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Merger between HDFC Bank &Centurion Bank of Punjab

MBA 2009-12 Group 1

Debojyoti Guha (16)

Poulami Chakraborty (22)

Prasenjit Roychoudhury(25)

Sarup Paul(32)

Subhajit Ghosh (39)

Suman Chakraborty (44)

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Agenda

Background

History of HDFC bank

History of Centurion Bank of Punjab

Environmental factors

Context of Merger

Challenges towards Merger

Merge Financials

Outcome of the merger

Learning from the merger

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Background

The Reserve Bank of India sanctioned theScheme of Amalgamation of Centurion Bank ofPunjab Ltd. with HDFC Bank Ltd in exercise of thepowers contained in Sub-section (4) of Section 44A

of the Banking Regulation Act, 1949. All branches of CboP => branches of HDFC Bank

Nationwide network of 1,167 branches

Deposit base of around Rs. 1,22,000

Net advances of around Rs. 89,000 crores

Balance sheet size would be over Rs. 1,63,000crores

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Background

History of HDFC bank

History of Centurion Bank of Punjab

Environmental factors

Objectives of Merger

Challenges towards Merger

Merger financials

Outcome

Learning

Agenda

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1994- HDFC Bank was incorporated by HousingDevelopment Finance Corporation Limited (HDFC),India's largest housing finance company

2000-Times Bank Limited (owned by Bennett, Coleman& Co. / Times Group) was merged with HDFC Bank

Ltd. This was the first merger of two private banks in India.

Shareholders of Times Bank received 1 share of HDFCBank for every 5.75 shares of Times Bank.

2008 - HDFC Bank acquired Centurion Bank of Punjab

HDFC Bank

Source : Wikipedia

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Background

History of HDFC bank

History of Centurion Bank of Punjab

Environmental factors

Objectives of Merger

Challenges towards Merger

Merger financials

Outcome

Learning

Agenda

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Centurion Bank of Punjab

1994 Centurion Bank was incorporated -Joint venturebetween 20th Century Finance Corporation and itsassociates and Keppel Group of Singapore

1995 Centurion Bank amalgamated 20th CenturyFinance Corporation.

2005Merger of Centurion Bank and Bank of Punjab 2006 Centurion Bank of Punjab acquired Kochi-based

Lord Krishna Bank.

2008 HDFC Bank acquired Centurion Bank of Punjab.

Source : Wikipedia

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Background

History of HDFC bank

History of Centurion Bank of Punjab

Environmental factors

Objectives of Merger

Challenges towards Merger

Merger financials

Outcome

Learning

Agenda

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Environmental factors

Indian banks on a growth face

Hard to get metro licenses

Increased competition from foreign and

domestic *next generation* banks

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Objectives

Increase in scale of operations

Expanding metro reach

Widening the line of products

To get more dominance on the market Counter competition

HDFCs Brand leverage and increased utilization ofCBOP

Branches

CBOPs SME focus complement HDFCs Corporatefocus

Natural synergy owing to strong foothold in vehicle

financing

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Expanding Metro Reach

CBOP HDFC

Metro 127 287

Non Metro 267 467

Metro Proportion 32% 38%

Non Metro Proportion 68% 62%

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Product Portfolios

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Challenges

HR

challenges

Operational

challenges

Technologicalchallenges

Infrastructurechallenges

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Background

History of HDFC bank

History of Centurion Bank of Punjab

Environmental factors

Objectives of Merger

Challenges towards Merger

Merger financials

Outcome of the merger

Learning from the merger

Agenda

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Merger financials

POST MERGER SNAPSHOT (Rs M)

HDFC Bank CBOP Merged

Dec-07 Dec-07 Dec-07

Branch 754 394 1148

ATM 1906 452 2358

Liabilitis

Deposits 993869 207100 1200969

CASA Deposits 505630 50740 556370

CASA % 50.87 24.50 46.33

Share Capital 3541 1857 4301

Net worth 113584 19633 225742

Other Liabilities 206942 27306 234248

Total Liabilitis 1314395 254039 1660959

Asset

Advances 713868 150835 864703Retail 364073 90228 454301

Other assets 600527 103204 703731

Goodwill 92525

Total Assets 1314395 254039 1660959

At a swap ratio of1:29, it would leadto dilution of 21%for HDFC Bank.

HDFC Bank wouldissue 76m shares (fully diluted) toCboPshareholders. Themerger would

worsen HDFCBanks RoEs

Source:Corporate Restructuring via Amalgamation in Private Sector Banks

A Case Study of HDFC Bank and Centurion Bank of Punjab -Prof. Deepak Tandon ,Manish Vohra &Meenakshi Saluja

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Background

History of HDFC bank

History of Centurion Bank of Punjab

Environmental factors

Context of Merger

Challenges towards Merger

Merger financials

Outcome of the merger

Learning from the merger

Agenda

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Outcome

Increased footprint and wider distribution reach Expand metro reach by 44%

HDFC bank emerge as the biggest private bank in terms of

branches

There is scope to enhance productivity and improved utilizationof branches

Higher productivity help HDFC bank to bring down cost toincome ratio

Merger resulted in having a strong and experienced

management team Near term performance likely to be muted, benefits to accrue

over medium term

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Background

History of HDFC bank

History of Centurion Bank of Punjab

Environmental factors

Objectives of Merger

Challenges towards Merger

Merger financials

Outcome of the merger

Learning from the merger

Agenda

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Key Learning

Integrating of IT systems withoutdisrupting customer service

Mapping of Employees

Customer communication Elimination of redundancies

Top management vision

Coordination between differentfunctions

Structuring of the deal and taximplications

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Thank You!