MERGER OF IDBI BANK WITH UWB (UNITED WESTERN BANK)
3/3/13
Defination of merger:The definition of merger in general and in finance can be stated as follows: In General:"Merger is an absorption of one or more companies by a single existing company." In Finance:"Merger is an act or process of purchasing equity shares (ownership shares) of one or more companies by a single existing company." 3/3/13
Different types of merger:Horizontal merger Vertical merger Conglomerate merger Market Extension Mergers Product Extension Mergers 3/3/13
Post merger IDBI bank ltd.
On October 1, 2004, IDBI converted into a Banking company (as Industrial Development Bank of India Limited) 3/3/13
United western bank (UWB) PROFILE
Chirmule.
In the year 1936, United Western Bank came into existence.In
the private sector, it is among the largest banks in our country.
United Western Bank was formed by W.Gaka Annasaheb
Two mergers, one with Union Bank of Kolhapur and another
with Satara Swadeshi Commercial Bank Limited.
branches in 9 states apart from its Zonal offices at Pune, Mumbai, Kolhapur, Nagpur and Jalgaon. 3/3/13
UWB, later acting as a private sector bank, operated 230
Todays market of idbi bank ltd
Type Industry Founded Headquarters Key people Public Banking, Financial services July 1964 Mumbai, India R M Malla (CMD) Credit cards, consumer banking, corporate banking, finance and insurance, investment banking, mortgage loans, private banking, private equity, wealth management Rs.2.91 lakh crore Rs.3.92 lakh crore. 14,000 (2012)
Products
Balance sheet size Business size Employees 3/3/13
IDBI-United Western Bank merger IDBI:
It came into force on 3rd oct in 2006. v
BUY UWB: ACCEPT
All the UWB branches have been operating as IDBI BANK LTD branches since 2006. v
This merger is different from 3/3/13 takeover of GLOBAL
v
PC-Purchase Consideration UWB shareholder,
IDBI to pay Indian rupee-Rs 28 per share to
This is at a 30% premium to its current
market price, PC at this price, work out to about Rs 150
crore 3/3/13
Synergies Ready Available Market Semi-Urban & Rural market Diversified business Deposit Mix
3/3/13
Ready Available Market
IDBI was holding
181 branches UWB gave immediate
access to +230 branches
UWB spread in 9 states ,
47 districts and 75 ATM
3/3/13
Semi-Urban & Rural market
rural area,
UWB branches are in semi-urban and in
IDBI also get exposure to agriculture
credit thought UWB
3/3/13
Diversified business IDBI was dominant in Industrial
financing,
IDBI Bank was known as IDBI ltd, after
which popular by IDBI bank
3/3/13
Deposit Mix IDBI benefited of an improved deposited
mix from,
Industries, Urban, Semi-urban, Rural, Agriculture, Other sector.
3/3/13
Impact Of Merger v Expansion v RBI Policies v Beneficial for depositors of United Western
Bank Limited v
Retained trust of public in banking industry
3/3/13
Impact Of Merger ( Cont)legal matters v Impact on
v Increased in deposit franchise of IDBI bank v Diversify the credit profile of IDBI bank v Sustain the momentum of IDBI bank v
Benefits for employees of United Western Bank Limited
3/3/13
The Fall of United Western Bank
Irregular transactions with some of its major
shareholders. (Makharia Group of companies)
Conflicts between its major shareholders
regarding the ownership of the bank.
Poor governance and inefficient management of
capital.
3/3/13
3/3/13
Challenges Faced by IDBI
The effective cost is likely to go up by another Rs 100 crore. Post-merger, its level of net nonperforming assets is likely to increase Managing and containing the level of bad loans remain a challenge for IDBI. 3/3/13
Cont,d
Employee strength issue. UWB's weaker asset quality had impact on IDBI's financial profile negatively IDBI paid premium of 30%. There will be a cultural difference in terms of integration
3/3/13
The amalgamation of UWBL with IDBI would support IDBI's growth. It was a good fit for both the banks as they come together. By filling the gaps and upgrading skills of employees the merger can be effective.
