STRATEGIC MOVE OF ICICI BANK: A STUDY ON MERGER OF ICICI BANK AND BANK OF RAJASTHAN

Abstract

Changing is the regulation of nature. Any business organization undergoes change on a continuous basis, technically termed as Corporate Restructuring. It can be defined as a strategy to achieve faster growth, desired capital structure and change in the ownership and control of company. In the present scenario, business organization undertakes changes to increase their cutting edge over the competition and enhance their leadership positions The International Banking scenario has shown major changes in the past few years in terms of the Mergers and Acquisitions. Due to the financial system deregulation, entry of new players and products with advanced technology, globalization of the financial markets, changing customer behavior, wider services at cheaper rates, shareholder wealth demands etc., have been on rise. 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. This study shows the impact of Mergers and Acquisitions in the Indian Banking sector and this cases have been taken for the study as sample to examine as to whether the merger has led to a profitable situation or not. For this purpose, data from the financial statements of both the banks for the year 2008-2009-2010 for pre-merger and 2011-2012-2013 is taken and the profitability ratios are calculated, for a comparison between pre and post-merger performance in terms of Operating Profit Margin, Net Profit Margin, and Return on Assets, Return on Equity, Earning per Share, Debt Equity Ratio, Dividend Payout Ratio and Market Share Price. In case of, ICICI Bank Net Profit and Return on Assets have showed a considerable improvement after the merger except others which shows an improvement but not considerable. But as per the “t” test carried out on the means of the above data/ratios for a 95% confidence limit, it is found that there is a significant difference between the pre and post- merger value of Net Profit and the Return on Assets. Whereas in case of other values of ratios no significant difference observed.