarding merger, amalgamation and acquisition of

banks under various acts are discussed in brief as under:

Mergers- banking Regulation act 1949

Amalgamations of banking companies under B R Act fall under categories are

voluntary amalgamation and compulsory amalgamation.

Section 44A Voluntary Amalgamation of Banking Companies.


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Section 44A of the Banking Regulation act 1949 provides for the procedure to

be followed in case of voluntary mergers of banking companies. Under these

provisions a banking company may be amalgamated with another banking

company by approval of shareholders of each banking company by resolution

passed by majority of two third in value of shareholders of each of the said

companies. The bank to obtain Reserve Banks sanction for the approval of

the scheme of amalgamation. However, as per the observations of JPC the

role of RBIis limited. The reserve bank generally encourages amalgamation

when it is satisfied that the scheme is in the interest of depositors of the

amalgamating banks.

A careful reading of the provisions of section 44A on banking regulation act

1949 shows that the high court is not given the powers to grant its approvalto the schemes of merger of banking companies and Reserve bank is given

such powers. Further, reserve bank is empowered to determine the Markey

value of shares of minority shareholders who have voted against the scheme

of amalgamation. Since nationalized banks are not Baking Companies and

SBI is governed by a separate statue, the provisions of section 44A on

voluntary amalgamation are not applicable in the case of amalgamation of

two public sector banks or for the merger of a nationalized bank/SBI with a

banking company or vice versa. These mergers have to be attempted interms of the provisions in the respective statute under which they are

constituted. Moreover, the section does not envisage approval of RBI for the

merger of any other financial entity such as NBFC with a banking company

voluntarily.

Therefore a baking company can be amalgamated with another banking

company only under section 44A of the BR act.

Sector 45- Compulsory Amalgamation of banks


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Under section 45(4) of the banking regulation act, reserve bank may prepare

a scheme of amalgamation of a banking company with other institution (the

transferee bank) under sub- section (15) of section 45. Banking institution

means any banking company and includes SBI and subsidiary banks or a

corresponding new bank. A compulsory amalgamation is a pressed into

action where the financial position of the bank has become week and urgent

measures are required to be taken to safeguard the depositors interest.

Section 45 of the Banking regulation Act, 1949 provides for a bank to be

reconstructed or amalgamated compulsorily i.e. without the consent of its

members or creditors, with any other banking institutions as defined in sub

section(15) thereof. Action under there provision of this section is taken by

reserve bank in consultation with the central government in the case of

banks, which are weak, unsound or improperly managed. Under the

provisions, RBI can apply to the central government for suspension of

business by a banking company and prepare a scheme ofreconstitution or

amalgamation in order to safeguard the interests of the depositors.

Under compulsory amalgamation, reserve bank has the power to

amalgamate a banking company with any other banking company,

nationalized bank, SBI and subsidiary of SBI. Whereas under voluntary

amalgamation, a banking company can be amalgamated with bankingcompany can be amalgamated with another banking company only. Meaning

thereby, a banking company can not be merged with a nationalized bank or

any other financial entity.

Companies Act

Section 394 of the companies act, 1956 is the main section that deals with

the reconstruction and amalgamation of the companies. Under section 44A of

the banking Regulation Act, 1949 two banking companies can be

amalgamated voluntarily. In case of an amalgamated of any company such

as a non banking finance company with a banking company, the merger

would be covered under the provisions of section 394 of the companies act

and such schemes can be approved by the high courts and such cases do not


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require specific approval of the RBI. Under section 396 of the act, central

government may amalgamate two or more companies in public interest.

State Bank of India Act, 1955

Section 35 of the State Bank of India Act, 1955 confers power on SBI to enter

into negotiation for acquiring business including assets and liabilities of any

banking institution with the sanction of the central government and if so

directed by the government in consultation with the RBI. The terms and

conditions of acquisition by central board of the SBI and the concerned

banking institution and the reserve bank of India is required to be submitted

to the central government for its sanction. The central government is

empowered to sanction any scheme of acquisition and such schemes of

acquisition become effective from the date specified in order of sanction.

As per sub-section (13) of section 38 of the SBI act, banking institution is

defined as under banking institution includes any individual or any

association of individuals (whether incorporated or not or whether a

department of government or a separate institution), carrying on the

business of banking.

SBI may, therefore, acquire business of any other banking institution. Any

individual or any association of individuals carrying on banking business. The

scope provided for acquisition under the SBI act is very wide which includes

any individual or any association of individuals carrying on banking business.

That means the individual or body of individuals carrying on banking

business. That means the individual or body of individuals carrying on

banking business may also include urban cooperative banks on NBFC.

However it may be observed that there is no specific mention of a

corresponding new bank or a banking company in the definition of bankinginstitution under section 38(13) of the SBI act.

It is not clear whether under the provisions of section 35, SBI can acquire a

corresponding new bank or a RRB or its own subsidiary for that matter. Such

a power mat have to be presumed by interpreting the definition of banking

institution in widest possible terms to include any person doing business of


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banking. It can also be argued that if State Bank of India is given a power to

acquire the business of any individual doing banking business it should be

permissible to acquire any corporate doing banking business subject to

compliance with law which is applicable to such corporate. But in our view, it

is not advisable to rely on such interpretations in the matter of acquisition of

business of banking being conducted by any company or other corporate.

Any such acquisition affectsright to property and rights of many other

stakeholders in the organization to be acquired. The powers for acquisition

are therefore required to be very clearly and specifically provided by statue

so that any possibility of challenge to the action of acquisition by any

stakeholder are minimized and such stakeholders are aware of their rights by

virtue of clear statutory provisions.

Nationalised banks may be amalgamated with any other nationalized bank or

with another banking institution. i.e. banking company or SBI or a subsidiary.

A nationalized bank cannot be amalgamated with NBFC.

Under the provisions of section 9 it is permissible for the central government

to merge a corresponding new bank with a banking company or vice versa. If

a corresponding new bank becomes a transferor bank and is merged with a

banking company being the transferee bank, a question arises as to the

applicability of the provisions of the companies act in respect to the merger.

The provisions of sec. 9 do not specifically exclude the applicability of the

companies act to any scheme of amalgamation of a company. Further section

394(4) (b) of the companies act provides that a transferee company does not

include any company other than company within the meaning of companies

act. But a transferor company includesanybody corporate whether the

company is within the meaning of companies act or not. The effect of this

provision is that provision contained in the companies act relating to

amalgamation and mergers apply in cases where any corporation is to be

merged with a company. Therefore if under section 9(2)(c) of nationalization

act a corresponding new bank is to merged with a banking

company( transferee company), it will be necessary to comply with the

provisions of the companies act. It will be necessary that shareholder of the

transferee banking company the in value present and voting should


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approve the scheme of amalgamation. Section 44A of the Banking Regulation

Act which empowers RBI to approve amalgamation of any two banking

companies requires approval of shareholders of each company 2/3rd in value.

But since section44A does not apply if a Banking company is to be merged

with a corresponding new bank, approval of 3/4th invalue of shareholders will

apply to such merger in compliance with the companies act.

MERGER OF

HDFC BANK AND CENTURIAN

BANK OF

PUNJAB

A CASE STUDY


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The Reserve Bank of India has approved the scheme of

amalgamation ofCenturion Bank of Punjab Ltd. with HDFC Bank

Ltd. with effect from May 23, 2008.

All the branches of Centurion Bank of Punjab will function as

branches of HDFC Bank with effect from May 23, 2008. With RBIs

approval, all requisite statutory and regulatory approvals for the

merger have been obtained.


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The combined entity would have a nationwide network of 1167

branches; a strong deposit base of around Rs.1,22,000 crores and

net advances of around Rs.89,000 crores. The balance sheet size of

the combined entity would be over Rs.1,63,000 crores.


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Merger with Centurion Bank of Punjab Limited

On March 27, 2008, the shareholders of the Bank accorded their

consent to a scheme of amalgamation of Centurion Bank of Punjab

Limited with HDFC Bank Limited. The shareholders of the Bank

approved the issuance of one equity share of Rs.10/- each of HDFC

Bank Limited for every 29 equity shares of Re. 1/- each held in

Centurion Bank of Punjab Limited. This is subject to receipt of

Approvals from the Reserve Bank of India, stock exchanges and

Other requisite statutory and regulatory authorities. The shareholders

Also accorded their consent to issue equity shares and/or warrants

convertible into equity shares at the rate of Rs.1,530.13 each to

HDFC Limited and/or other promoter group companies on preferential


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basis, subject to final regulatory approvals in this regard. The

Shareholders of the Bank have also approved an increase in the

authorized capital from Rs.450 crores to Rs.550 crores.

Promoted in 1995 by Housing Development Finance Corporation

(HDFC), India's leading housing finance company, HDFC Bank is one

of India's premier banks providing a wide range of financial products

and services to its over 11 million customers across hundreds of


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Indian cities using multiple distribution channels including a pan-India

network of branches, ATMs, phone banking, net banking and mobile

banking. Within a relatively short span of time, the bank has emerged

as a leading player in retail banking, wholesale banking, and treasury

operations, its three principal business segments.

The bank's competitive strength clearly lies in the use of technology

and the ability to deliver world-class service with rapid response time.

Over the last 13 years, the bank has successfully gained market

share in its target customer franchises while maintaining healthy

profitability and asset quality.


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As on March 31, 2008, the Bank had a network of 761 branches and

1,977 ATMs in 327 cities. For the year ended March 31, 2008, the

Bank reported a net profit of INR 15.90 billion (Rs.1590.2crore),

up 39.3%, over the corresponding year ended March 31, 2007.

As of March 31, 2008 total deposits were INR 1007.69 billion,

(Rs.100,769 crore) up 47.5% over the corresponding year ended

March 31, 2007. Total balance sheet size too grew by 46.0% to INR

1,331.77 billion (133177 crore). Leading Indian and international

Publications have recognized the bank for its performance and

quality.


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Centurion Bank of Punjab is one of the leading new generation

private sector banks in India. The bank serves individual consumers,

small and medium businesses and large corporations with a full

range of financial products and services for investing, lending and

advice on financial planning. The bank offers its customers an array

of wealth management products such as mutual funds, life and

general insurance and has established a leadership 'position'.

The bank is also a strong player in foreign exchange services,


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personal loans, mortgages and agricultural loans.

Additionally the bank offers a full suite of NRI banking products to

Overseas Indians. On 29th August 2007, Centurion Bank of Punjab

merged with Lord Krishna Bank (LKB), post obtaining all requisite

statutory and regulatory approvals. This merger has further

strengthened the geographical reach of the Bank in major towns and

cities across the country, especially in the State of Kerala, in addition

to its existing dominance in the northern part of the country.


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Centurion Bank of Punjab now operates on a strong nationwide

franchise of 404 branches and 452 ATMs in 190 locations across the

country, supported by employee base of over 7,500 employees.

In addition to being listed on the major Indian stock exchanges,

the Banks shares are also listed on the Luxembourg Stock

Exchange.

REVIEW OF LITRETURE

Before examining the applications of the three approaches enumerated above, a

practical issue arises namely what should be the label of analysis. To primary

approaches to defining merger exist in the literature. Mergers as defined at the bank

level and at the holding company level. Financial institution efficiency bank level

merger occurs when previously distinct banks are consolidated into one institution.


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assets and reach a similar conclusion: no average gain and no relation between gains

and the relative performance of acquirers and targets. Non- interest costs yield

significant results, but the findings are opposite of expectations that the operations of

an inefficient target purchased by an efficient acquirer should be improved.

Akhavein, Berger, And Humphrey (1997) analyze changes in profitability

experience in the same set of large mergers as examined by Berger and Humphrey.

They find that banking organisation significantly improved their profit efficiency after

mergers. However, rankings based on more traditional ROA and ROE measures that

excludeb loan loss provisions and taxes from net income did not change significantly

following consolidation.

De Young (1993) also utilizes frontier methodology to examine cost efficiency and

reaches similar conclusion as Berger and Humphery. Cost benefits from mergers did

not exist for bank level mergers taking place in 1986 and 1987. In addition to the lack

of average efficiency gains, improvements were unrelated to the difference between

acquirer and target efficiency.

Srinivasan and Wall (1992) examine all commercial bank and bank holding

company mergers occurring between 1982 and 1986. They find that mergers did notreduce non interest expenses. Srinivasan (1992) reaches a similar conclusion. Both of

these studies focus solely on non interest expenses resulting in an incomplete picture

of the cost savings associated with mergers. In order to gain a complete view of bank

costs, the total of interest and non interest expenses must be examined. Various

funding and investment strategies have different impacts on thetwo cost components.

For example, an increase in purchased funds raises interest costs, but lowers non

interest costs. Therefore, to void attributing efficiency gains.

In Rhoades (1990), a similar study to Rhoades (1993) is conducted with acquisitions

involving billion dollar banks. Consistent with his other work , Rhoades finds no

performance effects due to mergers.


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The works of Linder and Crane (1992) is also note worthy. They analyse the

operating performance of 47 bank level intrastate mergers that took place in New

England between 1982 and 1987. Of the 47 mergers in the sample, 25 were

consolidated of bank subsidiaries owned by the same holding company. The authors

aggregate acquirer and target data one year before the merger and compare it to

performance one and two years after consolidation. The performance of merged banks

is adjusted by the performance of all non merging banks in the same state as the

merging entities. The results indicate that mergers did not results in improved

operating income, as measured by net non interest income to assets.

Several studies find evidence of merger gains, but the results of these studies must be

scrutinized carefully,

Spindt and Tarhan (1993) find gains in their sample of 192 commercial bank

mergers completed in 1986, non parameters tests comparing the performance changes

of merged banks with a group of matched pairs indicate that mergers led to operating

improvements. The results, however may be due primarily to economies of scale. The

existing evidence in the literature suggests that scale economies do exist for

institutions holding less than $100 million in assets have to be market driven. Banks

also should rake into account regional and ethnic consideration and maximize

synergies.

RESEARCH METHODOLOGY


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Research has its significance in solving various operational and planning problems of

business and industry. Operational Research and market research along with

Motivational Research are considered crucial and their results exist in more that one

way in taking business decision.

Market research is the investigation of the structure and development of market for

the purpose of formulating efficient policies for the purchasing, production and sales.

Operational research refers to the application of mathematical, logical and analytical

techniques to the solution of business problems for cost minimization or

maximization for the profit, which can be termed as optimization problems.

Motivational Research of defining why people behave as they do is mainly concerned

with the determination of motivations underlying their consumer behavior.

As there are of great help to people in business and industry who are responsible for

taking business decisions.

The present study, which attempts to estimate the market share of the different

insurance companies, plays a very crucial role.

For a good research and for proper and authentic results research methodology plays acrucial role.

Research Methodology is a way to systematically solve the research problem, which

is a science of studying how research is done scientifically. Thus research

methodology encompasses the research methods or techniques research results are

capable at being evaluated either by the research himself or by others.

The project also covers Descriptive Research which includes surveys and fact

findings from various inquiries.

The relationship between the customers and the market players must be established

and explored to make the marketing effort fruitful and profitable. Thus, it is reflected

in the above wording that the present study shall be useful in meeting and exploring


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the proposed objectives. Therefore to make the present study meaningful the data

shall be collected from various sources such as questionnaire, journals, newspapers,

and internet etc. that will serve as the base for the primary and secondary data and for

interacting with the respective users of the insurance/mutual fund.

Research design

In the present study the exploratory-cum-descriptive research design will be followed

which help in exploring the specified objectives of the present study.

A research design is an arrangement of condition for collection and analysis of data in

a manner that aims to combine relevance to research purpose with economy in

procedure.

In fact the research design is the conceptual structure with in which the research is

conducted. Research design is needed because it facilitates the smooth sailing of the

various research operations. Thereby making research as efficient as possible yielding

maximal information with minimal expenditure of efforts, time and money.

Research design , in fact has a great bearing on the reliability of the results arrived at

and as such constitutes the firm foundation of the entire evidence of the researchwork. In the other words we can say that research design is advance planning of

research.

A good research design should be flexible, appropriate, and efficient and so on. It

should try to minimize biases and maximize reliability of that collected and analyzed

is considered a good design.

The design must give the smallest experimental error and it should yield maximuminformation.

Data collection


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The task of data collection begins after the research programs has been defined and

research design plan checked out. The data collection is and important part of the

research.

Data collection method

In the data collection method different methods are adopted for primary data

collection and secondary data collection.

Primary Data Collection

Primary data collection, which is collected through observation or direct

communication with the respondent in one form or another. These are several

methods for primary data collection.

Observation Method.

Interview Method.

Through Questionnaire.

But as the time was limited I used the Observation Method for data collection.

Secondary Data

Secondary data is also collected by me various document of the company from the

internet.


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OBJECTIVE OF THE STUDY

This study is important because it put right on the effects of the company which before

and after its merger and acquisition. Following are the major objectives:

To study the concept of merger in the banking industry companies

To point-out the deficiencies which forced the company to merge with the

target company.

To study the effect on shareholders of the company

To analysis and interpretation of market share, return of assets and total

assets of the target company

Its impact on the Indian scenario.


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Scope of the study

Every bank try to increase its customer base only and they only want to get more and

more money. But some not only want to increase its customers but also provide security

to their customers.

The study will be done to understand the financial position so

that we can get a clear view of how the institution performed; do they want only the

money of the customers? Or they also provide any real security to the money invested by

them.

In the study I will try to check the customer perception about private bank.

Significance of Study


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The study of the project will be beneficial for both the banks and customers. As banks

will know about the level of service which they are providing to the customer and how to

improve so as to reach up to the standard of customers.

From customer point of view it will

be beneficial as customer will come to know that what actually the bankers expect that

customers should interact with them.

LIMITATIONS OF THE STUDYBeing based on collected facts and personal judgments ,the following

limitations should be taken into sented

Incomplete and inexact information:

Since the analysis are done on the basis of the annual reports of business,

therefore, the information presented them is in complete. Actual financial

position of the firm can be known only after the close

Qualitative information:

These statements of financial analysis express only that information which

can be denoted in the form of money. Qualitative information , which cannot


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be expressed in money, are ignored although some of this business

information is quite significant.

Time constraint:

Time was another because report was prepared with in the period of two

month which were too less to have a complete and accurate view of the

complete industry.

Balance Sheet of HDFC Bank------------------- in Rs. Cr. -------------------

Mar '06 Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mths 12 mths

Capital and Liabilities:

Total Share Capital 313.14 319.39 354.43 425.38

Equity Share Capital 313.14 319.39 354.43 425.38

Share Application Money 0.07 0.00 0.00 400.92

Preference Share Capital 0.00 0.00 0.00 0.00

Reserves 4,986.39 6,113.76 11,142.80 14,226.43

Revaluation Reserves 0.00 0.00 0.00 0.00

Net Worth 5,299.60 6,433.15 11,497.23 15,052.73

Deposits 55,796.82 68,297.94 100,768.60 142,811.58


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Borrowings 4,560.48 2,815.39 4,478.86 2,685.84

Total Debt 60,357.30 71,113.33 105,247.46 145,497.42

Other Liabilities & Provisions 7,849.49 13,689.13 16,431.91 22,720.62

Total Liabilities 73,506.39 91,235.61 133,176.60 183,270.77

Mar '06 Mar '07 Mar '08 Mar '09

12 mths 12 mths 12 mths 12 mths

Assets

Cash & Balances with RBI 3,306.61 5,182.48 12,553.18 13,527.21

Balance with Banks, Money at Call 3,612.39 3,971.40 2,225.16 3,979.41

Advances 35,061.26 46,944.78 63,426.90 98,883.05

Investments 28,393.96 30,564.80 49,393.54 58,817.55

Gross Block 1,589.47 1,917.56 2,386.99 3,956.63

Accumulated Depreciation 734.39 950.89 1,211.86 2,249.90

Net Block 855.08 966.67 1,175.13 1,706.73

Capital Work In Progress 0.00 0.00 0.00 0.00

Other Assets 2,277.09 3,605.48 4,402.69 6,356.83

Total Assets 73,506.39 91,235.61 133,176.60 183,270.78

Contingent Liabilities 138,898.60 202,126.73 582,835.94 396,594.31

Bills for collection 5,239.26 7,211.88 17,092.85 17,939.62

Book Value (Rs) 169.24 201.42 324.38 344.44


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Research Project on Merger of Hdfc

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