MERGERS & ACQUISITIONS OF SBI ASSOCIATE BANKS

Submitted in partial fulfillment of the requirements for Post Graduate Diploma In Management (PGDM) 2012-2014

SUBMITTED BY

RASHI ASHAR PGDM PG-12-001 Batch: 2012-2014

IES Management College and Research Centre, Bandra, Mumbai

IES Management College and Research Centre Bandra, Mumbai

MAY JUNE 2013

Students Declaration

I hereby declare that this report, submitted in partial fulfillment of the requirement for the award for the PGDM, to IES Management College and Research Centre is my original work and not used anywhere for award of any degree or diploma or fellowship or for similar titles or prizes.

I further certify that without any objection or condition subject to the permission of the company where I did my summer project, I grant the rights to IES Management College and Research Centre to publish any part of the project if they deem fit in journals/Magazines and newspapers etc without my permission. Place : Mumbai

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: RASHI ASHAR : PGDM (SEM 4)

Roll No. : PG-12-001 Certificate from the Faculty Guide

This is to certify that the dissertation submitted in partial fulfillment for the award of Post Graduate Diploma in Management (PGDM) of IES Management College and Research Centre is a result of the bonafide research work carried out by Ms. Rashi Ashar under my supervision and guidance. No part of this report has been submitted for award of any other degree, diploma, fellowship or other similar titles or prizes. The work has also not been published in any journals/Magazines.

Date:

Faculty guide Signature of the Faculty Guide: ______________

Name of Faculty Guide: ____________________ Place: IES Management College and Research Centre

ACKNOWLEDGEMENT

It is a matter of great pleasure for me to submit the project report titled Mergers and Acquisitions of SBI Associate Banks towards the partial fulfilment of the requirement for my PGDM course at Indian Education Society Management & Resource Centre. I owe a deep gratitude to all those who have helped me in preparing this report. Words seem to be inadequate to express my sincere thanks to Dr.Saumya Kanti Ghosh, CEA & GM Economic Research Department for his valuable guidance, constructive criticism, and encouragement during the entire course of the study. I would also like to thank Mr. Ulhas Wakhade, AGM; Mr. Saket Hishikar, Manger (Economist) and Mr. Tapas Parida, Deputy Manager (Economist) who gave me an opportunity to learn the recurring acknowledgement of what is working in our lives that can help us not only to survive but surmount ours difficulties. I am highly obliged to all those who helped me to procure data especially the Merger Department for this project. I express my sincere thanks to State Bank of India, Corporate Centre, Nariman Point, Mumbai) forgiving me all the facilities during my project and helping & guiding me during my internship period. I would even like to thank my Project Mentor at college Prof. Gaziya Sayed for helping me to do the same.

Rashi Ashar

TABLE OF CONTENTS
TABLE OF CONTENTS..................................................................................................................5 1. EXCECUTIVE SUMMARY.........................................................................................................7 1.1 INTRODUCTION TO BANKING SECTOR.............................................................................8 1.3 INTRODUCTION TO MERGERS & ACQUSITIONS...........................................18 HISTORY OF MERGERS IN INDIAN BANKING INDUSTRY..................................................24 2.1 OBJECTIVES OF STUDY.......................................................................................................27 2.2 METHODOLOGY ..................................................................................................................28 2.3 LIMITATIONS OF THE STUDY.............................................................................................29 3. ANALYSIS OF PAST MERGERS OF ASSOCIATE BANK....................................................30 3.1 ANALYSIS OF PAST MERGERS OF SBI..............................................................................33 3.2 VALUATION OF ASSOCIATE BANKS.................................................................................37 4. CONCLUSION AND RECOMMENDATIONS.........................................................................46 BIBLOGRAPHY.............................................................................................................................47

LIST OF CHARTS
FIGURE 1: HIERARCHY OF BANKS IN INDIA.........................................................................11 FIGURE 2: VALUATION METHODS..........................................................................................37 FIGURE 3: COMPARISON OF ASSOCIATE BANKS BASED ON THEIR VALUE.................46

LIST OF TABLES
TABLE 1: VALUE OF FIRM IN (RS. CRORE)..............................................................................7 TABLE 2 : PERFORMANCE HIGHLIGHTS OF ASSOCIATE BANKS.....................................14 TABLE 3: CAPITAL AND SHAREHOLDING PATTERN AT SBI.............................................15 TABLE 4: TABLE OF PAST MERGERS IN INDIAN BANKING SECTOR...............................25 TABLE 5: PROFITABILITY RATIOS TREND OF STATE BANK OF INDIA...........................33 TABLE 6: CRAR TREND OF STATE BANK OF INDIA.............................................................34 TABLE 7:LIQUITDITY RATIOS OF STATE BANK OF INDIA.................................................35 TABLE 8: GROWTH INDICATORS OF STATE BANK OF INDIA...........................................36

1. EXCECUTIVE SUMMARY
Merger is a combination of two or more companies into one company. The acquiring company acquires the assets and the liabilities of the target company. Typically, shareholders of the amalgamating company get shares of the amalgamated company in exchange for their shares in the target company. The primary objectives(s) of this project is to study and past mergers of State Bank of India (SBI) with its associates using the pre and post event analysis using various financial ratios. The study is done with an eye on future to ascertain which of the existing Associate Banks of SBI would contribute what to valuation of SBI if mergers are contemplated today. In this study valuation of all the Associate Banks is done using Capital Asset Pricing Model (CAPM) augmented with Discounted Cash Flows Technique so as to arrive at the terminal value of each Associate Bank. The results this exercise are summarized in Table 1 Table 1: Value of Firm in (Rs. Crore)
Name of Associate Bank State Bank of Bikaner & Jaipur State Bank of Travancore State Bank of Mysore State bank of Patiala State of Hyderabad Value of Associate Bank 3590.00 3122.00 858.05 123.30 644.40

The major findings of valuation are that of all the Associates Banks, the highest value is estimated for State Bank of Bikaner & Jaipur followed by State Bank of Travancore. In terms of sequencing the mergers of Associate Bank, it will be advisable to merge State Bank of Bikaner & Jaipur followed by State Bank of Travancore for maximizing the value of SBI holding company.

1.1 INTRODUCTION TO BANKING SECTOR

Indian banking is the lifeline of the nation and its people. Banking has helped in developing the vital sectors of the economy and usher in a new dawn of progress on the Indian horizon. The sector has translated the hopes and aspirations of millions of people into reality. But to do so, it has had to control miles and miles of difficult terrain, suffer the indignities of foreign rule and the pangs of partition. Today, Indian banks can confidently compete with modern banks of the world. Before the 20thcentury, usury, or lending money at a high rate of interest, was widely prevalent in rural India. Entry of Joint stock banks and development of Cooperative movement have taken over a good deal of business from the hands of the Indian money lender, who although still exist, have lost his menacing teeth. In the Indian Banking System, Cooperative banks exist side by side with commercial banks and play a supplementary role in providing need-based finance, especially for agricultural and agriculture-based operations including farming, cattle, milk, hatchery, personal finance etc. along with some small industries and self-employment driven activities. Generally, co-operative banks are governed by the respective co-operative acts of state governments. But, since banks began to be regulated by the RBI after 1 st March 1966, these banks are also regulated by the RBI after amendment to the Banking Regulation Act 1949. The Reserve Bank is responsible for licensing of banks and branches, and it also regulates credit limits to state co-operative banks on behalf of primary co-operative banks for financing SSI units. India cannot have a healthy economy without a sound and effective banking system. The banking system should be hassle free and able to meet the new challenges posed by technology and other factors, both internal and external. In the past three decades, India's banking system has earned several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to metropolises or cities in India. In fact, Indian banking system has reached even the remote corners of the country. This is one of the main aspects of India's growth story.

History of Banking in India 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:

Early phase of Indian banks, from 1786 to 1969 Nationalization of banks and the banking sector reforms, from 1969 to 1991 New phase of Indian banking system, with the reforms after 1991

The Banking Structure in India The commercial banking structure in India consists of scheduled commercial banks and unscheduled banks. Scheduled banks constitute those banks that are included in the Second Schedule of Reserve Bank of India (RBI) Act, 1934. After the nationalization of banks in India, the branches of the public sector banks rose to approximately 800 percent in deposits and advances took a huge jump by 11,000 percent. As on June 30, 1999, there were 300 scheduled banks in India having a total network of 64,918 branches. The scheduled commercial banks in India comprise State Bank of India and its associates (8), nationalised banks (19), foreign banks (45), private sector banks (32), co-operative banks, and regional rural banks. Before the nationalization of Indian banks, the State Bank of India (SBI) was the only nationalized bank, which was nationalized on July 1, 1955, under the SBI Act of 1955. The nationalization of seven State Bank subsidiaries took place in 1959.

Nationalization Process

1955: Nationalization of State Bank of India 1959: Nationalization of SBI subsidiaries 1969: Nationalization of 14 major banks

1980: Nationalization of seven banks with deposits over Rs 200 crore

Banks in India In India, banks are segregated in different groups. Each group has its own benefits and limitations in operations. Each has its own dedicated target market. A few of them work in the rural sector only while others in both rural as well as urban. Many banks are catering in cities only. Some banks are of Indian origin and some are foreign players. Banks in India can be classified into:

Public Sector Banks Private Sector Banks Cooperative Banks Regional Rural Banks Foreign Banks

Figure 1: Hierarchy of Banks in India

Reserve Bank of India (RBI) The Reserve Bank of India is the central bank of our country. It was established in April 1935 with a share capital of Rs 5 crore on the basis of the recommendations of the Hilton Young Commission. The share capital was divided into fully paid shares of Rs 100 each, which was entirely owned by private shareholders in the beginning. The government held shares of nominal value of Rs 220,000.

The RBI commenced operation on April 1, 1935, under the Reserve Bank of India Act, 1934. The Act (II of 1934) provides the statutory basis of the functioning of the Bank. The Bank was constituted to meet the following requirements:

Regulate the issue of currency notes Maintain reserves with a view to securing monetary stability Operate the credit and currency system of the country to its advantage

Commercial Banks Commercial Banks are banking institutions that accept deposits and grant short-term loans and advances to their customers. In addition to giving short-term loans, commercial banks also give medium-term and long-term loan to business enterprises. Now-a-days some of the commercial banks are also providing housing loan on a long-term basis to individuals. There are also many other functions of commercial banks, which are discussed later in this lesson. Co-operative Banks People who come together to jointly serve their common interest often form a co-operative society under the Co-operative Societies Act. When a co-operative society engages itself in banking business it is called a Co-operative Bank. Specialised Banks There are some banks, which cater to the requirements and provide overall support for setting up business in specific areas of activity. EXIM Bank, SIDBI and NABARD are examples of such banks. They engage themselves in some specific area or activity and thus, are called specialised banks. Banking sector reforms:

Reforms in the commercial banking sector had two distinct phases: 1). The first phase of reforms introduced subsequent to the release of the Report of the Committee on Financial System (Chairman: M. Narsimham), 1992, focused mainly on enabling and strengthening measures. 2). The second phase of reforms, introduced subsequent to the recommendations of the committee on Banking Sector Reforms (Chairman: M. Narsimham), 1998, placed greater emphasis on structural measures and improvement in standards of disclosure and levels of transparency in order to align the Indian standards with then international best practices. Hence the key objective of reforms in the banking sector has been to enhance the stability and efficiency of banks.The reform measures can hence be broadly divided into three main groups: 1). Enabling measures were designed to create an environment where banks could respond optimally to market signals on the basis of commercial considerations. 2). Strengthening measures aimed at reducing the vulnerability of banks in the face of fluctuations in the economic environment. These included capital adequacy, income recognition, asset classification and provisioning norms, disclosure standards etc. 3). Institutional measures focused on reforms in the legal framework pertaining to banks and creation of new institutions.

1.2 ABOUT STATE BANK OF INDIA

SBI is the largest commercial bank in India in terms of assets, deposits, profits, branches and no of employees employed. At the end of 2012-13, the Bank had total assets of Rs.5, 66,261.04 crore, total deposits size of Rs.12,02,740crore and recorded a net profit of Rs. 14,105 crores. The Bank has a vast domestic network of 14,816 branches and staff strength of 2, 28,296. State Bank Group, with a network of 20,325 branches, including 5,509 branches of its five Associate Banks, dominates the banking industry in India. In addition to banking, the Group, through its various subsidiaries provides a range of financial services, which include Life Insurance, Merchant Banking, Mutual Funds, Credit Card, Factoring, Security trading, Pension Fund Management, Custodial Services, General Insurance and Primary Dealership.
Associate Banks

The five Associate Banks of SBI have a market share of 6.16% in deposits and 6.32% in advances as on last Friday of March 2013. The performance highlights of Associate Banks as on March 2013 is given in Table 2.

Table 2 : Performance highlights of Associate Banks Particulars Total Assets Agg. Deposits Total Advances Operating Profit Net Profit As on 31.3.2013 5,04,556 4,17,657 3,40,321 8,803 3,678 As on 31.3.2012 4,34,947 3,61,589 2,89,148 8,214 3,626 Change(%) 16.00 15.51 17.70 7.17 1.43

SBI Group achieved full core banking status in 2008 when all the branches of the Bank were made functional on core banking system. This rapid and commendable technology up-gradation has won the Bank many laurels. The Bank also enjoys the distinction of having the largest ATM network in the country with over 32,752 ATMs from Leh in Ladakh to Kanyakumari in Tamil Nadu.

Glorious Banking Tradition

The origins of SBI date back to 1806, when the Bank of Calcutta (later called the Bank of Bengal) was established. In 1921, the Bank of Bengal and two other presidency banks Bank of Madras and Bank of Bombay were amalgamated to form the Imperial Bank of India. In 1955, the controlling interests of the Imperial Bank of India were acquired by the Reserve Bank of India (RBI) and SBI was created by a special Act of the Parliament to succeed the Imperial Bank of India. In its biggest ever cash purchase, the Government of India in June 2007 acquired the entire RBI shareholding in State Bank of India consisting of over 314 million equity shares at a total amount of over Rs.355 billion. The Bank has completed over 205 years of operations, with an unbroken record of profitability.
Structure and Organisation

The SBI is committed to best practices in the area of corporate governance. The Bank believes that proper corporate governance facilitates effective management and control of business. This, in turn, enables the Bank to maintain a high level of business ethics and to optimize value for all its stakeholders. The Bank has its Corporate Office at Mumbai. At the helm of affairs is the Bank's Central Board of Directors, comprising specialists from various sectors. The directors represent the Government of India, RBI, shareholders, workmen and non-workmen staff of the Bank. There are several independent and non-executive directors apart from the executive directors on the Board. The Bank's domestic operational area is divided into 14 Circles, each with one Local Head Office (LHO). The Bank's Top Management consists of the Chairman, four Managing Directors, and Deputy Managing Directors.
Capital and Shareholding Pattern

SBI was the first public sector bank to access the domestic capital market in 1994 to shore up its capital base. SBI Act has been amended permitting the Bank to bring down the Government holding to 51%. The total number of shareholders as on 31st March 2012 was Rs7,28,729 with the following ownership pattern:
Table 3: Capital and Shareholding pattern at SBI

Shareholders President of India Non-residents (FIIs/OCBs/NRIs/GDRs) Financial Institutions including Insurance Companies/Banks etc. Mutual Funds/Government Companies/UTI Private Corporate Bodies Others including Resident Individuals

% of shares held 62.313 13.32 10.96 4.85 2.72 5.84

SBI Associates and Subsidiaries

A network of five Indian banking subsidiaries, comprising five Associate Banks. State Bank of Bikaner & Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of Travancore are engaged in the business of commercial banking in the country. As a part of consolidation, the Bank merged with itself two of its Associate Banks: State Bank of Saurashtra in August 2008 and State Bank of Indore in August 2010 and another subsidiary, SBI Commercial and International Bank Ltd. (SBICI) in 2011. SBI has other domestic non-banking subsidiaries providing various financial services and also has foreign subsidiaries/joint ventures/associates. The Bank is a co-promoter of Credit Information Bureau of India Ltd. (CIBIL) and Clearing Corporation of India Ltd. (CCIL). The Bank has set up Asset Reconstruction Company (India) Ltd. (ARCIL) under SARFAESI Act, 2002 jointly with seven other commercial banks.
Global Markets

Global Markets Department at Corporate Centre mainly handles the Banks liquidity and provides foreign exchange services to customers. In addition, it also handles compliance with reserve requirement of RBI, provides products like derivatives, gold forwards and portfolio management services, and handles the Banks proprietary trading and investment portfolio. The Bank is one of the Registrars of UIDAI (Unique Identification Authority of India). After State governments, SBI is the top enroller of Aadhaar (unique ID number).

Core Banking: A major infrastructure upgrade of hardware and data storage system has been undertaken for Disaster Recovery to ensure uninterrupted and efficient operations, reduce processing time and make provision for scalability for future requirements. Milestones of 56 million peak transactions in a day, 2,067 Transactions per second and managing 307 million accounts achieved. A centralised functionality to generate statement of accounts for Current Account customers, Home Loan interest/ installment payment certificates and TDR/STDR interest paid during the year with TDS particulars have been rolled out. ATM: State Bank Group has the largest single ATM network in the country with 27,286 ATMs located in every nook and corner of the country. State Bank Group has in its stable, variants of ATMs namely Bunch Note Acceptors, Bio metric ATMs, Low Cost Rural ATMs, Solar Powered ATMs, Multi function Kiosks - for printing passbooks, statement of accounts, bar code readers for utility bill payments, internet banking, etc. Internet Banking: Internet banking service is available through www.onlinesbi.co.in for both retail and corporate customers of the Bank. The Banks Internet Banking product has been rated very high for its customer friendly user interface and the range of products and services offered to retail and corporate customers. SBI Instapay for utility bills payment, CINB Saral a simplified single user Corporate Internet Banking facility for small entrepreneurs etc. has also been introduced. Mobile Banking: A host of Mobile Banking services, such as funds transfers, enquiries, demat account enquiry, cheque book requests, bill payments, Mobile Top-up, recharging of DTH services, etc are currently being offered. SBI is the market leader in this space, both in number and value of financial transactions. The new GPRS based mobile banking service State Bank Freedom Premium has been rolled out. Mobile technology based prepaid payment service State Bank Mobi Cash has been launched on pilot basis in Delhi and Mumbai Circles of the Bank.

1.3 INTRODUCTION TO MERGERS & ACQUSITIONS

In the globalized economy, Merger and Acquisition (M&A) acts as an important tool for growth and expansion of a firm. The main motive behind the M&A is to create synergy that is one plus one is more than two and this rationale beguiles the companies for merger at the tough times. M&A help the companies in getting the benefits of greater market share and cost efficiency. Companies are confronted with the facts that the only big players can survive as there is a cut throat competition in the market and the success of the merger depends on how well the two companies integrate themselves in carrying out day to day operations CONCEPTUAL FRAMEWORK Merger and amalgamation: The term merger or amalgamation refers to a combination of two or more corporate into a single entity. It may involve either: absorption- one bank acquires the other. Consolidation- two or more banks combine to former a new entity. In India the legal term for merger is amalgamation. Acquisition: This may be defined as an act of acquiring effective control by one corporate over the assets or management of the other corporate without any combination of both of them. It can be characterized as the corporate remain independent or they have a separate legal entity.
Types of mergers

There are many types of mergers and acquisitions that redefine the business world with new strategic alliances and improved corporate philosophies. From the business structure perspective, some of the most common and significant types of mergers and acquisitions are listed below:
Horizontal Merger: This kind of merger exists between two companies who compete in the

same industry segment. The two companies combine their operations and gains strength in terms of improved performance, increased capital, and enhanced profits. This kind

substantially reduces the number of competitors in the segment and gives a higher edge over competition.
Vertical Merger: Vertical merger is a kind in which two or more companies in the same

industry but in different fields combine together in business. In this form, the companies in merger decide to combine all the operations and productions under one shelter. It is like encompassing all the requirements and products of a single industry segment.
Co-Generic Merger: Co-generic merger is a kind in which two or more companies in

association are some way or the other related to the production processes, business markets, or basic required technologies. It includes the extension of the product line or acquiring components that are all the way required in the daily operations. This kind offers great opportunities to businesses as it opens a hue gateway to diversify around a common set of resources and strategic requirements.
Conglomerate Merger: Conglomerate merger is a kind of venture in which two or more

companies belonging to different industrial sectors combine their operations. All the merged companies are no way related to their kind of business and product line rather their operations overlap that of each other. This is just a unification of businesses from different verticals under one flagship enterprise or firm. REGULATORY & LEGAL FRAMEWORK IN M&A The following are the legal acts supporting the mergers and acquisitions in the Indian banking sector: 1) Companies Act 1956 Approval of the board of directors of individual companies for the draft proposal Application in High Court Approval of shareholders by 75% majority Sanction by the High Court Filing of the court order with the Registrar of Companies 2) Banking companies (Acquisition & Transfer of Undertakings) Act 1970

 Capital structure of corresponding new bank Constitute the board of directors Reconstitution of a new bank into two or more corporations or amalgamation of any new bank with any other new bank 3) Banking regulation Act, 1949 Section 45 of the Act, RBI has the power to compulsorily reconstruct or amalgamate a weak bank with any other bank Section 44A of the Banking Regulation Act lays down the procedure for amalgamation of banking companies Section 44B empowers RBI in the matter of compromise arrangements between a bank and its creditors Under Section 36 AE of the Act, the Central Government can under advice from RBI take over a weak bank Part-II C of the Banking Regulation Act deals with the acquisition of the undertaking of banking companies. Section 36-AE of the Banking Regulation Act deals with the power of Central Government to acquire undertakings of banking companies in certain cases. Sec.36-AF deals with the powers of Central Government to make scheme Section 36AG deals with compensation to be given to shareholders of the acquired bank The Central Government on receipt of a report from the RBI may acquire a banking company if it fails to comply with the directions given to it under Sec.21 or Sec. 35-A of the Banking Regulation Act. Similar action if Banking Company is being managed in a manner detrimental to the interest of its depositors, or against the banking policy or public interest.
4) Role of RBI in bank mergers

Derives power from banking Regulation Act (as sections stated above) Main role is the merger review process 44-A of the Banking Regulation Act, 1949 is the empowering section.

 Decision of merger has to be approved by 2/3rd of the total Board of the respective companies. Applicable to PSU banks also. Approval by shareholders with 2/3 majority After approval the scheme should be submitted to RBI If the scheme is sanctioned by the Reserve Bank, by an order in writing, it becomes binding not only on the banking companies concerned, but also on all their shareholders. RBI had issued guidelines in May 2005 laying down various requirements for the process of such mergers including determination of the swap ratio, disclosures, the stages at which Boards will get involved in the merger process, etc. Broadly RBI will examine the following: The objective to be achieved by the merger. What impact could the merger have on the financial markets? What impact could be the creations of mega bank have on monetary policy, the management of interest rates? What threat to the Indian economy would be posed by the difficulties experienced by a mega bank in its international activities? The impact that the merger might have on the overall structure of the industry. The possible costs and benefits to customer and to small and medium size businesses, including the impact on bank branches the availability of financing price, quality and the availability of services. The timing and the socio-economic impact of any branch closures resulting from the merger. The manner in which the proposal will contribute to the international competitiveness of the financial services sector.

The manner in which the proposal would indirectly affect employment and the quality of jobs in the sector, with a distinction made between transitional and permanent effects.

The manner in which the proposal would increase the ability of the banks to develop and adopt new technologies. Remedial steps that the merger applicants would be willing to take to mitigate the adverse effects identified to arise from the merger.

5) Competition Act and Competition Commission of India MRTP Act,1969 replaced by Competition Act,2002 Competition Commission of India (the CCI) is the new statutory authority to inquire into alleged contraventions of the Act. Sec 5 defines Combination and lays out the relevant thresholds for regulation Combination includes mergers, amalgamations, acquisitions and acquisitions of Control. Section 6 authorizes the CCI to investigate combinations above certain size, thresholds, which includes mergers, amalgamations, and acquisitions of shares, assets, voting rights, or control. Section 6(1) states that combinations that cause, or are likely to cause, an appreciable adverse effect on competition are prohibited. Section 6(2), as amended in 2007, provides for mandatory pre-merger notification within30 days of either approval of the proposal for a combination or execution of the agreement for an acquisition. CCI only checks whether a combination will likely result in dominance or likely to facilitate cartelisation. It regulates anti-competitive behaviour. ROLE OF CCI IN BANK MERGERS CCI does not have much role to play in Banking Mergers So far as banking mergers are concerned it is a paper-tiger.

 It only has the power to determine whether the proposed merger is going to have an anti-competitive and cartelization impact. It only checks a possibility of dominance. It does not have the authority to look into the details of the scheme of merger. 6) Latest development- Banking Law (Amendment )Bill,2011 Since the beginning of 2011, RBI had urged the Finance Ministry to give it the exclusive control to deal with banking mergers. It sought that the intervention of the CCI in respect of banking mergers be done away with. Accordingly, in April 2011 the Government tabled the Banking Law (Amendment) Bill before the Lok Sabha in the month of March, 2011. The amendment exempts mergers and acquisitions in the banking sector from the scrutiny of the Competition Commission of India Section 2A of The Banking Laws (Amendment) Bill, 2011 is as follows: Notwithstanding anything to the contrary contained in section 2, nothing contained in the Competition Act, 2002 shall apply to any banking company, the State Bank of India, any subsidiary bank, any corresponding new bank or any regional rural bank or co-operative bank or multi-state co-operative banking respect of the matters relating to amalgamation, merger, reconstruction, transfer, reconstitution or acquisition under this act the State Bank of India Act, 1955 the State Bank of India (Subsidiary Banks) Act, 1959 the Banking Companies (Acquisition and Transfer of Undertakings) Act,1970 the Regional Rural Banks Act, 1976 the Banking Companies (Acquisition and Transfer of Undertakings) Act,1980 the Multi-State Co-operative Societies Act, 2002 and any State law relating to co-operative societies.

HISTORY OF MERGERS IN INDIAN BANKING INDUSTRY

The Indian banking sector can be divided into two eras, the pre liberalization era and the post liberalization era. In pre liberalization era government of India nationalized 14 Banks on 19 July1969 and later on 6 more commercial Banks were nationalized on 15 April 1980. In the year 1993government merged The New Bank of India and The Punjab National Bank and this was the only merger between nationalized banks, after that the numbers of nationalized Banks reduced from20 to 19. In post liberalization regime, government had initiated the policy of liberalization and licenses were issued to the private banks which lead to the growth of Indian Banking sector. On 13th August 2010, the process of M&As in the Indian banking sector passes through the Bank of Rajasthan and the ICICI Bank. Moreover, the HDFC Bank acquired the Centurion Bank of Punjab on 23 May 2008. The Reserve Bank of India sanctions the scheme of mergers of the ICICI Bank and the Bank of Rajasthan. After the merger the ICICI Bank replaced many banks to occupy the second position after the State Bank of India (SBI) in terms of assets in the Indian One size does not fit for all, therefore many companies finds the best way to go ahead like to expand ownership precincts through Merger and acquisitions. Merger creates synergy and economies of scale. For expanding the operations and cutting costs, Business entrepreneur and Banking Sector are using Merger and Acquisitions worldwide as a strategy for achieving larger size, increased market share, faster growth, and synergy for becoming more competitive through economies of scale. A merger is a combination of two or more companies into one

company or it may be in the form of one or more companies being merged into existing companies or a new company may be formed to merge two or more existing companies. On the other hand, when one company takes over another company and clearly wellknown itself as the new owner, this is called Acquisition. The companies must follow legal procedure of Merger and Acquisitions which has given by RBI, SEBI, Companies Act 1956 and Banking Regulation Act 1949. Growth is always the priority of all companies and confers serious concern to expand the business activities. Companies go for Merger and Acquisitions for achieving higher profit and expanding market share. Merger and Acquisitions is the need of business enterprises for achieving the economies of scale, growth, diversification, synergy, financial planning, Globalization of economy, and monopolistic approach also creates interest amongst companies for Merger and Acquisitions in order to increase the market power. Merger and Acquisitions is not a single day process, it takes time and decisions are to be taken after examining all the aspects. Indian companies were having stringent control before economic liberalization; therefore they led to the messy growth of the Indian corporate sector during that period. The government initiated the reform after 1991 and which resulted in the adaptation of different growth and expansion strategies by the companies. The Banking system of India was started in 1770 and the first Bank was the Indian Bank known as the Bank of Hindustan. Later on some more banks like the Bank of Bombay1840, the Bank ofMadras-1843 and the Bank of Calcutta-1840 were established under the charter of British East India Company. These Banks were merged in 1921 and took the form of a new bank known as the Imperial Bank of India. For the development of banking facilities in the rural areas the Imperial Bank of India partially nationalized on 1 July 1955, and named as the State Bank of India along with its 8 associate banks (at present 5). Later on, the State Bank of Bikaner and the State Bank of Jaipur merged and formed the State Bank of Bikaner and Jaipur.
Table 4: Table of Past mergers in Indian banking sector
DATE OF NAME OF THE TRANSFEROR BANK Bank of Bihar Ltd NAME OF THE MERGER/AMALGAMATION November 8, 1969 TRANSFEREE BANK State Bank of India

February 20, 1970 July 29, 1985 August 24, 1985 August 26, 1985 December 19, 1986 May 13, 1988 October 31, 1989 February 20, 1990 February 20, 1990 February 20, 1990 August 29, 1990 September 4, 1993 1993-1994 January 1, 1996 April 8, 1997 June 3, 1999 December 22, 1999 February 26, 2000 March 10, 2001 May 3, 2002 June 20, 2002 February 1, 2003 June 25, 2004 August 14, 2004 April 2, 2005 October 1, 2005 September 2, 2006 October 3, 2006 March 31, 2007 April 19, 2007 August 29, 2007 May 23, 2008 August 13, 2010 August 26, 2010

National Bank of Lahore Ltd Miraj State Bank Ltd Lakshmi Commercial Bank Ltd Bank of Cochin Ltd Hindustan Commercial Bank Ltd Traders Bank Ltd. United Industrial Bank Ltd Bank of Tamilnadu Ltd. Bank of Thanjavur Ltd Parur Central Bank Ltd Purbanchal Bank Ltd. New Bank of India Bank of karad Ltd KashiNath Seth Bank Ltd Bari Doab Bank Ltd Punjab Co-operative Bank Ltd. Bareilly Corporation Bank Ltd Sikkim Bank Ltd Times Bank Ltd Bank of Madura Ltd ICICI Ltd Benares State Bank Ltd Nedungadi Bank Ltd South Gujarat Local Area Bank Ltd. Global Trust Bank Ltd. IDBI Bank Ltd Bank of Punjab Ltd Ganesh Bank of Kurundwad Ltd United Western Bank Ltd Bharat Overseas Bank Ltd. Sangli Bank Ltd Lord Krishna Bank Ltd. Centurion Bank of Punjab Ltd The Bank of Rajasthan State Bank of India

State Bank of India Union Bank of India Canara Bank State Bank of India Punjab National Bank Bank of Baroda Allahabad Bank Indian Overseas Bank Indian Bank Bank of India Central Bank of India Punjab National Bank Bank of India State Bank of India Oriental Bank of Commerce Oriental Bank of Commerce Bank of Baroda Union Bank of India HDFC Bank Ltd ICICI Bank Ltd. ICICI Bank Ltd Bank of Baroda Punjab National Bank Bank of Baroda Oriental Bank of Commerce IDBI Ltd Centurion Bank Ltd Federal Bank Ltd IDBI Ltd. Indian Overseas Bank ICICI Bank Ltd Centurion Bank of Punjab Ltd. HDFC Bank Ltd ICICI Bank Ltd State Bank of Indore

2.1 OBJECTIVES OF STUDY

SBI is the biggest commercial bank in India in terms of its earnings. It is the top public sector bank in India amongst the top 100 banks over the world. So if merged effectively with its Associates it may lead to have a stronger market share in the banking sector. Fundamental reason motivating SBI merger with its 5 associate banks is because of the old 3S formula which SBI has i.e. size, scale, and synergy. Mergers can be a good idea because the cultural trends followed by SBI and its associates are similar. This will reduce the post merger cultural issues generally observed elsewhere. The Merger of State Bank of India is also guided by the Central Governments objective of creating a global size bank for India which can stand at par with the chart of banks in the international financial architecture. Based on this background the main objectives of this study are: 1) To study the mergers in Indian banking sector. 2) To study profitability of past mergers of State bank of India with its Associates. 3) To study the and find out which associate of State bank of India will be the best alternative to merge with.

2.2 METHODOLOGY

For the analysis of the past mergers of associates ratios like profitability ratios, liquidity ratios, growth indicators, and Capital adequacy ratios have been used to do the pre- post merger analysis. Interpretations have been drawn on the ratios which have been calculated in Ms Excel, based on the standalone balance sheet and profit and loss statements of State bank of India. For the Valuation of Associates banks of State Bank of India, CAPM and Discounted Cash Flow has been used. The information regarding the associate banks have been collected through their respective annual reports, Reserve bank of India journals. The indices used for calculation under CAPM are found out from websites like Rueters (for Beta calculation), Bombay Stock exchange (for Bankex Index) and Reserve Bank of India (for 364 T-Bill rate)

2.3 LIMITATIONS OF THE STUDY

It was a challenge to value all associates as State Bank of Patiala and State Bank of Hyderabad are not Public listed companies. The Beta rate used for calculating the cost of equity is taken to be that of State Bank of India as a whole. DCF analysis also has its share of shortcomings. For starters, the DCF model is only as good as its input assumptions. Depending on what one believes about how a company will operate and how the market will unfold, DCF valuations can fluctuate wildly. If the inputs - free cash flow forecasts, discount rates and perpetuity growth rates - are wide of the mark, the fair value generated for the bank won't be accurate, and it won't be useful when assessing stock prices. DCF works best when there is a high degree of confidence about future cash flows. But things can get tricky when a company's operations lack visibility - that is, when it's difficult to predict sales and cost trends with much certainty. While forecasting cash flows a few years into the future is hard enough, pushing results into eternity is nearly impossible. The investor's ability to make good forward-looking projections is critical and that's why DCF is susceptible to error. Valuations are particularly sensitive to assumptions about the perpetuity growth rates and discount rates.

3. ANALYSIS OF PAST MERGERS OF ASSOCIATE BANK

The following section summarises the Past merger of State Bank of India with State bank of Saurashtra in 2008 and State Bank of Indore in 2010 STATE BANK OF SAURASHTRA Date of acquisition Deposits Advances No. of employees No. of branches : 13th August, 2008 : : : : Rs. 15,721 cr. Rs. 12,427 cr. 6900 461 (out of which 400 were in Gujarat & 61 in other states)

Break up of employees: Officers Award staff Subordinate Total : 2153 : 3127 : 1620 : 6900

HIGHLIGHTS OF MERGER State Bank of India on 25th August 2007 gave its proposal to merge with State Bank of Saurashtra. Merger was subject to approval of the government and Reserve Bank in accordance with State Bank of India Act, 1955. In a communication to the Bombay Stock Exchange, SBI said its central board on August 25 approved the merger, subject to approval of the government and Reserve Bank in accordance with State Bank of India Act, 1955.

SBS was the smallest of the seven associates and based on the experience SBI would look at other banks. SBI's interest in the associate banks ranges from 75-100 per cent. SBS had 460 branches and the merger would help eliminate duplication of branches in the same area. Its net profit rose 45 per cent to Rs 87.4 crore in 2006-07. The bank has paid-up equity capital of Rs 314 crore. The merger helped SBI consolidate its position as the country's biggest bank and widen the gap with nearest rival at that time which was ICICI Bank. With 9,579 branches, SBI had total assets of Rs 5,66,565 crore and posted a net profit of Rs 4,541 crore as on March 31, 2007. The bank was also looking at freeing up capital by setting up a holding company for its life insurance and asset management businesses. STATE BANK OF INDORE Date of acquisition Deposits Advances No. of employees No.of branches : 26th August, 2010 : : : : Rs. 27, 105 cr. Rs. 21,180 cr. 6183 472 (Rural-120, Su-142, Urban- 87, Metro -123, in 15 states

& 1 UT) out of 472, 389 branches in M.P & Chhattisgarh)

HIGHLIGHTS OF MERGER The SBI with the sanction of Govt. of India entered into negotiations with State Bank of Indore for the acquisition on Oct 8, 2009. The Board of Directors of State Bank of Indore On October 31, 2009, approved the Scheme of Acquisition of State Bank of Indore (SBIN) by SBI, under Section 35 of the SBI Act, 1955. SBI 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.

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. After the merger, the issued capital of SBI would increase from Rs 634.96 crore up to a maximum of Rs 635.08 crore. 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. M/s Kotak Mahindra capital company ltd.(Category 1 merchant bankers) was appointed by both the banks independently to provide a fairness opinion to valuation of the independent valuers. 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 listed companies.

3.1 ANALYSIS OF PAST MERGERS OF SBI

The Past merger of State Bank of Saurashtra and State Bank of Indore and the effect of the merger on the holding company is highlighted below using ratio analysis.
Table 5: Profitability ratios trend of State Bank of India PROFITABILITY RATIOS Return on Assets Return on Equity NIM Return on Net Worth(%) Mar-08 ( Pre) 1.01 10.66 2.53 13.72 Mar-09 (Post) 1.04 14.37 2.26 15.74 Mar-10 (Pre) 0.88 14.44 2.33 13.89 Mar-11 (Post) 0.71 11.61 2.77 12.71 Mar-12 0.88 17.46 3.39 13.94

INTERPRETATION Return on assets (ROA): This gives an indication as to how much profit a bank is able to generate from the assets. Higher value of this ratio is indicative of higher profitability, and hence, productivity. There is a increase in ROA after the merger of State bank of Saurashtra in March 2009 i.e after the merger the assets were properly utilized. Whereas in March 2011, after the merger of State bank of Indore the figures depict gradually decreasing in return on assets which shows bank performance on assets is not going adequate. The return on equity (ROE), defined as the ratio of net profits after tax to total equity capital, is, therefore, used as an alternative measure of profitability. The RoE indicates the amount of profits a business unit is generating for its equity investors. The ratio is widely used by equity investors in their decision making. Higher value of the ratio is indicative of higher profitability, and hence, productivity. The ROE has increased after merger of State bank of Saurashtra whereas decreased after merger of State bank of Indore

Net Interest Margin (NIM): The net interest margin is the difference between the total interest earned (including from such items as investments) and total interest expended. (Including on such items as inter-bank borrowings), normalised by assets. This ratio indicates as to how effectively the banks deploy all their funds (both deposit and borrowings) to generate income from credit and investment operations. Higher the ratio, the more efficient is the banking system. Here the ratio lowers down after the merger of State Bank of Saurashtra this means the efficiency of the bank has decreased. Whereas, in the case of State Bank of Indore the ratio has been increased this means the efficiency of the bank has been increased Return on investment (ROI) is the percent of return on capital employed in the business. Higher the return the more efficient the bank is. The ROI has decreased after both the mergers. It means the return on the investment has been not been good. All these ratios show that the profitability indicators have been increased after merger of State bank of Saurashtra and have declined after merger of State Bank of Indore.
Table 6: CRAR trend of State Bank of India Mar CAPITAL Mar '08 '09 (Post) 14.25 ADEQUACY (Pre) Capital Adequacy Ratio 13.47 Mar '10 (Pre) 13.39 Mar '11 (Post) 11.98 13.86 Mar '12

Capital to Risk Weighted Assets Ratio (CRAR): This measures the amount of a banks capital in relation to its risk-weighted credit exposures and is most widely used as a measure of soundness of banks. In other words, it determines the capacity of a bank to withstand the unexpected losses arising out of its operations. The higher the capital adequacy ratio a bank has, the greater the capacity it has to absorb the unexpected losses before becoming insolvent. Thus, it provides a cushion for potential losses, which protects the banks depositors or other lenders. After the merger with State bank of Saurashtra in March 2008-09 the CAR has improved and the bank had increased its

capacity to absorb unexpected losses. And that of State bank of Indore has reduced after its merger in March 2010-11.
Table 7:Liquitdity ratios of State Bank of India

LIQUIDITY RATIOS Current ratio Quick ratio

Mar '08 (Pre) 0.07 6.15

Mar '09 (Post) 0.04 5.74

Mar '10 (Pre) 0.04 9.07

Mar '11 (Post) 0.04 8.5

Mar '12 0.05 12.05

INTERPRETATION Current ratio measures whether or not a company has enough resources to pay its debt over the next business cycle by comparing firms current assets to current liabilities. A high ratio indicates a safe liquidity but also it can be a signal that the company has problems getting paid on its receivable or have long inventory turnover. The liquidity position of State bank of India after merger with State bank of Saurashtra has been reduced indicating threat to the liquidity position of the bank. Whereas there is no change in the current ratio after the merger of State bank of Indore. Quick ratio is an indicator of companys short term liquidity. It measures the ability to use its quick assets to pay its current liabilities. If quick ratio is higher, company may keep too much cash on hand or have a problem collecting its accounts receivable. Higher quick ratio is needed when the company has difficulty borrowing on short term notes. The ratio has decreased after both the mergers but it doesnt have significant impact as the ratio is much higher than the required standard of 1:1.

Table 8: Growth indicators of State Bank of India

GROWTH INDICATO R EPS P/E Ratio Dividend payout ratio 22.64 22.9 23.36 26.03 22.59 Mar '08 (Pre) 106.56 15.45 Mar '09 (Post) 143.67 6.98 Mar '10 (Pre) 144.37 13.84 Mar '11 (Post) 116.07 23.12 174.15 11.81 Mar '12

Earnings per share are the portion of companies profit allocated to each outstanding share of common stock.EPS serves as an indicator of companys profitability. EPS of SBI has increased after the merger of State bank of Saurashtra in 2008-09 this means the profitability of company has increased after the merger. Whereas after the merger of State bank of Indore in 2010-11 there is a sharp fall in EPS indicating decrease in profitability. P/E ratio is the ratio of companys share price to its earnings per share. It tells whether the share price of a company is fairly valued, undervalued or overvalued. There is a sharp fall in the P/E ratio after merger of State bank of Saurashtra indicating the investors after the merger expected lesser growth of companys earnings in the future. Whereas after the merger of State Bank of Indore there is a rise in P/E ratio indicating investors expects a higher growth of companys earnings. Dividend payout ratio is the ratio of dividend per share divided by earnings per share. It is a measure of how much earnings a company is paying out to its shareholders as compared to how much it is retaining for reinvestment. A healthy dividend payout ratio leads to investor confidence in the company. There has been an increase in the dividend payout ratio after both the mergers leading to increase in the investors confidence.

3.2 VALUATION OF ASSOCIATE BANKS

Valuation technique is the process of determining the economic value of a business or company. Business valuation can be used to determine the fair value of a business for a variety of reasons, including sale value, establishing partner ownership and divorce proceedings.
Figure 2: Valuation Methods

There are several techniques to value a business. Broadly, these can be classified into: Earnings based valuation, Market based valuation and Asset based valuation.

 Earnings based valuation takes into consideration the future earnings of the business and hence the appropriate value depends on projected revenues and costs in future, expected capital outflows, number of years of projection, discounting rate and terminal value of business. Thorough diligence has to be exercised in deciding these above factors since these factors would differ from sector to sector and company to company. Market based approach determines the company value by comparing one or more aspects of the subject company to the similar aspects of other company which have established market value. The asset based value considers either the book value assets net liabilities or the net adjusted value revalued net assets. If the company has intangible assets like brands, copyrights, intellectual property etc., these are valued independently and added to the net asset value to arrive at the business value. Sometimes, if the business were not to be acquired on a going concern basis, the liquidation value or the realization from sale of assets is considered for the purpose of valuation. Timing is very critical while divesting a business since valuation depends on the timing. Timing of sale is crucial keeping in mind economic cycles, stock market situations which would decide market multiples, global situations etc. Theoretically, the DCF is the most sound method of valuation. The DCF method is forward-looking and it depends more future expectations rather than historical results. The DCF method is more inward-looking, relying on the fundamental expectations of the business or asset, and is influenced to a lesser extent by volatile external factors. It is focused on cash flow generation and is less affected by accounting practices and assumptions. It also allows expected operating strategies to be factored into the valuation. And moreover it also allows different components of a business or synergies to be valued separately.

STEPS IN VALUATION OF ASSOCIATE BANKS Discounted Cash Flow Method Step 1: Cost of Equity (Ke) =Rf + (Rm-Rf) Where Rf = risk free rate of return i.e.is the expected return on risk-free securities = Beta a measure of the systematic risk of State bank of Indias common stock. Rm= Risk premium Here Rf is taken as 364 treasury bill rate as on 31st March 2013 Rm is taken as growth in bankex index in the last year. Step 2: Cost of Debt (Kd) = Interest/Debt *100 Step 3: Weighted Average cost of capital

Step 4: Free Cash Flows (FCF) = NOPAT + Depreciation CAPEX NWC Where, NOPAT is equal to EBIT (1-t) Depreciation is non-cash operating charges including depreciation, depletion, and amortization recognized for tax purposes. CAPEX is capital expenditures for fixed assets. NWC is the increase in net working capital defined as current assets less the noninterest bearing current liabilities. Step 5: Terminal Value of firm = Terminal value =

CALCULATION OF COST OF EQUITY FOR STATE BANK GROUP Cost of equity = 7.79+ 1.14(10.91-7.79) =11.35

VALUATION OF ASSOCIATE BANKS (Note: All figures are in Rs. Crore) 1) State Bank of Bikaner & Jaipur Cost of equity (Ke) =7.79 +0.99(10.91-7.79) = 10.88 Cost of debt (Kd) = Interest / Debt *100 = 4932.37 /77,958.25 * 100 = 6.33 Weighted Average cost of capital

= 0.009 +6.324*0.86 =5.4464 Calculation of Free cash flows Here, NOPAT = 6645.25 (1 0.14) = 5714.915 Depreciation = 57.15 CAPEX = 29.5 NWC = 10524.79

FCF = 16267.355

Terminal value =

Terminal Value of firm=3589.82 2) State bank of Travancore Cost of Equity = 7.79 +1.03(10.91-7.79) = 11.00 Cost of debt (Kd) = Interest / Debt *100 =6506.64/93,370.88*100 =6.97 Weighted Average cost of capital

2077)

= 0.006 + 6.97 * 0.7923 = 5.53 Calculation of Free cash flows Here, NOPAT =7857.65(1- 0.2077)

= 6225.62 Depreciation= 0 CAPEX = 43.02 NWC = (9961.63) FCF = NOPAT + Depreciation CAPEX NWC = 16144.23

Terminal value =

Terminal Value of firm = 3122.34 3) State Bank of Mysore Cost of capital = 7.79 +0.93(10.91-7.79) Cost of debt (Kd) = Interest / Debt *100 = 4125.28 / 60,823.24 *100 = 6.78 Weighted Average cost of capital =

= 0.008 + 6.77 *0.5983 = 4.1

Calculation of cash flows Here, NOPAT =1331.03 (1- 0.4017) = 796.36 Depreciation = 47.04 CAPEX= 1224.39 NWC = (3242.05) FCF = 3043.06

Terminal value =

Terminal Value of firm = 858.05 4) State Bank of Patiala Cost of debt (Kd) = Interest / Debt *100 = 7113.4267/8840.601*100 = 80.46 Weighted Average cost of capital =

= 0.036 + 75.43* 0.8817 = 66.54

Calculation of FCF Here, NOPAT= 7869.642 (1- 0.1183) = 6938.66 Depreciation = 52.33 CAPEX = 23.73 NWC= (333.16) FCF= 7300.42 Terminal Value =

Terminal Value of firm =123.30 5) State Bank of Hyderabad Cost of debt (Kd) = Interest / Debt *100 = 2,224.40/5448.42*100 = 40.83 Weighted Average cost of capital =

=0.043 + 40.675 * 0.8506 = 34.96 Calculation of cash flows

Here NOPAT= 2,671.00(1-0.1495) =2271.69 Depreciation = 37.94 CAPEX = 35.03 NWC= (16784.25) FCF = 19058.85 Terminal Value =

Terminal Value of firm =644.40

4. CONCLUSION AND RECOMMENDATIONS

After using the DCF valuation method, a trend which has been noticed is that the value of Public listed associate banks is greater than that of the Banks which are not listed i.e. State Bank of Patiala and State Bank of Hyderabad. The associate bank with the highest value of firm is found out to be State Bank of Bikaner & Jaipur with Rs3590 crore , whereas State Bank of Travancore follows closely behind with the value of Rs. 3122 crore. The difference between top 2 associate Banks is of Rs. 467 crore. Even the number of branches of State Bank of India would increase from 14816 to 15853 and Number of employees would increase from 228296 to 241127 if merger with State Bank of Bikaner & Jaipur Figure 3: Comparison of Associate Banks based on their Value

Considering the limitations of the study as well as the external economic factors prevailing in the industry, SBI may choose to merger either of the two.The first preference according to the study being State bank of Bikaner & Jaipur.

BIBLOGRAPHY

Retrieved june 2013, from State Bank of Travancore: www.statebankoftravancore.com/ Retrieved June 2013, from State Bank of Patiala: www.sbp.co.in/ Retrieved June 2013, from State Bank of Mysore: www.statebankofmysore.co.in/ Retrieved June 2013, from State bank of India: http://www.sbi.co.in/ Retrieved June 2013, from State Bank of hyderabad: www.sbhyd.com/ Retrieved june 2013, from State Bank of Bikaner & Jaipur: https://www.sbbjbank.com/ Retrieved June 2013, from Reuters: http://in.reuters.com/ Retrieved June 2013, from Reserve Bank of India: www.rbi.org.in/ Retrieved June 2013, from Money Control: www.moneycontrol.com/ Retrieved from BSE: www.bseindia.com/ Retrieved from economictimes.indiatimes.com/ Bose, j. (2007). Bank mergers -The indian scenerio (1 ed., Vol. 1). (J. Bose, Ed.) Hyderabad, India: JB- The Icfai University Press. Chaplinsky, S., & Schill, M. J. (2000). Valuation Analysis for Mergers and Acquisitions. Charlottesville, VA: University of Virginia Darden School Foundation.