INTRODUCTION

The Indian banking sector is currently in transition phase. While public sector banks are in process of restructuring, private sector banks are busy consolidating through mergers and acquisitions. The sector, which was considered dry in the last several years, has caught the investor fancy in expectations of changing regulations and improving business conditions due to opening up of the economy. Entry of private and foreign banks in the segment has provided healthy competition and is likely to bring more operational efficiency into the sector. The sector itself is seeing many changes in the last decade like imposition of prudential standards, greater competition among banks, entry of new private banks, etc. This paradigm shift in the Indian banking sector can be seen in terms of two dimensions: one relates to operational aspect especially performance and risk management system and the second dimension relate to structural and external or exogenous aspects. We are slowly moving from a regime of large number of small banks to small number of large banks. The new era is going to be one of consolidation around identified core competencies. Mergers and acquisitions in the banking sector are going to be the order of the day. Successful merger of many banks have demonstrated that trend towards consolidation is almost an accepted fact. Indian banks have a long way to go before they reach the size of their international counterparts. Even the biggest Indian bank, State Bank of India, is nowhere on the international scale, with assets in the range of $50billion. Absence of significant scale benefits and higher implicit costs of several services are perpetuating the poor ranking of Indian banks in the international league tables. And such a poor ranking forced Sangli bank to do merge with ICICI Bank in 2007. The present study COMPARATIVE STUDY OF FINANCIAL PERFORMANCE BEFORE & AFTER MERGER: A STUDY OF ICICI & SANGLI BANK MERGER focuses on objective to understand the merger process in banking sector, synergy effects, pre merger & post merger scenario of the banks and pros and cons of banking mergers. The finding revealed that the reasons behind mergers to expand its asset and client base and geographical coverage, acquire a poor performing bank and with the goal to head towards universal banking and to achieve size and scale of operations. In some cases, the acquired firms shareholders sometimes enjoyed abnormal returns on their equity investment after the announcement of the merger, the shareholders of the acquiring firms rarely gained significantly.

In this context, it would be essential for us to understand what mergers are:

The Main Idea One plus one makes three: this equation is the special alchemy of a merger .The key principle behind buying a company is to create shareholder value over and above that of the sum of the two companies. Two companies together are more valuable than two separate companies--at least, that's the reasoning behind merger.

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.

CASE STUDY OF ICICI & SANGLI BANK MERGER

April 19, 2007

RBI approves amalgamation of Sangli Bank with ICICI Bank

Mumbai: The Reserve Bank of India has approved the amalgamation of Sangli Bank Limited with ICICI Bank Limited (NYSE: IBN). The effective date of the amalgamation is April 19, 2007. The amalgamation has already been approved by the Boards of Directors and shareholders of both banks. The amalgamation is expected to be beneficial to the shareholders of both entities. ICICI Bank will seek to leverage Sangli Banks network of over 190 branches and existing customer and employee base across urban and rural centers in the rollout of its rural and small enterprise banking operations, which are key focus areas for the Bank. The amalgamation would also supplement ICICI Banks urban distribution network. The amalgamation would enable shareholders of Sangli Bank to participate in the growth of ICICI Banks strong domestic and international franchise. The amalgamation will also provide new opportunities to Sangli Banks employees, and give its customers access to ICICI Banks multi-channel network and wide range of products and services.

Sangli bank is merged with now ICICI bank a leading bank in India....so now will called as ICICI bank Sangli ....

About Sangli Bank: Sangli Bank is an unlisted private sector bank headquartered at Sangli in the state of Maharashtra, India. At March 31, 2006, Sangli Bank had deposits of Rs. 2,004 crore, advances of Rs. 888 crore, net NPA ratio of 2.3% and capital adequacy of 1.6%. In the year ended March 31, 2006, it incurred a loss of Rs. 29 crore. Sangli Bank has 198 branches and extension counters, including 158 branches in Maharashtra and 31 branches in Karnataka. Approximately 50% of the total branches are located in rural and semi-urban areas and 50% in metropolitan and urban centers.

About ICICI Bank: ICICI Bank is Indias largest bank by market capitalization and the second-largest in terms of total assets. At December 31, 2006, ICICI Bank had total assets of Rs. 295,832 crore. In the nine months ended December 31, 2006, it made a profit after tax of Rs. 2,285 crore. It has over 750 branches and extension counters and over 3,270 ATMs. ICICI Bank offers a wide range of financial products and services directly and through subsidiaries in the areas of life and general insurance, asset management and investment banking. Its shares are listed on the Bombay Stock Exchange Limited and the National Stock Exchange of India Limited and its American Depositary Shares are listed on the New York Stock Exchange.

Main reasons behind merger of ICICI & Sangli bank:

To leverage Sangli Bank Access to multi-channel network For wide range of products and services For the strong growth of both concerns

REVIEW OF LITERATURE
Ismail, Tariq and Radwa;[2005] disputed regarding the factors that affect the reported performance, where eight factors might affect performance as follows: (1) method of payment (Cash or Stock), (2) book to market ratio, (3) type of merger or acquisition transaction (related or unrelated), (4) cross-border versus domestic M&A, (5) mergers versus tender offers, (6) firm size, (7) macro economic conditions, and (8) time period of transaction. Managers should be aware of the impact of such factors on post-merger corporate performance to accurately evaluate proposed offers of mergers take sound decisions.

Croson, Gomes, Mcginn and Noth; [2006] insisted that the ultimate goal of a merger is to realize synergies, but how the synergies are divided between the involved companies is an open question that is critical for identifying winners and losers in mergers. Experimental method is used to investigate these questions. This research focuses on the bargaining...

Schulz, Norbert; [2007] revealed that both M&A are instruments for growth and competitive advantage. Therefore they are fundamental to each firms competitive strategy. The process of innovation and the process of mergers - are intimately connected. The impact of mergers on innovation can only be rigorously assessed, if the converse direction of influence - mergers caused by innovation - is accounted for. Therefore this article tries to take a balanced view on both processes and to point out links between them.

Thuy, Lapumnuaypon; [2008] emphasized as expert advisory are sought in M&A activities to facilitate the undertaking and maximize the value of the transaction. Being an area of limited research, it is thus valuable to investigate what M&A advisory firms view as critical success factors to the projects they undertake. Consequently, the research question of What are the critical success factors for merger & acquisition projects in the view of merger & acquisition advisory firms has been raised. The findings from this research contribute valuable new knowledge to both researchers and practitioners in both project management and M&A fields, while facilitating the achievement of success in M&A.

Elumilade & Oladepo; [2009] filled the gap by investigating the effects of mergers on the efficiency of financial intermediation in the banking industry. This is carried out by estimating a model that incorporates some key financial variables in a model that regress interest rates on these financial variables. Two models are estimated: one for the lending activity and the other is for the deposit activities. The consolidation programme-induced mergers in the banking industry had improved competitiveness and efficiency of the borrowing and lending operations of the banking industry.

Chummar; [2010] revealed that the various players in the banking arena have already begun to feel the heat of the intense competition. M&A is one among the various modes of restructuring restored by banks to ensure a better growth prospect. It is believed that by undergoing such M&A deals banks will enable them to emerge stronger, increase their earning capacity and strengthen their capital base.

Dr. Ibrahim; [2010] investigated whether the merger/amalgamation of Regional Rural Banks in India, undertaken in 2005-06 has helped in improving their performance or not. Several committees have emphasized the need to improve the performance of these banks which play an important role in the rural credit market in India. The study is diagnostic and exploratory in nature and makes use of secondary data. The study finds and concludes that performance of rural banks in India has significantly improved after amalgamation process which has been initiated by the Government of India.

NEED OF STUDY

From the review of literature, it is found that no specific study has been carried out on merger of ICICI & SANGLI BANK. So, this study is an attempt to analyze the impact of merger on financial performance of both banks in terms of benefits to the shareholders and value of firm.

OBJECTIVES OF THE STUDY To evaluate the pre merger financial performance of the acquirer and target entities. To evaluate the post merger financial performance of the acquirer and target entities. To know the effect on NPAs of both banks during pre- merger & post merger.

Period of Study:
Three years before merger and three years after merger is considered.

Sources of Data:
Secondary data from websites, research studies, journals and personal websites of ICICI & Sangli Bank.

Interpretation Instruments:
Ratio analysis and Trend analysis

PLAN OF ANALYSIS

After having collected the financial data related to the merger entity, analysis was done by calculating the various valuation ratios and other financial calculations. This helped to find out the pre merger and post merger financial position of the entities. Trend analysis was done to find out the effect of merger.

LIMITATIONS OF STUDY Since the study was done by using the case study method and depending more on the secondary data, the findings may not be accurate. Unavailability of the financial data of entities. It is difficult to use the results to generalize to other cases.

CURRENT RATIO

PRE-MERGER
TABLE 1.1 Current Ratio of ICICI Bank

Year 2004-2005 2005-2006 2006-2007

Current Ratio 0.06 0.08 0.09

INTERPRETATION: In case of ICICI Bank pre merger (Table 1.1) it can be noted down that current ratio was increasing during the study period. In 2004-05 it was 0.06 and in 200506 it went on high and became 0.08, in 2006-07, when ICICI Bank announced merger with Sangli Bank its current ratio was 0.09.

TABLE 1.2 Current Ratio of Sangli Bank Year 2004-2005 2005-2006 2006-2007 Current Ratio
0.09 0.04 0.09

INTERPRETATION: The standard norm is 2:1. But in case of Sangli Bank (Table1.2) the ratio fluctuated throughout the research period and it moved from 0.09 in 2004-05 to 0.04 in 2005- 06. As this ratio actually shows a very low trend it could be concluded that the bank had not maintained a reasonable level of the liquidity position.

POST MERGER

TABLE 1.3 Current Ratio of ICICI Sangli Bank Year 2007-2008 2008-2009 2009-2010 Current Ratio 0.11 0.13 0.14

INTERPRETATION: A ratio equal or near to the rule of thumb of 2:1 is considered to be satisfactory. And in above calculations of ICICI Sangli Bank-Post merger (Table1.3), it can be seen that although it is not according to the rule of thumb but its increasing year by year. However the rule of 2:1 should not be blindly followed while making interpretation of the ratio, because firms having less than 2:1 ratio may be having a better liquidity than even firms having more than 2:1 ratio. This is so because the current ratio measures only the quantity of current assets and not quality of current assets.

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CAPITAL ADEQUACY RATIO

PRE-MERGER
TABLE 2.1 Capital Adequacy Ratio of ICICI Bank Year 2004-2005 2005-2006 2006-2007 Capital Adequacy Ratio 12.52 13.35 11.69

INTERPRETATION: Capital Adequacy Ratio (CAR) propounds the relationship of banks capital with bank's risk. It is also helpful to check strengthen, soundness and stability of the banking system. In the above case of ICICI bank-pre merger (Table2.1) CAR was only 12.52 in 200405, although it increased in 2005-06 by 13.35 but this flow hadnt continued in 2006-07 the CAR came down by 11.69. Thats why ICICI Bank decided to do merger.

TABLE 2.2 Capital Adequacy Ratio of Sangli Bank Year 2004-2005 2005-2006 2006-2007 Capital Adequacy Ratio
12.56 09.23 08.42

INTERPRETATION: Table2.2 shows Sangli Banks CAR, which is very crucial. It is in continued declined stage. In 2004-05 it is 12.56 and declined by 09.23 in 2005-06. And in 2006-07 is only 08.42, that become the cause of ICICI & Sangli Bank merger.

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POST MERGER

TABLE 2.3 Capital Adequacy Ratio of ICICI Sangli Bank Year 2007-2008 2008-2009 2009-2010 Capital Adequacy Ratio 13.97 15.53 19.41

INTERPRETATION: As per (Table2.3), after merger in 2007-08 it is 13.97 and next year it progresses by 15.53 and in 2009-10 it was 19.41. This ratio indicates the capacity of bank to suffer credit risk, operational risk, etc.

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CASH DEPOSIT RATIO

PRE-MERGER
TABLE 3.1 Cash Deposit Ratio of ICICI Bank

Year 2004-2005 2005-2006 2006-2007

Cash Deposit Ratio 4.92 5.77 6.99

INTERPRETATION: ICICI Bank pre merger Table3.1 indicates increased Cash Deposit Ratio, but the level of this ratio is too much low. In 2004-05 the ratio is 4.92. In 2005-06 it is 5.77 and it is 6.99 in 2006-07. As this ratio actually shows a very low trend it can be concluded that the bank had not maintained a reasonable level of cash deposit ratio.

TABLE 3.2 Cash Deposit Ratio of Sangli Bank Year 2004-2005 2005-2006 2006-2007 Cash Deposit Ratio
6.85 5.42 3.12

INTERPRETATION: In case of Sangli Bank pre merger (Table3.2) trends of CDR, it can be noted that the bank hadnt such a level of ratio, it is decreasing year by year. In 2004-05 the CDR is 6.85 that is almost equal to ICICI bank but this level isnt be maintained onwards. In 2005-06 it reduced by 5.42 and in 2006-07 the CDR of bank is only 3.12, that is too much low to survive in an economy. So, Sangli Bank took the decision to merge with ICICI Bank in 2007.
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POST MERGER

TABLE 3.3 Cash Deposit Ratio of ICICI Sangli Bank

Year 2007-2008 2008-2009 2009-2010

Cash Deposit Ratio 10.12 10.14 10.72

INTERPRETATION: The impact of merger can be noted down from the Table 3.3. It can be seen that initially CDR increased with a very rapid rate. Before merger it is at the average of 3.89 and after merger in 2007-08 it becomes 10.12, which shows favourable impact of merger, but the thing is that in 2008-09 & in 2009-10 it is 10.14 &10.72 respectively, which signals a slow progress.

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CREDIT DEPOSIT RATIO

PRE-MERGER
TABLE 4.1 Credit Deposit Ratio of ICICI Bank Year 2004-2005 2005-2006 2006-2007 Credit Deposit Ratio 85.58 87.56 83.83

INTERPRETATION: Credit Deposit Ratio finds out how much the firm is efficient to take in repaying its trade creditors. The credit deposit ratio of ICICI bank (Table 4.1) is fluctuating during the study period. In 2004-05 it is 85.58 and in 2005-06 it went on high by 87.56, but in 2006-07 it again reduced and come at the point of 83.83%.

TABLE 4.2 Credit Deposit Ratio of Sangli Bank Year 2004-2005 2005-2006 2006-2007 Credit Deposit Ratio
85.46 84.75 77.84

INTERPRETATION: The credit deposit ratio of Sangli bank (Table 4.2) during study period of pre merger moved from 85.46 in 2004-05 to 84.75 in 2005-06. And in 2006-07 it again reduced by 77.84.This credit deposit ratio indicated that the Bank had not taken carious steps for mobilizing deposits.
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POST MERGER

TABLE 4.3 Credit Deposit Ratio of ICICI Sangli Bank Year 2007-2008 2008-2009 2009-2010 Credit Deposit Ratio 84.99 91.44 90.04

INTERPRETATION: From the above (Table 4.3) it can be noted that before merger the average of ratio is 83.63% and after merger it went on high & become 90.04% in 2009-10 that indicates full efficiency of concern in credit depositing.

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OPERATING PROFIT RATIO

PRE-MERGER
TABLE 5.1 Operating Profit Ratio of ICICI Bank Year 2004-2005 2005-2006 2006-2007 Operating Profit Ratio 29.56 46.91 58.74

INTERPRETATION: In (Table 5.1) it is found that both the banks had increased operating profit ratio. ICICI bank had 29.56 % operating profits in 2004-05 that increased in 2005-06 by 46.91% and in 2006-07 these profits are 58.74%.

TABLE 5.2 Operating Profit Ratio of Sangli Bank Year 2004-2005 2005-2006 2006-2007 Operating Profit Ratio
22.85 24.69 31.32

INTERPRETATION: As(Table5.2) Sangli bank also had increased operating profit ratio but it is not too enough to survive in a competition. In 2004-05 this ratio is 22.85 and in 2005-06 it is only 24.69. In 2006-07 the ratio is 31.32%. So, this can be concluded that Sangli bank was in a slow pause condition at that time. To survive in hard competition it had to merge with ICICI bank.
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POST MERGER
TABLE 5.3 Operating Profit Ratio of ICICI Sangli Bank Year 2007-2008 2008-2009 2009-2010 Operating Profit Ratio 79.61 89.25 97.32

INTERPRETATION: After merger (Table 5.3) there is a magical impact on the Operating Profits of the concern. In 2004-05 the average ratio is only 26.20%, After merger in 2007-08 the profits has increased very high (79.61) and in 2008-09 the ratio is 89.25% .In 2009-10 the Operating Profits are 97.32%, that indicates a very favourable impact of merger.

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NET PROFIT MARGIN

PRE-MERGER
TABLE 6.1 Net Profit Margin of ICICI Bank

Year 2004-2005 2005-2006 2006-2007

Net Profit Margin 15.22 14.12 10.81

INTERPRETATION: In case of ICICI pre merger (Table 6.1), net profit margin was in declining stage. In 2004-05 it was 15.22 that reduced in 2005-06 by 14.12 and by further reducing; in 2006-07 it was 10.81.

TABLE 6.2 Net Profit Margin of Sangli Bank Year 2004-2005 2005-2006 2006-2007 Net Profit Margin
-10.12 -3.00 -2.57

INTERPRETATION: (In Table 6.2)This ratio was negative in 2004-05, 2005-06, and 2006-07 of Sangli Bank. It was very much fluctuating for the entire study period and was very lowing during these three years. It indicated that the overall performance is low for the program of the Bank. So, in this negative gains position the Sangli bank think to have better to merge with ICICI Bank.

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POST MERGER

ICICI Sangli Bank- Post Merger- Net Profit Margin: TABLE 6.3

Year 2007-2008 2008-2009 2009-2010

Net Profit Margin 10.51 9.74 12.17

INTERPRETATION: After doing the pre merger study of both banks, it can be said that both the concerns need to merge for increasing their synergy. And after merger (Table 6.3) they even get this synergy. Although net profit margin 10.51 in 2007-08 reduced by 9.74 in 2008-09, but it again went on high and in 2009-10 it is 12.17, that is about 4% more than previous year.

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OPERATING EXPENSE / TOTAL INCOME RATIO

PRE-MERGER
TABLE 7.1 Operating Expense / Total Income Ratio of ICICI Bank

Year 2004-2005 2005-2006 2006-2007

Operating Expense / Total Income Ratio 22.51 25.86 28.87

INTERPRETATION: Table 7.1 shows that in the pre merger period ICICI bank had to bear increased operating expense ratio. The ratio is 22.51% in 2004-05 and in 2005-06 it is 25.86, which is more than previous year. It had again increased by 28.87% in 2006-07. Then bank decided to do merger.

TABLE 7.2 Operating Expense / Total Income Ratio of Sangli Bank

Year 2004-2005 2005-2006 2006-2007

Operating Expense / Total Income Ratio

42.03 51.63 62.12

INTERPRETATION: (In Table 7.2) Sangli bank also had to face the problem of increased operating expenses. In 2004-05 the ratio is 42.03%, which increased in next year 2005-06 by 51.63%. And in 2006-07 it again went on high and the ratio was very high by 62.12%.

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POST MERGER
TABLE 7.3 Operating Expense / Total Income Ratio of ICICI Sangli Bank

Year 2007-2008 2008-2009 2009-2010

Operating Expense / Total Income Ratio 26.00 26.22 29.05

INTERPRETATION: Next table (Table 7.3) of ICICI Sangli bank also presents the increasing Operating Expenses means merger couldnt be able to overcome the problem of increasing operating expenses, but after merger the level of operating expense ratio reduced. It is still beneficial only for Sangli bank not for ICICI bank.

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DIVIDEND PAYOUT RATIO NET PROFIT

PRE-MERGER
TABLE 8.1 Dividend Payout Ratio Net Profit of ICICI Bank

Year 2004-2005 2005-2006 2006-2007

Dividend Payout Ratio Net Profit 34.85 34.08 33.89

INTERPRETATION: Dividend Payout Ratio is calculated to find the extent to which earnings per share have been retained in the business. It is an important ratio because ploughing back of profits enables a company to grow and pay more dividends in future. In the above calculating ratios (Table 8.1) can be seen that before merger ICICI Bank had a fine dividend payout ratio that is 34.85 in 2004-05 and it was 34.08 in 2005-06. But in 2006-07 it reduced down by 33.89. TABLE 8.2 Dividend Payout Ratio Net Profit of Sangli Bank Year 2004-2005 2005-2006 2006-2007 Dividend Payout Ratio Net Profit
28.63 24.39 23.26

INTERPRETATION: In case of Sangli Bank pre merger (Table 8.2) it indicates low dividend payout ratio. In 2004-05 it was 28.63and in 2005-06 was 24.39, which again came down in 2006-07 by 23.26. That condition forced Sangli bank to do merger.
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POST MERGER

TABLE 8.3 Dividend Payout Ratio Net Profit of ICICI Sangli Bank Year 2007-2008 2008-2009 2009-2010 Dividend Payout Ratio Net Profit 33.12 36.60 37.31

INTERPRETATION: After merger (Table 8.3) ICICI Sangli bank has a favourable impact on its dividend payout ratio. The table indicates that in 2007-08 this ratio was 33.12 and in 2008-09 it increased by 36.60 and by further growth in 2009-10 the ratio is 37.31. This increased level of dividend payout ratio is beneficial both of the concern as well as the shareholders.

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EARNINGS PER SHARE

PRE-MERGER
TABLE 9.1 Earnings per Share of ICICI Bank Year 2004-2005 2005-2006 2006-2007 Earnings Per Share 26.54 28.55 34.59

INTERPRETATION: Table 9.1 of ICICI bank pre merger shows that banks earning per share went on high during the study period. It move 28.55/- in 2005-06 from 26.54/- in 2004-05.and in 2006-07 the earning per share is increased by 34.59/-. So, it can be concluded that ICICI bank was in almost strong condition during the merging period.

TABLE 9.2 Earnings per Share of Sangli Bank Year 2004-2005 2005-2006 2006-2007 Earnings Per Share
34.46 28.56 26.42

INTERPRETATION: (In Table 9.2) The earnings per share of the Sangli bank worsened year after year throughout the study period and were not sufficient. It was 34.46 in 2004-05 and it moved 26.42 in 2006-07 from 28.56 in 2005-06. It indicated that the earning per share of the Bank was not sufficient to meet the value to shareholders.
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POST MERGER

TABLE 9.3 Earnings per Share of ICICI Sangli Bank

Year 2007-2008 2008-2009 2009-2010

Earnings Per Share 37.37 33.76 36.10

INTERPRETATION: After merger (Table 9.3) earnings per share is fluctuated it was 37.37 in 2007-08 and in 2008-09 it reduced by 33.76 but it again increased in 2009-10 by 36.10. This shows a positive impact of merger. It creates synergy both for the concern as well as shareholders.

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EFFECT ON NPA

PRE-MERGER
TABLE 10.1 NPA of ICICI Bank
Year 2004-2005 2005-2006 2006-2007 Gross NPA 34.32 22.73 41.68 Net NPA 19.83 10.75 20.19

INTERPRETATION: Net NPA of ICICI bank (Table 10.1) shows that in 2004-05 it was 19.83 which move by 10.75 in 2005-06. And in 2006-07 it was 20.19 that is almost double from previous year. So, pre merger the net NPA of ICICI bank was very much fluctuating.

TABLE 10.2 NPA of Sangli Bank Year 2004-2005 2005-2006 2006-2007

Gross NPA 63.32 60.52 65.77 Net NPA 40.56 41.65 43.98

INTERPRETATION: And in case of Sangli bank pre merger net NPA (Table10.2) it was too high that profitability of the bank was very low due to the heavy over dues and low rate of recovery. In 2004-05 the net NPA was 40.56 that moved 43.98 in 2006-07 from 41.65 in 2005-06. It can be concluded that the Sangli bank was suffering by losses from three years during the study period.

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POST MERGER
TABLE 10.3 NPA of ICICI Sangli Bank

Year 2007-2008 2008-2009 2009-2010 INTERPRETATION:

Gross NPA 75.88 98.03 96.27

Net NPA 35.64 46.19 39.01

After merger net NPA of ICICI Sangli bank (Table 10.3) 35.64 in 2007-08 and in 2008-09 it was 46.19 which present the increased level of nonperforming assets, but in 2009-10 this level of NPA reduced and become 39.01. But it can be concluded that the NPA still fluctuating.

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TRENDS
As this study interpretive various types of ratios of ICICI & Sangli Bank- pre merger and post merger from (2004-10) and after interpretation the trends in six years can be observed. In the pre merger period The Sangli bank Ltd. had not been maintained a reasonable level of solvency position and was unable to cover it medium and short term obligations. The financial position of this bank analyzed by ratio analysis techniques and it is found that the position solvency, liquidity and profitability are not satisfactory due to these ratios not up to the standard level. The credit deposits ratio was not satisfactory indicating a lower deposit mobilization, current ratio of Sangli bank indicating less and unsystematic utilization of deposits meant for not current operations. Profitability of the bank was very low due to the heavy over dues and low rate of recovery. The Sangli bank also suffered by losses from three years during the pre merger study period. The net worth of Sangli Bank was decreased year after year and net capital ratio was less than unity indicating the assets of the bank were not sufficient to cover its all liabilities. It is also mentioned that if effective steps would not be taken by Sangli bank within the limit of time to recover these heavy over dues it might to be lead the virtual collapse movement. So, to resist this collapse Sangli bank merged with ICICI Bank in 2007. And after merger First talk about the current ratio of ICICI Sangli Bank, although it is not according to the rule of thumb, but it is increasing year by year and second is capital adequacy ratio it went on high after merger and in 2010 it was 19.41 which show a positive effect of merger. Then the cash deposit ratio, which is very valuable for a bank and can be analysed from the trends of ICICI bank that initially was only 4.92 and after merging now it is 10.72, which is more favourable. Credit deposit ratio also went on high year by year its only 85.58% in 2004-05 and in 2010 it was 90.04% Financial efficiency of a concern can also be noted down by the profits of that concern, so, this study revealed some profitability ratios, which also shows favourable effect of mergers like operating profit ratio, which has a very magical effect. It was only and only 29.56% in 2004-05 of ICICI bank and it was 97.32% in 2009-10(after merging).likewise, net profit margin also increased but is not in a stable position.
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A merger has also affected share holders, so this study dividend payout ratio to note downs its synergy. In 2004-05 it was only 34.85% of ICICI bank and 28.63% of Sangli bank but after merging the dividend payout ratio became 37.31% Earnings per share affect both the concern and share holders because both get profits from EPS. It can be said that there is a very positive effect of merger of ICICI and Sangli bank because in 2004-05 the EPS was only 26.54/- in case of ICICI bank. The earnings per share of the Sangli bank worsened year after year throughout the pre merger study period but after merger it went on high and it was 36.10/- in 2009-10. And NPA is moderately affected by the merger, it is still fluctuated. So, by doing trend analysis it can be concluded that the merger of ICICI and Sangli bank has a favourable effect.

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FINDINGS
Findings of the study have been summarized as follows: The reasons behind the merger activity in the case studied above are to expand its asset and client base and geographical coverage, acquire a poor performing bank (like Sangli bank ) and with the goal to achieve size and scale of operations. During the Pre merger study period ICICI Bank was in strong position but Sangli Banks financial condition was very critical. After merger ICICI Sangli Bank enjoyed abnormal returns on their investments like, Dividend Payout Ratio, Operating Profit Ratio & Capital Adequacy Ratio Show favourable impact of merger. Some ratios are still fluctuating after merger like, Earning per Share, Net Profit Margin & Non Performing Assets. The acquiring banks are, in general, more efficient and profitable than the acquired banks .e.g. ICICI & Sangli Bank. So, ICICI Bank be a leverage for Sangli Bank.

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CONCLUSION
In developed economies, corporate mergers and amalgamations are a regular feature where hundreds of mergers take place every day. In India, too mergers have become a corporate game today. The study of ICICI and Sangli bank merger concludes that bank performance increases after merger. Sangli Bank that was almost in the declining stage during the period of 2004-2007, again stands and gets synergies after merged with ICICI Bank.

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BIBLIOGRAPHY

ARTICALS:
Dr. Ibrahim M. Syed [October 2010] Performance Evaluation of Regional Rural Banks in India International Business Research Vol. 3, No. 4; pp-203-211 Chummar; Mathew, John & Dr. Raju G. [June 2010] Mergers in the banking sector a case study Of HDFC & Times Bank. International Business Research Vol.6, No.5; pp-107-112 Elumilade; Oladepo, David [May2010] Mergers & Acquisitions and Efficiency of Financial Intermediation International journal of business and management Vol. 5, No. 5; pp-201-210
Ismail; Tariq, Hassaneen and Magdy, Radwa [2005] Linking Corporate Performance

to Mergers and Acquisitions Euro journals Vol. 11, No. 6; pp-89-99. Schulz and Norbert [March 2007] The Impact of Mergers on Innovation Euro journals Vol. 7, No. 6; pp-1-39.

WEB PORTALS: www.financialexpress.com/.../sangli-bank...icici-bank/186137/ - United States

www.scribd.com Business/Law Finance pratyush.instablogs.com/.../icici-banks-merger-with-sangli-bank-reaches-in-finalstage/ www.financialexpress.com/.../sangli-bank...icici-bank/.../2 - United States http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=2247&Mode=0 www.wisegeek.com/what-is-a-merger.htm www.investorwords.com/3045/merger.html moneyterms.co.uk/merger/ management4you.blogspot.com/.../merger-and-acquisition.html www.businessweek.com/managing/.../ca2010121_103369.htm http://www.svtuition.org/2010/05/capital-adequacy-ratio-wiki.html http://www.isrj.net/March_2011/032.pdf

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BOOKS:
Pandy I M, Financial Management, Vikas Publication House Pvt. Ltd., 10th Edition Khan and Jain, Financial Management, New Delhi, 7th Edition Tata McGraw-Hill Publishing Co. Ltd.,

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ANNEXURE

LIST OF ABBREVIATIONS:

M&A: Merger and Acquisition ICICI: Industrial Credit and Investment Corporation of India EPS: Earning Per Share NPA: Non Performing Assets CAR: Capital Adequacy Ratio CDR: Cash Deposit Ratio

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