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1 VALUATION OF MERGER AND ACQUISITION AXIS BANK AND KOTAK MAHINDRA BANK A DISSERTATION SUBMITTED

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IN PARTIAL FULFILMENT FOR THE AWARD OF THE DEGREE OF MASTER OF BUSINESS ADMINISTRATION

IN INTERNATIONAL BUSINESS (2020-2022) AT INSTITUTE OF MANAGEMENT STUDIES BANARAS HINDU UNIVERSITY

SUBMITTED TO: SUBMITTED BY: DR. ABHIJEET BISWAS KRITI RASTOGI MBA-IB (4 th SEMESTER) 20423BIB021

2 TABLE OF CONTENTS S1. No Particulars Page No. 1 Introduction 6-9 2 Literature Review 10 3 Research Methodology
11-13 4 Data Analysis and Interpretation 14-41 5 Findings and Conclusion 42-44 6 Limitations 45 7 Bibliography 46

3 INTRODUCTION In this age of globalization, consolidation, joint ventures and strategies relationships have become a
seasonal flavour. Mergers and Acquisition (M&A) is another such an integration approach is commonplace in the Industrial
world today. As a recent study, Since 2000, more than 790,000 transactions have been announced worldwide at a known
cost. more than 57 billion USD. In 2021, the number of contracts fell by 8% to about 49,000. transactions, while their value
increased by 4% to 3.8 trillion USD. Therefore, companies in the lack of organic growth depends on M&A increasing their
size and / or their size importance (gaining collaboration) in the industry in which they work. Merger: A combination of
two or more companies in which the assets and liabilities of the trading company absorbed by the purchasing company.
Although the buying company may be very different the organization after merger, retains its original identity. Integration
usually refers to both companies that join together (usually through stock exchanges) as peers to become one.
Acquisition: The purchase of an item such as a plant, component, or whole company is referred to as found. Acquisitions
usually have one company, a buyer who buys goods

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or shares of another, seller, in the form of cash payments, securities buyer, or other goods of value to the seller.

Motivation / Reasons for Consolidation and Acquisition: Consolidation and acquisition are a very

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effective and efficient way to enter a new market, add a new product line, or increase distribution

access. In most cases, integration and acquisition exist driven by important trends in a particular industry, such as rapidly
changing technologies, driving multiple deals in technical fields or a fierce, driving competition many deals in the
telecommunications and banking industries. Recently many deals are driven by the belief that it is less expensive to buy
product loyalty and customer relationships can build on them. Consumers pay the premium of this intangible asset on a
balance sheet, commonly referred to as goodwill. In today's economy, kindness represents the most valuable asset that it
has adequately displayed on the seller's balance sheet. The global city has forced many companies to test mergers and
acquisitions as ways to improve international presence and increase their market share. And the market an entry strategy
is often more economical than trying to build an overseas business from scratch. It also helps the parent company to
differentiate the risk of operation / service delivery a particular country in the world market place.

4 M&A Waves: Blending and discovery long ago occurs in waves. Waves are important for as follows: First Wave (1890-
1903): U.S. companies tried to create monopolies in their industries by building trust — actually, an extreme form of
horizontal integration. Example: The construction of Standard Oil Company of New Jersey 1899, United States Steel
Corporation in1901. After the government enacted laws prohibiting anti-competitive behaviour, acquired companies
turned to direct integration as a means of growth. Direct integration is probably best illustrated by the oil and gas industry;
companies that began as pure oil refineries eventually became involved in refining, transportation, and, finally, the sale of
oil and gas products. Second Wave (1910-1929): The second wave in the 1920's involved small U.S. companies. which
were left out monopoly created during the previous wave. Those companies merged or acquired one to gain a moderate
economy and be able to compete with the outstanding player their industry. The 1929 catastrophe and the ensuing

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depression ended the second wave of M&A. Third Wave (1950-1973): The third wave of M&A occurred in the 1950s when
companies were trying to differentiate their brands sources of revenue and, in so doing, reduce the perceived risk. This
practice has led to the creation of conglomerates and hosting companies built by many unrelated businesses. The
General Electric Company is a typical example of this practice. The Fourth Wave (1981-1989): In the late 1970s and early
1980s there was a high rate of inflation again, as a result, higher borrowing costs. In order to remain profitable, many
companies sought ways to make ends meet reducing both operating and operating costs. Achieving an important size
was often considered as a way to survive the "earthquake" industry that inevitably reflects these economic times, resulting
in the fourth wave of M & As. Many companies merged or acquired one another benefit of the scale economy associated
with large volume manufacturers. In addition, some companies see M&As as a way to reduce their risk and reduce them
financial costs, which reached 25 to 30 percent in some cases in the late 1970's. and in the early 1980's. The Fifth Wave
(1981-1989): In the fifth wave, companies have made a profit to gain access to information-based assets, especially in the
late 1990's, when the profits of the “first translator” became more important.

5 The 1990s also saw an increase in the price and volume of border purchases. With the development of the global
economy, many companies see M&A as too fast inexpensive ways to gain a presence in another country and maintain
their place in the global economy. Wave Six (2003-2007): This wave saw the continuation of two practices that began in
the 1990s: crossing the border. acquisition and industrial integration. This sixth M&A wave suddenly ended following The
subprime debt crisis of 2007 Source: Institute for Mergers, Acquisitions and Alliances (IMAA) Synergy: The cooperation of
two or more organizations to produce a combined result / greater results the sum of the different effects / effects is
interaction. Synergy is a major cause of all M&A as it is ultimately leading to an increase in the value of shareholders. V (AB)
< V (A) + V (B) There, V (AB) = Value of a firm created by combining A and B (Synergy), V (A) = Value of firm A, operating
independently and V (B) = Value of firm B, operating independently Synergies can take three forms:

6 i. Operating Synergy: Functional synergies arise from acquisition and target combinations jobs. Another type of
synergies that work is to improve income. It includes gaining market power in a particular market or being able to increase
sales capacity in access to new markets — for example, by using the marketing power of one company or distribution
network, or by selling company products to another company customers. The second type of synergies that work is cost
reduction. As mentioned In the past, many companies consider M&A as a way to achieve significant size and, as a result,
they were able to benefit from an economy of scale with low production costs. Discovery can also generate cost savings
on advertising, advertising, or research and development. ii. Financial Synergy Financial contracts arise from lower capital
costs. Big companies often have them access to a broader and cheaper fund than small companies. One reason for that
the third wave of M&A was that diversity became unrelated businesses companies to reduce risk, therefore, increase their
debt capacity and reduce it before tax on expenses. The risk reduction benefit is covered by beneficial tax credit related to
equity. Thus, the company incurs a lot of debt in its capital structure, it reduces its funding costs, the amount of taxes. iii.
Management Synergy: Management interaction occurs when an efficient management team takes the position of a
ineffective. Another benefit of acquisition is that it gives the acquirer ian opportunity to remove unqualified managers,
which could improve the target performance. So in a profitable company it is important to inform the target company
based on it synergy waiting to come out of merger or acquisition. Evaluation becomes so most importantly in the case of
M&A historically it has been shown that if the company acquires overpayment of M&A targets did not result in value
addition to the existing shareholder initially intended to benefit. Therefore, this project will focus on a variety of value
propositionsan M&A agreement and partnership that aims to create.

7 LITERATURE REVIEW There are a lot of rating books for companies that are hired to verify fair value. The basis of all such
estimates is the cash flow of the company in question is able to penetrate and the synergy benefits that go with it can be
the result of merging or acquisition. According to DePamphilis (2010), synergies from the M&A agreement show more the
formation of value from corporate mergers and potential it is impossible without this connection. In other words, the M&A
agreement has a positive effect if the process of cooperation between the two parties creates an additional value of more
than the amount produced by entities prior to this agreement. There are various ways to measure synergy. Damodaran,
(2005) provides an example of the most widely used method. The synergetic effects of M&A contracts are embedded in
his core targeted company value assessment formula: Price Target = Target-Independent + Value Consolidation +
Premium Control. According to these statistics, the target company's stock consists of three main components: 1) its
independent value; 2) the number of synergies acquired by M&A agreement; 3) an administrative premium representing
the additional amount the recipient is obliged to pay the appropriate stand-alone value for the target company. Smith and
Triantis (1995) argue that multiple purchases create important options for that discounted cash flow models do not
capture. These options could be the result of further growth better or more competitive position for a combined or
lucrative firm time to invest, and add value to a profitable company. Intuition behind the real the controversy over options

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is understandable. Finding it sometimes opens up opportunities that they would not otherwise have it was found in
another way and these opportunities are hard to turn into an expected amount of money it flows. Some healthy
scepticism is appropriate in most cases, however. If the only way to enter I the emerging market by buying a company in
that market and that acquisition offers specialty the rights of the beneficiary to expand the emerging market, there is good
reason to apply premium of choice. If, as is very common, finding a company is one of the many different ways entry into
a competitive market, discounted cash flow estimates are more than enough to capture the expected synergies

8 RESEARCH METHODOLOGY Title Valuation of Merger and Acquisition- Axis Bank and Kotak Mahindra Bank. Objectives
The objective of the project is to do the fundamental analysis and valuation of Kotak Mahindra Bank and Axis Bank for the
purpose of merger and then do the post-merger analysis. Tools and Techniques A company that benefits from the M&A
agreement is usually interested in the base price basic value because it represents the “continuous” value of the company
and therefore ways to get a company's basic value were focused on this work. The measurement methods used in this
project are: 1) Dividend Discount Model (DDM): The dividend discount (DDM) model is the process of measuring the price
of a stock by using predicted dividends and lowering the discount back to the current value. If the value earned on DDM is
more than what the stock currently trades, then the stock is undervalued. In companies that grow at different prices these
two categories or growth rates of three stages can be used depending on the growth rate. Price per share = D (1) / (Ke - g)
Where, D (1) = the estimated value of next year's dividend Ke = the company's cost of equity capital g = the constant
growth rate for dividends, in perpetuity Three stage growth Model: For companies growing which are growing rapidly
currently and is expected to stabilise to sustainable rate and reach stable growth rates in later stages, we use three stage
growth model.

9 Where, EPSt = Earnings per share in year t DPSt = Dividends per share in year t ga= Growth rate in high growth phase
gn= Growth rate in stable phase Pa= Payout ratio in high growth phase Pn= Payout ratio in stable growth phase r =
Required rate of return on equity 1) Indirect or Relative Valuation Methods: Price Multiples: Multiplying the ratio between
two financial variables. In most cases, the number of double the market price of a company or its business value (if
applicable business value repetition). The business value of a company is usually defined as market value of its currency
(debt and equity value), total amount. A. Price-to-Book Ratio (P / B): Shows a premium related to existing investors who
are willing to pay the book value of their equity investment in the company. Unfortunately, the value of a company's book
is very sensitive to single accounting rates management accounting decisions. For this reason, the P / B rating is used
selectively; in fact, it is not a valid measure or standard for most companies, except perhaps financial institutions and
insurance companies. These companies they have very liquid assets and debt on their balance sheets, which makes a
book sets the actual pricing proxy prices on the market. B. Price-to-Earnings Ratio (P /E): This estimate is obtained by
dividing the market price of a company and its profit per share (EPS). Companies with high wage growth prospects often
have higher P / E rates because these companies are expected to be able to reward investors with faster and greater
returns on their investment in the form of shares, stock price appreciation or both.

10 2) DuPont Equation: The Du Pont Equation divides Return on Equity (ROE) into five distinct elements. This analysis
allows the user to understand the source of high (or low) return. to compare with companies in the same industry (or
between industries). Du Pont Equation it can be said that it plays an important role in informing the company. The
components of DuPont Equation are: The PAT/PBT gives the tax expense of the company. The next part of the equation-
Operating Profit /Total Income gives the profit margin while Total Income/Total Asset gives us the asset turnover of the
company. Finally, the Total Asset/Total Equity gives us the financial leverage of the company. Period of Study The present
study covers a period of three financial years i.e., 2018-19 to 2020-21 Sources of Data • Annual reports of the selected
companies • Investor presentations and other reports released by companies • Websites like Money Control, Screener,
etc. • Ace Equity • National Stock Exchange (NSE) website

11 DATA ANALYSIS AND INTERPRETATION • KOTAK MAHINDRA BANK (KMB)

Kotak Mahindra Bank Limited is an Indian banking and

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financial services company headquartered within the city of Mumbai, India. It offers banking products and financial
services for corporate and retail customers within the areas of private finance, investment banking, life assurance, and
wealth management. it's India's third largest private sector bank by

assets and by capitalization as of November 2021. As of February 2021, the bank has 1600 branches and 2519

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ATMs. In 1985, Uday Kotak founded what later became an Indian financial services conglomerate. In February 2003,
Kotak Mahindra Finance Ltd. (KMFL), the group's flagship company, received a banking licence from the banking
company of India. With this, KMFL became the primary non-banking non depository financial institution in India to be
converted into a bank. In a study by Brand Finance Banking 500 published in February 2014 by Banker magazine, KMBL
was ranked 245th among the world's top 500 banks with

a brand

valuation of around US$481 million and brand rating of AA+

The bank has over 323 branches and a customer account base of over 2.7 million. Spread all over India, not just within the
metros but in Tier II cities and rural India additionally, it's redefining the reach and power of banking. Presently it's engaged
in

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commercial banking, stock broking, mutual funds, life assurance and investment banking. It caters to the financial needs
of individuals and corporates. The bank has a global presence through its subsidiaries with offices in London, New York,
Dubai, Mauritius, city and Singapore

that specialize in providing services to overseas investors seeking to take a position into India.

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In 2015, Kotak Bank acquired ING Vysya Bank in a deal valued at ₹150 billion (US$2.0 billion). With the merger
completed, Kotak Mahindra Bank had almost 40,000 employees, and the number of branches reached 1,261. After the
merger, ING Group, which controlled ING Vysya Bank, owned a 7% share in Kotak Mahindra Bank.

In 2021, the bank acquired a 9.99% stake in Ferbine, an entity promoted by Tata Group, to operate a Pan-India umbrella
entity for retail payment systems, similar to National Payments Corporation

of India.

ING Vysya Bank ING Group Tata Group National Payments Corporation of India

12 SWOT ANALYSIS OF KOTAK MAHINDRA BANK Strengths of Kotak Mahindra Bank 1. Financial Products: Kotak Mahindra
offers a wide range of economic products and services in various fields, catering to a wide range of consumers from
different sectors. 2. Various Business Model: Kotak Mahindra Bank has expanded its services in a variety of fields from asset
management to large-scale mortgage lending, ensuring a smooth wage with low-risk services, thus holding the entire
value chain within the financial sector. 3. Customer Service: Another area where Kotak Mahindra runs ahead of its
competitors in customer service. It informs the customer and provides a variety of ways for them to participate in
customer service, including telephone banking, online chat, online assistance, and their branches and ATMs. 4. Strong
Foundations and Management: Kotak Mahindra has a high level of management who are graduate students at prestigious
institutions and are experienced professionals within the banking and finance industry. Weaknesses of Kotak Mahindra
bank 1. Negative Marketing: Kotak Mahindra allocated a small portion of its budget to advertising and marketing. With
meaningless advertising, it is difficult to attract new customers as they do not recognize Kotak's services and promotions.
This causes the business to expand over time and hinders their ability to grow. 2. Small Business Banking: Although a bank
has an important sales base, it is in short supply when it involves corporate clients. Compared to its peers, Kotak Mahindra
embraces the irrational presence within the corporate banking industry, which can be a major source of revenue. 3.
Substitutional business: Kotak is a brand new business that started in 2003, people trust less than other banks.

13 4. Small business bank: Kotak Mahindra has smaller banks compared to other banks. Opportunities for Kotak Mahindra
Bank 1. Presence in Asset Management: The presence of the Kotak Mahindra bank within the asset management sector
allows it to oversee companies and MNCs. 2. Increased demand for banks: With the advancement of technology and
finance in the country, there is a great need for affordable banking services and services. Kotak Mahindra Bank can attract

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the current crowd by choosing specialized services for them. 3. Overseas Expansion: Kotak Mahindra Bank can cater to
overseas customers and companies by expanding its services internationally. this can help the bank map on a global map
in addition to importing customers from all over the world, which increases revenue within the process. 4. RBI Act: Recent
changes in the RBI have helped Kotak improve its CASA rating, which may eventually attract more people. Threats of
Kotak Mahindra Bank 1. Competitive growth within the financial sector: The financial sector is dominated by high-income
companies, which provide unlimited resources and cater to clients from almost every domain, sector and region. The
massive distribution network allows banks to cover the entire country, thus increasing competition. They should also
constantly come up with new and unique ideas for connecting their services, and allocate a large portion of their budget
to advertising and marketing. 2. Depression: As the epidemic and the dollar index affect the Indian economy, the banking
and finance industry seems to be bearing the brunt of the economic downturn, making it difficult for Kotak Mahindra bank
to retain customers and assets, in addition to gaining new customers. 3. Competition in financial services: due to the
many new competitors entering the market for economic services, it is difficult for Kotak to compete and maintain market
share and profits.

14 FINANCIAL ANALYSIS OF KOTAK MAHINDRA BANK Net Profit Since 2017, there has been almost. 100% growth on total
profits of Kotak Mahindra Bank. Meanwhile the rapid growth of loans from the retail sector aided by better asset quality
has led to a reversal of the arrangements ultimately increasing profits. The Bank also saw a full growth in consumer goods
which led to a 38 per cent increase in home loans, a 27 per cent increase in real estate loans and a double increase in
unsecured loans such as credit cards, personal loans and agricultural-related loans. ROA ROA of KMB is marginally
increasing over the year due to rise in PAT of the ban

15 NPA NPA has shown decreasing trend from FY17 to FY20 but in FY21 it suddenly increased to 1.21%. It is less compared
to other banks. NIM (Net Interest Margin) NIM of the bank showed decreasing trend from FY17 to FY20 but increased in
FY21. NIM shows the difference between interest income earned and interest paid by the bank

16 Valuation Of Kotak Mahindra Bank DuPont Analysis

17 Tax payments have been almost constant over the years as they may be reflected in the PAT / PBT rating. All Income /
Total Asset reflect the asset's carrying amount, which is approximately the same. The business profit margin has also been
increasing over the years from 25.3% to 28.9%. The total asset / equity ratio of 6.06 relative to other established banks is a
sign of high borrowing capacity and the scope of business growth without the need for equity financing. The difference in
operating income / total income indicates that the capital expenditures are those of interest that is closely followed by
another additional income that includes employee expenses. The exchange rate varies indicating that the interest rate
account is part of a larger shareholder and the other income is a smaller amount of Kotak Mahindra Bank.

18 Projection of Financials for Valuation Assumptions 1. The bank is expected to reduce operational costs and increase
profits due to fluctuations in technology and flexibility. The automation of bank support services over the coming years
due to the rapid development of technology will help the bank to significantly reduce its operating costs. 2. The reduction
of the NPA in the future due to better use of borrowing information (forecasting statistics). Thus, it will help the bank to
lend wisely and make better decisions. 3. Better acquisition of an existing NPA. The IBC will assist banks to repay their
payments as largely as possible within a limited period of time (180 days plus 90 days extension). 4. Increased borrowings
(low-cost deposits) for borrowing due to investment. PMJDY-like driving investments made by all banks in India will help
them get cheap money. 5. The experienced management team and board continue to provide sustainable leadership and
ensure strategic continuity. The bank is led by a competent leader in Mr. Day Kotak can therefore be guaranteed to have a
bright future and the effective use of strategies. 6. Adoption of Other Delivery Channels (ADC) to deliver services to
customers in a more affordable and timely manner and thus will reduce operational costs and increase bank profitability.
7. The bank will face the challenge of obtaining cheap loans in international markets. due to the interest rate on European
and American markets, if the bank could not borrow abroad, it would have to borrow at higher rates, e.g., ECB loans.

19 Dividend Discount Model Ke = 7.02% ROE for transition period- 10% (Assumed) Rate of change in growth= 3% ROE for
Stable period- 15% (Assumed) Rate of change in Beta = 31% MRP= 7.50%

20 • The Dividend Discount Model is a three- stage dividend discount model. Three stages being – Abnormal Growth
Period, Transition Period and Stable Period. • Abnormal Period and Transition Period is assumed to be 3 years each and
stable growth rate is assumed to be 5%. • Beta for the stable growth is assumed to be 1. Risk Free Rate and Market Rate is
assumed to be 6.50% and 14% respectively. • Thus, using the assumptions and projected ROE the value of an KMB using
the dividend discount model has been found to be ₹ 34.91 per share. Relative Valuation Method Value of Stock as per this
model is 1848.60

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21 Valuation Based on Projection Projected Balance Sheet (Assumptions) Projected Balance Sheet

22 Projected Profit and Loss Account (Assumptions) Projected Profit and Loss Account

23 Dividend Discount Model (After Projection) Ke = 7.02% ROE for transition period- 10% (Assumed) Rate of change in
growth= 2.76% ROE for Stable period- 15% (Assumed) Rate of change in Beta = 31% MRP= 7.50

24 • AXIS BANK Axis Bank Limited, formerly referred to as UTI

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Bank (1993–2007), is an Indian banking and financial services company headquartered in Mumbai, Maharashtra. It sells
financial services to large and mid-size companies, SMEs and retail businesses. The bank was

promoted jointly by the Administrator of the investment company of India (UTI), life assurance Corporation of India (

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LIC), General Insurance Corporation, social insurance Company, The New India Assurance Company, The Oriental
Insurance Corporation and United India

insurer. the primary branch was inaugurated on 2 April 1994 in by Manmohan Singh, he was Finance Minister of India back
then

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In 2001 UTI Bank agreed to merge with Global Trust Bank, but the banking company of India (RBI)

withheld approval and therefore the merger failed to happen. In 2004, the RBI put Global Trust under moratorium and
supervised its merger with Oriental Bank of Commerce. the subsequent year,

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UTI bank was listed on the London securities market. within the year 2006, UTI Bank opened its first overseas branch in
Singapore. the identical year it opened an office in Shanghai, China.

In 2007, it opened a branch within the Dubai International Financial Centre and branches in port. The Bank’s registered
office is found at Ahmedabad and their home office is found at Mumbai. With 4800 domestic branches (including
extension counters) and 17,801 ATMs across the country, the network of Axis Bank spreads across 2,033 cities and towns,
enabling the bank to achieve resolute an outsized cross-section of consumers with an array of products and services. The
bank also has nine overseas offices with branches at Singapore, Hong Kong, Dubai (at the DIFC), Shanghai and Colombo;
representative offices at Dubai, Abu Dhabi and Dhaka and a distant subsidiary at London, UK. The Bank has also adopted
an industrial cluster-based financing as an important strategy towards ensuring manufacturing credit flow in SME sector.
As part of this initiative, important clusters have been identified across various sectors and awareness has been created
within the Bank’s teams to focus more on these identified clusters in the coming years.

25 SWOT ANALYSIS OF AXIS BANK The Strengths of Axis Bank Axis Bank is ranked in the fastest growing Bank within the
Private Sector. Financial Express and KPMG rated Axis Bank as the best bank in the 26-point area. Axis Bank has 4800
regional branches and 17801 ATMs. Banks ‘financial positions rose by 20% last year, which could be a big good sign for
each country. Active sales of $ 2 billion in 2019. US $ 110 billion worth of assets in 2019. Total Profit Rs. 1677.90 million.
Axis Bank contains a strong image of urban people. Axis Bank is growing well in the Indian banking sector. Bank with
comprehensive products and services. Moderate access to rural areas has boosted the industry. One of India's largest
private sector financings for agricultural loans is Retail Agri & Corporate Agri. Good online services offered by Axis Bank,
such as debit banking, mobile phones, etc. Effective ads and branding help the product grow. Weaknesses of Axis Bank
Gaps - mainly focused on commercial banking, supermarket banking, treasury services, retail banks. International
branches calculate V-day for all goods. The bank has recently begun to focus more on people's banks and rural areas.

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AXIS bank share prices are constantly fluctuating at high levels, leaving investors in a precarious position most of the time.
There are many differences that work well between a financial product and such as achieving a goal for the consumer.
There are many fraudulent activities involving credit cards, as banks consider the acceptance of credit cards even without
initial document confirmation. Their financial advisers are not smart enough to guide consumers to the right investment.
Customer support needs to change drastically to be able to manage other great players.

26 Axis Bank has a small market share due to high competition within the banking sector. Opportunities for Axis Bank The
rural market is also an important market for Axis Bank. Acquisition to fill a space. Various future prospects in financial
markets, such as mutual funds, may be used within the Bond Market. The online banking network will be supported. UPI
payments and mobile wallets may be upgraded. The number of e-transactions increased from 0.7 million to about 2
million. Expansion of space in the agricultural market - 80% of them do not have access to fixed loans. Forty-six percent
of them use formal lending platforms. The bank should address the growing demand for business loans and car loans.
24% of non-regulated lenders. As it is a time of bankruptcy, there is a greater chance of developing new banking strategies
compared to well-known major players. Axis Bank assets are rising 9% faster. The definition of AXIS Bank ATM has had a
strong response to attracting new customers to the non-public banking market. Threats for Axis Bank RBI control of
interest rates. Government control from the perspective of epidemic conditions. Government schemes are usually run
only by SBI, Indian Banks, Punjab full-service bank, etc. ICICI and HDFC put their aggressive marketing campaigns at great
risk with their growth within the consumer base. Foreign banks entering India may reduce the presence of Axis Bank.

27 FINANCIAL ANALYSIS OF AXIS BANK Net Profit Profit after axis bank tax approx. the same over the years from 2018 to
2021, although there has been a significant increase in interest rates on FY21 because Last year when COVID-19 started
showing signs of risk, bad credit was a cursed word for banks that were afraid to offer more loans. automatic fear. A year
has passed and the virus is not gone, but people seem to own it and find out how to measure it. Data from the past few
months shows that Axis Bank's non-performing loans have declined sharply, indicating that people are benefiting on time.
Therefore, the bank also reduced its offers for fear of failure. ROA ROA of Axis Bank has been like a roller coaster but
finally it reached to increasing level and currently it is 0.69.%

28 Non – Performing Asset (NPA) Last few months’ data show that Axis Bank's non-performing loans have come down
sharply, which means people are paying back on time. And thus, the bank has also lowered its provisions on fear of
default. NIM (Net Interest Margin) In FY18 NIM decreased drastically from 3.28% to 2.92% but after the various strategies
adopted by the bank it again increased and it is continuously increasing.

29 Valuation Of Axis Bank DuPont Analysis

30 Tax revenue has been rising and falling over the years unseen on the PAT / PBT scale. All Income / Income Assets
reflect the value of the asset, which is also always the same or less. The business profit margin has been increasing over
the years, from 27% to 33%. An asset-based equity / equity ratio of more than 10.20 is an indication that money is being
managed efficiently and that the entity will be able to repay its debts on time. The difference in operating income / total
income indicates that the capital expenditures are those of interest that is closely followed by another additional income
that includes employee expenses. The exchange rate varies indicating that interest rates accrue on a larger shareholder
and that the other is less than Axis Bank.

31 Projection of Financials for Valuation Assumptions 1- The bank is predicting a high growth rate due to a clean record
and the huge supply made this year due to low-profit banks ROE has dropped significantly and is not expected to happen
in the coming years. 2- The bank is thought to be developing additional funds by one part or more in Indian and the
overseas market within the currency type and may see business growth over the coming years. 3- Reduced costs
especially operating costs, post-automation management and digitization of delivery models All businesses especially in
the financial sector are quick to implement new technologies and ensure reduced operating costs over the coming years.
4- The quality of a business book has also been steadily improving with high throughput sanctions on rated companies, a
significant reduction in the risk of concentration once an increase within the budget for a mortgage loan and one would
think it would happen better acquisition of accredited assets and fewer NPAs which is why PAT increases. 5- Opportunity
to sell PSL Loans to banks and earn extra money. AXIS has the right value portfolio especially those that qualify as Priority
Sector according to each RBI. So you can sell these loans to other banks are obliged to buy these in order to repay RBI
Terms of Priority Sector Loan. 6- With strict RBI procedures and the establishment of the IBC and NCLT bank it is expected
to determine the best recovery in the case of stressed and substandard assets. 7- With the additional provision made this
year the bank will benefit in the coming years from financial growth for other purposes and therefore we will take the best
course of bank growth. 8- The bank has built a solid deposit-based deposit base. Continuous trading assignment as The
current account and savings bank account (CASA) is one of the most efficient in the industry.

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32 Dividend Discount Model Ke = 6.72% ROE for transition period- 10% (Assumed) Rate of change in growth= 1% ROE for
Stable period- 15% (Assumed) Rate of change in Beta = 32% MRP= 7.50%

33 • The Dividend Discount Model is a three- stage dividend discount model. Three stages being – Abnormal Growth
Period, Transition Period and Stable Period. • Abnormal Period and Transition Period is assumed to be 3 years each and
stable growth rate is assumed to be 5%. • Beta for the stable growth is assumed to be 1. Risk Free Rate and Market Rate is
assumed to be 6.50% and 14% respectively. • Thus, using the assumptions and projected ROE the value of Axis Bank using
the dividend discount model has been found to be ₹ 15.59 per share. Relative Valuation Method Value of Stock as per this
model is 1087.46

34 Valuation Based on Projection Projected Balance Sheet (Assumptions) Projected Balance Sheet.

35 Projected Profit and Loss Account (Assumptions) Projected Profit and Loss Account.

36 Dividend Discount Model (After Projection) Ke = 6.72% ROE for transition period- 10% (Assumed) Rate of change in
growth= 0.30% ROE for Stable period- 15% (Assumed) Rate of change in Beta = 32% MRP= 7.50%

37 Post-Merger Pay-out ratio of the combined entity is arrived by considering the last year’s DPS and EPS. Pay-out Ratio=
[DPS(KMB-2021) +DPS (Axis-2021)]/[EPS(KMB-2021) + EPS (Axis 2021)] Weighted average of market capitalisation has
been used to arrive at the beta of the combined entity.

38 SWAP RATIO So, as per valuation Kotak Mahindra Bank will have to issue 2.57 shares of its own bank for every share of
Axis Bank. Swap Ratio is 2.57:1. Since the merger of Axis Bank and Kotak Bank is just as rumoured as one newspaper
reports, the two companies have denied rumours that they are merging. Therefore, there was no consolidation market
contract and no real and expected rate of exchange. The measurement and analysis considered here is simply an
assumption based on current market conditions and future prospects

39 FINDINGS Possible reasons for merger of these two banks 1) Axis Bank has cracked down on the NPA recognition
system so most of the bad news is now known. 2) Since the time of the last consolidation negotiations, Kotak Bank stock
has performed much better than Axis Bank. about 30 percent, which makes the discovery reasonable. 3) Kotak Bank will
receive credit and commodity size sufficient to comply with HDFC Bank 4) From the facilitator's point of view, this can
help to reduce the promoter's stake to RBI requirements. 5) The Financial Institution not only agreed that in the event of
an M&A, the agreement would be approved by EPS / BPS at Kotak Bank even after paying a reasonable premium to Axis
Bank shareholders. Assumed Benefits of Merger KOTAK MAHINDRA BANK 1) Axis Bank has violated the NPA recognition
system so many bad news is now known. 2) Since the time of the last consolidation negotiations, Kotak Bank stock has
done much better than Axis Bank. about 30 percent, which makes the discovery reasonable. 3) Kotak Bank will receive
sufficient credit and asset size to comply with HDFC Bank 4) From the facilitator's point of view, this can help reduce the
facilitator's share of RBI requirements. 5) The Financial Institution has not only agreed that in the event of an M&A, the
agreement will be approved by EPS / BPS at Kotak Bank even after paying the appropriate premium to Axis Bank
shareholders. Synergies Financial synergy The merger would end in financial synergy for the merged entity. KMB
incorporates a very strong corporate banking franchise, while axis is strong on retail front.

40 Operational synergy: The infrastructure and manpower of the Bank would add great value to the bank. The customer
base and sort would also diversify resulting in more cross selling options for the merged entity. The experience and
knowledge of AXIS in rural areas would help to serve this purpose Future of the merged firm if it happens so Nomura's
report says this is often Kotak's best opportunity to meet Axis Bank. "With the RBI pressure on Axis Bank management /
board and the asset quality work in progress, we believe this is often Kotak Bank's best opportunity to acquire / integrate
with Axis Bank," said Nomura. It can be noted that from the point of view of Axis Bank, there will be a relative slowdown
now in any merger, given the loss of confidence the regulator has expressed in not approving the renewal of the CEO's
term, as well as a call to senior management. The merger will enable Kotak + Axis Bank to merge the second largest bank
after HDFC Bank in terms of development and CASA as a whole, and the largest in terms of number of branches. Ideally,
although Axis Bank's loan letter will mandate a specific cleaning-related offer, the recent increase by Axis Bank and the
excess rates of Kotak Bank will help clean up. Adding a combination of franchise / Axis Bank access and writing under the
leadership of Kotak Bank could make merged business one of the most important and leading private banks.

41 CONCLUSION Merger of Kotak Mahindra Bank and Axis Bank gives a plethora of opportunities for both the financial
institutions. While there exist many valuation methods we can safely conclude the direct methods like Dupont Analysis
and Dividend Discount Models to value a company are a more accurate method to value a company vis-a-vis indirect
models like relative valuation. There are also many pitfalls in valuation like over optimistic forecasting of future cash flows,

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use of incorrect discount rates and managerial hubris leading to over estimation of synergy benefits, if these pitfalls can be
avoided the valuation can be beneficial to shareholders of both companies resulting in a win-win situation for both of
them. Kotak Mahindra Bank really needs a clean slate and leadership to travel through the challenges they could bump
into soon. Scaling up CASA goes to be of utmost importance post-merger because the bank should have a powerful
liability side together with the asset side so as to be a going concern. Everything rests within the hands of the
management and therefore the synergies which this merger derives. There'll be challenges also post-merger. a number of
them are: •Cultural Fit: many prospective mergers only observe the 2 entities on paper – without taking their people
under consideration. Failure to assess cultural fit can result in failure of the merger. Here, both the FIs are tech-savvy and
promotes new generation banking. So, it's less likely to be a cultural mismatch. •Lack of commitment: Leadership is
required for a merger to be successful, but employees even have to devote enough time and resources into bringing two
platforms together. •Regulatory requirements: Regulatory capital requirements and Priority sector lending are going to be
challenging because the record size of the bank increases. lastly, synergy is difficult to deliver but it's not impossible to
make. Synergy is usually promised and infrequently delivered in most cases. it's difficult to deliver the promised synergy
but it's not impossible to form.

42 LIMITATIONS o Lack of data regarding the mergers of these two banks as they have not yet disclosed anything. o No
information about the contact between the two banks. o No decision about the deal like whether it's about share swap
ratio or deal are closed by paying money. o The study is finished supported the varied likely assumptions made, so
anything related to the transactions don't seem to be hard and fast, the worth came across various stage are based on
assumptions

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or shares of another, seller, in the form of cash payments,

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effective and efficient way to enter a new market, add a

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financial services company headquartered within the city

of Mumbai, India. It offers banking products and financial
services for corporate and retail customers within the
areas of private finance, investment banking, life
assurance, and wealth management. it's India's third
largest private sector bank by

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ATMs. In 1985, Uday Kotak founded what later became an

Indian financial services conglomerate. In February 2003,
Kotak Mahindra Finance Ltd. (KMFL), the group's flagship
company, received a banking licence from the banking
company of India. With this, KMFL became the primary
non-banking non depository financial institution in India
to be converted into a bank. In a study by Brand Finance
Banking 500 published in February 2014 by Banker
magazine, KMBL was ranked 245th among the world's top
500 banks with

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commercial banking, stock broking, mutual funds, life

assurance and investment banking. It caters to the
financial needs of individuals and corporates. The bank
has a global presence through its subsidiaries with offices
in London, New York, Dubai, Mauritius, city and Singapore

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In 2015, Kotak Bank acquired ING Vysya Bank in a deal

valued at ₹150 billion (US$2.0 billion). With the merger
completed, Kotak Mahindra Bank had almost 40,000
employees, and the number of branches reached 1,261.
After the merger, ING Group, which controlled ING Vysya
Bank, owned a 7% share in Kotak Mahindra Bank.

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Bank (1993–2007), is an Indian banking and financial

services company headquartered in Mumbai, Maharashtra.
It sells financial services to large and mid-size companies,
SMEs and retail businesses. The bank was

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LIC), General Insurance Corporation, social insurance

Company, The New India Assurance Company, The
Oriental Insurance Corporation and United India

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In 2001 UTI Bank agreed to merge with Global Trust Bank,

but the banking company of India (RBI)

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UTI bank was listed on the London securities market.

within the year 2006, UTI Bank opened its first overseas
branch in Singapore. the identical year it opened an office
in Shanghai, China.

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