INTRODUCTION:
Banks
referred to as a financial institute or a corporation which deals with money by
accepting deposits, giving out loan and investing in securities, and authorized
by the state or central government. The bank contributes in the growth of economy
by providing funds for investment. In recent times banking sector’s regulations
has changed much and this sector also got impacted through globalization. Changing
scenario impacted this sector both structurally and strategically. And with this
changing scenario, different strategies have been adopted by banking sector in order
to remain efficient and to surge ahead in the global arena. One of such profitable
strategy is the process of consolidation of the banks. The most common strategy
to consolidate the banking industry adopted by banks is merger.
LITERATURE
REVIEW:
Kantamaneni
Hema Divya. T, Goutham Reddy, Sai Sabareesh studied
the performance of Kotak Mahindra bank for pre and post-period. The approach is
Based onthe review of literature, the study is aimed at evaluating the performance
of pre and post-merger of Kotak Mahindra Bank. The period taken for pre-merger is
four yearsand post-merger is one year. Performance is evaluated on the basis of
quick ratio, current ratio, debt equity ratio, Cash to current Liabilities, deposits
over 1year to 3years, Borrowings over 1 year to 3 years, Loans and advances and
net Profit Margin. The author concluded that
loan advances in post-merger is higher than
the loan advances in premerger period which is statistically significant. The debt
equity ratio is gradually decreasing and in post-merger period it started increasing.
The author has finally concluded that Merger
is a useful strategy, through this Banks can expand their operations, serve larger
customer base, increases profitability, liquidity and efficiency but the overall
growth and financial illness of the bank can’t be solved from mergers
V Radha Naga Sai and Dr. Syed Tabassum Sultana (2013) evaluated
the financial ratios of two banks to judge the performance from the perspective
of pre and post-merger. Paired t-test was applied to analyse the various financial
ratios for before and after merger data. The two banks which were selected for this
study were HDFC and Indian overseas.
Based on the analysis of Indian overseas bank data, it
can be concluded that there is significant difference in Operating profit margin,
Net profit margin, Return on equity, Return on capital employed and Debt Equity
ratio, but no significant difference is seen with respect to Gross profit margin.
The results of HDFC bank data showed that there is no significant difference in
Operating profit margin, Net profit margin, Return on capital employed, Return on
equity and Debt Equity ratio. But significant difference is shown with respect to
Gross profit margin.
Dr. P. Chellasamyand N Ponsabariraj (2014) tries toanalysefinancial
performance of merged banks with the help of financial parameters like which includes
profitability analysis, current ratio and liquidity ratio of pre and post-merger.
The study covers the area of Merger and Acquisitions from
1999-2000 to 2010-2011 in Indian banking sector. The author used paired t-test on
the performance of pre and post- Merger and Acquisitions of selected scheduled commercial
banks in India to find out the significant relationship between the profitability
and liquidity. The author finally concluded that no greater changes showed in the
banksin pre andpost Merger and Acquisitions period.
Devarajappa S. (2012) in the study comparedfinancial performance
of merged banks with the help of financial parameters like, operating Profit margin,
Gross Profit margin, Net Profit margin, Return on Equity, Return on Capital Employed,
and Debt Equity Ratio in the pre and post-mergerperiod. The sample case of Merger
taken in the study is HDFC Bank ltd andCenturion Bank of Punjab. The period taken
is three years -pre-merger and three years - post-merger. Independent T-test was
used to test the statistical significance and this test analysed the ratios and
also effect of merger on the performance of banks. The author finally concluded
that banks affected positively by the merger, and the positive effect is seen in
ratios like return on equity, debt –equity ratio and Gross Profit margin which shows
increase after the merger.
Simranjeet Singh (2015) analyzed financial performance
efficiency during post-merger period of ICICI Bank in the area of profitability,
liquidity, financialleverage, and capital market standards. Variables like ROI,
ROA, ROE, Net profit margin, Debt/Equity ratio, Current ratio, Acid test ratio and
EPS are considered in the study to check the financial performance of ICICI Bank.
To check the financial performance of ICICI Bank, the impact
of merger of Bank of Rajasthan with ICICI Bankand the merger of Sangli Bank with
ICICI Bank was analysed.
The author concludedthat in both the cases, half of ratios
have significantly changed after mergers while other half of ratios have not significantly
changed after merger.
Monaben
Rameshbhai, analysed the advantages of Mand A in banking sector. The focus of the
study is to analyze performance of bank after merger and acquisition. Author found various advantages of merger and acquisition
in banking sector likeincrease in number of ATM network, increase in customer base,
increase in branches, increase in number of product and service offered, increase
in deposit and advance amount, increase in number of employees, benefits of expertise
employees, access to various region in the country, But there are some challenges
also -like difficulty in managing nonperforming assets ,difference in deposit rate
and interest rate, difficulty in managing the employees because difference in salary
structure, etc. The author has also concluded that after merger and acquisition
there is increase in net interest income, increase in profitability, increase in
number of customers, improve liquidity, share price.
OBJECTIVE:
·
To study the various ratios
of Kotak Mahindra Bank during pre andpost mergerperiod with ING vysa Bank
·
To analyse whether the
ratios of Kotak bank has improved after merger
·
To analysethe various ratios
in pre andpost merger , taking t test
METHODOLOGY:
Sample
Selection:
Since
the study aimed at evaluating the performance of pre and post-merger of Kotak Mahindra
Bank. ING VYSYA bank has been merged with Kotak Mahindra bank after 2015.So the
period taken pre-merger is 2 years and post-merger is 3 years.
Sample
Size:
The
data for the study is collected for five years from financial year 2011-12 to 2015-16
Source
of data:
The
study is based on secondary data. The secondary data is collected data from the
annual reports of the banks included in sample. It also collected from the RBI,
SEBI, from various journals, magazines, newspapers and Kotak Mahindra bank Annual
Reports.
Statistical
tools used in the study Independent Sample
T Test is used which helps you compare whether two groups have different average
values
Merger
Deal Of Kotak and ING Vysa Bank
Kotak Mahindra Bank is an Indian private sector bank headquartered
in Mumbai, Maharashtra, India. In February 2003, Reserve Bank of India (RBI) issued
the licence to Kotak Mahindra Finance Ltd., the group's flagship company, to carry
on banking business.It offers a wide range of banking products and financial services
for corporate and retail customers through a variety of delivery channels and specialized
subsidiaries in the areas of personal finance, investment banking, general
insurance, life insurance, and wealth management.Kotak Mahindra Bank has a network
of 1,369 branches across 689 locations and 2,163 ATMs in the country (as of 31 March
2017). In 2018, it is the second largest private bank in India by market capitalization
after HDFC Bank.
ING Vysya Bank was a privately owned Indian multinational
bank based in Bangalore, with retail, wholesale, and private banking platforms formed
from the 2002 purchase of an equity stake in Vysya Bank by the Dutch ING Group.
This merger marked the first between an Indian bank and a foreign bank. Prior to
this transaction, Vysya Bank had a seven-year-old strategic alliance and shareholding
arrangement with erstwhile Belgian bank Banque Bruxelles
Lambert, which was also acquired by ING Group in 1998.
As of March 2013, ING Vysya was the seventh
largest private sector bank in India with assets totaling ₹54,836
crore (US$7.6 billion) and operating a pan-India network of over 1,000 outlets,
including 527 branches, which serviced over two million customers. ING Group, the
highest-ranking institutional shareholder, held a 44% equity stake in ING Vysya
Bank, followed by Aberdeen Asset Management, private equity firm ChrysCapital, Morgan
Stanley, and Citigroup, respectively.ING Vysya had been ranked the "Safest
Banker" by the New Indian Express and among "Top 5 Most Trusted
Private Sector Banks" by the Economic Times.
On 20 November 2014, in an all-stock amalgamation,
ING Vysya Bank decided to merge with Kotak Mahindra Bank, creating the fourth largest
private sector bank in India.On 1 April 2015, the Reserve Bank of India approved
the merger. On 15 May 2016 the whole merger process was completed.
Facts
about the Merger deal of Kotakand ING vysa
Date
of Announcement of deal – 20 Nov, 2014
Transaction
date – 1 Apr, 2015
Exchange
Ratio – for every 1000 shares in ING vysa Bank, 725 shares offered in Kotak Bank
(ER=Kotak:
ING vysa = .725: 1)
Ratios
Table-2
|
LIQUIDITY RATIOS
|
|
Year
|
Mar '18
|
Mar '17
|
Mar '16
|
Mar '15
|
Mar '14
|
|
Current Ratio
|
0.05
|
0.06
|
0.07
|
0.02
|
0.03
|
|
Quick Ratio
|
19.49
|
18.09
|
15.61
|
14.83
|
17.39
|
Chart-1
Interpretation:
The
current ratio increases in post merger period from Mar ’15 (2%) to Mar’16 (7%),
then there is a slight downfall in 2017 and 2018. The quick ratio shows increase
from Mar’14 (17.39) to Mar’18 (19.49)
Table-3
|
Debt coverage ratio
|
|
Mar '18
|
Mar '17
|
Mar '16
|
Mar '15
|
Mar '14
|
|
Credit Deposit
Ratio
|
87.35
|
86.04
|
86.57
|
88.99
|
92.18
|
|
Investment Deposit
Ratio
|
31.32
|
32.54
|
38.26
|
41.74
|
49.37
|
|
Cash Deposit
Ratio
|
4.69
|
4.86
|
5.07
|
5.13
|
4.68
|
|
Total Debt to Owners Fund(Total
debt/equity)
|
5.81
|
6.46
|
6.66
|
6.15
|
5.86
|
|
Financial Charges
Coverage Ratio
|
1.73
|
1.66
|
1.46
|
1.58
|
1.54
|
Chart-2
Interpretation:
credit
deposit ratio shows decreasing trend from 92.18 in Mar’14 to 87.35 in Mar ’18 .Investment
deposit ratio has also shown decreasing trend from 49.37 in Mar’14 to 31.32 in Mar’18
.Cash deposit ratio was 4.68 in mar’14, shows some increase in mar’15 and 16 and
it is 4.69 in Mar’18 .Total debts to owners fund was 5.86 in mar’14, shows some
increase in 2015 , 2016 , 2017 and it is 5.81 in mar’18.
Table-4
|
Balance sheet Ratios
|
|
Mar '18
|
Mar '17
|
Mar '16
|
Mar '15
|
Mar '14
|
|
Capital Adequacy
Ratio
|
18.22
|
16.77
|
16.34
|
17.17
|
18.83
|
|
Advances /Loans
Funds (%)
|
85.65
|
80.49
|
96.23
|
83.23
|
73.95
|
(Chart-3)
Interpretation:
Capital
adequacy ratio has not changes much it was 18.83 in Mar’14 and 18.22 in Mar’18.
Advance /loans Funds ratio shows a positive change it was 73.95 in Mar’14 and 85.65
in Mar’18.
Table-5)
|
PROFITABILITY RATIOS
|
|
Mar '18
|
Mar '17
|
Mar '16
|
Mar '15
|
Mar '14
|
|
Net Profit
Margin
|
20.68
|
19.27
|
12.75
|
19.19
|
17.13
|
|
Return on Long Term Fund (%)
|
43.84
|
53.3
|
52.62
|
58.89
|
59.62
|
|
Return on Net Worth
(%)
|
10.89
|
12.35
|
8.72
|
13.19
|
12.24
|
|
Operating margin
(%)
|
17.26
|
15.81
|
10.47
|
11.95
|
15.31
|
|
Gross profit
margin (%)
|
15.72
|
14.16
|
8.72
|
9.96
|
13.43
|
|
Adjusted cash margin (%)
|
18.43
|
17.48
|
12.51
|
17.52
|
16.4
|
Chart-4
Interpretation:
Net
profit margin was 17.13 in Mar’14 and raised to 20.68 in Mar’18. Net profit margin
showed a increasing trend except in Mar’16 where it decreased to 12.75. Return on
long term fund shows a decreasing trend from Mar’14 (59.62) to March ‘18 (43.84).
Return on net worth was 12.24 in Mar’14 and 10.89 in Mar’18. Operating margin showed
increase in 2017 and 2018 but it was decreasing in 2015, 2016. Gross profit margin
showed a increasing trend from 2014 to 2018 i.e from 13.43 to 15.72. Adjusted cash
margin was 16.4 in Mar’14 and 18.43 in Mar’18.
HYPOTHESIS:
The
following hypotheses have been framed in the present study:
1. H0: There is no significance difference in
current ratio before and after the merger.
2. H0: There is no significance difference in
Quick ratio before and after the merger.
3. H0: There is no significance difference in
credit deposit ratio before and after the merger.
4. H0: There is no significance difference in
investment deposit ratio before and after the merger.
5. H0: There is no significance difference in
Financial Charges Coverage ratio before and after the merger.
6. H0: There is no significance difference in
Capital Adequacy ratio before and after the merger.
7. H0: There is no significance difference in
Advances / Loans Funds ratio ratio before and after the merger.
8. H0: There is no significance difference in
Net Profit Margin ratio before and after the merger.
9. H0: There is no significance difference in
Return on Long Term Fund ratio ratio before and after the merger.
10. H0 :There is no significance difference in Net Worth ratio
before and after the merger.
11. H0 : There is no significance difference in Operating margin
ratio before and after the merger.
12. H0 :There is no significance difference in Gross profit
margin ratio before and after the merger.
13. H0: There is no significance difference in Adjusted cash
margin ratio before and after the merger.
T test
is employed to see whether the difference in the Key Parameters is significant or
not for Pre and Post Merger Periods. The t stat values as per “t” test at 5% significance
level in case of all the Parameters is less than the t critical two tail value,
p value less than .05, indicating that there is a significant difference in their
performance, rejecting the null hypothesis.
CONCLUSION:
Merger
increases the operation, branches and reach of Bank in wider areas. The study results
that some ratios like Net Profit margin ratio, operating margin ratio Advances/loans
funds ratio shows increase from pre merger period to post merger period. The author
concluded that credit deposit ratio in post-merger is significantly differ than
pre merger period. The ratios like current ratio, quick ratio, debt equity ratio,
Investment Deposit Ratio, Cash Deposit Ratio, Financial Charges Coverage, Capital
Adequacy Ratio, Net Profit Margin Ratio, Return on LongTerm Fund Ratio, Return on
Net Worth Ratio, Operating margin Ratio, Gross profit margin Ratio, Adjusted cash
margin Ratio are not significantly differ in post andpre merger period. The author
has finally concluded that Merger is a useful strategy, through this Banks can expandtheir
operations, serve larger customer base, increases profitability, liquidity and efficiencybut
the overall growth and financial illness of the bank can’t be solved from mergers
WEBLINKS:
1. https://www.moneycontrol.com/financials/kotakmahindrabank/ratios/KMB
2.
https://money.rediff.com/companies/Kotak-Mahindra-Bank-Ltd/14060005/ratio?src=comp_research
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Table-1