A STUDY ON EARNING PER SHARE IMPACT ON AMALGAMATION OF BANKS

With reference to the

UNION BANK
A project report submitted to
SCHOOL OF MANAGEMENT STUDIES, JNTUK
MASTER OF BUISNESS ADMINISTRATION
Submitted by
A. Surya Manohar
(Reg no: 19021E0027)
Under the Guidance of
Dr. P.V.V.SATYANARAYANA sir
Ph.D., M.Phil., MBA., M.Com., B.L., NET., SLET.
Assistance Professor

SCHOOL OF MANAGEMENT STUDIES

JAWAHARLAL NEHRU TECHNOLOGICAL UNIVERSITY KAKINADA
KAKINADA – 533001 (A.P), INDIA
2019-2021
Introduction:
In an amalgamation, two or more companies are combined into one by merger or by one taking
over the other. The companies should engaged in the same line of activity or has some synergy in their
operations. Again the companies may also combine for diversification of activities or for expansion of
services.

Amalgamation contains three types of activities, they are,

Activities

Amalgamation Absorption External

Reconstruction
1. Amalgamation :

Existing companies A and B are wound up and a new company C is formed to take over the
businesses of A and B. in other words A and B will lose their existence to become part of the New
company AB.

2. Absorption:

Existing company P takes over the business of another existing company Q which is wound
up. In other words P will lose its existence to become part of Q.

3. External Reconstruction:

ABC company will lose its existence and New company XYZ is formed with the same
shareholders.
Reasons:
 Economies of scale
 Synergy
 Growth
 Diversification
 Operating Economies
 Better Financial Planning
 Economic Necessity
 Increase in Value
 Elimination of Competition
 Utilisation of Tax Shields
Earnings per share:
Earnings per share (EPS) is the portion of the company’s distributable profit which is allocated to each
outstanding equity share. It is the amount of money each share would receive if all the profits were distributed to
the outstanding shares at the end of a period (quarterly or yearly).

Earnings per share =

(Net income after tax – Preferred stock dividends) / Average number of common shares outstanding
 NEED FOR THE STUDY 

 To analyse whether existing shareholders of Andhra bank and Corporation bank position of loss or
profit when amalgamated with Union bank.

 Impact of bank efficiencies and performance level after amalgamation.

 The project analysis is mostly about the Exchange ratio and PE ratio which was offered for before
amalgamation of shareholder.

 The change in the EPS of the company before and after amalgamation.
 OBJECTIVES OF THE STUDY

 To study the impact of earning per share value before amalgamation and after amalgamation of

1. Andhra Bank to Union Bank

2. Corporation Bank to Union Bank

 To study the synergy value of amalgamation of Union Bank.

 To study the information regarding earning available to each equity share holder of a company.
SCOPE OF THE STUDY

 The scope of the study refers to EPS analysis and to analyse the impact of amalgamation of banks on EPS.

 The study covers the financial data(balance sheet) it constitute to Assets and Liabilities of the bank
where the amalgamation will be analysed.

It covers financial data from 2015-16 to 2019-20 have been considered for the study
REVIEW OF LITERATURE

1. Impact on Earning per share (eps)-A study with special reference to Ucal Polymer Industries Limited.

- L. Vijayakumar and D. Prabakaran (2013)

Abstract:
Financing decision refers to the selection of appropriate financing-mix and so it relates to the capital
structure or leverage. Capital structure refers to the proportion of long- term debt capital and equity capital
required to finance investment proposal. There should be an optimum capital structure, which can be
attained by the judicious exercise of financial leverage. This study mainly concentrates on the exercise of
leverage in the context understanding its impact on earnings per share.

Objectives:

 To study the overall function of the Company.

 To analyse the EBIT- EBT analysis.

Findings:

 It clearly indicates the financial performance of UCAL for Eight years from 2005-06 to 2012-13 with
respect to Sales, contribution, EBIT, EAT, EBT, and EPS.
Suggestions:

The operating leverage can be favourable when increase in sales volume has a positive magnifying effect on
operating profits and it is unfavourable when a decrease in sales volume has a negative magnifying effect on operating
profits. Therefore, high operating leverage is good when sales revenues are rising and bad when they are falling. The
degree of operating leverage has implications for the business risk of the firm. Use of debt fund is cheaper than the equity
as the cost of debt is generally lower than that of equity and tax advantage is attached with its use.
Conclusion:

The purpose behind this study is to bridge the gap between theoretical and practical aspects. UCAL could not enjoy
the benefit of accepted leverage theorem. Rather it accrued the benefit of EPS through the reverse operation of leverage.
So leverage theorem is not a general rule. The dividend policy of the company is conservative. The company has been
maintaining a decrease trend in the dividend pay-out. The company was enabling to maximize the EPS by reverse
operation of financial leverage. The company successfully pulled down the degree of financial leverage to reap the EPS
advantage.
2. Firm performance and earnings per share: A study of listed banks in Sri Lanka

- Sathasivam Balaputhiran (2014)

Abstract:

This paper focuses on identifying the relationship between firm performance and Earnings per Share of the
listed banks in Sri Lanka. The data of this study composed of 7 listed banks from the banks, finance and insurance
sector covering the period of 5 years from 2008 to 2012. Correlation method has been utilized to find out the
relationship whereas simple regression method has been used to identify the impact of firm performance on
Earnings per share. Findings reveal that there is no significant association between firms’ performance and EPS.  

Objectives:

The main objective of the study is to identify the relationship between firm performance and earnings per
share. The sub objectives are as follows,

• To identify the impact of firm performance on earnings per share.

• To find out the factors influencing earnings per share.

 
Research methods:

Quantitative research approach was employed to find out the findings of the research study. Correlation
and simple linear regression methods have been utilized in order to arrive at the end result of the study.
Dependent and independent variables used in the study. Earnings per Share have been used as the dependent
variable where as net profit ratio and return on assets have been used as the dependent variables in the study.

Findings:

The indicates the relationship between the independent variables and dependent variable used in the study.
It is apparent from the table that the relationship was found to be positive but statistically insignificant for all the
variables used in the study. The r values consist of 0.03 and 0.09 for the association between ROA and EPS and
NP and EPS respectively.
3. Analysis of impact of earning per share, dividend per share and price earnings ratio on stock performance

- Dr. Nagendra S, Dr. Satish Kumar and Mr. Aarish venoor (2018) 

Abstract:

The research paper is based on a research work conducted to study the impact of EPS, DPS and P/E
ratio on stock performance. This study covered top 50 BSE listed companies that are belonging to different
sectors. This study aimed to measure the inter connection between earnings per share (EPS) and dividend per
share (DPS) .The study covered a period 10 of years i.e. from 31st Dec 2006 to 2015. This study included the
yearly inter relationship between earnings per share (EPS) and dividend per share (DPS). The understanding
on these concepts would help the share market investor to take wise decisions while investing their money in
share market.

Objectives:

The main objective of the study is to analyse the impact of EPS, DPS & P/E ratio on stock performance The
specific objectives are

1. To measure the inter connection between earnings per share (EPS) and dividend per share (DPS)

2. To analyse the effects of EPS, DPS and P/E ratios on stock performance.
Scope:

 This study covers the 50 BSE index that are belong to 5 different sectors

 The study covers a period of 10 years i.e. from 31st Dec 2006 to 2015

 This study include the yearly inter relationship between earnings per share (EPS) and dividend per share
(DPS).

Methodology:

In the current study the researcher is going to use both primary and secondary data. The various source
to be used in the study are Books, Journals; the secondary sources. The sample size of the study is 50
companies and the sample is randomly selected from the NSE listed companies.
4. A Regression Impact of Earning per Share on Market Value of Share

- Muhammad zulqarnain Jatoi, Ghulam Shabir, Naqvi Hamad(2014)

Abstract:

The price of equity shares depends on the two basic factors, demand and supply. Price fluctuates with the
phenomenon of buying and selling. Prices usually move up with buying and go down with selling of equity shares.
Many accounting variables affect market value of equity share and Earnings Per Share is one of them. The purpose
of this research is to find out the effect of Earning Per Share (EPS) on the Market Value of Share (MVS) and their
mutual relationship.
Methodology:

The targeted population was the Pakistani Cement industries that were listed in the Stock Exchange
Commission of Pakistan. The thirteen Cement industries were targeted for the analysis and five years secondary
data that was available in the financials of the cement industries of Pakistan and stock exchange commission of
Pakistan reports used for this purpose. The data was analysed through SPSS software and represented in the
form of tables and graphs.

Conclusions:

There are different factors affecting the market value of a share. Among them one of the important factor
taken in the study is Earnings per share Therefore, the present study examines impact and the relationship
between MVS & EPS. The regression and correlation models for EPS exposed basic related variable that
influencing the MVS of that industry. The graphical representation also shows that MVS increase with the
increase of EPS and vice versa.
RESEARCH GAP:
Based on Above reviews, the gap is there between my study and above reviews.

The above reviews covered only

1. Impact on Earning per share (eps)-A study with special reference to Ucal Polymer Industries
Limited.

2. Firm performance and earnings per share: A study of listed banks in Sri Lanka.

3. Analysis of impact of earning per share, dividend per share and price earnings ratio on stock
performance.

4.A Regression Impact of Earning per Share on Market Value of Share

The research gap is identified by the researcher i.e., No studies are banking sector regarding
merging impact.

So, that the study is “A study on Earning per share impact on Amalgamation Banks with
reference to the Union Bank”.
 METHODOLOGY OF THE STUDY

The information for the study has been gathered mainly from the secondary data
comprising the balance sheets and financial statements of Banks.

A five years financial statements i.e., from 2015-16 to 2019-20 have been considered for
the study.
Company profile:

About Andhra Bank

Andhra Bank is one of the leading public sector banks in India. With its headquarters in Hyderabad, which is
currently the shared capital city of Andhra Pradesh and Telangana. The bank has worked hard to be recognised for its
pan India presence in the past decade, outgrowing the South Indian focus that it had retained since its inception.
Andhra Bank was founded in 1923 by Dr. Bhogaraju Pattabhi Sitaramayya, an eminent freedom fighter and political
leader from the West Godavari region of Andhra Pradesh. The bank obtained its registration on 20 November 1923
and within a few days commenced banking activities. Andhra Bank was nationalised in the second phase of bank
nationalisation in India in 1980.
About Corporation Bank of India:

The Corporation Bank in India started its journey in the name of the Canara Banking Corporation
(Udupi) Ltd in 1906 with a sum of ` 5000 only in a small town of Udupi near the city of Mangalore in
Karnataka.
Corp Bank received RBI license in 1952 and saw a merger with the Bank of Citizens in 1961. In the month
of April 1980, it was given a status of nationalized bank. From the time of its establishment till today, the
bank has never looked back. Currently it is one of the well-recognized Public Sector Banks in India.

Corporation Bank India is identified with dynamic services of its young and dedicated staffs, who
know no bounds. It runs more than 600 ATMs extending across 21 States and 2 Union Territories. It shares
ATM network with Andhra Bank, ING Vysya Bank Ltd. and IndusInd Bank Ltd.
About Union Bank of India:

  Union Bank of India had started with a vision to turn into "the bank of first choice in our chosen
area by building beneficial and lasting relationship with customers through a process of continuous
improvement". Also referred to as UBI, because of which many confuse it with United Bank of India, the
Union Bank of India has evolved into one of the largest state-owned banks in India. It is also included on
the Forbes 2000 list.
The Union Bank of India has its offices in the overseas destinations like United Arab Emirates, Abu
Dhabi, Shanghai and Peoples Republic of China. Its branch can be found in Hong Kong also.

History of Union Bank:

In the year 1919, the Union Bank of India underwent a registration process as a limited company in
Mumbai. Our Father of the nation 'Mahatma Gandhi' had done the inauguration of this bank. In 1947, UBI
had 3 branches in Mumbai and 1 in Saurashtra. In1975, it was assigned the status of the national bank by
the government. At that point of time, it was managing 240 branches across 29 states.
In its journey, UBI witnessed mergers with a private sector bank called Belgaum Bank and then Miraj State
Bank. On the request of RBI, it acquired Sikkim Bank, which had 8 branches in the North-east at that time.

In the year 2007, Union Bank of India made its presence felt in the international arena by opening
representative offices in the destinations of United Arab Emirates, Abu Dhabi, Shanghai and Peoples Republic of
China. Besides, it chose Hong Kong as the destination to open its very first branch outside India.
Thank you…