A STUDY ON MERGE OF SBI AND ITS ASSOCIATES

BY
K.SURENDRA REDDY (162510024)

REVIEW OF LITERATURE:

Some researches have been conducted on this merge of sbi and its associates
and I also consider research papers related to merges of other banks in indian
banking system and performance of those banks related to pre and post merge.

Bharat Khurana (May 2017) analyzed the merge of sbi with its 5 associates
banks and bharatiya mahila bank.the focus this paper has been placed on
reasons of this merger and effects of this merger has also been discussed.he
concluded that in view that profitability of SBI was going down, and it
needed reconstruction, this step of merger seems to be a smart step. However,
profitability of the bank after merger has fallen by approximately Rs. 3000
crore. This was mainly because of accumulated losses of associate banks and
this bold steps have effects in long run.

Dr. Jayashree R Kotnal (june 2016) studied the The economic impact of
merger and acquisition on profitability of SBI.this paper explore various
motives of merger in Indian banking industry.This includes various aspects of
bank mergers. It also compares pre and post-merger financial performance of
merged banks with the help of financial parameters like, Gross Profit margin,
Net Profit margin, operating Profit margin, Return on Capital Employed,
Return on Equity, and Debt Equity Ratio. This performance being tested on
the basis of two grounds i.e., Pre-merger and Post- merger. this paper
concluded that Mergers and Acquisition is a useful tool for the growth and
expansion in any Industry and the Indian Banking Sector is no exception. It is
helpful for the survival of the weak banks by merging into the larger bank In
case SBI there is no significant improvement in the performance after the
merger as the merger was mainly in the interest of the public. In the initial
stage, after merging, there may not be a significant improvement due to
teething problems but later they may improve upon.

Prof. Ritesh Patel (dec 2014) studied the Pre-Merger and Post-Merger
Financial & Stock Return Analysis: A Study with reference to selected Indian
Banks. For this purpose, six banks have been selected whose merger is done
in duration of 2006-2008. Study is carried out by comparing various financial
parameters. It analyze the financial strength of the selected Indian Banks on
the basis of key financial ratios and examine the effects of merger on equity
shareholders wealth .This study shows the impact of M & A in the Indian
banking sector and researcher took two cases for the study as sample examine
that merger led to a profitable situation or not. For this a comparison betwe.en
pre and post-merger performance in terms of net profit margin, return on net
worth, return on long term fund and return on assets. public sector banks get
more profits than compared to private sector banks. Overall impact of merger
and acquisition is positive on the Indian banking sector.

Dr. Veena K.P and Prof. S.N. Patti,(dec 2016) studied about Financial
Performance Analysis of Pre and Post Merger in Banking Sector: A Study
with Reference To ICICI Bank Ltd. This paper evaluates the financial
performance of the ICICI bank such as, profitability ratio, liquidity ratio,
leverage ratio,growth ratio, net profit margin, ROE, ROA, debt equity ratio,
current ratio, quick ratio, cash ratio,debt ratio, interest coverage ratio etc. the
purposes of measure the performance of ICICI bank they used different ratios
such as, profitability ratio,liquidity ratio, leverage ratio and growth ratios, this
results shows banks are able to performance better after merger with other
banks. Finally in this study post merger performance standards are better
compared to the pre merger performance standards therefore post- merger
movement as well as impact of merger on acquiring entity i.e. ICICI Bank
Ltd.
Dr. Anupam Mitra(2014) studied on Indian Banking Industry Performance in
Pre and Post Merger and Acquisition. This paper was to explore various
reasons of merger in Indian banking industry. It also compares pre and post
merger financial performance of merged banks with the helps of financial
parameters like, Gross Profit ratio, Net Profit ratio, operating Profit ratio,
Return on Capital Employed, Return on Equity, and Debt Equity Ratio. To
analyze the impact of merger paired t-test was applied to the various financial
ratios for before and after merger data.it selects merges of three indian banks
i.e Bharat Overseas Bank &indian Overseas Bank ,Centurian Bank of Punjab
&HDFC Bank, Bank of Rajasthan &ICICI Bank .this paper concluded that
Merger is the useful tool for growth and expansion in Indian Banking Sector.
It is helpful for survival of weak banks by merging into larger bank.it achieve
significant growth and minimize the expenses.

Dr.padmasani & shobanageetha.k (nov 2014) studied about impact of merger

on financial performance of selected indian banks. this paper attempts to
effectively analyze the financial performance of the selected indian banks
using ratio under 8 parameters like profitability, efficiency ,asset quality
liquidity, leverage, productivity, tax consideration ,risk reduction .mergers are
very important business strategy ,the real impact of merger depends on
business and economic environment of the banks. the result of this study
clearly reveal that merger has positively affected the federal bank, pnb, icici
and iob in achieving the motives of profitability ,efficiency ,asset quality,
liquidity, leverage, productivity, tax consideration, risk reduction.

Research Gap :

Merges of sbi and its associates happened in three times .i.e in 2008,2010 and
2017.the previous researches mainly highlights theoretically i.e reasons and
effects of this merge . pratically there is no analytical data about that.so,this
research intends to focus on analyzing the pre and post merger financial
performance of the sbi bank and comparing the results that those results are
fulfill the reasons of the merger or not.
Objectives of the study :

1. analyze the pre and post merger financial performance of the sbi bank.
2. comparing the post merger results fulfill the reasons of the merger or not.

Hypothesis of the study:

Null (H0): There is no significant difference between pre-merger and post-

merger financial performance of sbi bank ..
Alternative (H1): There is a significant difference between pre-merger and
post-merger financial performance of sbi bank .
Null (H0): There is no relation between post-merger financial performance
and reasons of the merger of sbi bank..
Alternative (H2): There is a relation between post-merger financial
performance and reasons of the merger of sbi bank .

Research Methodology :

Methodology is the way to solve the research problem systematically. In this

study we have selected SBI bank for analysis of data. The sources of
secondary data were collected from Annual reports of sbi bank. The
information for this study is gathered for the time of 2012-13 to 2017-18. For
the purpose data analyze applied group or descriptive statistics, independent
sample T-test to known the significant relationship between two variables and
also to prove the hypotheses of the study to measure the reliability of data.

Gross Profit ratio, Net Profit ratio, operating Profit ratio, Return on Capital Employed, Return on Equity,
and Debt Equity Ratio
 Gross Profit margin, Net Profit
margin, operating Profit margin, Return on Capital Employed, Return on Equity, and Debt Equity
Ratio.

Profitability Ratio Pre-Merger Post-Merger

Net Profit Margin 7.21 7.54
Return on Long Term Fund 88.14 126.72
Return on Net Worth 7.15 10.78
Return on Assets
profitability ratio, liquidity ratio, leverage ratio,
growth ratio, net profit margin, ROE, ROA, debt equity ratio, current ratio, quick ratio, cash
ratio,
debt ratio, interest coverage ratio etc