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Kotak Mahindra Bank2016

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    Introduction

    Strategic Management - An Introduction

    Strategic Management is all about identification and description of the strategies that managerscan carry so as to achieve better performance and a competitive advantage for their organization.

    An organization is said to have competitive advantage if its profitability is higher than the

    average profitability for all companies in its industry.

    Strategic management can also be defined as a bundle of decisions and acts which a manager

    undertakes and which decides the result of the firms performance. The manager must have a

    thorough knowledge and analysis of the general and competitive organizational environment so

    as to take right decisions. They should conduct a SWT Analysis!Strengths" Weaknesses"

    pportunities" and Threats#" i.e. they should make best possible utilization of strengths" minimize

    the organizational weaknesses" make use of arising opportunities from the business environment

    and shouldnt ignore the threats.

    Strategic management is nothing but planning for both predictable as well as unfeasible

    contingencies. $t is applicable to both small as well as large organizations as even the smallest

    organization face competition and" by formulating and implementing appropriate strategies" they

    can attain sustainable competitive advantage.

    $t is a way in which strategists set the ob%ectives and proceed about attaining them. $t deals with

    making and implementing decisions about future direction of an organization. $t helps us to

    identify the direction in which an organization is moving.

    Strategic management is a continuous process that evaluates and controls the business and the

    industries in which an organization is involved& evaluates its competitors and sets goals and

    strategies to meet all e'isting and potential competitors& and then reevaluates strategies on a

    regular basis to determine how it has been implemented and whether it was successful or does it

    needs replacement.

    Strategic Management gives a broader perspective to the employees of an organization and they

    can better understand how their %ob fits into the entire organizational plan and how it is co(

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    http://www.managementstudyguide.com/swot-analysis.htmhttp://www.managementstudyguide.com/swot-analysis.htm
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    related to other organizational members. $t is nothing but the art of managing employees in a

    manner which ma'imizes the ability of achieving business ob%ectives. The employees become

    more trustworthy" more committed and more satisfied as they can co(relate themselves very well

    with each organizational task. They can understand the reaction of environmental changes on the

    organization and the probable response of the organization with the help of strategic

    management. Thus the employees can %udge the impact of such changes on their own %ob and can

    effectively face the changes. The managers and employees must do appropriate things in

    appropriate manner. They need to be both effective as well as efficient.

    ne of the ma%or role of strategic management is to incorporate various functional areas of the

    organization completely" as well as" to ensure these functional areas harmonize and get together

    well. Another role of strategic management is to keep a continuous eye on the goals and

    ob%ectives of the organization.

    Different Types of Strategy

    Research and development strategy

    )usinesses cannot grow and survive without new products. $t is the role of *+, specialists to

    generate new product ideas" nurture them carefully and develop them fully into commercially

    viable propositions. Where innovation proves to be a costly e'ercise imitation could also be tried

    as a fruitful option. Many -apanese electronics companies were uite successful in copying

    American technology and by avoiding *+, costs" improved their competitive strength

    significantly.

    Operations Strategy

    This strategy outlines steps to keep costs under check and improve operational efficiency. The

    focus is on arriving at decisions regarding plant layout" plant capacity" production processes"

    inventory management etc.

    Financial strategy$t deals with financial planning" evaluating investment proposals securing funds for various

    investments and controlling financial resources. Thus raising funds" acuiring assets" allocating

    funds to operations" using funds efficiently etc are all part of the strategy.

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    Marketing Strategy

    $t deals with strategies relating to product pricing" distribution and promotion of a companys

    offering important issues here cover what type of products at what prices through which

    distribution channel and by the use of which promotional tool and sales force etc.

    Human Resources strategy

    /* strategy deals with hiring" training" assessing" developing rewarding motivating and retaining

    the number and types of employees reuired to run the business effectively" internal !union

    contracts" productivity indices" labor turnover" absenteeism accidents etc# and e'ternal factors

    !labor laws" son of the soil" reservation" eual employment opportunity" employment of children

    and women etc# need to be carefully evaluated while formulating /* strategies.

    Constraints and strategic choice

    0iewed collectively the *+, strategy should encourage innovation& marketing should stress

    brand loyalty and reliable distribution channels of production should maintain long production

    runs" cost reduction" finance should focus on cash flows and positive returns and /* department

    should develop strategies for retaining and developing a stable workforce. f course

    organizations do come across constraints while formulating functional level strategies in several

    forms" how to finance the proposals what kind of risk to be taken" how to combine suppliers and

    make channel partners happy" how to encounter competitive retaliation etc. $n any case while

    selecting appropriate strategies at corporate business and functional level the following criteria

    should be kept in mind.

    Strategy Implementation:

    Strategy implementation is the process of translation of strategies and policies into action

    through the development of programs" budgets and procedures $t is typically conducted by the

    middle and lower level management but is reviewed by the top management. /owever" programs

    and procedures are simply more detailed plans for the eventual implementation of strategy.

    1nless the corporation is appropriately organized" programs are adeuately staffed and activities

    are properly directed these operational plans fail to deliver the goods. To be effective a strategy

    must be implemented through the right organization structure and appropriate management

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    practices. $n addition" management must also ensure that there is progress towards" ob%ectives

    according to plan by instituting a rigorous process of control over important activities. The

    following figure would help in understanding the process of strategy implementation.

    Directing

    2eople should be motivated to implement a new strategy in desired ways. $t is not sufficient

    merely to have people who can do the %ob& it is necessary to have people who want to do the %ob

    the way you need it done. $n addition to traditional motivational techniues managers should also

    make use of modern techniues in order to inspire people to perk performances.

    WHAT IS A FINANCIAL STRAT!"#

    To get the most out of your financial resources and achieve sustainability you3ll need to

    successfully manage all your funding and financing sources in an overarching strategy for your

    organization. 4ind out how to go about this and who to involve.

    W$y $a%e strategies#

    Many organizations manage income from a number of different funding and finance sources (

    from donations" grants" contracts and income generated from trading.

    A financial strategy enables your organization to assess your financial needs and the sources of

    support reuired to meet your ob%ectives and fulfill the organizational mission" whilst also

    planning for continued growth to enable stability.

    5ou3re financial strategy will derive from your mission. So the first step is to clearly define why

    you e'ist and you plan to achieve your mission before preparing any budgets.

    What's your mission?

    A mission statement is a brief declaration of an organizations !ur!ose and

    "alues # the reason $hy it e%ists& our mission should be a long#term

    statement of intent deri"ing from the "ision that originally ins!ired the

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    organization to form& )t shouldn't be a detailed list of $hat you $ill do* ho$

    you'll do it and $hen&

    4ocusing on your mission will help you move your focus from what you do" to what you want to

    achieve.

    nce your mission is clear you3ll be able to set strategic goals !both medium and long term# that

    set the direction of your organization.

    With your direction clear you can create a coasted" timed and detailed work plan that outlines the

    operational activities necessary to achieve each goal down to the day to day activities. This will

    ensure that your mission and financial goals are complementary to each other rather than in

    competition.

    Whats the role of a +nance function?

    *ather than being seen as a separate function" %ust doing the books" your finance function should

    be integrated within" and add value to" the overall planning and management of every

    organization.

    5our finance function ( whether that is a team or an individual ( can add value to both planning

    and management. The key roles are6

    2roviders of information for decision(making

    )usiness management.

    4inancial managers will need to assess what information they have" particularly on costs and

    income pro%ections to be able to control or plan the future.

    What's the role of the trustee board?

    The financial management role of a voluntary organization trustee board is uite different to a

    commercial organization. The three main financial management functions of the board are

    financialmonitoring" proceduresandmanagement.

    Most voluntary organizations are financially accountable to a far greater number of stakeholders

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    that commercial organizations being funded by a combination of ta' concessions and money

    from the general public" local government and charitable trusts.

    The goal of ma'imizing shareholder value ( which can be measured ob%ectively ( is not relevant

    to non(commercial organizations. $nstead" the whole trustee board must demonstrate value for

    money and effectiveness" which by their nature are more sub%ective criteria.

    A financing strategy is integral to an organisations strategic plan. $t sets out how the

    organisation plans to finance its overall operations to meet its ob%ectives now and in the future.

    A financing strategy summarises targets" and the actions to be taken over a three to five yearperiod to achieve the targets. $t also clearly states key policies which will guide those actions.

    Managing an organization3s financial resources so as to achieve its business ob%ectives and

    ma'imize its value. Strategic financial management involves a defined seuence of steps that

    encompasses the full range of a company3s finances" from setting out ob%ectives and identifying

    resources" analyzing data and making financial decisions" to tracking the variance between actual

    and budgeted results and identifying the reasons for this variance. The term 7strategic7 means

    that this approach to financial management has a long(term horizon.

    At the most fundamental level" financial management is concerned with managing an

    organization3s assets" liabilities" revenues" profitability and cash flow. Strategic financial

    management goes a step further in ensuring that the organization remains on track to attain its

    short(term and long(term goals" while ma'imizing value for its shareholders.

    Strategic financial management also means that short(term goals may occasionally need to be

    sacrificed to meet longer(term ob%ectives. A typical e'ample is when a loss(making company

    trims its asset base through factory closures or headcount reduction in order to reduce operating

    e'penses. While such actions have a detrimental effect on near(term results because of

    restructuring costs and other one(time items" it positions the company to achieve profitability in

    the longer term.

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    Financia& Strategies

    A large part of the business plan for any small business is the financial section of the plan. The

    financial section includes the income statement" cash flow statement and balance sheet. 4or new

    businesses" these financial statements will be pro%ections" whereas for an e'isting the business

    the section will contain several years of history as well as pro%ections. $n addition to statements"

    the plan should include the financial strategies of the business in how finances will be handled.

    Cas$ F&o' Management

    The income statement and balance sheet of a business may look great on paper" but if the cash is

    not properly managed" the small business can uickly go under. 2art of the financial strategy of

    the business plan will detail how cash will be used in the business. This includes identifying an

    amount that will always be in reserves as well as how ma%or e'penses will be paid. )y laying out

    the financial cash strategy ahead of time" it will make financial decisions easier about when to

    write a check and when to access a line of credit during normal business practice.

    (urc$ases

    Any purchases made through the business" particularly large purchases" should have detailed

    guidelines in the business plan. This will determine which purchases will be made with cash" a

    line of credit and with a credit card. This strategy will also outline taking advantage of the terms

    of suppliers. 4or instance" if a supplier offers 89(day terms" the business will wait until the end of

    the term to make a payment. $n addition" the purchasing strategy should specify if approval is

    needed by a manager or board for purchases over a certain amount.

    Co&&ections

    $f the business is not properly managing its own receivable" it can be devastating to the financial

    health of the business. The financial strategy should detail the collections plan. This may include

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    dedicating in(house staff to following up with overdue customers or turning them over to an

    outside agency. $t will also specify late fees and if deposits are due before products and services

    are delivered for new customers.

    In%estments

    Although a specific investment strategy may not be able to be detailed in a written plan" general

    guidance should be given to management. This includes a percentage of money invested in high(

    risk portfolios vs. lower(risk portfolios. The investment section of the plan will also include

    guidelines of when approval is needed to make changes to current investments or to liuidate

    investments to cover business necessities.

    Considerations

    The financial strategy of a business plan should be a general guide. While some specifics" such

    as approval authorities can be outlined" it will be difficult to account for every possible financial

    scenario that may arise in the business. /owever" the financial strategy should be enough of a

    guideline to direct the basic staff of the business in conducting the financial aspects of the

    business from paying for purchases to making payroll.

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    Strategic Management in )an*ing

    ,eveloping a strategic mindset in the fast changing environment of banking. )anks and

    regulators alike have woken up to the growing needs of emerging $ndia. ver the past couple of

    years" the $ndian banking sector has displayed a high level of resilience in the face of high

    domestic inflation" rupee depreciation and fiscal uncertainty in the 1S and :urope. This has

    necessitated the banks in $ndia to concentrate much more on operating efficiency" outsourcing

    and cost optimization now than ever before. With deregulation of savings bank rate and bleak

    global economy" the banks are focusing on alternative sources of revenue" like fee income" trade

    and vendor financing" geographic e'pansion et al to ma'imize their revenues. The )anking

    sector in $ndia has adopted and embraced technology to keep pace with the international

    development in the banking industry and offer uality products to its clients. Technology has

    enabled banks to conceive and deliver products that are more in line with the reuirements of its

    clients on the one hand and also more cost efficient on the other. We have captured few emerging

    trends in the )anking space that are gaining traction.

    The competitive environment in the banking sector is likely to result in individual players

    working out differentiated strategies based on their strengths and market niches. 4or e'ample"

    some players might emerge as specialists in mortgage products" credit cards etc. whereas some

    could choose to concentrate on particular segments of business system" while outsourcing all

    other functions. Some other banks may concentrate on SM: segments or high net worth

    individuals by providing specially tailored services beyond traditional banking offerings to

    satisfy the needs of customers they understand better than a more generalist competitor. To be

    strengthened to ensure transfer of funds on real time basis eliminating risks associated with

    transactions and settlement process. )anks will have to adopt global standards in capital

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    adeuacy" income recognition and provisioning norms. *isk management setup in )anks will

    need to be strengthened. )enchmark standards could be evolved. *egulatory set(up will have to

    be strengthened" in line with the reuirements of a market(led integrated financial system will

    have to adopt best global practices" systems and procedures. )anks may have to evaluate on an

    ongoing basis" internally" the need to effect structural changes in the organization. This will

    include capital restructuring through mergers ; acuisitions and other measures in the best

    business interests.

    $)A and ?st century will bring about all(embracing convergence of computing"

    communications" information and knowledge to radically change the business of banking. The

    growth of high speed networks" coupled with the falling cost of computing power" is makingpossible applications undreamed of in the past. 0oice" data" images" and video may now be

    transferred around the world in microseconds.

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    opportunities of a rapidly(changing environment. They recognize that without the right

    technology" they cannot hope to remain globally competitive. The present study investigates

    Sustainable )anking Strategies adopted by $ndian banks by reviewing the last decade

    performance of scheduled commercial banks in $ndia. The development of banking sector and its

    stability is essential for the overall development of the economy. The stability of banking sector

    is determined on the basis of its performance and uality of assets. This study e'amines the

    various issues of the

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    Improve Income

    There is a lot of opportunity to improve income. :ach opportunity reuires adaptation for the

    bank that wants to pursue it. The future will be ruled mainly by big banks that can scale up their

    value proposition !and a few niche banks" some owned by bigger banks#.

    Gro !y ac"uisition

    Some banks are buying up troubled or smaller banks or assets at home or abroad. Their challenge

    is to effectively integrate their acuisition and ensuring that the promised value is captured. A

    heavy(handed approach from the acuiring company without understanding the acuired banks

    market" customers" or culture can destroy value and lose business.

    Gro !y e#pansion

    )anks which are able to fund e'pansion of their operations into new markets need an effective

    e'pansion strategy to capture value and recover investments.

    Gro !y partnership

    $nnovating services and creating something really new for customers can be achieved through

    innovative partnerships.

    Community Marketing

    )anks range in size and capabilities. Small banks may only have one or two branch offices

    whereas large commercial banks may have thousands of branches across the nation. *egardless

    of the size of the bank" each branch needs to tailor local marketing strategies to serve the

    immediate community. =onsumers bank in a place where they feel safe and comfortable. This

    means tellers and account representatives who speak :nglish as well as any prominent language

    in the community. )y having branch managers look at the local community needs" the bank can

    attract a larger percentage of the target market.

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    $roduct %undling

    A successful strategy employed by all banks is product bundling" such as offering a free checking

    account for those who open a savings account. )ecause this has become common practice"

    successful strategies implement creative bundling solutions. An automatic home line of credit

    with a mortgage refinance might be a solution when interest rates are low or the community has

    a large percentage of consumers looking to consolidate debt.

    $re&'pproved $roducts

    =onsumers are more likely to say yes to something when they already know they are approved

    for it. )anks can review e'isting accounts to determine positive banking and credit trends in

    customers. Those identified with positive trends and credit history are sent 7pre(approval7 letters

    for credit cards" lines of credit or mortgages.

    Grow organically

    )anks need to grow back their customer bases and deepen their relations and share of wallet.

    They must reverse the attrition of their e'isting customers" and try to generate new business by

    selling more products to e'isting customers and attracting new customers.

    This reuires an innovative approach in order to be the preferred bank for target customers.

    )anks are re(e'amining their portfolios and customer segments. They are identifying the

    customer segments they want to serve and where they think they can be competitive.

    More than ever" they will have to understand each segment and build a pragmatic and convenient

    customer value proposition relevant to that segment. More than ever" banks will have to focus on

    the long term value of a customer" not %ust immediate transactional value.

    ome o!!ortunities for creating "alue $ith your customer base

    Customer

    ive customers reasons to trust you.

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    Make customers happy" make their lives easier !not more complicated#

    Segment customers and develop value propositions for target segments" based on needs

    and behaviors

    Measure and improve customer loyalty" across product lines

    Process

    *ethink processes from a customer e'perience perspective and create a superior customer

    e'perience

    ptimize processes to present a seamless face to the customer across all products and

    channels

    Channel

    *ethink branch operating models and branch network footprint

    $ncorporate all channels into an integrated customer e'perience.

    1se technology to provide multi(channel" more convenient access to products and

    services

    Product

    =reate more transparent products !for assets" liabilities" off(balance products#

    ffer the right products to the right customer segment based on their risk profile

    )undle products and services relevant to a target segment to reward customers for

    keeping more products with you

    )uild a strategic pricing framework that drives relation deepening and customer loyalty

    Train front staff to be able to describe products simply and clearly" rightly target them and

    take new clients properly on board

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    Service

    $mprove service operation e'cellence. Train and incentivize staff to delight your target

    customers

    ,evelop personalized relationships with your most valuable customers. *edirect front

    staff time to relationship(building with most valuable customer segments& automate standard

    transactions through remote channels to gain efficiency

    Align the service model with the value that customer segments bring

    $nnovate your sales systems& improve cross(selling and retention rates

    Improve Efciency

    The future will also be ruled by banks that can simplify their product lines and processes. Many

    banks have high cost structures. They can improve their bottom line" decrease costs by

    improving efficiency" while increasing service levels and the uality of the customer e'perience.

    4ocus on a clear customer value proposition. Stop trying to do everything at once

    Align processes" systems" structure and key pro%ects to the overall strategy

    Streamline systems and processes across functions and product lines. $ntroduce end(to(

    end process simplification for key processes.

    1se technology to measure and improve operational efficiency and productivity

    $mprove efficiency and effectiveness of people by engaging them and reducing attrition

    of your best talent

    Optimize Allocation o Capital

    Adapt to new regulations ( capital" risk" liuidity

    ,eleverage balance sheets where needed

    btain more reliance on fee income and balance loans to deposits ratios

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    Manage operational risks6 trading" reputation" product" workforce" and cyber(security.

    The challenge is to manage these risks with minimal constraint to customer convenience and

    minimum impact on capital

    Allocate capital across business lines" investing in the best customers and the business

    lines important to them

    (eller Re)errals

    )ank tellers interact with the ma%ority of the bank clientele. Tellers perform the day(to(day

    transactions" such as cashing checks" making deposits or transferring money. Successful banks

    consistently train tellers to look for opportunities to cross(sell bank products and refer customers

    to the right person. A teller may see a regular customer cash a dividend check and refer the

    person to the investment specialist. The teller may see a high savings balance and suggest a

    higher (earning time certificate. Smart banks reward top referring tellers to entice them to take

    the time to suggest a new product or service.

    $remier Services

    2remier services are designed to attract high net worth bank clientele. /igh net worth clients

    often have different needs as well as e'pectations. )y offering a select set of private bankers to

    personally handle all transactions and account reviews" client trust increases. Service is often

    better with private bankers able to focus on finding the best solutions to fit complete financial

    scenarios.

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    Eotak intro

    About Eotak Mahindra )ank :stablished in ?BF9" the Eotak Mahindra group has been one of

    $ndia3s leading financial services conglomerate. $n 4ebruary >@@G" Eotak Mahindra 4inance Htd"

    the group3s flagship company was given the license to carry on banking business by the *eserve

    )ank of $ndia !*)$#. This approval creates banking history since Eotak Mahindra 4inance Htd. is

    the first non(banking finance company in $ndia to convert itself in to a bank as Eotak Mahindra

    )ank Htd.

    Eotak Mahindra )ank offers complete retail financial solutions for varied customer

    reuirements. The Savings Account goes beyond the traditional role of savings and provides a

    range of services through a comprehensive suite of investment services and other transactional

    conveniences like nline Shopping" )ill 2ayments" AS)A" !Automatic T, sweep(in and Sweep(

    out# etc. The )ank also offers an $nvestment Account where Mutual 4und investments are

    recorded and can be viewed in a consolidated fashion across fund houses + schemes. ne can

    purchase" redeem" switch and even make systematic investments in Mutual 4und Schemes of

    over >@ $ndian Mutual 4und houses. All this can be availed through $nternet or phone banking

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    services. The )ank also offers loan products such as 2ersonal Hoans" =ommercial 0ehicle Hoans"

    etc.

    Eeeping in mind the diverse needs of the )usiness =ommunity" Eotak Mahindra )ank offers

    comprehensive business solutions that include =urrent Account" Trade Services" =ash

    Management Services and =redit facilities. Eotak Mahindra )ank has over 8?? full(fledged

    retail branches and over B?F ATMs spread across >8? locations in the country. The )ank has the

    products" the e'perience" the infrastructure and most importantly the commitment to deliver

    pragmatic" end(to(end solutions that really work.

    +ota* Ma$indra )an*is the fourth largest $ndian private sector bank by market capitalization"

    headuartered in Mumbai" Maharashtra. The banks registered office !headuarters# is located

    at Mumbai"$ndia.

    $n 4ebruary >@@G" Eotak Mahindra 4inance Htd" the group3s flagship company was given the

    licence to carry on banking business by the *eserve )ank of $ndia!*)$#. Eotak Mahindra

    4inance Htd. is the first company in the$ndian banking historyto convert to a bank.

    Merger Strategy 1sed by Eotak Mahindra )ank

    $ntroduction

    $n @?8" Eotak Mahindra )ank Himited !Eotak# announced its acuisition of $

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    /owever" industry e'perts had doubts on the synergies of the merger. They uoted a study by

    E2M and Wharton which found FGJ of Merger and Acuisitions !M+A# failed to produce any

    benefits and over half of M+A ended up reducing shareholder value instead of increasing it.

    Some e'perts were worried about the various challenges the merger deal threw up" such as the

    cultural differences between the two banks and the reaction of the employees union among

    others. /owever" other e'perts were positive about the deal.

    Since ancient times" an indigenous banking industry had prevailed in $ndia with some

    communities being traditionally involved. These communities mostly ran huge businesses apart

    from the banking business. $n fact" the banking business was relatively smaller than their other

    businesses. They mainly dealt in money lending" did not accept deposits from customers" and

    discouraged savings.

    The western type of banks came into the picture in the late ?Fth century in $ndia when )ank of

    /industan was established in ?KK@ in =alcutta !now Eolkata# in Western $ndia. Hater" eneral

    )ank of $ndia was established in ?KFL in =alcutta. =alcutta became the center of banking

    activities mainly due to the trading activities of )ritish :mpire. $n the ?Bth century" the ma%or

    development in the $ndian banking industry was the establishment of three presidency banks by

    the )ritish :ast $ndia =ompany. /owever" in ?B>?" these three presidency banks were

    amalgamated to create the $mperial )ank of $ndia.

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    M*' 'ctivity In Indian %anking Sector

    The $ndian banking sector did not witness too many M+A activities when compared to western

    and other countries. After the first stage of nationalization in ?BLB" only G8 mergers took place in

    the $ndian banking sector. $n >L of these deals" 2S)s acuired private sector banks that were on

    the brink of failure" mostly on a directive from the *)$. The remaining F deals happened

    between private sector banks.

    The merger prior to the Eotak and $@?@ when )ank of *a%asthan merged with $=$=$ )ank in a 1SIGBF million deal. There

    were many reasons for the low number of M+As in $ndia. These included restrictive regulations"

    a ma%or part of the banking industry being owned by the $ndian government" and the rigid

    resistance by strong employees unions.

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    '!out +otak Mahindra %ank ,imited -+otak.

    Eotak started as a 9 shares of Eotak for every ?"@@@ shares

    of $

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    Synergies Out O) (he Merger

    The merger increased the geographical presence and further deepened Eotaks network" thanks to

    the complementary network of $

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    Challenges O) (his Deal

    The ma%or challenge was related to human resource management. The salary structure of both

    banks was also uite different. Around one(third employees of the ?@"9B? employees of $

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    Strategic Rationale and !ene)its

    Eotak" with L8? branches and relatively deeper presence in the West and ?8 branches" with a wide(spread pan($ndia

    network" getting both breadth and depth given the strong geographic complementarity between

    Eotak and $

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    organizations have strong cultures and employee best practices and the combined entity will

    work towards imbibing these and building a world(class organization. $