BIJAPUR DISTRICT CENTRAL CO-OPERATIVE LTD

The co-operative movement was started in India in 1904 with the object of providing finance to agriculturists for productive purposes at low rates of interest and thereby relieving them (i.e., the agriculturist) from the clutches of the money lenders. A large number of agricultural credit societies were setup in the villages under the Co-operative Societies Act of 1904. The Co-operative Societies Act of 1912 contributed to the establishment of Central Co-operative banks and the state co-operative banks to provide refinance to primary credit societies which could not mobilize funds by their own efforts. By facilitating the formation of central co-operative banks and the state co-operative banks, the Co-operative Societies Act of 1912 gave stimulus to the co-operative credit movement in India. The co-operative credit movement made good progress during and after the First World War of 1914-1918. But during the Great Depression of 1929-1933, it received a serious setback. With the outbreak of the Second World War of 1939-45, the co-operative credit movement made considerable progress once again. The number of co-operative credit institutions had increased, their membership had gone up and their deposits and advances also had increased considerably. Since then, the progress has been maintained thanks to the keen interest shown by the Reserve Bank of India in the co-operation credit movement.

The Indian co-operative banking system is a three-tier system. It consists of three sections, viz., (1) Primary Credit Societies at the base, (2) Central Co-operative Banks in the middle and (3) State Co-operative Banks or the Apex Banks at the top.

Central co-operative banks are federations of primary credit societies operating in a specified area. Generally, they are located in the district headquarters or some prominent towns of the district. They are organized on the basis of limited liability.

Though, in theory, central co-operative banks are supposed to be federations of primary credit societies, in practice, the membership of central co-operative banks may be confined only to the primary credit societies or open to primary credit societies as well as individuals.

If the membership of central co-operative banks is confined to only primary credit societies, they are called pure central co-operative banks or co-operative banking unions. Pure central co-operative banks are found in the states of Kerala, Maharashtra, Orissa, etc. on the other hand, if the membership of central co-operative banks is open to primary credit societies as well as some individuals, they are called mixed central co-operative banks. Mixed central co-operative banks are found in the states of Tamil Nadu, Andhra Pradesh, Karnataka, Assam etc.

The Bijapur District Central Co-operative Bank Ltd. is functioning in the Mumbai, Karnataka area of Bijapur from 1919. The district has 644 villages with five talukas. The main aim of the bank is to provide financial assistance to the Agriculture and allied activities. It has opened 28 branches in the area to serve all the people. The present share capital of the bank is around 18 crores and the accumulated reserves amounted to Rs.3.35 crores. The analysis and interpretation of the financial statements assumes significance.

Financial statements may refer to any formal and original statements which disclose financial information relating to any business concern. The financial data summarized in the form of financial statements are of outstanding significance to the various parties interested in and concerned with the operation and the financial growth of the business executives. In fact, these financial statements render a Yeoman’s service to owners, suppliers, government agencies, employees, customers and even common public in their respective field of interest. It may however be observed that mere presentation of these statements does not serve the purpose of none of the aforesaid parties in any way. The significance of these statements lies not in their preparation but in their analysis and interpretation. Therefore, analysis and interpretation of financial statement is essential so as to show the full disclosure of profitability and financial soundness.

According to Myers “Financial statement analysis is a study of relationships among various financial factors in a business as disclosed by a single set of statement and a study of the trends of there factor as shown in a series of statements”. A number of tools, techniques and methods are available for financial analysis. The following are the important tools and techniques for financial analysis.

Comparative financial and operating statements.
Ratio Analysis.
Fund flow analysis.
Cash flow analysis.
Trend analysis.

The Problem:
The Bijapur District Central Co-operative Bank Ltd. is functioning in the Mumbai, Karnataka area of Bijapur from 1919. The district has 644 villages with five talukas. The main aim of the bank is to provide financial assistance to the Agriculture and allied activities. It has opened 28 branches in the area to serve all the people. Inspite of many hardships in the co-operative sector, this bank has made considerable progress in terms of Advances and Profit. This bank has been named number one bank in the state in terms of profit from 1998-99 to 2001-02. The report on the financial position of the bank is very much essential for all sections of the society in general and management in particular. Hence, it is essential to measure and report the financial position, composition of assets and liabilities, ratio of debt and equity to the people concerned.

EQUITY SHARES VALUATIONS

VALUATION OF EQUITY: AN ANALYSIS
Before presenting an analysis of the results obtained, a brief profile Hindalco Aluminium Ltd. is provided.

Hindalco Industries Limited, a flagship company of the Aditya Birla Group, is structured into two strategic business -Aluminium and Copper and is an industry leader in both. A non-ferrous metals powerhouse with a turnover of Rs. 11,396 crore (Fy06), Hindalco’s integrated operations and operating efficiency have positioned the company as Asia’s largest integrated primary producer of aluminium and among the most cost efficient producers gloablly. Its copper smelter is today the world’s largest custom smelter at a single location.

Established in 1958, Hindalco commissioned its aluminium facility at Renukoot in eastern U.P. in 1962 and has today grown to become the country’s largest integrated aluminium producer and ranks among the top quartile of low cost producers in the world.

With a strategic intent to achieve vertical integration in the copper business, Hindalco acquired two capitve copper mines in Australia - Nifty and Mt. Gordon through Aditya Birla Minerals Limited.

Some recent milestones
In May 2007 the company signed an M0U with the Government of Madhya Pradesh for setting up a Greenfield aluminium smelter and a captive power plant. The company also entered into a joint venture with Essar Power (M.P.) Ltd. To develop and operate coal mines at Mahan, Madhya Pradesh. The joint venture will supply coal to the proposed aluminium smelter and power complex in Madhya Pradesh.

In May 2006, the company’s copper mining subsidiary Aditya Birla Minerals Limited (formerly Birla Mineral Resources Ptv. Ltd. Came out with an equity offering and subsequent listing on the Australian Stock Exchange (ASX).

In March 2006, the company acquired an aluminium rolling mill and wire rods facility, from Asset Reconstruction Company (India) Limited (ARCIL), belonging to Pennar Aluminium Company Limited.

In January 2006, the company concluded 4:1 rights issue of its shares on partly paid basis. It was the largest ever rights issue in the history of corporate India and first one to issue partly paid instruments.

In September 2005, the company split its shares in ratio of 10:1 in order to enhance liquidity and to encourage participation from retail investors.

April 2005, the company signed an MOU to establish a world class aluminium project in the state of Orissa.

In April 2005, the company entered into MOUs with the Orissa and Jharkhand government for setting up a green field alumina facility and aluminium facility respectively, in the states.

In March 2005, the company entered into an M0U with the Government of Jharkhand to set up aluminium smelter and captive power plant in the state.

In August 2004, the boards of Hindalco and Indal approved a scheme of arrangement in which all assets of Indal other than the foil unit at Kollur in Andhra Pradesh were to be de-merged into Hindalco. This came into effect from 1 April 2004.

In FY 2002, Hindalco acquired the copper business of Indo Gulf Corporation Limited, a Group company. Over the last two years, with a strategic intent to achieve vertical integration, the copper business of Hindalco has acquired two captive copper mines in Austrialia — Nifty and Mt. Gordon.

In FY 2000, Hindalco acquired a majority stake in Indian Aluminium company Limited (Indal), an Alcan Canada Group Company, which had a major presence in downstream aluminium products and is a leader in specialty alumina chemicals.

Aluminium
Hindalco is one of Asia’s largest producers of primary aluminium and one of the most cost-efficient producers globally. In India, Hindalco enjoys a leadership position in specialty alumina, primary aluminium and downstream products.

Hindalco’s major products include standard and specialty grade aluminas and hydrates, aluminium ingots, billets, wire rods, flat rolled products, extrusions, foil and alloy wheels.

The integrated facility at Renukoot (Uttar Pradesh) houses an alumina refinery and an aluminium smelter along with facilities for production of semi-fabricated products, namelyu, redraw rods, flat rolled products and extrusions. The plant is backed by a co-generation plant and a 742 mw captive power plant at Renusagar to ensure continuos and consistent supply of power or smelter and other operations.

Other facilities include an aluminium smelter at Hirakud (Orissa) with a captive power plant, alumina refineries at Muri (Jharkhand) and Belgaum (Karnataka) and rolling mills at Belur (West Bengal) and Taloja, Mouda, (Maharastra) foil rolling at Kalwa (Maharashta) and Silvassa (UT of Dadra and Ngar Haveli) and an extrusions plant at Alupuram (Kerala). The foil plant t Kollur, Andhra Pradesh is the only remaining entity with the erstwhile Indal after the merger of Indal with Hindalco.

The aluminium alloy wheels plant is located at Silvassa (Dadra and Nagar Haveli). Hindalco was among the first few alloy wheels companies to have obtained the ISO/TS 16949 certification to meet the stringent standard of the automobile industry. All Hindalco units are ISO 9001:2000 and 14001 certified, and several have attained the OHSAS 18001 — the occupational health and safety certification.

The company has two R&D centres: the Belgaum Research and Development Centre in Belgaum, Karnataka and Taloja Research and Development Centre in Taloja, Maharashtra. They have been recognized by the Government of India’s Department of Scientific and Industrial Research (DSIR).

A strong presence across the value chain and synergies in operations have given Hindalco a dominant share of the domestic value-added products market. In India, the company enjoys a leadership position in specialty aluminas and hydrates as well as in primary aluminium and downstream semi-fabricated products. As a step towards expanding the market for value-added products and services, Hindalco launched several brands in recent years. These include the Aura Aluminium Alloy Wheels for cars, Everlast Roofing Sheets and Freshwrapp and Freshpakk household foil for packaging.

Apart from being a dominant player in the domestic market. Hindalco’s products are well accepted in international markets. Exports account for more than 20 percent of total sales of aluminium products.

SHOWING THE WAY
Our Vision
To be a premium metals major, global in size and reach, with a passion for excellence.

Our Mission
To relentlessly pursue the creation of superior shareholder value by exceeding customer expectations profitably, unleashing employee and being a responsible corporate citizen adhering to our values.

Our Values
Integrity
Honesty in every action.

Commitment
On the foundation of integrity, doing whatever it takes to deliver, as promised.

Passion
Missionary zeal arising out of an emotional engagement with work.

Seamlessness
Thinking and working together across functional silos, hierarchy levels, business and geographies.

Speed
Responding to stakeholders with a sense of urgency.

THE MARKET LEADER
Hindalco is a leading domestic player in two non-ferrous metals business segments — aluminium and copper.

The aluminium division’s product range includes alumina chemicals, primary aluminium ingots, billets, wire rods, rolled products, extrusions, foils and alloy wheels.

The company has a significant market share in all the segments in which it operates. It enjoys a domestic market share of 42 per cent in primary aluminium, 63 per cent in rolled products, 20 per cent in extrusions, 44 per cent in foils and 31 per cent in wheels.

Hindalcos portion of sales aluminium is 53% and copper is 47%, which shows that aluminium is having higher volume of sales.

AWARDS (LAURELS)
Hindalco has been active on many fronts, and takes its role as a socially responsible corporate house very seriously. The company has won a number of awards for community welfare and environment protection, as well as for its quality and export performance.

Year 2007
Hindalco won the prestigious “D.L. Shah National Award for Economics of Quality” given by Quality Council of India. Chief Manufacturing Officer, Mr. R.P. Shah and Mr. Arun Kumar received the award from the President of India, H.E. Dr. A.P.J. Abdul Kalam on 9 February 2007 at New Delhi.

Year 2006
The prestigious “National Energy Conservation Award-2006” was awarded to Hindalco by Ministry of Power, Government of India.

The IT department of Hindalco received prestigious IT certificates BS 15000 (IT services), ISO 9001 (Software development) and BS7799 (Information security). Hindalco Renukoot IT department is the first in our group as well as in India to be recommended for all these certifications in an integrated manner.

The prestigious Greentech Safety Award came Hindalco’s way for its outstanding performance towards organization health and safety.

The company’s fabrication plant’s hot mill team won the prestigious Qualtech Award for their project “Reduction of time in work role change time”.

Hindalco received the integrated Management System Certificate from D.N.V. certification agency. This certificate was for ISO-9001, ISO14001, OHSAS-18001 in an integrated manner.

Hindalco, Renukoot has won the National Award for Excellence in Water Management 2006 organized by CII.

Year 2005
Mr. Debu Bhattacharya, Managing Director was conferred with “Asian business leader award for the Aisa corporate citizen of the year” by the CNBC. The award was conferred in recognition of Hindalco’s outstanding contribution to arts, education, the environment and community development.

Mr. Kumar Mangalam Birla, Chairman, has been named “Business Today young super performer in the CEO category”

Hindalco’s fabrication team won the Qualtech Award 2005 presented by Qumpro College, Mumbai.

National Award for Excellence in Water management 2005 (Water Efficient Unit) from CII — Sohrabji Godrej Green Business Centre.

Greentech Environment Excellence Gold Award 2005 from Greentech Foundation, New Delhi.

Year 2004
Hindalco won the forth annual Greentech Safety Gold award for the year 2004-05 in metallurgy sector.

Renusagar Power awarded the Innovation Training and Development (HR) Practices award-2004 by Indian Society for Training & Development, New Delhi.

Joint winner of Aditya Birla planet award 2004 for community initiatives and rural development.

National energy conservation award 2004 in alumium sector by the government of India, ministry of power.

IMC Ramkrishna Bajaj National Quality award 2004 certificate of merit.

Prime Minister’s Shram awards 2004 — Shram Veer award to Mr. Ram Kailash of Alumina Plant and Shram Shree award to Mr. Suresh Prasad of alumina plant.

CII National Award for Excellence in Energy Management 2004.

Year 2003
Hindalco has been awarded the trophy for highest exports — prime metal ferrous and non ferrous (non-SSI) — 2003-04 Engineering Export Promotion Council (EEPC), India in recognition of outstanding export performance of engineering goods and services.

Industrial safety award (runners up) presented to Alupuram smelter for 2003-2005 for lowest average accident frequency by the National Safety Concil, Kerala chapter.

Greentech gold award 2003-04 to Renusagar Power by Greentech Foundation, New Delhi for organizational health and safety.

National Safety Award 2003 by Ministry of Labour and Employment.

Year 2002
FIMI’s Social Awareness Award
The FICCI Socio-Economic Development Foundation’s (FICCI-SEDF) Social Responsiveness Award for the year 2001, for projects on rural development and promoting economic self-reliance in over 334 villages.

Year 2001
The Fair Business Practices’ award by the CFBP Jamnalal Bajaj Uchit Vyavahar Puraskar 2001.

The ‘Outstanding Export Award’ for the years 2000 and 2001 from EEPC and CAPEXIL.

Adjudged the worldwide runner-up for the ‘Millenium Business Award for Environmental Achievement’, under the auspices of the United Nations Environment Programme.

Mother Teresa Commendation Certificate for Community Initiative Activities.
FICCI Award for Community Initiative Activities.
Energy Conservation Award by the Ministry of Power.
Various Awards for Mines Environment and Mineral Conservation by the Indian Bureau of Mines.

Year 2000
Alumina refinery is named as the ‘Best Safety Performing Plant’ in the world by the International Aluminium Institute.

Safety Performance Benchmarking — ‘Joint Best Smelter’ by International Aluminium Institute.
Safety Performance Benchmarking — Best Refinery’ by International Aluminium Institute.
Export Award from EEPC.
Export Award from CAPEXIL.
Annual Report — Best in Asia Winners by CFO Asia.

HAL MANAGEMENT TEAM
AT THE HELM
Board of Directors
Mr. Kuamr Mangalam Birla, Chairman
Mrs. Rajashree Birla.
Mr. C.M. Maniar
Mr. E.B. Desai
Mr. S.s. Kothari
Mr. M.M. Bhagat
Mr. K.N. Bhandari
Mr. A.K. Agarwala
Mr. N.J. Jhaveri
Mr. Debu Bhattacharya, Managing Director

Key Executives
Mr. S. Talukdar, President and Chief Financial Officer

Aluninium and Power
Mr. P. Balakrishnan, Chief Officer — Operations, Renukoot
Mr. S.M. Bhatia, Business — President — foil and Wheel
Mr. S.K. Maudgal, Chief Marketing Officer
Mr. Shankar Ray, Business Head, Chemicals and International Trade
Mr. S. Majumdar, Head Operations — De-merged Indal units
Mr. J. Bhaumik, Joint President, Renusagar Power Plant

Company Secretary
Mr. Anil Malik

Aditya Birla Minerals Limited
Mr. D. Bhattacharya, Chairman
Mr. Sanjay Loyalka, CEO and MD
Mr. M.R. Prasanna, Director
Mr. A Hogendijk, Director
Mr. B.McGowan, Director
Mr. K. Dharmananda, Director

Company Secretary
Mr. Peter Torre

Shree Chatrapati Shivaji Maharaj Sahakari Bank Niyamit, Gulbarga

COMPANY PROFILE
The bank is opened by Shri Dinakar More, the President and Founder of the Shri Chatrapati Shivaji Maharaj Sahakari Bank Niyamith, Gulbarga. The bank threw open is door from 01.07.1999 at 9.00 am Ghansham Housing Complex, Opp: Fire Station, Brahmapur, Gulbarga with Reg. No.: AR-4 / V2 / AOG / REGN. 24987 / 97-98 Dtd: 04.05.1998.

The Founder Directors
The Founder Directors of the Shri Chatrapati Shivaji Maharaj Sahakari Bank Niyamith Group are listed below:
Shri Dadarao Biradar
Shri Venkatrao Patil
Shri Marutirao Male
Shri Shivaram Pavar
Smt. Sandya B. Patil
Shri Manikrao Shinde
Shri Jyotibarao Bhise
Shri Shyamrao Jagatap
Shri Dattatrey Tovar
Shri Mohanrao Mane
Shri Sheshrao Patil

Shri.Narasing.S.Patil is Manager in Shri Chatrapati Shivaji Maharaj Sahakari Bank Niyamith, Gulbarga Branch.

VISION
To be a progressive bank with strong brand equity, enhancing value for all the stake holders through excellence in performance and good governance

Excellence in Management
The bank has been fortunate in having very eminent and honest men of vision and great talent as Board of Directors and Executives. The ever increasing profit figures of the bank depict the efficiency of the management. The bank, which was opened with a share capital of Rs.5.44 lakhs.

Chief Executives
The strong foundation was laid down by the Chief executives of the bank from the very beginning by their outstanding efficiency, devotional duty, able administration and profound knowledge.

Rate of Interest on Term Deposits
45 days to 90 days old 5.0%, General 5.5% and Senior Citizens 5.5%.
91 days to 180 days old 6.0%, General 6.5% and Senior Citizens 6.5%.
181 days to 365 days old 7.0%, General 8.0% and Senior Citizens 8.5%.
1 year to 3 years old 8.5%, General 10.0% and Senior Citizens 11.0%.
3 years and above old 10.0%, General 10.75% and Senior Citizens 11.25%.

Recurring Deposit
For 1 year general scheme 6.0% and Senior Citizens 6.5%.
For 2 year general scheme 9.0% and Senior Citizens 9.5%.
For 3 year general scheme 9.75% and Senior Citizens 10.5%.
For 3 years and above general scheme 10.25% and Senior Citizens 11.0%.

Loans and Advances :
For Ware House Construction Loan available in 12.0%.
For NSC, KVP, LIC bonds Loan available in 15.0%.
For Gold Loan available in 15.0%.
For General Secured Loan available in 15.0%.
For Overdraft Loan available in 15.0%.
For Vehicle Loan available in 15.0%.
For Unsecured Loan available in 17.0%.

RELIANCE LIFE INSURANCE MONEY MULTIPLIER PLAN

About Reliance Life Insurance Money Multiplier Plan :
Reliance life insurance company introduced one of the new policy that is Reliance Life Insurance’s Money Multiplier Plan.

Key Features :
Double life cover – This plan offers you a life cover of twice the basic sum assured.
Increasing life cover every year – Life cover which increases with time, through guaranteed loyalty additions.
Triple survival benefits (on Maturity) :
Basic sum assured.
Accrued Guaranteed Loyalty Additions.
Guaranteed Maturity Addition.
Longer the commitment, higher the benefits – through an increasing guaranteed loyalty additions every year and guaranteed maturity additions with policy term.
A host of optional rider benefits to enhance protection cover.

Details of Policy :
You pay premium every year during the chosen policy term. On maturity, get
Accrued Guaranteed Loyalty additions and Guaranteed Maturity additions in addition to basic sum assured.

On death, the nominee will get twice the basic sum assured and accured guaranteed loyalty additions.

Minimum age of entry is 18 years and maximum is 65 years as per last birthday.
Minimum age of Maturity is 28 years and maximum is 75 years as per last birthday.
Policy term is 10 years, 15 years and 20 years.
Minimum sum assured is 50,000 and maximum is no limits.

Flexible Premium Payment Modes :
You have the option to pay regular premium under yearly, half-yearly, quarterly and monthly mode. Quarterly and Monthly modes are allowed only if premiums are paid electronically. The mode of premium payment can be changed on the policy anniversary.

Benefits under this plan :
Life cover benefit.
Maturity benefit.
Rider Benefits :
Reliance New major surgical benefit rider.
Reliance New critical conditions (25) rider.
Reliance Term life insurance benefit rider.
Reliance accidental death and total and permanent disablement rider.
Guaranteed maturity addition.
Guaranteed loyalty addition.

Premium Rates :
for sum assured of Rs.1,00,000
Age / Policy term 25, 10 years 14665, 15 years 11775, 20 years 10520.
Age / Policy term 35, 10 years 14810, 15 years 11965, 20 years 10775.
Age / Policy term 45, 10 years 15375, 15 years 12645, 20 years 11565.
Age / Policy term 55, 10 years 16860, 15 years 14370, 20 years 13620.

Grace Period for payment of premium :
There is a grace period of 30 days from the due date for payment of regular premiums. In case of monthly mode, the grace period is of 15 days.

Avail of a loan against this policy :
Yes Loan is available under this policy up to 80% of the surrender value under basic plan after the policy acquires a surrender value.

Free look Period :
15 days free look period as per policy terms and conditions.

Tax benefits :
As per the In come tax Act 1961, tax deduction under section 80C and the major surgical benefit rider and reliance new critical conditions 25 riders are eligible for tax deduction under section 80D of the act. The benefits under this plan and riders are tax exempted under section 10(10D) of the act.

If you want to purchase this policy please contact your nearest Reliance Life Insurance Company Limited branch or visit on to www.reliancelife.com or mail to rlife.coustomerservice@relianceada.com.

RIL HIGHEST NAV PLAN

About Reliance Life Insurance Highest NAV Advantage Plan :
Reliance life insurance company introduced one of the new policy that is Reliance Life Insurance’s Highest NAV Advantage Plan. In this plan is unit linked investment cum insurance plan in which we guarantee that you benefit from the highest NAV (Net Asset Value) per unit ever achieved by your fund during the entire policy term of 15 years.

In essence, even if, on the date of maturity of your policy, the NAV (per unit price) under the fund has declained from the highest it achieved during the period from date of inspection, we will encash your units as at the date of maturity at the highest (NAV (per unit price).

So, you are protected from the typical conditions of the declines in your equity oriented investments under this policy. Highest NAV Guarantee is applicable only at maturity of the policy.

Key Features :
Enjoy the upside we guarantee you get the highest NAV per unit ever achieved during the policy term at maturity.
It provides risk cover on your life.
choose any amount of sum assured desired for your life protection subject to the applicable limits.
Additional risk cover on account of accidental death.
Liquidity through partial withdrawals.
Flexibility to choose from regular or single premium payment options.
Flexiblity to pay top ups.
Liquidity through loans to meet your unforeseen needs.
Enhance protection cover through a host of optional rider benefits.
Exchange option to take advantage of any new plans we may offer in the future.
Tax benefits as per Income Tax Act.

Details of Policy :
Any individual aged between 7 years to 60 years age can be insured under this plan.
Minimum and maximum policy term under the plan. The policy term under this plan is fixed for 15 years.
The minimum annualized premium is Rs.20,000 under regular premium payment option and Rs.50,000 under single premium.
Regular Premium : 7 to 30 times of annualized premium depend on age at entry.
Single Premium : 1.1 to 6 times of Single premium. Depend on age at entry.
Top-Up : 110% to 125% of the top up premium, subject to age at the time of payment of top up.

Death benefits under this plan and top up, plus, fund value under base plan and top up at the date of intimation of death is payable to nominee. amount equivalent to sum assured is payable in addition to the above on account of accidental death.
On survival up to maturity, fund value related to the base plan and top up is paid based on the highest NAV during the tenure of the policy.

Charges :
The Allocation charge are deducted from each premium received. The charges applicable under the plan are as below.
Policy 1st year regular premium 7% allocation charge as a percentage of annualised premium amount. Policy 2st to 4th year regular premium 6% allocation charge as a percentage of annualised premium amount. Policy 5th to 10th year regular premium 5.50% allocation charge as a percentage of annualised premium amount. Policy 11th and onwards regular premium 5.00% allocation charge as a percentage of annualised premium amount. Single premium and top up is 2%.

Fund Management charges for Highest NAV advantage fund range 1.35% per annuam. Policy administration charge, under regular premium policies is not applicable. Under single premium and settlement option, Rs.40 is deducted per month.

Guarantee charges for highest NAV guarantee on maturity of 0.25% per annum of fund value is built into the NAV. Mortality charge will vary depending on the amount of life insurance cover; the attained age of life assured; the occupation of the life assured; the health of the life assured.

Service Tax and Education cess, will be levied on fund management charge, mortality charge and rider premium, if any, at the applicable rate as declared by the government from time to time.

Additional Benefits under this plan :
Liquidity through partial withdrawal and surrender after 5 policy years from the date of commencement of the policy.
Option to take the maturity proceeds in periodic installments within a maximum of 5 years from the date of maturity through settlement option.
Customize the product through Reliance new major surgical benefit rider, reliance new critical conditions
25 rider and reliance term life insurance benefit rider.

If you want to purchase this policy please contact your nearest Reliance Life Insurance Company Limited branch or visit on to www.reliancelife.com or mail to rlife.coustomerservice@relianceada.com.

RELIANCE LIFE INSURANCE CASH FLOW PLAN

About Reliance Life Insurance Cash flow Plan :
Reliance life insurance company introduced one of the new policy that is Reliance Life Insurance’s Cash Flow Plan.

Key Features :
Easy Liquidity Get periodic cash flows at the end of the fourth year and thereafter at the end of every three years.
Wealth creation through bonus additions.
On maturity, receive accumulated bonuses along with final lump sum payout.
More value for your money by way of high sum assured rebate.
Full sum assured plus bonuses in case of your unfortunate death. This is over and above the survival benefits already paid.
Option to add two riders – critical illness rider & accidental death benefit and total and permanent disablement rider.

Details of Policy :
You pay premium every year for the entire term and get survival benefits at periodical intervals as mentioned. On death, your beneficiary will get the full sum assured, plus accumulated bonuses, over and above the survival benefits already paid to you.

Benefits :
Survival Benefit : Get a percentage of the sum assured on the fourth anniversary and on every third policy anniversary till maturity.
Maturity Benefit : On maturity, you get the remaining percentage of the sum assured plus accumulated bonuses.
Life cover benefits : In the unfortunate event of loss of life, your beneficiary will receive the full sum assured plus accumulated bonuses till that date.
Rider Benefit : You also have the option to add two additional benefits to customize the policy as per your needs.
Accidental Death benefit and total and permanent disablement rider.
Critical illness rider.

Minimum age of entry is 15 years and maximum is 63 years as per last birthday.
Minimum age of Maturity is 22 years and maximum is 70 years as per last birthday.
Sum assured is minimum 25,000 and maximum is No limits.
Minimum policy term is 7 years and maximum is 34 years.
Payment modes are yearly, half yearly, quarterly, monthly with salary deduction schemes only.

Company will not pay any accidental death claims and total and permanent disablement claim with results directly or indirectly from any one or more of the above :
An act or attempted act of self injury.
Participation in any criminal or illegal act.
Being under the influence of alcohol or drugs except under direction or a registered medical practitioner.
Racing or practicing racing of any kind other than on foot, flying or attempting to fly in, or using or attempting to use, an aerial device of any description, other than as a fare paying passenger on a recognised airline or charter service.
Participating in any riot, strike or civil commotion, active military, naval, air force, police or similar service.

Critical Condition riders are sudden onset of a major illness causes worries and heavy expenses, our optional critical conditions cover helps provide financial relief in such case. It pays you the sum assured upfront in respect of ten major illnesses like :
Cancer
Coronary Artery Bypass Surgery
Heart Attack
Stroke
Kidney Failure
Aorta Surgery
Coma
Heart Value Replacement
Major Organ Transplant
Paralysis.

Waiting and survival period :
The company will not pay the critical illness benefit if :
The critical illness begins prior to or within six months of the commencement date or date of reinstatement of the benefit – waiting period.
Death from critical illness takes place within 30 days of the onset of the same survival period.

Avail of a loan against this policy :
No Loan is not available under this policy.

Free look Period :
15 days free look period as per policy terms and conditions.

Tax benefits :
As per the In come tax Act 1961, tax deduction under section 80C and under section 80D of the act. Maturity and Death benefit are tax free under section 10(10D) of the act.

If you want to purchase this policy please contact your nearest Reliance Life Insurance Company Limited branch or visit on to www.reliancelife.com or mail to rlife.coustomerservice@relianceada.com. or call me 9886043598 / 9449410244.

Merger of Bishnauth Tea co. ltd. with Everyday Industries.

History of the merging and merged companies and scheme of Merger
History of Bishnauth Tea Co. Ltd. (i.ed. Merging Company)
Bishnauth Tea Company Ltd, (hereinafter referred to as BTCL) was incorporated at Calcutta in 1863. It is a subsidiary of the Williamson Magor group of the Khaitan. The company is engaged in the cultivation of tea plantations and manufacture of electrical appliances, plant and machinery. Bor Pukhuri Tea co. Ltd. was amalgamated with the company in 1965. In the year 1998. Rupajuli Tea company (India) Ltd. (RTCIL) and Niagara investment Company Ltd, (NICL), wholly owned subsidiaries of the company amalgamated with the Bishnauth Tea Company Limited (BTCL) in 1997.

History of Eveready industries (India) Ltd. (i.e. Merged company)
Eveready industries (India) Ltd. (hereinafter referred to as EIL) a flagship of the B.M Khaitan-controlled Williamson Magor group was incorporated in 1934. It was formerly known as Union Carbide. The company manufactures and sells dry batteries and allied products, flashlight cases and parts, zinc alloys, strips & plates, satellite super alloys, cinema arc carbons, carbon electrodes & electrolytic manganese dioxide. In 1997, the company acquired the tea business through a merger with McLeod Russel, which contributes to about 40% of turnover. The battery is sold under the brand name ‘Eveready’ and tea under ‘Taj’ and ‘Premium Gold,’ EIL’s battery manufacturing facilities are located at Delhi, Chennai and Hyderabad.

Effectiveness of Merger and its impact of the Shareholders of merging company – BTCL
It is clear from the table-6.9 and 6.10 that performance of merging company, BTCL was healthy before merger. The company is seriously impacted by the merger during post-merger. The net profit margin of the company witnessed a sharp decline in the year of merger from 11.29% to 1.36% (i.e decline by 87.95%) and thereafter it further declined and attained a negative margin of 14.13%. On the whole, the pre-merger average net profit margin of 13.17% declined substantially to –4.29% representing decline by 132.57%).

In the RONW front also the company suffered during post-merger period. The pre-merger average RONW of 9.27% declined to –5.96%, representing decline by 164.29%.

The short term solvency of the company also adversely affected. The pre-merger average liquidity ratio of 4.27 decreased to 1.64%, representing decline by 61.59%. But, it is not below the standard norm.
It is also noticed that the leverage position of the company is affected from the merger. The leverage ratio of the company increased from 0.55 to 1.45 in the year of merger (i.e. increase by163.64%). And thereafter the company reduced debt component in the capital structure. It successively declined each year after the merger. Thus, the merging company, BTCL is seriously affected from the merger.

The shareholders of merging company are also seriously affected from the merger.

EPS of the company declined from Rs. 12.63 to Rs.4.37 in the year of merger, representing a decline by 65.40% and it further declined to Rs. 36.65. on the whole, the average pre-merger EPS of Rs. 15.22 declined to Rs. 11.35, representing a declined by 174.57%.

In terms of dividend, the shareholders were getting an average dividend of Rs. 4.67 during pre-merger period. After the merger the shareholders did not get any dividend.

The pre-merger average P/E ratio declined from 6.15 to 193.17, representing decline by more than 32 times, BVPS of the company declined marginally. The average pre-merger BVPS of Rs. 160.27 declined to Rs. 148.46 representing decrease by 7.37%.

Pre-merger average share price (i.e. one year share price only) declared from Rs.97.75 to Rs.30.63, representing a decline by 68.66%.

Effectiveness of merger and its impact on the shareholders of merger company – EIL.
It is noticed from the table that the company’s financial performance is seriously affected during post –merger period. The net profit margin of the company is showing continuos declining trend from the pre-merger period. It declined from 6.57% to 1.12% (first year before merger(. After the merger it further declined tonegative margin of 4.13% on the whole, the pre-merger if further declined to negative margin of 4.13%. On the whole, the pre-merger average net profit margin of 4.17% is declined to -4.29% representing a decline by 202.88%.

In terms of RONW also, the company saw negative results after the merger. The average pre-merger RONW of 5.45% declined to –5.96% representing a decline by 209.36%.

Liquidity ratio is also affected by the merger. The average pre-merger liquidity ratio of 3.85 is declined to 1.64, representing a decline by 57.40%.

Sales and reserves and surplus also experienced decline marginally after the merger. The average pre-merger sales and reserves and surplus fell to 4.42% 2.04% respectively.

But, the only advantage is reduction in the leverage ration. The pre-merger average leverage ration of 1.36 is declined to1.16, which represents a decline by 14.70%. Thus, the merged company EIL is seriously affected from the proposal.

It is noticed in the table tat the EPS of the company before merger was showing declining trended. It declined from Rs. 12.44 (i.ed. Y-3) to Rs. 2.35 (y-1). In the year of merger it marginally increased to Rs. 3.28 and thereafter it declined to a negative value of Rs. 27.49 and again increased. On the whole, the pre-merger average EPS of Rs. 8.14 substantially declined to Rs. –8.52, representing decline by 204.67%.

Another loss to the shareholders f the company is loss of dividend after merger. Before the merger the shareholders were getting an average dividend of Rs. 3.49 per share. However after merger the company could not pay the dividend.

Substantial decrease is also seen with the P/E ratio. The average pre-merger P/E ratio of 15.59 decreased to –193.17, which represents decline by 1339.06%.

The benefit availed of by the shareholders of the company is only increase in he BVPS, that too marginally. The pre-merger average BVPS of the company increased from Rs. 10.91 to Rs. 11.34, representing increase by just 1.34%.

Surprisingly in this case, the market price of share of the company declined substantially during post-merger period instead of increasing. It was trading at an average value on Rs. 847.53. However, during post-merger period, it declined to Rs. 22.97, representing a decline by 71.30%. in the year of merger the average market price declined from Rs. 74.8 to 43.05 (i.e. Decline by 43.45%) and thereafter it again declined to Rs. 15.50.

In this case, neither, merging nor merged company is benefited from the merger. During post-merger period, all the performance key indicators have shown negative. Shareholders are also diversely affected by this merger. In both the companies, the shareholders were given dividend during post merger period.

The company’s performance has suffered because of ever increasing debt burden and interest cost. And another reason is that the tea industry was badly affected during the year financial year 2000, due to averse weather conditions in tea growing areas of Northeast. Tea last three years have been bad for the tea industry in general. Tea production in the country dropped. Prices remind firm despite lower production due to a decline in Exports. Exports were affected due to government’s decision to allow free import of tea for re-export as it led to inflow of inferior quality tea affecting the exports of original Indian tea.

Thus, the post-merger results were effected due to the adverse situation prevailing in the industry. Due to this reason, merged company could not be successful in getting the synergic benefit out of merger.

MERGER OR AMALGAMATION

Merger is a combination of two or more companies, whereby acquirer company acquire company loses its identify.

In finance literature merger and consolidation are technically differentiated. India text also makes such distribution between consolidation and merger wherein former is called absorption and the latter is called amalgamation wherein consolidation and merger are treated as amalgamation, thus the term merger are treated as amalgamation, thus the term merger and amalgamations are interchangeably used.

The tem “merger” and “amalgamation” have not been defined in the Company Act 1956. But as per the act, amalgamation may take place in any of the following methods.

A merger is a combination of two or more firms in which only one firm would survive and the other would cease to exist. Its assets/ liabilities being taken over by the surviving firm.
An amalgamation is an arrangement is which the assets/ Liabilities of 2 or more firms become vested in another firm.

Types of Mergers:
Horizontal merger
Vertical merger
Conglomertic merger
Concentric merger

Horizontal Mergers:
Horizontal merger take place when two or more corporate firms dealings in seemlier lines of activity combine together elimination co. reduction in competition, putting an end to price cutting, economic in competition putting an end to price cutting economic or scale in production, there are often motives underlying such mergers.
For Ex: Merger of valiant types Cosmo Films Ltd,

Vertical Mergers:
Vertical merger occurs when a firms acquires firms “Upstream or downstream from it in the case of “upstream merger” it extends to the firms supplying raw materials to those firms that sell eventually to the consumers. It the case of “downstream merger” thus the combination involves two or more stages of production or distribution that are usually separate, however saying cost of material lower distribution costs assured suppliers and market, increasing or creating barriers to entry for potential competitors or placing them at a cost disadvantage are the chief gains occurring from such merger’s.
For ex: Merging of Usha alloys and Steel Ltd., with Usha Martin Industries ltd., (on 01.01.1980).

Conglomeratic Merger:
When the companies having unrelated business combine together, it is known as Conglomerate Merger.

The objective of such type of merger is not synergies rather, it focuses on now the acquiring company can enhance the overall stability and balance the total portfolio in terms of better use of resources and generation of reserves. It does not have direct impact on acquisition of monopolistic power and then favoured throughout the world as a means of diversification, this type of merge occurred mainly during 1960’s.

Concentric Merger:
When merging companies are related through the basic technologies, production process or market, combine together, it is known as congeneric / cocentric merger, in thus type of merger the acquired company represent just an extension of product line, market participation or technologies of the acquiring company.

Congeneric merger can be further classified as product extension and market extension, when a new product line is added to the existing product line, it is production extension, market extension help to added a new market either through the same line of business or adding an allied filed.
For ex: Merger of alchemic organize limited with anti industries limited, spice organize limited with Monali Petro Chemical Ltd.,

Definition of Amalgamation:
According to “Halsburg’s Law” of England
“Amalgamation has no precise legal meaning. It is a blending of 2 or more existing undertaking into one undertakings, the shareholder of each blending company, becoming substantially the shareholder.

According to “Gower”
Under an amalgamation merger or takeover two companies are merged either defuse by a consolidation of their undertaking by the acquisition of controlling interest. In the share capital of one by the other or of the capital of both by a new companies. Thus, Gower makes no distinction between merger and acquisition.

Weinberg defines amalgamation as an arrangement by which the assets of 2 or more companies become vested in under the control of one of the existing companies or a newly formed company. The share capital of the combined company will spread amongst the shareholder of original companies. Thus, Weinberg treats mergers as different from acquisition.

Reasons for merger:
Merger evaluations are relatively more difficult. The two (2) chief reasons being;
All benefits from merger are not easily quantifiable and so also all costs for instance, benefits of less competition and economics of scale (technical, managerial, financial) are not easily measurable attributes.
Buying a company is more complicated than buying a new machine, in that the firm is to address itself to many tax, legal and accounting issues.

This describes the conceptual aspects of mergers acquisition, amalgamations, takeover, absorption and so on. In terms of their types, economics and limitation although the terms mergers, amalgamation and acquisition are different, their economic impact is the same as for so the business firms involved are concerned for this reason these terms are used interchangeably.

Demerger:
The need of the time to grow and proper is to concentrate on core competences, upto couple of years before, there was urge to expand in different ventures, but today the corporate world has realized the importance of core competence, so need arose to demerge some divisions or undertaking so as to enable to concentrate on main activity.

Definition:
Sec 2(19AA)13 of income tax act defines, “demerger” in relation to company as a transfer, pursuant to a scheme of arrangement under section 391 to 394 of the companies act 1956 by the transferor company of its one or more undertaking to any transferee company.

Demerged company:
Sec 2(19AAA) defines “demerged company as the company, whose undertaking is transferred pursuant to dermerger to a resulting company”.

Meaning:
Demerger means to split the conglomerate (multidivision) of a company into separate company.

Resulting company15:
Section 2(41A) defines resulting company as one or more companies concluding wholly owned subsidiary there of to which the undertaking of the demerged company is transferred in demerger and the resulting company. In consideration of such transfer of undertaking issues shares to the shareholder of demergered company.

The following conditions are to be satisfied:
All the properties and liabilities of the undertaking being transferred by seller become the properties and liabilities of the buyer and shall be transferred at their book values.
Shareholders holding not less than three-fourth. In value of the shares, in the transferor (other than shares already held there in immediately before the demerger by the transferee or its subsidiary) become shareholder of the transferee company.
The transferee company issues shares to the shareholders to transferor company on a proportionate basis.
The transfer of the under is in a going concern basis.
The demerger is in accordance with conditions if any notified under section 72 A (5) of the income tax act by the central government. In this behalf.

The tax concessions to amalgamated company the following are the major tax benefits available to the amalgamated company:
Carry forward and set off of business losses and unabsorbed depreciation.
Expenditure on scientific research.
Expenditure on acquisition of patent rights or copy right.
Expenditure on know-how.
Expenditure for obtaining licences to operate telecommunication services.
Preliminary expresens.
Expenditure on prospecting of certain minerals.
Capital expenditure on family planning.
Bad debts.

Acquisition / Takeover:
Acquisition differs from amalgamation as regards to implementation procedure, acquisition may take place either by outright purchase of assets or by acquisition of shares. It may also take the shape of holding company, although the economic considerations in terms of motives and effect of mergers and acquisitions are similar, the legal procedure involved are different, which merger constituted a subject matter of the companies act and acquisition or takeover side fall, under the preview of SEBI (Substantial acquisition of shares and takeover) regulation 1997.

The term “Takeover” has defined as acquiring, controlling interest in other company, takeover is also synonymous to acquisition. It does not lead to dissolution of the target company unlike in case of merger.

Types of takeover:
A company can takeover another company, in any of 3 ways.
Negotiated takeover (or) friendly.
Hostile takeover or raid on the company.
Bail-out takeover.

Negotiated takeover (or) friendly:
In this type of takeover, the management of target company, itself is ready to part with controlling interest to another management group through negotiation. The terms and conditions of the takeover are mutually settled by the groups. Most of the takeovers occurring are friendly nor hostile.

Hostile Takeover or Open Market:
In this type of takeover, in order to acquire the controlling interest in the target company, the management of acquiring company, acquires the shares from the open market / financial institution / mutual funds / willing shareholders at a price higher than the providing market price. This is also referred to as raid on the company.

Bail-out takeover:
When a healthy company takeover the side company to said it out (i.e., to protect it). It is known as bail-out takeover.

EFFECTIVENESS OF MERGERS AND ITS IMPACT ON SHAREHOLDERS
In this chapter the researcher has made an attempt to study the effectiveness of merger from the perspective of both merging and merged companies. And also the impact of merger on the shareholders of both merging and merged companies is studies. For the purpose of the study the researcher has analysed ten sample cases costing of 21 companies which underwent merger during 2000-03. The researcher has analysed and compared post-merger result of merging and merged companies with the pre-merger results or merging and merged companies with the per-merger results or respective companies.

Methodology adopted for case analysis:
The study has considered three years pre-merger and three years post merger period. For the purpose of analysis, balance sheets, income statements, etc., contained in the published annual reports or the companions have been used.
The study has analysed the data for each of the five cases in the following order.

Part –I
Brief history of the merging and merged companies and the scheme of merger.

Part –II
Effectiveness of merger and its impact on the shareholders of merging company.

In this part, the study of the effectiveness of merger for merging company and it impact on the shareholders of merging company.

Part –III
Effectiveness of merger and its impact on the shareholder of merged company.

In this part, the study of the effectiveness or merger of merged company and its impact of the shareholders of merged company.

For the purpose of studying the effectiveness of merger for merging and merged companions, the researcher has used key indicators like; Net profit (NP) margin, Return on Net worth (NONW). Liquidity Ration, Leverage Ratio, Sales and Reserves and Surplus. However, Sales and Reserves and surplus are considered only in the case of merged company, not in the case of merging company, because, the share of merging entity in the total sale and reserves and surplus after merger cannot be identified.

The Key indicators used for studying the effectiveness of mergers are calculated as under.

Sales:
Sales for this purposed means sales after deducting excise duty. The per-merger combined net sales (of both merging and merged companies) is compared with the post-merger net sales.

Reserves and Surplus (R&S) :
To measure the profitability of merger, the per-merger combined reserves and surplus (of both merging and merged companies) is considered for comparing it with the post – merger reserves and surplus.

For the purposed of studying the impact merger on the shareholders of both merging and merged companies, the researcher has used the key indicators like, Earning per share (EPS). Dividend per share (DPS). Book Value per Share (BVPS), Share Price.

The Sales and reserves and surplus for more or less then 12 months are annualized.

To measure the impact of merger on the shareholders or merging entity, the post-merger key indicator of merged are adjusted with the exchange ratio settled due to merger and compared with its pre-merger indicators.

The key indicators used for studying the impact of mergers on the shareholders of merging and merged companies are calculated as under.

Share Price:
Share price is used to judge the reaction of the shareholders to the merger for this purpose, the average market price of equity share is calculated by taking into account the high and low price traded in each financial year at Mumbai Stock Exchange.

Part –IV

Conclusions based on the analysis made in the previous parts.
While analyzing the date the researcher was constrained of some information. And therefore, the researcher has confined the discussion relating to such information to a limited extent.

ITC BHADRACHALAM PAPER BOARDS LTD., WITH ITC LTD.,

History of merging and merged companies and scheme of merger
History of ITC Bhadrachalam paper Boards Ltd. (i.e., Merging Company)
ITC Bhadrachalam paper Boards Ltd. (hereafter referred to as IBPL) was incorporated ass Bhadrachalam Paperboards Ltd, on 17th July 1975 by ITC Ltd, in association with VSTY Ltd. and APIDC. The company manufactures paper and paperboard plant, commissioned in April 1991. The new 120000-tpa coated paperboard plant, commissioned in April 1998, was eligible for exemption under the sales tax deferment scheme form 14 years. This plant gave the company a strong position in the paperboards segment. The company had the advantage of getting cheap wood as it had its own plantation.

History of ITC Ltd. (i.e., Merged Company)
ITC Ltd. (hereinafter referred to as ITCL) was incorporated on 24th August 1910 as a private Limited Company under the name imperial Tobacco Co. of India Ltd. The Company under the name imperial Tobacco Co, of India Ltd,. The Company manufacture s cigarettes, smoking tobaccos, pulp, marine products, specialty papers including cigarette tissue papers, tobacco leaf processing, printing and packaging, hotels, food etc. The company was converted into a public Limited Company on 27th October 11954. The name of the company was changed from the imperial Tobacco Co. of India Ltd, into India Tobacco Co. Ltd, in May 1970.

Effectiveness of merger and its impact on the Shareholders of merging company – IBPL.
It is observed from the table 6.13 and 6.14 that IBPL made profit (i.e. net profit margin of 6.07%) in the first year before merger but it suffered losses during second (i.e –7.49%) and third year (-29.77%) before merger it is because, the company’s performance was affected due to excess capacity in the domestic and international markets, sluggish demand growth and the resultant fierce price competition. The average net profit margin during pre-merger period was –10.40%. accordingly the RONW also shown negative results. The average RONW was –7.81%. During post-merger period, NP margin and RONW both improved significantly by 336.54% and 433.67% respectively.

It is also noticed that, there is a substantial improvement in the leverage ratio in the post-merger period. The average pre-merger leverage ratio declined from 1.13 to 0.02 (ie. Decline by 98.23%).

The only minor loss is dilution in the liquidity ratio. The average liquidity ratio of 1.74 (pre-merger) declined to 1.07.

EPS of IBPL was negative before merger except the first year before merger. The overall average EPS during pre-merger period was Rs. –3.61. However, after merger the EPS improved substantially. The average EPS during post-merger stood at Rs.4.3, representing 219.94% improvement over the pre-merger EPS.

In terms of dividend, the shareholders never got the dividend before merger, but during post –merger period, shareholders are continuously given dividend. The average DPS during post-merger period is Rs. 1.8.

In terms of market price of the share also the shareholders are benefited. The pre-merger average market price per share was Rs.42.6, but after merger it raise to Rs.54.51.

However, the greatest loss to the shareholders is only decline in the BVPS. The average pre-merger BVPS of Rs. 43.79 fell to Rs. 16.54, representing decline by 62.23%. This is mainly due to adjustment of lower swap ratio for the merging company (which is 1:16). Considering the net worth of both the companies, the swap ratio exchanged is very less.

Thus, the shareholders are benefited substantially in terms of EPS, DPS, P/E ratio and marginally in terms of share price.

Effectiveness of merger and its impact on the shareholders of merged company – ITCL
It observed from the table – 6.15 and 6.16 that profitability ratios have been improved in the post merger period, but the synergy gain went to the acquired company. This happened because of low profitability of acquired company in the pre-merger period. The net profit margin declined in the year and first year after merger and then it started increasing.

It is also noticed in the table that there is a continuous decline in the RONW of the company upto two years after merger and then it increased.

There is noticeable growth in terms of sales and reserves and surplus. The pre-merger average sales of Rs. 4402.47 crores and reserves and surplus of Rs. 2910.15 crores increased to Rs. 6868.65 crores and Rs. 6308.89 crores respectively after merger.

ITCL is also benefited in terms of huge tax savings (i.e. Rs112 crores). IBPL had an accumulated losses of Rs. 122 crores and unabsorbed depreciation of Rs. 200 crores.

On the basis of key indicators of pre-merger period, it is judged that ITCL is a healthy company. Profitability of the company is not affected even after a loss making company is merger with the company. All the key Indicators have shown substantial increase in post – merger period. The pre-merger average EPS of Rs. 32.90 is increased to Rs. 69.24, representing more than duple (i.e. increased by 110.46%). Average DPS increased from Rs. 7.67 to Rs. 22.00, representing 186.83% and average BVPS increased from Rs. 91.11 to Rs. 264.56 (i.e. 190. 37% increase).

The only disadvantage of the merger is decline in the P/E ratio. The P/E ratio started showing continuous declining tendency from the first year before merger. In that year it declined from 27.07 to 17.71. The pre-merger average P/E ratio of 26.09 declined to 12.59, representing decline by 51.74%. The reason for substantial decrease in the second and third year after merger it increased substantially. The overall average market price shown just 6.76% increase over the pre-merger price.

From the above analysis, it is concluded that, the merger helped both the companies to increase their profitability. However, since the merging company was loss making before merger, most of the synergy went to the merging company and its shareholders.

The shareholders of merging (loss making company are benefited substantially in terms of EPS, DPS, P/E ratio and marginally in terms of share price. However, the BVPS of merging company declined substantially due to adjustment of lower swap ratio for the margining company (which is 1:16). Considering the networth of both the companies, the swap ratio exchanged is very less.

GULF oil India Ltd, With GULF Oil Corporation

History of the merging and merged companies and Scheme of merger
History of Gulf Oil india Ltd, (i.e. Merging company)
Gulf Oil India Ltd. (hereinafter referred to as GOIL) was incorporated as a private limited company on 16th December 1981, and then converted into public Limited Company on 21st February 1982 It was promoted by Hanuman Prasad Mansingka & Pradeep Kumar Mansngka. The company was amalgamated with Pita Ashish Oils and Lubricants and the name of the company was changed to Gulf Oil India Ltd. The company manufacture automotive and industrial lubricants and greases, coolants and allied products in the field of lubricants. The company markets its product under global brand name GULF which has been around the world since more than 100 years GOIL was the first multinational lubricant company to enter India in 1993. The company has a market share of around 6% in lubricants segment. It has two plants: one unit in Silvassa with 75,000 TPA capacity and another one in Calcutta with 10,000 TPA capacity. The Company has the advantage of its good distribution network.

History of Gulf Oil Corporation Ltd, (i.e. Merging company)
Gulf Oil Corporation Ltd, (hereinafter referred to as GOCL) was incorporated on 26th April 1961 by Hinduja group at Hyderabad. It was formerly known as IDL Industries. Its plants are located in Andhra Pradesh, Maharastra, Uttar Pradesh, Jharkhand, and Orissa Sates. It manufactures the products like, Cartridged ANFO and NCN (High Explosive), Detonating Fuse Donators, Exploders, Gypsum Ceiling Boards, Gypsum Wall (partition) Boards, Lubricating Oils, PETN/ Penta Erythritol Tetra Nitrate, Special Gypsum Plaster, Boosters, Car Care Products etc, The Company had five subsidiaries. These are IDL Agro Chemicals Ltd., IDL Finance Ltd, IDL Arom international Ltd, Gulf Carrosserie India Ltd, Gulf Oil Bangladesh Ltd, Pt Gulf Oil Lubricants Indonesia and It has five divisions, vi IDL Division, Lubricants Division, Building Division, Floriculture Division, Wand Mill Division.

Effectiveness of merger and its impact on the shareholders of merging company GOIL
It is noticed in the table, that before the merger, the merging entity, GOIL was profit making except in the year Y-1 (i.e. 2000-1). For the first time, the total sales and profit declined in that year. The net profit margin declined form 5.16% to 0.7% (i.e decline by 86.43%). This was due to sharp increase in the input cost by about 35% over the previous year (as stated in the director’s report). The recessionary trends in the economy, particularly with the slow down in the automobile sector also adversely affected the working of the company.

It also indicates that, the average Pre-merger net profit margin of 3.61% increased to 5.00%, which represents an increase by 38.50%.

The pre-merger RONW also shows increase from 13.50% to 15.87%, representing increase by 17.56%. it indicates that the capital employed in the company has been more effectively utilized during Post-merger period than pre-merger period.

The merging company got the benefit of marginal reduction in the leverage. The company had an average leverage ratio of 0.79 during pre merger period, however, during post-merger period it attained at 0.71 (i.e, 10.13% decrease over the pre-merger Period).

However, the short tem solvency of the company is slightly affected during post-merger period, although it increased in the year of merger. The pre-merger average liquidity ratio of the company was as high as 2.18 but after merger it reduced to 1.83 (i.e. 16.06% decreases)

It is noticed in the table that EPS of merging company was fairly good during pre-merger period except in the first year before merger, where it was declined to Rs. 1.36 from its previous year, Rs. 10.79 After the merger, the EPS continued to rise. The average pre-merger EPS rose from Rs. 7.72 to Rs.13.99 (during post-merger period), which is 81.22% high.

After the merger the DPS continued to rise in each year. The average DPS of the company during the pre-merger period was Rs 3.00. it rose to Rs. 5.83 during the post-merger period.

P/E Ratio of the company before merger was quite satisfactory. However, it still improved in each year after the merger. The average pre-merger P/E ration of the company was just 3.62, after the merger it rose to 16.79 (i.e. increase by 361.81%).

The BVPS also increased during Post-merger Period. The pre-merger average BVPS Rs. 56.94 was increased to Rs. 88.17, representing increase by 54.85% over the pre-merger period.

Effectiveness of merger and its impact on the shareholders of merged company. – GOCL
In the case of GOCL, the average net profit margin and RONW decreased by 61.21% and 43.98% (see in table 6.4) respectively in the post-merger period. it is due to huge non-recurring income made in the year. Y1 (i.e, 2000-01 ). In fact the company has suffered a loss of Rs. 2.45 croes in that year. If such non-recurring income is excluded, the pre-merger result will be negative and post-merger result is seen positive.

Liquidity ratio, when was excessive during pre-merger period, declared considerably during the post-merger period. The average liquidity ratio was decreased from 2.51 (during pre-merger period ) to 1.83 (Post-merger period).

Sales of the company declined in the year of the merger and thereafter it increased gradually. In the year of merger, it declined from Rs. 397. 92 Crores to Rs. 224.88 crores, representing decline by 43.49%. Then it increased continuously. On the whole, the average pre-merger sales declined by 0.34% during post-merger period.

Reserves and surplus witnessed a sharp decline on the year of merger. It declined from Rs. 149.02 crores to Rs. 129.43 Crores and in the first year after merger also it dipped to Rs. 14.54 Crores and thereafter it started increasing. The average pre-merger reserves and surplus witnessed a marginal growth (i.e. Just by 0.45%).

During pre-merger period, EPS was almost the same (ranging from Rs. 6.28 to Rs. 6.35) in all the years except the year Y-1 where it rose as high as Rs. 68.29. Such exceptional increases in EPS is due to increase in non recurring income in that year. If only recurring result is considered (i.e. loss of Rs. 20.45 crores), the EPS in the year would be Rs. 25.56, and average Pre-merger EPS would be Rs. 4.31. however in the post-merger period the average EPS increase to Rs. 13.99 representing 424.59% increase.

During Pre-merger period, the DPS was in the range of Rs. 2.50 to Rs. 5.00 whereas, in the year of merger it fell from Rs. 5.00 to Rs. 3.00. It is because of increase in the number of equity shares due to merger. However, during post-merger period, it rose to an average DPS of Rs. 5.83 as compared to Rs.3.33 per-merger, which represents 75.08% increased over the pre-merger period.

P/E Ratio experienced continuous increase during poet-merger period. During the pre-merger period it was in the range of 5.21 to 6.46 with an average value of 4.11, but during post-merger period, it rose to an average value of 16.79. it increased by more than four times during the post merger (i.e. 308.52%).

The BVPS increased sharply to Rs. 160.34 in the year of merger itself from Rs.111.09 (a year before merger). However, during post merger it fell, but it was more than per-merger value. An average BVPS rose from Rs. 72.88 to Rs. 88.17 during the post-merger period. which represents 20.98% increase.

The average market price during pre-merger period was just Rs.39.34 it raise to Rs. 239.61 (i.e 507.68% increase) during post-merger period. It indicates that the shareholders welcomed the merger proposals.

From the above analysis it is concluded that, since a healthy company is merged with another healthy company, the merger has a favourable impact on both merging and merged companies and also it benefits the shareholders of both the companies.

The merger resulted in a better synergy between the two companies for product development and research, purchasing, marketing and other back-office function and optimum user of resources.

It is also noticed in the Director’s report that due to merger of GOIL with GOCL, brought forward tax losses of Rs. 34.71 crores in the year 2001 (i.e., Y-1) have been considered on computing the merged company’s tax liabilities.

GUJARAT PROPACK LTD., WITH COSMO FILMS LTD.

History of merging and merged companies and scheme of merger.
History of Gujarat Propack Ltd. (i.e., Merging Company)
Gujarat Propack Ltd. (hereinafter referred to as GPL) was incorporated on 27th November, 1984 as a public limited company in Ahmedabad by J M Patel group in association with Gujarat industrial investment corporation ltd (GIIC). Later it become 93.79% subsidiary of CFL. The company is engaged in Plastics Films, Bi-Axially Oriented Poly Propylene (BOPP) sheets etc. The company has two plants which are located one in Halol and another in Karjan (both are in Gujarat state).

HISTORY OF COSMO FILMS LTD. (i.e. Merged Company)
Cosmo Film Ltd., (Hereinafter to as CFL) was incorporated on7tOctober, 1976 at New Delhi. The company was promoted by Ashok Jaipuria and is engaged the manufacture of BOPP film (which is extensively used in fixable packaging sector and electronic application). Extrusion Coating and Synthetic paper. Cosmo films accounts for a substantial capacity in the BOPP segment. In the year 1990, the increase in the cost of raw material, higher interest charges and steep levy in margin money on imports adversely affected the results. The over capacity in the flexible packaging sector also affected the demands as well as the margins of the company. However, during the year 2001-02 the company re-reported 45.53% rise in exports.

Effectiveness of merger and its impact on the shareholders of merging company – GPL
It has been observed from the table–6.8 that the merging company, GPL was loss making before merger. It’s net profit merging and RONW both showed negative figures. The company’s is very much benefited from the merger due to following reasons.

The per-merger average net profit of -3.49% improved substantially and reached to a positive figure of 4.97% after merger, representing increase by 242.41%.

Pre-merger average RONW also improved substantially from -19.21% to 18.07%, representing increase by 194.07%.

The reason for this as stated in the director’s report is restructuring of most its debt capital. Due to restructuring of debt capital the average interest cost of combined debts has been reduced from 10.6% p.a. (2001-02) to 4.4% p.a. (2002-03). In the table, it is noticed that the per-merger average leverage ratio has been declined from 3.49 to 1.7.1 representing reduction by 51.00%. And another reason is synergetic advantage of realigning the entire organization team for effectively managing operating costs. In fact the merger was planned for the purpose of cost reduction and man power rationalization.

The company is also benefited in terms of increased liquidity ratio, although it is marginal. The company’s pre-merger average liquidity ratio of 1.16 is increase to 1.54.

It is clear from the table that EPS of the company was negative before merger except in the second year before merger, that too a meager amount of Re.0.13. During post-merger period it substantially improved. In the year of merger itself it attained a positive figure of Rs.11.78 and thereafter declined. The pre-merger average negative EPS of Re.3.79 turned out to be positive Rs.4.42 after merger, representing 216.62% improvement.

Another benefit gained by the shareholders is in terms of dividend. The company did not paid dividend before merger. But after the merger the company continuously paid it. An average DPS after merger is Rs2.00.

BVPS also increased substantially after merger. An average BVPS before merger of Rs.20.13 increased to Rs.33.13, representing increase by 64.58%.

Effectiveness of merger and its impact on the shareholders of merged company - CFL
It is observed from the table, that the merged entity, CFL was healthy before merger. All the key indicators were positive. The net profit margin increased marginally only in the year of merger to 12.68% from 12.05%. After that, it continuously declined. Thus, the average pre-merger net profit margin of 8.28% declined to 4.98%, representing decline by 39.98%. However, the RONW has witnessed an increase during post-merger period. An average pre-merger RONW of 13.53% increased to 18.07%, representing increase by 33.56%.

It is observed from the table that the merged entity, CFL was profitable before merger. During pre-merger period, the EPS of the company continuously increased from Rs.3.20 (third year before merger) to Rs.20.64 (first year before merger). In the year of merger it further increased to Rs.23.55 and thereafter decline continuously. The average pre-merger EPS of Rs.12.01 declined to Rs.8.84, representing a decline by 26.39%.

In terms of dividend, it had increasing trend before merger. In the year of merger it further increased to Rs.4.50 and in the next year also it maintained the same amount. However, in the second year after merger it declined to Rs.3.50.

The average pre-merger P/E ratio increased from 5.54 to 15.82, representing an increase by 185.56%.

The BVPS showed a sharp decline in the year of merger. It declined from Rs.103.27 (the first year before merger) to Rs.54.49 (i.e., decline by 47.24%) and thereafter it slowly recovered. Thus, the average pre-merger BVPS of Rs.62.72 increased marginally to Rs.66.27, representing an increase by 5.66%.

The market price of the share showed a tremendous increase in the year of merger. The price increased from Rs.37.75 to Rs.109.05 (i.e., increase by 188.87%) and thereafter it declined to s.86.83 in the first year after merger, but still it is more than the price prevailing during pre-merger period. On the whole, the pre-merger average price of Rs.36.06 is increased to Rs.77.44, representing an increase by 114.75%.

Based on the above analysis, it is concluded that, in this merger case, both merging and merged companies are benefited from the merger, but the loss Making merging company is more benefited than the merged entity. Because negative net profit margin and RONW turned out to be positive after the merger. Leverage ratio declined and liquidity ratio increased. The shareholders of merging company are more benefited than those of merged company in terms of EPS, DPS, BVPS etc.

Merged company is also benefited from the merger. But due to continuous increase in the material cost cause the company to bring down the net profit margin and RONW after the merger. The overall sales and reserves and surplus increased after the merger.

DURABLE GOODS INDUSTRY

DURABLE GOODS INDUSTRY:
The consumer durable segment can be segregated into consumer electronics (T.Vs VCD player and Audio system etc) and consumer appliances (also know as white goods) like refrigerators, washing machine, ACs (Air conditionery) Microware ovens, vaccum cleaners and dishwashers.

Over the years demand for consumer durable ahs increased with rising income levels, double has increased with rising income levels, double-income families, changing life styles, availability of credit, increasing consumer awareness and introduction of new module. Products like Air conditioners are no longer perceived as luxury products.

Most of the segments in this sector are characterized by intense competition emergence of new companies (especially MNC’s) introduction of stage-of-The art models. Price documents and exchange schemes. MNC’s continue to dominate. The Indian consumer durable segment, which is apparent from the fact that these companies command more than 56% market share in the colour television segment.

The biggest attraction for MNCs is the growing Indian middle class this market is characterized with low penetration levels MNCs hold an edge over their Indian counterparts in terms of superior technology combined with a steady flour of capital while domestic companies complete on the basis of their well acknowledged brands, an extensive distribution network and insight in local market conditions.

One of the critical factors those influences durable demand is the Govt. spending on infrastructures especially the rural electrification programes have always logged behind schedule. This has not fovoured durable companies till now any incremental spending in infrastructure electrification programes could spur growth of the industry.

While colour televisions and refrigerator have been around for many years washing machines, Microwave ovens, ACs and vacuum cleaners are beginning to make their presence felt in Indian house hold.

In recent years India is while goods industry has adopted enormous growth but per reports washing machine industry has been decrease 2% to 4%. In this year washing machine industry expecting 7% growth.

Washing Machine Industry:
The total domestic demand for washing machines was around 0.98 million units in 1997 – 9 as against a reported capacity of more than 2.17 million units per annum. The demand in 1996 -97 was 0.89 million units up from 0.69 million units in 1995-96. The demand for washing machine grew at a GAGR of 10% in the period 1993-99. A demand growth of 11% has been reported in the period between January –June 1998 over the corresponding period in the previous year. This growth rate appears to be sustainable over the medium term.

Semi automatic washing machines accounted for more than 80% of the total demand with the just being accounted for by fully automatic machines in 1997-98. This is primarily because of the price advantage of around 50% which semi-automatic machines have over fully automatic machines. Also the consumption of water and power is lower in the case of semi-automatic machine. WIL is the third player in the semi-automatic category with around 17% market share – automatic category with around 17% market share. IFB the market leader with 27.5% market share in fully automatic segment. WIL which currently is third in terms of the overall market share, has an established brand image. However, it compares poorly in term of dealer network

Washing Machine:
Washing machines in India are divided into two broud segments-semi automatic machines form around 75-80% of total washing machines market. The fully automatic machines was not very popular mainly is the earlier years due to the high price differential between the two. In addition to this just as we save above the washing machine per se. is not popular as a television or a refrigerator. Thus most of the buyers have Preferred to make smaller in this product category. However, with the washing machine becoming a widely accepted consumer durable and the price of the fully automatic machines in slowly picking up. Morver, the replacement buyers who already have a semi-automatic washing machine are the ones who prefer the fully automatic washing machine.

72% of the dealers interviewed, witnessed on increasing preference towards fully automatic washing machine. It is established that by 2005 the share of fully automatic machines will be 70%.

There are two models of washing machines front loading and top loading. Top loading convenience and safety. Front loading model has not picked up at all in India. In the survey conducted, all the respondents cited top loading as the preferred model.

This industry come into existence in 1900’s pure Indian washing machine company is TVS afterwards it is amalgamated with other foreign company.

Indian growing economy provides large market to white goods industry MNC have more scope to grave.

Origin of the product:
Dryers exists before the washing machine came into existence. The washing machine and dryers are not sold in pairs until 20th Century.

The earliest dryers were invested in the 1800s. They were basically just metal drums with holes in them. The user would rotate them by a stick, over fire. This is similar to the may modern clothes dryers work today.

CUSTOMER VALUE AND SATISFACTION

Defining Customer Value and Satisfaction
Over 35 years ago, Peter Drucker insightfully observed that a company’s first task is “to create customers”. But today’s customers face a vast array of product and brand choices, prices, and suppliers. This is the question: How do customers make their choices?

We believe that customers estimate which offer will deliver the most value. Customers are value-maximizers, within the bounds of search costs and limited knowledge, mobility, and income. They form an exception of value and act on it. Then they learn whether the offer lived up to the value expectation and this affects their satisfaction and their repurchase probability.

What is Customer Satisfaction?
Satisfaction is the level of a person’s felt state resulting from comparing a product’s perceived performance (or outcome) in relation to the person’s expectations.

What is Customer Value?
Customer delivered value is the difference between total customer value and total customer cost. And total customer value is the bundle of benefits customers expect from a given product or service.

Who is a Customer?
Business needs customers to survive and exists in the market.
Customer is important person in business.
A customer is someone who brings his expectations to the organization, and it is their job to meet there expectation and satisfy their wants.
A customer is the blood of any business without which it cannot function.

A Customer is for life – Make it possible
Select the right customer through market research.
Know your purpose for being in the business.
Move customers from satisfaction to loyalty by focusing on retention and loyalty schemes.
Develop reward programs.
Customize the products and services.
Train and empower the employees in excellent customer service.
Respond to customers’ needs with speed and efficiency.
Measure what is important to the customer – always add value.

IS CUSTOMER-REALLY IMPORTANT
What is importance to customer :
CARE FOR THE CUSTOMER
UNDERSTAND THE CUSTOMER
STUDY THE CUSTOMER
TRUST THE CUSTOMER
OBLIGE THE CUSTOMER
MEET THE CUSTOMER
EVALUATE THE CUSTOMER
RESPOND TO THE CUSTOMER
SELL AND WIN THE CUSTOMER

Know what the customers are worth and know their point of view
Firstly, let us look at how the true value of the existing customers can be calculated. Many businesses spend about 75 percent on their marketing budget in a search for more new customers. The cost of this marketing mistake is a negative effect on the overall profits of the organization. It is a mistake because:

It costs substantially more to win a new customer than it does to keep an existing customer.
The longer a business keeps a customer, the more profitable that customer is for the business.
As a customer’s lifetime value grows, the more dependent they become on the company, and the less susceptible they are to the competitors’ offers of low prices.

The Customer’s Eye View
From the customer’s viewpoint, the organization behaves like an ideal suitor. Their every need or wish is not only provided for but also anticipated and personalized. At every opportunity and interaction, the customer is made to feel not only special, but also perhaps the most special and valued customer the organization has.

Customer Care
“Customer care is a customer service that seeks to acquire new customers, provide superior customer satisfaction, and build customer loyalty.”

We are now in the 21st Century, which is the era of the “The Never Satisfied Customer”. The expectations and demands of the customers will keep growing in the coming days. In today’s market scenario customer is the “king”. All companies are striving hard not just for customer satisfaction but also “Customer Delight”. To maintain customer loyalty, it is very important for an organization to have a good relationship with them.

“ONE SATISFIED CUSTOMER IS EQUAL TO 100 NEW CUSTOMERS”
Understanding this factor, many companies are striving hard to keep their existing customers happy. They are spending enormous amount of money to retain their customers. Today the growth and profitability of any organization depends on the number of satisfied customers that it has, not its financial assets.

To maintain customer loyalty and brand loyalty, it is very important for any organization to have a good and long lasting relationship with its customers. Building long lasting customers requires understanding their needs, expectations, feelings, etc. once it is know what the customers expect, it is simple and easier to fulfil their expectations and delight them.

In this context “Customer Care” is very critical. It is about understanding and building a strong bond between the organization and the customer continuously, by serving him in the best possible way when he knocks at your door, or maybe when he requires you to knock at his door.

Customer’s difficulties and problems, valuable suggestions, ideas towards the organization, products, services and people will help the organization in becoming a better enterprise by developing new products and offering superior service. This will also make the customer feel good that he, his problems and his ideas are important to the organization, and will help the organization to build a better relationship.

Who would have imagined 15 years ago, for example that organizations such as Amazon.com could capture market share from the high street by offering the customer a wide selection of value for money products backed by a quality service? Or that companies such as First Direct could fundamentally challenge the traditional way customers do business with their bank by offering a friendly, efficient service 24 hours a day, 365 days a year?

As competition has become more global and more intense, many organizations have realized that they cannot compete on price alone. It is in these market places that many companies have developed a strategy of providing superior customer care to differentiate their products and services.

Surveys suggest that service driven companies can charge up to 9 % for the products and services they provide. They grow twice as fast as the average company and have the potential to gain up to 6 percent market share.

We have to ensure that Customer Lifetime value is created and this is an immensely powerful tool as it helps companies to work out how many transactions it will take to recoup the initial investment in attracting, and servicing each new customer and generate a worthwhile return.

What is an Excellent Service?
An excellent service is a pre requisite to create and maintain customers, but what exactly constitutes good service?

Most people’s definitions will be based on personal experience. The garage which unexpectedly provides complimentary umbrellas to its customers when they come to collect their cars and it’s raining; the newsagent who gives the customer a free sweet when they come in to pay their newspaper bill- these would seem as good service. Ask anyone for their opinions and you will find that, even when discussing the service received from one organization alone, customers’ expectation and experiences vary.

One person’s shining example of the treatment he or she has received can be another person’s horror story. Yet it is the perception of each customer that counts. The perception of customers is their reality. Customer service is about perceptions: it is often a subjective and intangible experience.

Customer Centric Organizations
“There is only one boss, the customer and he can fire anybody in the company from the Chairman down, simply by spending his money somewhere else.”

It has become imperative these days to place the Customer at the centre of any organization. This enables an organization o enjoy the following benefits:

To differentiate itself from the competition
To improve its image in the eyes of the Customer.
To minimize price sensitivity.
To improve profitability.
To increase customer retention and satisfaction.
To enhance the reputation of a company.
To improve staff morale.
To increase employee satisfaction and retention.
To increase productivity.
To reduce costs.

The Changing nature of Customer Service:
A new concept Customer Delight emerges
There are two distinct types of attributes: those that maintain satisfaction and those that create delight. Satisfaction-maintaining attributes tend to be core attributes frequently considered the price of entry in the marketplace. Delight-creating attributes tend to be soft, long term relationship-building factors.

Today it’s about delighting the customer. The focus has shifted from satisfying the needs of the customer to delighting him beyond expectations. It is this, which ultimately drives repeated purchasing and unalloyed Customer Loyalty. Customer delight is not just about better product performance.

Consumers have a certain degree of expectation from a brand and in most cases the brand is likely to deliver a level of performance pretty close to that expected by the customer; however when customers get value or benefits beyond what they had expected, the brand has succeeded in delighting the customer. Common sense suggests that a delighted customer may be more loyal to a brand than a satisfied customer may.

Customer Retention
As customers begin to experience better service their expectations tend to rise. Furthermore the service experienced is transferable in the mind of the customer. The customer makes conscious and unconscious comparison between different service experiences, irrespective of the industry sector. Customers expectation for example of the service experience they will receive from a car rental service may be based not only on their expectation and experience of the service itself but also experiences they might have had in the high street or on the Internet with other car rental companies and other leisure and travel organizations.

A company’s ability to attract and retain new customers therefore is a function not only of the product or product offering but also the way it services its existing customers and the reputation it creates within and across marketplaces. Many organizations overlook the potential of their existing customers and this has cost them dear.

The numbers say it all when they highlight the importance of retaining a customer:
Reducing customer defections can boost profits by 2-85 percent. (Harvard Business School)
The price of acquiring new customers can be 5 times than the cost of keeping current ones (US Office of Consumer Affairs)
The return on investment to marketing for existing customers can be up to seven times more than to prospective customers. (Ogilvy and Mather Direct).

Yet while most companies regard the acquisition of new customers as a crucial element in their sales strategy, very few of them record customer retention rates and even fewer analyze the reasons why previously satisfied customers become dissatisfied and go. Again the numbers speak volumes:
50% of the customers are lost in a five year period.
50% of the employees are lost in four years.
Replacement customers will not contribute to profit unless they are retained for at least three years.

Only best-practice organizations such as Toyota have customer retention levels higher than 70%. Put another way, most organizations lose significantly more than 30% of their customers before, or at the time of a repurchase decision, mainly through poor service. The only reason market share do not drop is because competitors are usually in the same position and are losing customers to competitors! The result is a constant churn of unsatisfied customers looking for a company in which they can put their faith.

The key to Customer retention is Customer Loyalty
“If you want a place in the sun, You’ve to put up with a few blisters”

Today’s customers are harder to please, they are more informed than ever before, more price conscious, more demanding, less forgiving, and approached by many competitors with equal or better offers.

Companies seeking to improve their profits and sales have to spend considerable time and resources in search for new customers. It is not enough being skillful in attracting new customers, it is more important to retain the existing customers.

It is very much necessary to work passionately for loyalty and retention. The company’s aim should be to go beyond the customer’s expectations, to satisfy and to delight them.

The key to customer retention is customer loyalty. A highly satisfied customer stays loyal, buys more products which the company introduces, upgrades existing products, pays less attention to competitors’ brands, and is less sensitive to price offers.

It is in this sense wise to call the recent buyers and enquire regarding the product performance and to know their satisfaction level.

The organization should try to exceed customer’s expectations and not merely meet them, because customers who are just satisfied still find it easy to switch over when a better offer comes along. But a delighted customer creates an emotional bond with the brand, not just a rational preference and this result in high customer loyalty.

Acquiring new customers can cost more than the cost involved in satisfying the existing customers. These satisfied customers tell more people about good products, services, and experiences. But an unsatisfied customer will give his opinion to many people. If this happens, the number of people exposed to bad word of mouth may grow exponentially. Company should not risk losing customers by ignoring a grievance or a small issue.

The cost involved in winning back lost customers is often less than attracting the new customers. Customers maximize the value of the organization. It is very important for the organization to understand this fact that a satisfied customer does the best advertising for the company.

Why do consumers change products?
Service is a key determinant in the choice of a product.

Reasons for choice of product:
7 percent technical specifications
50 percent manufacturer’s response and liability.

Reasons for changing product:
8 percent quality or cost.
40 percent dissatisfied with service.

A customer’s reasons for initial purchase decisions therefore, can be both for tangible and intangible factors, the service feature relating to both performance and sense of caring:

Tangible:
Performance
Quality
Reliability
Cost

Intangible:
Sense of Caring.
Courtesy to customer.
Willingness to help.
Ability to solve the problems.

Reasons for developing long-term relationships with customers:
On average it is estimated that cost five times as much to attract a new customer as it does to keep an old one. Long term relationships with customers are therefore more profitable because:
The cost of acquiring new customers can be high.
Loyal customers tend to spend more and cost less to serve.
Satisfied customers are likely to recommend your products and services.
Retaining existing customers prevents competitors from gaining market share.

Evolution of Banking
The evolution of the Commercial Banking Industry in India has been governed by the social objective of expanding the reach of banking services and the mobilization of domestic savings. The roots of this social character of Indian Banking can be traced to the passing of the State Bank of India Act, 1955, by which the undertaking of the imperial Bank of India was taken over by the newly Constituted State Bank of India (SBI). The SBI was established in 1955 by an Act of Parliament, nationalizing the former imperial Bank of India.

This institution and its seven associates banks, which becomes SBI subsidiaries in 1960, were distinct from the other major Indian Commercial Banks, which remained in private hands until two rounds of nationalization in 1969 (14 banks) and, in 1980 (6 banks). In February 1969, the Government of India's (GOI's) nationalization of 14 largest private sector banks was the culmination of pressures to use the banks as public instruments of development.

The GOI imposed "social control" on banks, of which priority lending was a major aspect. It introduced restrictions on advances by banking companies. These were intended to ensure that bank advances were confined not only to large scale industries and big business houses, but were also directed, in due proportion to other important sectors like agriculture, small-scale industries and exports.

Since 1969, there has been a significant spread of the banking habit in the economy and banks have been able to mobilize a large amount of savings. However, by the 1980s, it was generally perceived that the operational efficiency of banks was declining. Banks were characterized by low profitability, high and growing non-performing assets, and low capital base. Poor internal controls and the lack of proper disclosure norms led to many problems being kept under cover.

The quality of customer service did not keep pace with the increasing expectations. All these reasons led to the next phase of nationalization. The 1969 nationalization had raised public sector banks' share of deposit from 31 %to 86% while the nationalization of 1980 raised the same to 92%. In 1991, a fresh era in Indian banking began with the introduction of banking sector reforms as part of the overall economic liberalization in India.

Active and Predominant Financial Intermediaries in the Country.
Commercial banks
Public Sector Banks
Foreign Banks in India
Private Sector Banks
Old Private Banks
New Private Banks
State Bank of India
State Bank Associates

Public Sector Banks
The banking sector in India has been characterized by the predominance of PSBs, which include the SBI and its seven associates, and 19 other nationalized banks. As on March 31, 2002 the assets of PSBs aggregated Rs. 8,910 billion, representing 80.2% of the total assets of all SCBs. Taken gather, PSBs accounted for 82% of public deposits 79% of advances and 90% of branches of all commercial banks in 2000-02, thus clearly demonstrating their dominance of the Indian banking sector.

New Challenges
The challenges posed to the financial sector in the market place are the following
Deregulation
Advanced information technology
Globalize markets and growing volumes of financial transactions
Volatility of the markets, and
Increased customer demands and sophistication of markets and customers

Customer Satisfaction
Banks are service organizations whose customer service is poor and need a lot of organizational and personal skills. So this is the case of the life and general insurance, whose reputation for quality and delivery of services is probably poorer than that of banks. This has been the result of protracted market monopoly and semi-monopoly elements in the market and poor quality of human element and personal skills, which are the basic brick for service marketing.

Both in banking and insurance, whose customer base is as wide as the whole household sector, "customer is not treated as the king and their marketing strategies are weak. The prerequisites for customer satisfaction are the following.
Identification of customer needs for financial and non-financial services.
Develop appropriate plans and schemes for them.
Price them reasonably on a cost plus basis in a competitive spirit and not on monopoly basis.
Strategies for marketing through personal contact, letters, advertisement through agents as in the case of insurance and in media.
Use of development officers, R&D and customer based research.
Increased customer demands and sophistication of markets and customers.

INTERIM REPORT OF THE WORKING GROUP ON CUSTOMER SERVICE IN BANKS
In the present day circumstances, especially after the nationalization of the 14 major banks in the country, more and more attention is being paid to revolutionize the various factors of commercial banking. The group in its interim report made a number of recommendations to improve the customer service. These recommendations are as under:
Banking is nothing but a service.
Banks are business organizations selling bank services.
It is necessary for banks to continuously assess and reassess how customers perceive bank services what are the new emerging customer expectations and how these can be satisfied on an ongoing basis. Appraisal of customer service thus must be an essential activity for all banks to be carried out meaningfully.

Unfortunately, there has been so far no integrated, unified and organised effort for a study of customer service, in all its aspects by banks in India. Even individually, we are afraid, not much attention, at least on a regular basis, has so far been devoted to these banks.

The low priority given to such appraisal and study might perhaps have been due to inadequacy of bank services compared to large unsatisfied demand all these years, banks have been operating in a seller's market and this continue to have, ready customers and large waiting lists.

It is true that customer service is an extremely dynamic concept. What is good customer service today may be indifferent service tomorrow and bad service the day after. But even in absolute terms, there is general consensus that the service presently rendered by banks needs, and is capable of, vast improvement. There is general feeling today, both amongst bankers themselves and in the public at large, that customer service rendered by banks leaves much to be desired, and in certain respects, had indeed reached very low levels. This can be ascribed to many reasons.

Maybe the enormous branch expansion program undertaken by banks along with the ever-widening range of the activities and responsibilities particularly after nationalisation has weakened the structural fabric of the organisations. Simultaneously, public expectations have been constantly, often justifiably, increasing, and with the growing public awareness, dissatisfaction over the service has assumed growing expression.

And the time has come for banks to look inward to find out what is the nature and quality of the things they sell, what the product is demanded by their customers and have to go about marrying the two.

Briefly speaking, customer dissatisfaction is seen to be pointedly acute in the following aspects;
Delay in putting through transactions
Delay in correspondence
Delay in decision making
In regard to credit applications particularly, questions asked and data required are not fully Relevant. All the enquiries not made at one time. Lack of counseling.
Undue emphasis of staff on observance of rules and procedures and
General attitude of unconcern and apathy for the client.

Ascertaining these expectations therefore is necessary. Expectations vary from one class of customers to another--the underprivileged, the common man, the agriculturist, the professional, the trader, the industrialist, etc., also as between rural, semi-urban and urban customers. Circumstances under which expectations would be met also differ as between bigger and smaller offices.

Further, dynamics of customer expectations and aspirations and the resultant futuristic demands on banks also call for detailed investigation and long-term measures. One major component of customer service is related to the involvement and commitment of people rendering such service and the other major component covers the systems and procedures aspects.

Therefore the entire range of customer service will have to be studied against the backdrop of other major interdependent factors:
Demands on and expectations from banks
Quality and job knowledge of banks personnel
Attitude and motivation of bank employees
Back-up systems and procedures

Some of these and other related factors have a direct and immediate impact on customer service, while others have a long-term significance, but are, nonetheless, very relevant and important. The critical service areas needing urgent attention have been identified as
Deposits accounts.
Remittances and collections areas needing immediate attention.
Encashment of Cheques.
Issuance of receipts.
Statements of accounts.
Collection of Cheques and bills and
Remittances including issue and encashment of drafts.