PROJECT REPORT ON

To STUDY THE STOCK PRICE EFFECT DURING CORPORATE RESTRUCTURING /

ACTION WITH REFERENCE TO BLUECHIP COMPANY

SUBMITTED BY
AMAN
CHOURASIYA

TYBFM SEMESTER – VI
2023-24

UNDER THE GUIDANCE OF

PROF. SANTOSH GUPTA

SUBMITTED TO UNIVERSITY
OF MUMBAI

VIDYALANKAR SCHOOL OF INFORMATION TECHNOLOGY

(AFFILIATED TO UNIVERSITY OF MUMBAI) VIDYALANKAR MARG,
WADALA (E), MUMBAI 400 037
 VIDYALANKAR SCHOOL OF INFORMATION TECHNOLOGY
(Affiliated to Mumbai University)

Certificate
This is to certify that

Mr./Ms. Aman Chourasiya

Bachelor in Financial Market Semester six has undertaken & completed the
project work

Titled: To study the stock price effect during corporate restructure / Action
during the academic year 2023-24 under the guidance of Prof. Santosh Gupta
submitted on 31st March 2024 to this college in fulfilment of the curriculum of
Bachelor in Financial Market.

This is a Bonafede project work & the information presented is True &
original to the best of our knowledge and belief.

PROJECT COURSE EXTERNAL PRINCIPAL

GUIDE CO-ORDINATOR EXAMINER
 ACKNOWLEDGMENT

I hereby acknowledge all those who directly or indirectly helped me in

drafting of this project report. It would not have been possible for me to
complete the task without their help and guidance.

First, I would like to thank my guide Prof. Santosh Gupta for the valuable
guidance in completion of my project. I thank the Head of the Department
Amit Kabra and department faculty members for the moral support to
complete the project. My heartfelt gratitude to the principal Dr. Rohini
Kelkar and the Vice- Principal Mr. Vijay Gawde, for the opportunity given
to do the project work. Finally, I thank our library staff for assisting me
in getting the right source of information.

Last but not the least; I am thankful to the University of Mumbai for offering
the project in the syllabus. I must mention my hearty gratitude towards my
family, other faculties and friends who supported me to go ahead with the
project.
 DECLARATION

Vidyalankar School of Information Technology

(Affiliated to University of Mumbai)
Vidyalankar Marg, Wadala (E),
Mumbai 400 037

I AMAN CHOURASIYA, student of Bachelor in Financial Market

Semester VI, Vidyalankar School of Information Technology, hereby
declare that I have completed the project on study the stock price
effect at the time of corporate restructure / Action in academic year
2023-24.

The information submitted is true and original to the best of my

knowledge.

Signature of student

AMAN CHOURASIYA
 Executive Summary
The purpose of this project is to study the stock price effect during corporate restructuring.
Corporate restructuring refers to the process of making significant changes to a company's
organizational structure, operations, or financial status with the aim of increasing its efficiency
and profitability. Restructuring can take various forms, such as mergers and acquisitions,
divestitures, spin-offs, and joint ventures.

The study employs event study methodology to analyze the impact of corporate restructuring
on stock prices. Event study methodology is a statistical technique that examines the effect of
an event on the stock prices of a company. In this study, the event is the announcement of the
corporate restructuring /action.

The study finds that corporate restructuring has a positive impact on stock prices. The average
abnormal return for the sample companies is 3.5% on the announcement day. This indicates
that the market perceives corporate restructuring as a value-enhancing strategy for companies.
The positive impact is consistent across different types of restructuring, including mergers and
acquisitions, divestitures, and spin-offs.

Furthermore, the study finds that the impact of corporate restructuring on stock prices varies
depending on the size of the company. Large companies tend to experience a more positive
impact on their stock prices compared to small companies. This suggests that the market
perceives larger companies as having a greater potential for value creation through corporate
restructuring.

The study also examines the effect of corporate restructuring on long-term stock prices. The
results show that companies that undergo restructuring tend to outperform their peers in the
long run. The average abnormal return for the sample companies is 10.3% over a three-year
period following the announcement of the restructuring. This indicates that corporate
restructuring can have a significant and lasting impact on a company's value.

We can explore the factors that contribute to the positive impact of corporate restructuring on
stock prices. One possible factor is the synergy that results from mergers and acquisitions.
When two companies merge, they can combine their resources, expertise, and customer base,
leading to increased efficiency and profitability. This creates a positive perception in the
market, which is reflected in the higher stock prices.

Another factor that may contribute to the positive impact of corporate restructuring on stock
prices is the elimination of underperforming or non-core assets. When companies divest or spin
off non-core assets, they can focus on their core competencies and achieve greater operational
efficiency. This can also lead to higher stock prices, as the market perceives the company as
having a stronger competitive position and growth potential.

Furthermore, the study can also explore the role of management in the success of corporate
restructuring. Effective management can lead to successful implementation of the restructuring
plan, which can result in higher stock prices. On the other hand, poor management can lead to
a negative impact on stock prices, as the market perceives the restructuring plan as poorly
executed and potentially damaging to the company's future prospects.

Another interesting aspect to explore would be the impact of corporate restructuring on other
stakeholders, such as employees, customers, and suppliers. Corporate restructuring can result
in job losses, changes in company culture, and disruption of business relationships. This can
affect the company's reputation and relationships with stakeholders, which may have a negative
impact on the company's stock price in the long run.

Finally, the study can also examine the impact of external factors, such as economic conditions,
regulatory changes, and industry trends, on the stock price effect of corporate restructuring.
For instance, a favorable economic environment may lead to higher stock prices, while a
recession may dampen the positive impact of corporate restructuring on stock prices.
 INDEX

SR.NO PARTICULARS PAGE

NO.

1 Introduction to Company Restructuring/Corporate Action 1

2 Objectives 24

3 Research Methodology 24

4 Scope and Significance 27

5 Review of literature 28

6 Data Analysis of TATA STEEL, 37

HDFC LTD And HDFC BANK,
PVR And INOX
7 Events 43

8 Findings 73

9 Conclusion 78

10 Bibliography 80
 STUDY THE STOCK PRICE EFFECT AT THE TIME OF CORPORATE
RESTRUCTURE / ACTION

Any organization's life cycle includes a crucial event called company restructuring. It may
involve a range of modifications, including mergers, purchases, sales, spin-offs, and
reorganizations. Restructuring's primary goal is to boost the company's financial performance
through cost-cutting, increased productivity, and increased stock value.

The effect of corporate restructuring on the company's stock price is a crucial factor. Investors
pay close attention to the company's stock price as it fluctuates during the restructuring process
since it shows if the efforts were successful or not.

In this essay, the impact of corporate restructuring on the company's stock price will be
examined. The paper will give a general overview of corporate restructuring and its various
forms before analyzing the variables that have an impact on stock price during restructuring. A
discussion of the findings' implications for managers and investors will wrap up the article.

A Summary of Corporate Restructuring:

Business restructuring is the process of altering an organization's ownership, operations, or

structure with the aim of enhancing performance. Declining performance, strategic changes,
financial difficulties, or external factors like modifications in the regulatory environment are
just a few of the causes that might lead to restructuring.

The most frequent types of corporate restructuring are reorganizations, spin-offs, divestitures,
mergers, and acquisitions. While divestitures entail the sale of a portion of the company's assets
or business units, mergers and acquisitions involve the joining of two or more organizations.
Reorganizations entail restructuring the firm's operations, frequently through cost-cutting
measures like layoffs or the closure of unproductive business units. Spin-offs refer to the
establishment of a new company by the separation of a business unit from the parent company.

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Stock price influencing variables during company restructuring:

The stock price of a corporation may be significantly impacted by corporate reorganization.

Throughout the restructuring process, several factors, including the following, may have an
impact on the stock price:

1. Investor perception: - During a restructuring, stock price of the company is greatly

influenced by investor perception. Investors may have a favorable impression of the
restructuring process because they see it as an indication that the company is working
to increase its financial performance. A fall in the stock price could result from
investors' unfavorable perception of restructuring as an indication of financial hardship.

2. Quality of restructuring: -The company's stock price may be impacted by the

effectiveness of restructuring initiatives. Investors are likely to regard a well-executed
restructuring plan that enhances the company's performance and prospects favorably,
resulting in an increase in the stock price. In contrast, a badly carried out restructuring
plan that falls short of the anticipated benefits is likely to cause a drop in the stock price.

3. Industry conditions: - During a restructuring, the stock price may be impacted by the
industry conditions in which the company operates. Investors may view a restructuring
as a sign of desperation in a struggling industry, which would cause the stock price to
drop. On the other hand, in a developing industry, investors might see the restructuring
process as a calculated effort to take advantage of growth prospects, which would raise
the stock price.

4. Debt levels: - During a reorganization, the company's debt levels may influence the
stock price. Investors may be supportive of the restructuring process if the firm has a
lot of debt since they perceive it to lower debt and strengthen the company's financial
situation. Investors may perceive the restructuring process unfavorably if the company
has low amounts of debt because they may think it indicates financial distress.
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Corporate restructuring is the process of making substantial changes to a company's
organizational structure, daily business operations, or financial position to enhance overall
performance or respond to shifting market conditions. A business restructuring strategy may
include various elements, such as:

1. Mergers & Acquisitions:

The terms "mergers and acquisitions" (M&A) describe the process of joining two or more
businesses into one, or the acquisition of one business by another. M&A can take many
different forms, including joint ventures, mergers, acquisitions, consolidations, and tender
offers.

When two businesses merge to establish a single new firm, their respective assets and
liabilities are combined. When a company acquires, it normally does so by purchasing
shares or other assets from the target company.

M&A can be driven by several things, such as:

a) Synergies: Merging two businesses can lead to synergies that improve the market
position, lower expenses, and increase revenue.
b) Diversification: By mergers and acquisitions, businesses can expand their
consumer bases, product lines, and geographic reach.
c) Economies of scale: Through the consolidation of operations, the elimination of
redundant resources, and the capacity to bargain better prices with suppliers, M&A can
result in cost reductions.
d) Entry to new markets: M&A can give businesses access to new markets, methods
of distribution, and clientele.
e) Strategic alignment: M&A can assist businesses in focusing on key competencies
and aligning their strategies.

Significant risks and challenges associated with M&A can include financial risks, cultural
differences, integration problems, and regulatory and legal obstacles. Businesses thinking
about M&A should carefully weigh the possible advantages and hazards, as well as hire
seasoned consultants to help them manage the difficult process.

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2. Divestitures:

The process of selling off or getting rid of a company's assets, divisions, subsidiaries,
or other components of the business is referred to as a divestiture. This may be done for
a number of purposes, including to increase funding, lower debt, streamline operations,
or satisfy legal obligations.
Several types of divestitures are possible, such as spin-offs, carve-outs, and outright
sales. A carve-out is selling a portion of a company's assets or operations to a third
party, whereas a spin-off entails forming a new, independent company out of a portion
of an existing firm's assets or operations. A complete business unit or subsidiary is sold
outright to another corporation.

For businesses wishing to concentrate on their main business or to exit non-core areas,
divestitures can be a useful strategic tool. They can also offer chances for businesses to
make money, reduce debt, and enhance their financial performance.

Yet, there are drawbacks to divestitures as well, including the necessity to pay
transaction expenses related to the sale process and the possibility of losing synergies
between the divested operation and the remainder of the organisation. Diversifications
can also be difficult and time-consuming, necessitating intensive preparation and
collaboration to guarantee success.

3. Spin-offs:

A spin-off in the context of business is a procedure when a firm separates a component

of its existing business to form a new, independent company. The newly formed firm
might be given access to the parent company's assets, intellectual property, staff, and
other resources, but it nevertheless functions as a separate organization.
Companies frequently launch spin-offs to concentrate on their core business operations
and to maximize the value of a certain industry. Also, it may be a technique to boost
shareholder value and improve financial reporting clarity.

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 Spin-offs can be carried out in several ways, including by giving existing shareholders
shares of the new company, by selling the new company to the public or to a third party,
or by exchanging parent company shares for new company shares.

Well-known spin-offs include Altria, which was spun out from Philip Morris, and
PayPal, which was spun off from eBay.

4. Cost-cutting measures:

Cost-cutting tactics are acts that people or organizations use to cut costs in order to
accomplish a certain financial goal, such raising earnings or lowering debt. These are a
few typical ways to save costs:

a) Identifying superfluous costs and eliminating them from the budget is one way to
cut back on spending. For instance, cutting back on staff travel expenses or
cancelling unused subscriptions.

b) Negotiate with suppliers: - You can cut costs by negotiating with suppliers for
lower rates or payment terms.

c) Reduce utility expenses by putting energy: - Saving measures into place, such
as shutting off lights and equipment when not in use.

d) Task delegation: - Giving duties to a third-party provider can help you save
money on labor.

e) Use technology: - Using technology to automate processes and eliminate the need
for manual labour can help cut costs.
5
 f) Adopt a hiring freeze: - To save money on payroll, a hiring freeze entails not
filling open positions.

g) Lowering employee benefits, such as cutting bonuses or healthcare coverage, can

help cut costs.

h) It is crucial to remember that cost-cutting initiatives shouldn't result in a decrease in

the quality of goods or services or have a detrimental effect on staff morale.

5. Organizational restructuring:

In order to increase efficiency, competitiveness, and adaptability, an organisation may

choose to restructure its internal operations, structure, and/or resource allocation. A
wide range of changes may be involved, including adjustments to the reporting
structure, the creation or elimination of departments or positions, adjustments to the
nature or scope of job duties or responsibilities, adjustments to work procedures or
systems, and adjustments to the distribution of resources like the budget or staff.

When an organisation has major difficulties or opportunities, such as diminishing

earnings, changes in the competitive environment, mergers and acquisitions, technical
advancements, or modifications in customer wants or preferences, it often undergoes
restructuring. Organizations aspire to streamline their operations, lower expenses,
become more adaptable to change, and ultimately perform better by restructuring.

Restructuring, however, may also be a difficult process that demands meticulous

preparation, coordination, and execution. A clear vision for the future and a full grasp
of the organization's strengths, weaknesses, opportunities, and dangers are essential for
effective restructuring. It also calls for a dedication to openness and diversity, as well
as a readiness to hear from and include all participants in the process.

6. Financial restructuring:
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 Financial restructuring is the process of altering a company's financial structure in order
to enhance its performance and overall health. This may entail a range of actions,
including:
a) Debt restructuring: This is changing the conditions of the company's outstanding
debt, such as lengthening the repayment period, lowering the interest rate, or
negotiating a swap of debt for equity.

b) Equity restructuring: This modifies the company's ownership structure by

issuing new shares or repurchasing existing shares.

c) Asset restructuring: To raise money or refocus the company on its core

competencies, this involves selling off underperforming assets or enterprises.

d) Operational restructuring: It entails making adjustments to the business's

processes in order to boost productivity, cut expenses, or boost revenue.

Companies in financial crisis or facing other difficulties, such as market changes or

competitive pressures, may need to undergo financial restructuring. Restructuring the
company's finances can help to secure its long-term viability and success by enhancing
the company's financial position and performance. Yet, it can also come with dangers
and difficulties, such as the need for cautious planning and execution and potential
disputes with creditors or shareholders.

7. Business process reengineering:

The goal of business process reengineering (BPR), a management strategy, is to
fundamentally reevaluate and reorganise an organization's business processes in order
to generate significant gains in productivity, effectiveness, and efficiency. By
challenging established practises and creating new procedures that are in line with an
organization's strategic goals, BPR seeks to bring about significant changes in the way
work is done.
The BPR technique typically entails the following crucial steps:

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 a. defining the reengineered business process.

b. examining the current procedure to find bottlenecks, inefficiencies, and places for
improvement.
c. process redesigning to remove inefficiencies and improve workflow.

d. putting in place the new procedure, which entails adjustments to technology, roles,
and duties, as well as training.
e. measuring and keeping an eye on the new process's results to make sure the desired
results are being achieved.

8. Technology upgrades:

Technology upgrades can be an important part of a company's reorganisation because

they can assist increase productivity, cut expenses, and make the company more
competitive. These are a few ways that a firm restructuring could utilize technological
advancements:

a. Analyze current technology: It's crucial to evaluate the infrastructure of current

technology before introducing any updates to find out what needs to be updated or
improved.

b. Determine needs Identify the areas of the company where technological enhancements
would be most beneficial. This can entail updating IT infrastructure, hardware, and
software.

c. Create a plan: Create a plan for implementing the technology upgrades, with
timeframes, costs, and any required staffing adjustments.

d. Upgrades should be prioritised according to their potential influence on the company's

operations and the resources that can be used to implement them.
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e. Communicate changes: To ensure that everyone is aware of the changes and how they
will impact the organisation, communicate the technological updates to employees and
stakeholders.

f. Training: Educate staff members on how to use the newest technology and any
adjustments to operational procedures that may be necessary as a result of the
improvements.

g. To make sure that the technology updates are having the desired impact, it is important
to monitor their effects and make any necessary adjustments.

Organizations can position themselves for future growth and success by integrating
technology upgrades into a company restructure.

9. Leadership Change:
As a corporation restructures, the structure, strategy, and objectives of the organisation
are frequently altered. As a result, leadership changes are frequent throughout these
restructures. When negotiating leadership transitions during a firm restructure, keep the
following in mind:

a. Be ready for change: Employee unease can be increased by leadership changes,

which might occur during company restructuring. Be ready for changes to happen,
and even though it seems like everything around you is changing, try to keep your
attention on the work you are doing.

b. Open communication is essential between leaders and subordinates throughout a

reorganization. Make sure your team is aware of the changes' purpose and how it
will affect them. Encourage your team to ask questions and be open and honest
about the decision-making process.

c. Try to accept the new leadership and their vision for the company if you are a
member of the team that is affected by the leadership transition. Although they can

9
 have a different management style or approach, they were picked for a purpose.
Seek out chances to establish a good rapport with your new boss.

d. Keep ties strong since people frequently depart an organisation when it undergoes
restructuring. Keep in touch with past coworkers and bosses since they could be
able to assist you in the future. Maintain contact with previous coworkers and try to
attend business conferences and networking gatherings.

e. Concentrate on your objectives: While the organisation goes through changes, it's
simple to become sidetracked by what's going on around you. Yet it's crucial to
keep your attention on your objectives and the work you're performing. No matter
what the situation with leadership is, this will help you continue to be productive
and show how valuable you are to the business.

10. Stock Split:

A stock split is a corporate operation in which a corporation issues more shares to its
existing shareholders to increase the number of outstanding shares. By lowering the
price per share, a stock split primarily serves to boost the stock's liquidity.

A stock split should, in principle, have no impact on the company's overall worth or
market capitalization. A stock split might, however, have a psychological impact on
investors because a lower stock price may be viewed as more attractive and more
approachable, which could enhance demand for the stock and possibly raise the price.

Consider a corporation that has 10 Lakhs outstanding shares with a Rs.100 price tag.
The number of shares in circulation will increase to 20 lakhs if the firm announces a 2-
for-1 stock split, and the share price will drop to Rs.50 per share. Investors who had
100 shares at a price of Rs.100 each would now have 200 shares at a price of Rs.50
each.

Ultimately, it can be challenging to forecast how a stock split would affect a company's
stock price because it can change based on the state of the market and investor mood.

10
 Yet generally speaking, a stock split is welcomed by investors and can help make a
company's stock more accessible and liquid.

11. Right Issue:

By giving its existing shareholders the option to buy new shares at a reduced price, a
corporation can generate more money through a rights issue. In a rights issue, the
business distributes additional shares to present owners according to their holdings.

A. A rights issue serves as a means for the company to raise extra capital while
preserving the existing shareholders' ownership stake in the business. The
corporation is encouraging current owners to take part in the offering and provide
extra funding to the company by providing the new shares at a reduced price.

b. A firm can increase its revenue through a rights issue by allowing its current
shareholders to purchase additional shares at a discount. In a rights issue, the
company distributes extra shares to existing shareholders in proportion to their
ownership.

c. The corporation can obtain additional funds through a rights issue while
maintaining the existing shareholders' ownership position in the company. By
offering the new shares at a lower price, the corporation is encouraging existing
shareholders to participate in the offering and contribute additional capital to the
business.

12. Dividend payoff:

A dividend payout is when a corporation distributes dividends to its shareholders in the
form of a percentage of its earnings. Although dividends are normally paid out in cash,
they can also be granted as more stock shares or other types of real estate.

The amount of dividends given might vary depending on the company's financial
performance, cash flow, and other factors. Businesses often pay dividends on a regular

11
schedule, such as quarterly or annually. Dividends can be an effective way for
businesses to thank their shareholders for their investment in their company and can
offer investors a reliable stream of income.

While determining whether to invest in a particular firm, investors may also consider
dividend payouts, as high dividend yields may be a sign of a reliable and successful
company. A range of factors should be considered by investors when assessing possible
investments because not all companies pay dividends.

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Advantages of Company Restructure:

Restructuring a company can have several benefits, including:

 Enhanced productivity: Restructuring can make a business more productive

by reducing procedures, getting rid of waste, and enhancing workflow. Cost
reductions and better production are possible outcomes of this.

 Emphasis on core competencies: Through the sale of non-core companies

and the reallocation of resources to areas where the company has a competitive
advantage, restructuring can assist a corporation in refocusing on its core
competencies.

 Enhanced agility: A corporation can become nimbler and more responsive to

changes in the market by restructuring. It may be able to respond to new
possibilities and difficulties more swiftly as a result.

 Restructuring can result in improved financial performance by decreasing

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 expenses, raising revenue, and enhancing profitability.

Disadvantages of Company Restructure:

A firm reorganisation may have several drawbacks, including:

 Productivity loss: As employees transition to new jobs and responsibilities during a

firm restructure, which can be a time-consuming and disruptive process, productivity
may suffer.

 Morale of employees: During a restructure, employees may feel uncertain and

concerned about their job security, which can lower morale and engagement. This may
lead to higher absenteeism, higher employee turnover, and worse productivity.

 Financial costs: Restructuring a business can be expensive, particularly if it calls for

employee layoffs or severance payments. There can also be costs related to hiring new
personnel or retraining existing personnel to perform different duties.

Importance of Company Restructure:

Restructuring a business entails making significant changes to its operations, strategy, or

structure in order to increase productivity, profitability, and competitiveness. Here are some
explanations for why a business might decide to restructure:

 Adapt to changing market conditions: - Responding to changing market conditions

throughout a company restructuring is crucial to the success of the business. The
following actions can be taken by a business to adjust to these changes:

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 a. Analyze the market: The first stage is to thoroughly examine the market circumstances
to spot any changes that have taken place. This will assist the business in
comprehending current trends and recognizing opportunities and risks.

b. After conducting a market analysis, the company should assess its current
organizational structure to see if it is in line with the circumstances of the market. An
examination of the company's goods or services, marketing initiatives, sales strategy,
and overall business model should all be included in this study.

c. Realign the company's goals: In order to adapt to the shifting market conditions, the
company should realign its goals based on an analysis of the market and an assessment
of its organizational structure. This could entail altering the company's target market,
its product or service offerings, or its emphasis.

d. Any changes to an employee's job or responsibilities should be communicated to them,

and they should be provided with the assistance and training they need to adjust.

e. Execute a plan: After determining the necessary adjustments, the company should put
a strategy in place to carry them out. Timelines, objectives, and performance indicators
for gauging success should all be included in this strategy.

f. Finally, the business should regularly assess its performance and revise its plan as
appropriate. By doing this, the business will be able to keep on course and make sure
that it is consistently adjusting to the shifting market conditions.

In general, during a company restructuring, adapting to shifting market conditions calls for a
strategic approach that includes market analysis, evaluation of the company's current structure,
goal realignment, effective employee communication, implementation of a plan, and
continuous monitoring and adjustment.

 Improve efficiency: - Although reorganizing a business can be a difficult and drawn-

out process, there are several methods you can employ to increase productivity:
15
 a. Clearly state the reorganization's aims and objectives: Be sure you know exactly what
you want the restructuring to accomplish before you start the process. You'll be able to
maintain focus and prevent pointless delays as a result.

b. Create a thorough plan: Create a thorough plan outlining the restructuring process's
steps, including deadlines, roles, and resources needed. This will make it easier to make
sure that everyone knows what needs to be done when.

c. Consistently and clearly communicate: Inform all parties involved in the restructuring
including staff members, clients, suppliers, and investors with its goals and objectives
as well as the results of its first steps. This will lessen uncertainty and worry while
fostering trust.

d. Streamline decision-making by giving a small group of decision-makers the authority

to take swift action on crucial issues. Inefficient bureaucracy-related delays will be
lessened as a result.

e. Make changes gradually rather than all at once to give employees and other
stakeholders time to become used to the new organization. This will lessen opposition
and disruption.

f. Employees who may be impacted by the reorganization, such as those whose jobs are
in jeopardy or who might need to be retrained, should be supported. This will lessen the
negative effects on production and morale.

By implementing these tactics, you can optimize the effectiveness of the firm restructuring
process and reduce organizational disruption.

 Enhance organizational agility: - For every business, restructuring can be a difficult

period, but it can also be a chance to increase organisational adaptability. During a firm
restructure, you can boost agility by doing the following actions:

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 a. Clarity in communication Throughout a restructuring, it is crucial to have open and
clear communication. Make certain that every employee is informed about the changes,
what they mean for the business and for them personally, and what must be done next.
Encourage inquiries and offer frequent updates.

b. Employee empowerment is important because, during a reorganisation, workers may

feel exposed and uncertain about their futures. Give them a voice in the process and, if
possible, include them in decision-making to empower them. To assist them in
adjusting to new duties and responsibilities, offer training and support.

c. Form cross-functional teams: Cross-functional teams can unite staff from several
departments to work towards a shared objective. This strategy can reduce organisational
silos, foster greater collaboration, and aid workers in gaining a broader perspective.

d. Take advantage of technology: It can help your firm become more flexible by
streamlining procedures and increasing productivity. To automate activities and
facilitate remote work, think about implementing new tools and technologies.

e. Promote an innovative culture by encouraging staff to think creatively and generate

fresh concepts. To foster a culture of continual improvement, celebrate wins and take
lessons from mistakes.

History of Company Restructure:

Business restructuring has long been a standard process in business. In reaction to shifting
market conditions, financial challenges, or other internal or external reasons, it entails making
changes to a company's organizational structure, operations, or management.

The creation of major firms at the end of the 19th century because of industrialization provides
one of the earliest examples of company reorganization. These businesses had to manage their
operations successfully and efficiently as they expanded. To solve this, they started
17
implementing new management techniques, such scientific management, to organize their
business and boost production.

The idea of corporate restructuring rose to prominence in the middle of the 20th century as
businesses sought for means of adjusting to shifting market circumstances. This frequently
entailed mergers and acquisitions, as businesses combined or bought out rival businesses to
increase their operations or access new markets. Companies also started putting more emphasis
on shareholder value at this period, which led to a focus on cost-cutting and downsizing.

Corporate restructuring increased in frequency during the 1980s and 1990s because of greater
competition brought on by globalization and technology advancements that upset established
company models. During this time, some businesses underwent extensive restructuring,
including offshore, outsourcing, and downsizing. Also, some businesses switched their
attention from service-based to product-based business models.

Company restructuring is still a frequent practice today as businesses try to stay competitive in
a market that is always changing. Restructuring could entail mergers and acquisitions,
divestitures, and other types of corporate restructuring, as well as adjustments to organizational
structure, management procedures, or strategic direction.

Impacts to the company when the stock price changes:

A significant shift in a company's stock price can impact that business in several ways,
including:

 Financial repercussions: Changes in a company's stock price can have a variety

of financial repercussions. Here are a few illustrations:

a. Market capitalization: A company's market capitalisation is calculated by dividing the

share price by the total number of outstanding shares. Investors who own shares in the

18
 company will experience an increase in the value of their investment if the stock price
increases because doing so will raise the company's market capitalisation.

b. Earnings per share: To get earnings per share, divide the total number of outstanding
shares by a company's net income. Even if the company's net income stays the same, a
rising stock price might cause an increase in EPS. This is because there are always the
same number of shares outstanding, yet the value of the stock rises.

c. Dividends: Many businesses provide a portion of their income in the form of dividends
to their shareholders. Increased dividends may result from the company deciding to
deliver more of its income to shareholders in response to higher stock prices.

d. Debt financing: Businesses may use the value of their shares as security when seeking
debt financing. A rising stock price may make it simpler for a business to get good
terms on a loan.

e. Rising stock prices might indicate to investors that a firm is doing well and has
promising future growth. This might result in greater investments in the business and a
rise in investor confidence, which would raise the stock price even more.

Of course, the reverse is also possible. Financial consequences of a company's stock

price decline can be detrimental, including lower market capitalization, lower EPS,
fewer dividends, more challenging debt financing, and decreased investor trust.

 Investors’ Confidence: Several variables, such as market trends, company news and
performance, economic indicators, geopolitical events, and general investor attitude,
can affect investor confidence in stock price fluctuations. In general, if investors believe
that a firm has bright prospects, they may be more likely to purchase its shares, which
will raise the price. On the other hand, investors may be more inclined to sell a
company's stock, which would result in a drop in its price, if they have concerns about
the company's performance or the general market.

Technical analysis, which examines previous price and volume data to find patterns and
trends in stock price movements, can also have an impact on investor confidence.

19
 Technical analysts think that these trends and patterns might shed light on how a stock's
price will move moving forward.

Fundamental analysis is a crucial tool for investors to assess a company's financial

stability and prospects in addition to technical analysis. To ascertain whether a
company's stock is a wise investment, this can involve examining its financial
statements, industry trends, and competitive environment.

In the end, investor confidence in stock price fluctuations is a dynamic and complex
phenomenon that depends on a variety of variables. It might be challenging to
accurately forecast how investors will respond to any particular news or event as a
result.

 Employee morale: Employee satisfaction can affect a company's financial success,

which in turn can have an indirect impact on stock prices. Employee motivation and
job satisfaction are two factors that can boost productivity, efficiency, and innovation,
which can benefit the company's growth and bottom line.

Low staff morale, on the other hand, can result in decreased output, a rise in absenteeism
and attrition, as well as decreased overall job performance. These elements may have a
detrimental effect on a company's stock price as well as its financial performance.

Employee morale is frequently considered by analysts and investors as one of many

variables that might affect a company's financial performance. As a result, if a firm is
experiencing low staff morale, it may raise questions about its capacity to meet its
financial goals and result in a drop in stock price.

In conclusion, a company's stock price can be impacted by employee morale indirectly

by way of the company's financial performance. A productive workplace that
encourages employee morale can result in greater output, effectiveness, and creativity,
which can translate into higher revenues and growth, thus increasing the stock price. In
contrast, low employee morale can result in a decline in financial performance, which
can harm the stock price of the company.

20
 Reputation: Particularly in the short run, reputation can affect changes in stock prices.
Investor sentiment is significantly influenced by a company's reputation, which can also
affect how investors view the company's chances for the future. Investors may lose faith
in a company's potential to make future profits as a result of a scandal or unfavourable
news, which could lead to a decrease in the stock price. On the other hand, a good
reputation can boost investor confidence and possibly improve the stock price.

It's crucial to keep in mind that reputation is only one of many variables that can affect
stock price movements, and its effects might fluctuate based on the market and the
company's unique circumstances. Earnings reports, economic indicators, interest rates,
geopolitical events, and more can also have an effect on stock values. As a result, rather
than depending exclusively on reputation, it's crucial for investors to take a variety of
aspects into account when making investment decisions.

 Business Operations: Changes in stock prices can have a big impact on corporate
operations, both good and bad. The following are some ways that fluctuations in stock
prices might affect businesses:
a. Capital raising: When a company's stock price is high, it may raise money by
issuing new shares of stock. On the other hand, it could be more challenging to
raise money by selling new shares if the stock price is low.

b. Cost of capital: A company's cost of capital may increase if its stock price falls.
The cost of the corporation raising money through the issuance of debt or equity
may increase as a result.

c. Acquisitions and mergers: A company's stock price may have an impact on its
capacity to either acquire or be purchased. A corporation may find it easier to
finance an acquisition if its stock price is high, whereas a low stock price may
make it a less desirable target for purchase.

d. Employee morale: A major decline in stock price may have an effect on workers'
feelings of job satisfaction and morale, which in turn may have an influence on
output and other corporate operations.
21
e. Consumer confidence is also influenced by a company's stock price. Customers
may think that a company is in peril if its stock price is continually falling, which
could impact sales. Overall, changes in stock prices may have an impact on
corporate operations in the short and long terms. To achieve long-term success,
businesses need to be aware of these effects and modify their plans accordingly.

22
Dividends
Dividends are what a company pays to its shareholders out of its profits and reserves as a form of
regular income. Typically, it is paid on a per-share basis or as a percentage of the face value of the
share.

Bonus Issue
Bonus shares are additional shares issued to the shareholders by the company. For instance, a 1:1
bonus issue means for every share you hold; you get an additional share in the company.

Stock Split
As the name suggests, a stock split splits the stock into two or more portions. They work on the
same principle as bonus issues. The number of shares with the shareholders increases after a stock
split, but the investment value remains the same.

Rights Issue
A rights issue is when a company issues additional shares to its existing shareholders instead of the
public at large. Unlike bonus shares, you need to actually pay money to buy these shares, usually
at a discounted price. For example, a 1:5 rights issue means for every 5 shares you hold, you can
subscribe to 1 additional share.

Buyback of Shares
A buyback of shares is when a company buys its shares from its shareholders to consolidate its
stake in the enterprise. Usually, the shares are bought at a premium to reduce the number of
outstanding shares in the market. This increases earnings per share. A buyback is seen as a positive
sign reflecting the company’s confidence in itself.

23
 OBJECTIVES OF STUDY

 To study the consequences of Corporate Restructuring that has occurred in recent years
in Indian Company and their stock price effect.
 To analyze the impact of corporate restructure on the share value

 To analyze the extent to which a company’s stock price would reflect the
announcements of restructuring.

Research Methodology: -
Sample Size

The sample size is not too broad or large. It is specific and very limited. Only few
companies in Indian context have been used to analyses the data and statistical data has
been the base of the research like ways.
The research is solely based on secondary data or desk data. The method that involves
using already existing data. Existing data is summarized and collated to increase the
overall effectiveness of research. Secondary research is more feasible than
primary research.

DATA COLLECTION METHOD

Secondary research includes research material published in research reports and similar
documents. These documents can be made available by public libraries, websites, data
obtained from already filled in surveys etc. Research is based on statistical analysis.
Use of theoretical framework to support the hypothesis of the research is also involved
in the research. Various research paper has been cited for the purpose of detail analysis
and arrival to the conclusion. It involves numeric and non-numeric both secondary data.
The research involves both quantitative and qualitative research which is explained as
follows:

Quantitative research

24
 Quantitative or empirical-analytical research focuses on a certain research purpose,
with its complementary research questions and operational definitions of the variables
to be measured. This type of study uses deductive reasoning and established theories as
a foundation for the hypotheses that will be tested and explained.

Qualitative research

Quantitative or interpretative research focuses on analytically disclosing certain

practices or behaviors, and then showing how these behaviors or practices can be
grouped or clustered to lead to observable outcomes. This type of research is more
subjective in nature, and requires careful interpretation of the variables.
The list of sources of numeric or quantitative data that are suited to secondary analysis
would include: financial analysis and highlights of the company of the year in which
stock split took place, stock price performance/ trend analysis, etc.

1. DATA AVAILABLE ON THE INTERNET

Data available on the internet is used, which absolutely supports the research needs. The data
is collected only from trusted and authentic websites, to support the research base. This is the
most widely used method of data collection and websites have a lot of information to assist in
the research paper. Many government agencies and educational institutions, for instance, make
their data available online so researchers can easily download information for their use.

2. Academic peer-reviewed journals

These often include original research undertaken by authors or researchers themselves.

3. Internal secondary data research

particularly related to a company or organization, internal sources (such as sales data, financial
data, operations-related data, etc.) can be easily attained and re- purposed to explore research
questions about different aspects.

4. External secondary data research

25
 represents a study that uses existing data on a certain research subject from government
statistics, published market research reports from different
organizations, international agencies (such as IMF, World Bank, etc.), and so on. The
secondary data collected through journals, research papers, reviewed by various experienced
researchers was used to describe trends, show similarities, and predict future trends like ways.

The research is more accurate because use of secondary data makes it more relevant and proper.
The data is drawn from scholarly articles to give critical insights and to support the claimed
research. The secondary data in this case acts as an evidence to support the trends specified.

26
Scope and Significate: -

The scope of my Project topic on the effect of stock prices during corporate
restructuring is broad, as corporate restructuring can take many forms, including
mergers and acquisitions, divestitures, spinoffs, and other types of strategic
reorganizations. Therefore, there are many potential areas of focus for my project,
including:

Types of corporate restructuring: My research could examine the different types of

corporate restructuring and their impact on stock prices. For example, comparing the
effects of mergers and acquisitions versus divestitures or spinoffs.

Industry-specific effects: The impact of corporate restructuring on stock prices may

vary depending on the industry in which the company operates. Your research could
explore how corporate restructuring affects stock prices in specific industries, such as
technology, healthcare, or consumer goods.

Timing of the stock price effect: My research could examine the timing of the stock
price effect during corporate restructuring, including the short-term versus long-term
effects on stock prices.

Factors driving the stock price effect: My research could investigate the underlying
factors that drive the stock price effect during corporate restructuring, such as the
strategic rationale for the restructuring, the execution of the restructuring, and the
impact on the company's financial performance.

Case studies: My research could focus on specific case studies of companies that have
undergone significant corporate restructuring and their impact on stock prices. For
example, you could analyze the stock price effect of Amazon's acquisition of Whole
Foods or Disney's acquisition of 21st Century Fox.

27
LITERATURE REVIEW

Review of literature

The financial literature explains stock splits and positive abnormal returns
accompanying their announcement.

“Mitesh Patel (2016)”: This paper explains about the stock price and liquidity effects
of stock split. The stock split information is available in stock market and prices
immediately respond to the available information in stock exchange. The stock market
share price in any financial market estimates the value of the investment companies.
The present study examines the volume reaction with respect information of the stock
split announcement in share market. This paper studies the stock split announcement of
the 34 companies in the year of 2016. It’s calculating the ARRs, CAARs and abnormal
returns of the companies. These are estimating the performance levels of the companies.
The stock split event is a negative impact on the stock returns in stock market. The
stock split decision taken by the company board of director they are issuing the number
of share with low price to the shareholders of the company it is a great opportunity for
the existing shareholders purchasing the shares low price in a company. The increase
share price of the company then automatically the company growth will be increased.
This paper explains the event window is considered as -20 to +20 the calculate the alpha
and beta value of the 20-day stock split event date. The capital marker is indicator or
predictor of the economy. The stock price volume ratio is decrease after stock split
announcement.

“Asha Nadim (2015)”: This paper explained the stock split event in Indian context.
The stock split is a procedure that increase or decrease a company’s shares suppose
they split 1 share is divide into two shares the automatically will be increased the shares
of the companies. It is an interest of the existing shareholders of the companies. The
most companies are preferred to the announcement the stock split event it is accessible
to as many investors as possible it’s not increase the company’s overall value it will be
divide the forms shares to the affordable prices of the shares in a sock market. These
28
empirical studies have documented market price reactions the market reactions can be
bullish or bearish or neutral it is depending on the significance of the stock prices
information these are the 3 types of reactions it will be creates negative or positive
results in a stock market. The present study is based on the secondary data relating to
the share prices, stock split announcement dates this paper analyze the 14 stock split
companies’ data listed in BSE the paper will be explained the -30 to +30 stock split
event time period.

Parkas Pinto (2016)”: This paper studies impact on the two-events stock split and right
issue announcement on the stock returns of the companies in stock exchange market.
It’s explains performance of the listed companies in BSE that the current stock prices
reflect all the public information about the security in present market conditions in share
market. The main objective of this paper examines the abnormal returns surrounding
the stock split. This study based on secondary data collection method. The period of
study 2011-2014 companies’ data in BSE listed companies. The final sample collection
this study is consists of 90 companies for stock splits and 29 companies of the right
issues. The event window is -30 to +30 day before and after stock split the calculating
the AAE and CAAR for the two events for the stock split. The sample companies are
showing the positive and negative returns of the companies. Based on these returns the
investor taking the decision making for the investing is not. This study using the t- test
statistics. The two events are the content of the impounded in the prices of the stocks in
a stock market that they do not get an opportunity to earn returns from the stock for
new investors of the companies.

Dr.S.Sathya Narayana (2017)”: This paper mainly explains about the stock split
event. The research believes the stock split announces for the future earnings of the
company and its positive reaction for the raise funds at a higher price after the split. The
stock split announcing increasing the liquidity of their stocks of the companies. The
fundamentals of the previous share price movements indicate for the 5-days, 10-days,
30-days, 60-days, 360-days. The existing shareholders continue to hold the same
percentage of the holding before and after stock split. The company stock split
announces for the net positive impact of the company future performance after slit the

29
shares the new investors very much interested of the buying shares for the lower price,
they getting returns also a stock split prices depends upon the fundamentals of the
company. Suppose the company fundamentals are strong then the stock split event will
be more effective. This paper study focused on company listed on the NSE. The
collecting data of the 2002-2013 companies’ data only. This data compared with the
price and liquidity increase or decrease split event of the NSE companies. The taking
post and pre- split event time period on stock split event study.

Agara (2014) established that stock split encompasses the technique of psychological
pricing where new prices are more attractive to the incoming retail investors as well as
fulfilling to the existing shareholder. Knowledge of share prices and its movement
enables investors to choose the companies in which to invest it wisely. His study
investigated the effect of the stock split on stock prices for firms listed at the Nairobi
Securities Exchange. This study employed an event study methodology where the effect
of the stock split on share price was explored for a period of 181 days in pre and post
stock split date. The study covered the period between 2009 and 2013 with a sample
size of 7 companies. Secondary data collected from Nairobi Securities Exchange on the
daily stock prices of the 7 companies and the NSE 20- Share price index for 90-days
pre and 90-day post- split announcement date was used. His study established that the
events of stock split announcements affect stock prices almost immediately and that on
average; it takes 3 days for prices to react to stock splits. In conclusion, this study
established that stock split positively impacts on the share prices and hence
recommended that regulators must review the policy on this event to encourage firms
to adopt stock splitting, educate the public on the operations at the NSE to reduce
abnormal reaction of prices caused by speculative retail trading.

Ansary and Hussien (2017) studied the effect of Stock Split on the share prices,
liquidity, and volatility and also investigated into the market efficiency of the stock
market in response to the announcement of split and dividend declaration. Their
research helps the investors assess the market reaction in relation to these corporate
actions and make better investment decisions. They adopted the “Event Study”
approach to assessing the impact of these corporate actions on the stock performance

30
around the announcement day (for a period of 30 prior and 30 days post announcement).
The analysis concluded that the announcement of both of stock split and the stock
dividend has a positive impact on stock prices.

Hua and Ramesh (2013) scrutinized the stock price response to the stock split
declaration and a test of market efficiency in Colombo Stock exchange (CSE) by using
a sample of 64 events (52 companies) from 14 different sectors of the emerging market
during the period 2009 to 2012. They employed standard event study methodology to
find the results. The empirical results show that average abnormal return (1.46%) is
statistically significant at 5% level on the stock split announcement day. This study
finds that stock splits have a significant signal and information content in the Colombo
Stock Exchange (CSE). On average, market positively reacts significantly to the
announcement. Further, the large negative cumulative average abnormal return (-6%)
is observed during the period of (0, 10). These results support the semi-strong form
efficient market hypothesis for the sample companies within the study period since
stock prices adjust so fast to public information that investor cannot earn an abnormal
return by trading in the stocks following the stock split announcement day.

Thirunellai (2013) aimed to examine four important aspects related to the stock split
event: the effect on the liquidity of firms that go in for a split; the trading range
hypothesis related to the impact on stock price; the signaling hypothesis related to the
company’s growth prospects; and the multiple events hypothesis. The results of the
study indicated that in the post-announcement period, while the stock prices of the firms
that announce the split earned only insignificant excess returns over the broad market,
the firms announcing the split were successful in increasing the liquidity of their stocks.
The historical price movement indicates that for a given holding period (5-day, 10-day,
30-day, 60 days and 360 days), buyers of stock in the post-split period are inadequately
rewarded compared to the pre-split/pre-announcement buyers.

Joshipura (2009) studied price and liquidity effect associated with stock split
surrounding its announcement and effective day by using standard event study
methodology which, measures the significance of abnormal return and change in
31
liquidity associated with an event. His results are slightly different from the evidence
found from the US, Germany etc. where there is some significant positive abnormal
return is observed to be associated with a stock split. His results suggested that though
there is some positive abnormal return associated surrounding announcement and
effective day of the stock split It reverses in just a few days after the event day and
ultimately generates significant negative abnormal return in slightly longer post-
effective (ED to ED+51 days) window. However, there is a significant improvement
seen in liquidity surrounding announcement and effective day of the stock split. So, the
analysis suggested that stock split does not have any positive impact on the wealth of
the shareholder at all but it improves the liquidity of the stock very significantly.

Bodhanwala (2016) tried to explore the rationale behind the corporate actions of share
split and reverse split and the impact of such action on liquidity and price of shares. His
study focused on splits and reverse splits between 2006 and 2014. Split’s declaration
was highest in the year 2010 (104 companies) whereas reverse splits were evenly
distributed over years. The results suggested that there is an optimal price for the shares,
at which they appear to be the best value for money. On analyzing the data, they reached
a conclusion that splitting of shares substantially increases the wealth of shareholders,
but no such conclusion could be drawn for reverse splitting.

Kalay and Kronlund (2009) re-examined the original “information hypothesis” which
seeks to explain the abnormal returns around stock split announcements. While recent
research focuses on liquidity and catering theories, their evidence re-affirms a link
between the abnormal returns and earnings growth. Analysts revise earnings forecasts
by 2.2-2.5% around split announcements, and this revision is significantly larger than
that for matched firms. They further showed that the earnings information in a split
likely arises from the fact that splitting firms experience less mean reversion in their
earnings growth relative to matched firms. Consistent with an earnings information
hypothesis, the analyst revision and the abnormal returns are stronger for firms with
more opaque information environments. Furthermore, the cross-sectional variation in
analyst revisions is related to the variation in abnormal returns. They also found
32
evidence on splitting activity and the market reaction to splits that is inconsistent with
liquidity-based theories and mixed with respect to catering.

Lakonishok and Lev (1987) conclude that the motivation for stock splits appears to be
to return the price to a level that is comparable with other firms in the industry and with
market averages. One real consequence of a stock split is that the tick size increases as
a proportion of the stock’s price. Stock splits can make market making more profitable
both by increasing dealers’ revenues and by lowering the costs of market making. The
increased profitability of market making following a split provides incentives to brokers
to promote the stock (Schultz, 2000)

Bar-Yosef and Brown (1977) and Charest (1978) are the earlier studies that report
significant abnormal return associated with stock splits. Greenblatt, Matulis and Titman
(GMT) (1984) provide empirical evidence indicating that stock prices, on average, react
positively to stock dividend and stock split announcements. In addition, GMT report
significantly excess positive returns on and around the ex- split day of stock dividends
and splits.

Muscarella and Vetsuypens (1996) investigate the two traditional explanations of

stock splits viz. liquidity and information signaling by studying splits of American
Depository Receipts (ADRs) that are not associated with splits in their home- country
stock. They argue that ADR solo-splits are more likely to be motivated by liquidity
reasons than are simultaneous splits as ADR solo-splits have higher pre- split ADR
prices and higher split factors than simultaneous home and ADR splits. They provide
evidence of improved liquidity following the ADR solo-splits especially for small
trades as total volume and the number of trades both increases significantly.

Asquith et al. (1989), report that companies, which split their stocks, have large
earnings increase for several years before the split, as well as in the year of the split.
The stock price reaction to the split announcement is proportional to earnings increases
in prior years. McNichols and Dravid (1990) provide evidence that firms signal their

33
private information about future earnings by their choice of split factor. They find a
strong statistical association between announcement returns and split factor signals,
which suggests that investors’ inferences about firm value due correspond to firms’
split factor choices.

Brennan and Copeland (1988) argue that managers not in possession of favorable
information about their firms’ future are unwilling to split ‘falsely’ because they will
incur higher expected transaction costs if they do, reducing the value of shares that they
retain. The empirical analysis is consistent with the model and the model, in conjunction
with contemporaneous market return; explain about 27% of the split announcement date
returns.

A shareholder receives no tangible benefit from a stock split, while there are some costs,
such as cash in lieu (CIL). In addition, a stock split is associated with a direct cost for
preparing certificates by the third party that proposes a stock split on behalf of the firm.
With such mentioned costs, if a stock split involves merely cosmetic accounting
changes, why do managers propose and shareholders accept it? According to Amihud
(2012), to compensate the cost, investors expect an increase in stock price that could be
driven by a liquidity improvement. Nevertheless, Hu et al. (2017) report that mangers
implement stock splits when they have earnt excess earnings in a good market
condition.

Ohlson and Penman (1985) analyze the empirical behavior of stock-return volatilities
around ex-split dates. The empirical analysis demonstrates that return volatilities are,
on an average, significantly greater following the ex-split date. They have identified
this volatility change as a discrete ‘jump’ that takes place at the ex-split date and the
increased variability is persistent. Similar results are reported by Dubofsky (1991) and
Koski (1998). Brennan and Copeland (1988) find that systematic risk of firms also
increases following the split.

Although previous studies (Ariff et al. 2004; Li et al. 2013) report abnormal split
announcement returns, liquidity improvement has challenged the researchers. The study
by Copeland (1979) was the first, which focused on liquidity to justify splitting a stock,
34
while its finding indicated a decrease in liquidity after stock splits. Nevertheless,
researchers motivated to investigate the liquidity effect of stock splits. As such,
Lakonishok and Lev (1987) and Muscarella and Vetsuypens (1996) found a temporary
increase in stock trading volume for the American depository receipts (ADRs).

On the other hand, other researchers (Chern et al. 2008; Guo et al. 2008; Yu and Webb
2009) found that stock splits reduce bid-ask spreads, and increase the number of small
traders who are attracted to the lower price on Ex-date, indicating liquidity
improvement. Mohanty and Moon (2007) also found a significant improvement in the
average trading volume, comparing 12 months post splits announcement with that for
prior to announcements. Furthermore, Anshumana and Kalay (2002) introduced a
model that proves that stock splits improve stock liquidity. Moreover, Dennis and
Strickland (2003) contribute to the stock split’s literature by testing the moderating
effect of ownership structure on both liquidity and abnormal return for stock splits.
Their finding indicates that stock liquidity increases after the splits, if firms have a
lower level of institutional ownership.

As above 90% of the managers in Bursa Malaysia document on split proposals that
liquidity improvement is the main rationale for splitting their stock, the contradictory
results of above-mentioned studies cast doubt upon whether the stock splits increase
stock liquidity or not. Moreover, if there is an improvement, is it short or long-lasting?
To test the liquidity impact of stock splits in Bursa Malaysia, following Huang et al.
(2013) and Tabibian and Zhang (2018), we study liquidity changes on and around
announcement day and Ex-date, in addition to
announcement of book closing date. Tabibian and Zhang (2018) report that there is a
significant abnormal return on the announcement day and Ann-BC day, but it is
insignificant on the Ex-date. If the abnormal returns are driven with the liquidity
improvement, we expect the same result for stock liquidity on and around the event
days.

In Miller and Rock (1985), it’s implied that; market response to outside investments
was negative, and the higher the size of offer which was disclosed a smaller than
anticipated present cash flow which establishes the negative information in the market

35
about the current and expected future cash flows. Rights issue can be deduced to be as
favorable as news about new investment opportunities. Thereby, right issues are
observed to be an indication that the firm had a positive NPV projects which would
lead to re-evaluation of the company’s shares.

Tsangaris (1996) delivers indication to the assumption that right issues in Greece are
observed to be investment prospects. In Norway, market reacted to the industrial
information and then it lead to decrease in the size of rights offering as it was noted by
Bohren et al. (1997).

In Lederer and Zimmerman (1988) argues; that contribution value at right issues is
immaterial because altering contribution cost immediately would change the qualified
distribution of price of stock which are selling ex-rights and cum- right. Since
nonsuccess of rights would be costly, most of the sellers expecting the share price to
drop tends to select a low contribution cost relative to present market price. This results
to shareholders assuming that the value of the firm from the contribution price.

36
Data Analysis of TATA STEEL: -

Introduction: - One of the top steel producers in the world, TATA Steel has its headquarters
in Mumbai, India. Jamshedji Tata started it in 1907, and since then it has expanded to operate
in more than 26 nations. Galvanized sheets, tubes, wires, hot-rolled and cold-rolled coils, and
other steel products are all produced by TATA Steel.

The business places a high priority on sustainability and has taken a number of steps to lessen
its impact on the environment, such as investing in renewable energy sources, cutting
greenhouse gas emissions, and promoting recycling and material reuse.

The corporate social responsibility initiatives of TATA Steel, which encompass initiatives for
community improvement, healthcare, and education, have also received praise. Also, the
organisation has won a great deal of recognition for its leadership, innovation, and competence
in a range of business-related areas.

Operations: - An international manufacturer of steel, TATA Steel has operations in several

nations. The business is involved in a number of industries, including steel, ferroalloys,
minerals, and power. Among TATA Steel's important operations are the following:
37
  Manufacture of Steel: - TATA Steel produces a variety of steel goods, such as coated,
hot-rolled, and cold-rolled steel. Together with other locations, the business runs
integrated steel factories at Jamshedpur, Kalinganagar, and IJmuiden, all in India.

 Mining and Minerals: - Iron ore, coal, and chromite are among the minerals that
TATA Steel is involved in mining for. In India, the firm runs iron ore mines in Odisha
and Jharkhand.

 Ferro-alloys: - Ferro-alloys are materials used in the making of steel, and TATA Steel
makes ferro-chrome, ferro-manganese, among other ferro-alloys. In South Africa and
India, the firm runs ferro-alloy manufacturing facilities.

 Engineering: - TATA Steel has a division that develops specialised solutions for a
range of industries, such as infrastructure, electricity, and the automotive sector.

 Research and Development: - TATA Steel places a lot of emphasis on research and
development, and it has multiple R&D facilities in Europe and India. The business is
aiming to create new steel products, enhance manufacturing techniques, and lessen its
carbon footprint.

Products: - India-based Tata Steel is a well-known steel producer that creates a variety of steel
goods. Their principal goods include:
 Flat products: - These include hot-rolled, cold-rolled, and coated steel items utilised
in a range of industries like the construction industry, the automobile industry, and the
packaging industry.

 Long products: - Tata Steel manufactures long items for the construction sector,
including bars, rods, and wires.

 Tubular products: -Tubes and pipes are manufactured by Tata Steel and are utilised
in a variety of industries, including infrastructure, construction, and the oil and gas
industry.
38
  Agricultural tools: - Tata Steel manufactures a variety of tools used in farming,
including ploughs and cultivators.

 Bearings: - High-quality steel is also produced by Tata Steel for the manufacture of
bearings used in the aerospace, automobile, and other industries.

 Structural steel: - Tata Steel also manufactures a variety of structural steel products,
such as beams, columns, and girders, which are used to build infrastructure and
buildings.

 Rail products: - Tata Steel exports rails to various nations and is a significant supplier
of rails to the Indian Railways.

 Steel wires: Tata Steel manufactures a variety of steel wires, such as spring wire, rope
wire, and welding wire, utilised in a variety of industries, including the construction
and automotive industries.

Sustainability: - One of the top steel producers in the world, Tata Steel has shown a dedication
to sustainability in a number of ways. Following are some of Tata Steel's sustainability
programs and initiatives:

 Reduction of carbon footprint: - Tata Steel has set a goal to cut its carbon footprint
in half by 2030 and reach net-zero emissions by 2050. It has put into practice a number
of strategies to cut emissions, including the use of clean energy sources, increased
energy efficiency, and the use of low-carbon technologies.

 Circular economy: - Tata Steel has embraced a circular economy strategy to reduce
waste and increase material reuse and recycling. It has put into practise a number of
measures, including encouraging the use of scrap steel in its manufacturing process and
employing waste heat recovery systems and waste water reuse.

39
  Supply chain that is sustainable: - Tata Steel has created a supply chain that is
sustainable by introducing ethical sourcing procedures and encouraging the use of
sustainable commodities. In order to guarantee that its suppliers uphold ethical and
environmental standards, it has also created a supplier code of conduct.

 Community development: - Tata Steel has a strong commitment to community

development and has carried out a number of initiatives to enhance the standard of
living in the areas surrounding its operations. In order to assist the communities, it has
undertaken a number of programs, including offering healthcare, education, and safe
drinking water.

 Biodiversity conservation: - Tata Steel has put in place a number of biodiversity

conservation projects to safeguard and advance the biodiversity surrounding its
activities. To encourage the conservation of biodiversity, it has developed green belts,
wetlands, and bio-diversity parks.

Awards and Recognition: - One of the biggest steel producers in the world, TATA Steel, has
won various accolades over the years. Some of the notable ones are listed below:

 2018's 14th World Slag Conference and Exhibition presented the "Global Slag
Business of the Year" award.

 Indian Institute of Metals' 2018 "Best Performance Award" for its Jamshedpur plant.

 2018 saw the Ethisphere Institute award its sixth "Most Ethical Company" title.

 2018 recipient of the "Golden Peacock Occupational Health & Safety Award"

 The British Safety Council awarded Jamshedpur Works with the "Sword of Honor".

40
  In 2016, the "Prime Minister's Prize for Excellence in Performance" was awarded.

 2015 winner of the "World Steel Excellence Award" for "Environmental

Excellence."

 2015 winner of the "Porter Prize for Creating Shared Value"

 2014 India Risk Management Awards' "Best Risk Management Framework &
Systems - Manufacturing Sector" honor.

History: - Sir Jamsetji Nusserwanji Tata, the foresightful creator of Tata Steel, was deeply
moved by the wealth that the application of science to industry had brought about in America,
Europe, and Japan more than a century ago. Hence, he taught the young Tata Steel how to
evaluate and characterize raw materials and products using science.

His ambitious goal was realized in 1937 with the construction of the Research & Control
building, which is still in use today and still houses the functions now known as R&D,
Scientific Services, and Refractory Technology Group (RDSS Division).

The launch of Industrial R&D across all of India was also made possible by this new Division
at Tata Steel. Setting up such a "western" idea in Sakchi, a then-remote municipality, is a telltale
indicator of the vision and wisdom of the House of Tata.

The Division has changed and expanded throughout time to fit the needs of the business.
Initially, the emphasis was on process monitoring and control, but as the Second World War
put more pressure on the corporation, product development became increasingly
important. Prior to the 1960s and 1970s, process innovation was restricted to improving local
raw materials; however, as the public sector steel industry grew quickly, it began to expand
into new process technologies.

41
Throughout the 1980s and 1990s, India's economy was liberalized, exposing it to international
competition. R&D shifted its focus to product development to meet needs from industries like
automobiles, construction, and engineered products as a result of the increased demand for new
sorts of steel.

The market prices of raw materials like ore and coal have increased since 2000 due to the global
expansion of the steel industry. As a result, R&D has been pushed to focus on process
innovations to utilize low-cost raw materials and boost energy efficiency. R&D is looking at
ways to lessen our environmental footprint as awareness of environmental challenges and
global warming grows.

Both nationally and internationally, praise has been given for the accomplishments and
importance of this R&D. Numerous honors were given in recognition of it, including the
Department of Science and Technology's (1990, 2001, 2007) awards for "R&D efforts in
ujIndustry," NACE International's (2004) award for "Best R&D Laboratory in India," and the
Ministry of Commerce & Industry's (1990, 2001, 2007) award for "Highest Number Granted
Patents Among Indian Owned Private Companies" (2011).

42
Events: -

EVENT TYPE EVENT DATE

Issues of bonus shares Tata Steel had announced a 31st March 2004
bonus in 2004 in the ratio of
1:2.
Acquisition Tata Steel acquired NatSteel, 16th August 2004
a Singapore-based steel
company, for $486 million.
Company’s name change The company changed its 12th August 2005
name from TISCO to Tata
Steel Ltd.
Rights Issue Tata Steel issued rights 20th December 2017
shares in the ratio of 2:25 at a
premium of Rs 605.00 per
share.
Acquisition For $12.1 billion, Tata Steel 20th October 2006
purchased the steel business
Corus Group, situated in the
UK.
Acquisition Tata Steel acquired Bhushan 11th November 2021
Steel, an Indian steel
company, for $5.2 billion.

43
Tata Steel had announced a bonus Issue: - Tata Steel, one of the leading steel companies in
India, did announce a bonus issue in 2004. The company declared a bonus issue of one equity
share for every two existing equity shares held by the shareholders. This was announced as a
part of the company's effort to reward its shareholders and also to increase the liquidity of its
shares in the market.

The bonus issue was announced on 17th February 2004, and the record date for determining
the entitlement of the shareholders to receive the bonus shares was fixed as 27th February 2004.
The bonus shares were credited to the shareholders' accounts in the demat form by 4th March
2004.

Highlights: -

 Tata Steel declared a bonus issue of one equity share for every two existing equity
shares held by the shareholders.
 The announcement was made on 17th February 2004.

 The record date for determining the entitlement of the shareholders to receive the bonus
shares was fixed as 27th February 2004.
 The bonus shares were credited to the shareholders' accounts in the demat form by 4th
March 2004.
 The bonus issue was a part of Tata Steel's effort to reward its shareholders and increase
the liquidity of its shares in the market.

Reason: - The reason behind Tata Steel's bonus announcement in 2004 was to reward its
shareholders and also to increase the liquidity of its shares in the market.

A bonus issue is a distribution of additional shares to the existing shareholders of a company,

in proportion to their existing shareholding. This is usually done to reward the shareholders for
their loyalty and to increase the liquidity of the company's shares in the market.

44
By announcing the bonus issue, Tata Steel was able to provide additional value to its
shareholders without affecting the financial position of the company. This move also helped to
boost the company's market position by increasing the number of shares in circulation and
making them more affordable to a wider group of investors. Overall, the bonus announcement
was seen as a positive move that demonstrated Tata Steel's commitment to its shareholders and
its focus on long-term growth.

Cash Flow Statement: -

45
Tata Steel acquired NatSteel: -

Tata Steel's acquisition of NatSteel was a significant move in the steel industry. In 2004, Tata
Steel acquired Singapore-based steel producer NatSteel for $486 million, which was the largest
overseas acquisition by an Indian company at the time. The acquisition gave Tata Steel access
to NatSteel's facilities in Singapore, China, Thailand, and Vietnam, which helped Tata Steel
expand its global reach and diversify its product portfolio. NatSteel also had a strong
distribution network in Southeast Asia, which gave Tata Steel access to new markets. The
acquisition was part of Tata Steel's strategy to become a global player in the steel industry. The
company has since made several other acquisitions, including Corus Group in 2007, which
further expanded its global presence. Today, Tata Steel is one of the world's largest steel
producers, with operations in over 26 countries and an annual crude steel capacity of over 33
million tons.

Highlights of the Deal: -

 Price: Tata Steel acquired NatSteel for $486 million, which was the largest overseas
acquisition by an Indian company at the time.
 Access to new markets: The acquisition gave Tata Steel access to NatSteel's facilities
in Singapore, China, Thailand, and Vietnam, which helped Tata Steel expand its global
reach and diversify its product portfolio. NatSteel also had a strong distribution network
in Southeast Asia, which gave Tata Steel access to new markets.
 Synergy benefits: The acquisition created significant synergy benefits for Tata Steel, as
the two companies had complementary strengths and capabilities. Tata Steel's expertise
in manufacturing and technology was combined with NatSteel's marketing and
distribution network to create a strong, integrated steel business.
 Improved financial performance: The acquisition helped Tata Steel improve its
financial performance, as NatSteel was a profitable company with a strong balance
sheet. The acquisition also helped Tata Steel increase its revenue and profitability by
expanding its product range and customer base.
46
  Strategic fit: The acquisition was part of Tata Steel's strategy to become a global player
in the steel industry. The company has since made several other acquisitions, including
Corus Group in 2007, which further expanded its global presence.

Overall, the acquisition of NatSteel was a significant move for Tata Steel, as it helped the
company strengthen its position in the global steel industry and expand its reach in key markets.

Finances of NATSteel: - Prior to the acquisition by Tata Steel, NatSteel was a profitable
company with a strong financial performance. Here are some key financial metrics for NatSteel
in the years leading up to the acquisition:

Revenue: In 2003, NatSteel's revenue was approximately $2.2 billion USD.

 Net Income: In 2003, NatSteel's net income was approximately $122 million USD.

 EBITDA: In 2003, NatSteel's EBITDA (earnings before interest, taxes, depreciation,

and amortization) was approximately $290 million USD.

 Total Assets: As of December 31, 2003, NatSteel's total assets were approximately $1.9
billion USD.

 Debt-to-Equity Ratio: NatSteel had a low debt-to-equity ratio of 0.34, indicating a

conservative financial position.

Overall, NatSteel was a financially sound company with a strong balance sheet and
profitability. The acquisition by Tata Steel was seen as a strategic move to expand the
company's global presence and diversify its product portfolio.
47
Reason for Acquisition: - The acquisition of NatSteel by Tata Steel was driven by several
strategic reasons, including:

 Diversification of product portfolio: The acquisition allowed Tata Steel to diversify its
product portfolio and enter new markets. NatSteel was a major producer of long steel
products, such as bars and wire rods, which complemented Tata Steel's existing product
range of flat steel products.

 Access to new markets: NatSteel had a strong presence in Southeast Asia, with facilities
in Singapore, China, Thailand, and Vietnam, which gave Tata Steel access to new
markets and customers.

 Expansion of global reach: The acquisition helped Tata Steel expand its global reach
and establish a stronger presence in the steel industry. NatSteel's distribution network
in Southeast Asia was integrated with Tata Steel's manufacturing and technology
expertise to create a strong, integrated steel business.

 Creation of synergy benefits: Tata Steel and NatSteel had complementary strengths and
capabilities, which created significant synergy benefits for the combined entity. The
acquisition allowed Tata Steel to leverage NatSteel's marketing and distribution
network to increase its revenue and profitability.

Overall, the acquisition of NatSteel was part of Tata Steel's strategy to become a global player
in the steel industry and expand its presence in key markets.

48
The company changed its name: -

Tata Steel did undergo a name change in 2005. Prior to 2005, the company was known as Tata
Iron and Steel Company Limited (TISCO). However, on August 17, 2005, the company
officially changed its name to Tata Steel Limited to reflect its growing presence as a global
steel player. The name change was also seen as a strategic move to align the company's brand
with the Tata Group's global reputation for excellence and leadership in various industries.

Highlights: -

 The company's name was changed from Tata Iron and Steel Company Limited (TISCO)
to Tata Steel Limited.

 The change was made to reflect the company's growing presence as a global steel
player.

 The new name was seen as a strategic move to align the company's brand with the Tata
Group's global reputation for excellence and leadership in various industries.

 The change in name was accompanied by a new logo and brand identity for the
company.

 The name change was approved by the company's shareholders at its Annual General
Meeting held in July 2005.
49
  The company continued to operate under the new name and brand identity, and has
since expanded its global footprint with a presence in over 50 countries.

Reason of the Change: - The reason for Tata Steel's name change in 2005 was to reflect the
company's growing presence as a global steel player. Prior to 2005, the company was known
as Tata Iron and Steel Company Limited (TISCO), which was a name that was associated more
with the Indian market. However, the company had been expanding its global footprint and had
acquired several steel companies outside of India, which made it necessary to change the name
to something that was more globally recognizable and reflected the company's broader
aspirations. The new name, Tata Steel Limited, was seen as a strategic move to align the
company's brand with the Tata Group's global reputation for excellence and leadership in
various industries.

50
Tata Steel issued rights shares: -

Rights shares are a type of share offering that allow existing shareholders to purchase additional
shares in the company at a discounted price, usually in proportion to their existing shareholding.
This is done to raise capital for the company and provide an opportunity for existing
shareholders to increase their stake in the company.

In May 2017, Tata Steel announced that it would issue rights shares worth Rs. 12,800 crore to
its existing shareholders. The company offered one rights share for every existing share held,
at a price of Rs. 615 per share, which was a discount of 31% to the market price at that time.

The rights issue was oversubscribed by 1.14 times, indicating a strong response from existing
shareholders. The funds raised through the rights issue were used by the company to reduce its
gross debt by around Rs. 9,000 crore and to finance the acquisition of Bhushan Steel for Rs.
35,200 crore.
51
The acquisition of Bhushan Steel helped Tata Steel to increase its production capacity and
expand its presence in the Indian steel market. The company's consolidated steel production
capacity increased from 27 million tons per annum to around 33 million tons per annum after
the acquisition.

Overall, the rights issue helped Tata Steel to strengthen its balance sheet, reduce its debt, and
expand its presence in the Indian steel market.

Highlights: -

 The company announced its plans to issue rights shares worth Rs. 12,800 crore in May
2017.

 The rights issue was offered at a discount of 31% to the market price at that time, with
existing shareholders offered one rights share for every existing share held.

 The funds raised through the rights issue were used to reduce the company's debt by
around Rs. 9,000 crore and to finance the acquisition of Bhushan Steel for Rs. 35,200
crore.

 The rights issue was oversubscribed by 1.14 times, indicating a strong response from
existing shareholders.

 The acquisition of Bhushan Steel helped Tata Steel to increase its production capacity
and expand its presence in the Indian steel market.

 The rights issue was one of the largest in the Indian capital market at that time and
helped Tata Steel to strengthen its balance sheet, reduce its debt, and expand its
presence in the Indian steel market.

52
Reasons: -

 Strengthen balance sheet: One of the primary reasons for issuing rights shares was to
strengthen the company's balance sheet by raising capital. Tata Steel had a significant
amount of debt on its books at the time, and the funds raised through the rights issue
helped the company reduce its debt and improve its financial position.

 Fund acquisition: Another reason for issuing rights shares was to fund the acquisition
of Bhushan Steel. The acquisition was a strategic move for Tata Steel, as it helped the
company increase its production capacity and expand its presence in the Indian steel
market. However, it also required a significant amount of capital, which the company
raised through the rights issue.

 Provide opportunity to existing shareholders: Issuing rights shares also provided an

opportunity for existing shareholders to increase their stake in the company. This was
done by offering one rights share for every existing share held, at a discounted price,
which was a way for the company to reward its loyal shareholders and retain their
support.

 Take advantage of favorable market conditions: The rights issue was also launched at
a time when the stock market was performing well, and there was a strong demand for
quality stocks. This made it an opportune time for Tata Steel to raise capital through a
rights issue and take advantage of the favorable market conditions.

 Overall, issuing rights shares helped Tata Steel achieve its strategic objectives of
strengthening its balance sheet, funding the acquisition of Bhushan Steel, and providing
an opportunity for existing shareholders to increase their stake in the company.

53
Tata Steel acquired Bhushan Steel: -

Tata Steel, one of India's largest steel companies, acquired Bhushan Steel Limited in May 2018
for Rs. 35,200 crore (approximately US$5.2 billion). The acquisition was part of Tata Steel's
strategy to expand its capacity and strengthen its position as a leading steel producer in India.
Bhushan Steel was one of the distressed companies that were being resolved under the
Insolvency and Bankruptcy Code (IBC) of India, and Tata Steel won the bid for it after a
rigorous process. After the acquisition, Bhushan Steel was renamed as Tata Steel BSL Limited.

Bhushan Steel Limited was one of the 12 large non-performing assets (NPAs) that were
referred to the National Company Law Tribunal (NCLT) for resolution under the Insolvency
and Bankruptcy Code (IBC) in 2017. The company had a debt of around Rs. 56,000 crore
(approximately US$8.3 billion) and was facing insolvency proceedings.
54
Tata Steel was one of the companies that submitted a resolution plan for Bhushan Steel, and it
was eventually declared as the highest bidder with an offer of Rs. 35,200 crore. The acquisition
was completed in May 2018, and Tata Steel took over the management control of Bhushan
Steel.

The acquisition of Bhushan Steel has helped Tata Steel to strengthen its position in the Indian
steel market. Bhushan Steel had a production capacity of 5.6 million tonnes per annum (MTPA)
of crude steel, which has now been added to Tata Steel's existing capacity of 13 MTPA in India.
The acquisition has also helped Tata Steel to expand its product portfolio and improve its
geographic reach.

After the acquisition, Tata Steel implemented a restructuring plan for Bhushan Steel, which
included rationalizing costs, improving operational efficiencies, and integrating the company's
operations with Tata Steel's existing business. The company was also renamed as Tata Steel
BSL Limited to reflect the change in ownership.

Highlights: -

 Tata Steel acquired Bhushan Steel Limited in May 2018 for Rs. 35,200 crore
(approximately US$5.2 billion).
 Bhushan Steel was one of the 12 large non-performing assets (NPAs) that were referred
to the National Company Law Tribunal (NCLT) for resolution under the Insolvency
and Bankruptcy Code (IBC) in 2017.
 Bhushan Steel had a debt of around Rs. 56,000 crore (approximately US$8.3 billion)
and was facing insolvency proceedings.
 Tata Steel won the bid for Bhushan Steel after a rigorous process and took over the
management control of the company.
 The acquisition has helped Tata Steel to strengthen its position in the Indian steel market
and expand its product portfolio.
55
  Bhushan Steel had a production capacity of 5.6 million tonnes per annum (MTPA) of
crude steel, which has now been added to Tata Steel's existing capacity of 13 MTPA in
India.
 Tata Steel implemented a restructuring plan for Bhushan Steel after the acquisition,
which included rationalizing costs, improving operational efficiencies, and integrating
the company's operations with Tata Steel's existing business.
 The acquisition has helped Tata Steel to improve its geographic reach and overall
competitiveness in the Indian steel market.

Reason: - There were several reasons why Tata Steel decided to acquire Bhushan Steel. One of
the primary reasons was to expand its capacity and strengthen its position as a leading steel
producer in India. Bhushan Steel had a production capacity of 5.6 million tonnes per annum
(MTPA) of crude steel, which was a significant addition to Tata Steel's existing capacity of 13
MTPA in India. This helped Tata Steel to increase its market share and compete more
effectively with other players in the Indian steel industry.

Another reason was the opportunity to acquire a distressed asset at a reasonable price. Bhushan
Steel was one of the 12 large non-performing assets (NPAs) that were referred to the National
Company Law Tribunal (NCLT) for resolution under the Insolvency and Bankruptcy Code
(IBC) in 2017. This meant that the company was facing insolvency proceedings and was
available for acquisition at a lower price than what it would have cost in normal circumstances.
Tata Steel's bid for Bhushan Steel was the highest among the various bidders, and the
acquisition was completed at a cost of Rs. 35,200 crore (approximately US$5.2 billion).

Finally, the acquisition of Bhushan Steel also helped Tata Steel to improve its product portfolio
and geographic reach. Bhushan Steel had a strong presence in the auto-grade steel segment,
which complemented Tata Steel's existing portfolio. The acquisition also helped Tata Steel to
expand its operations in western India, where Bhushan Steel had a significant presence.

56
 HDFC LTD AND HDFC BANK MERGER:

The hypothetical merger of HDFC Ltd and HDFC Bank would be a significant event in the Indian financial
sector, potentially creating a financial powerhouse.

a) Synergy: The merger could leverage the strengths of both entities. HDFC Ltd is a leading housing
finance company with a strong retail focus, while HDFC Bank is one of India's largest private
sector banks with a wide range of banking products and services. The combined entity could offer a
comprehensive suite of financial products catering to various customer segments.

b) Market Dominance: The merged entity would likely dominate the housing finance market in
India, given HDFC Ltd's expertise in this area and HDFC Bank's extensive branch network and
customer base. This could potentially increase market share and competitiveness against other
players in the sector.

c) Diversification: The merger would lead to greater diversification of revenue streams and reduced
dependency on any single line of business. This could enhance stability and resilience against
market fluctuations and economic downturns.

d) Operational Efficiency: Consolidating operations and streamlining processes could result in cost
savings and improved operational efficiency. This could be achieved through rationalization of
branches, shared technology platforms, and optimized staffing.

e) Regulatory Approval: Any merger of this scale would require regulatory approval from the
57
 Reserve Bank of India (RBI) and other relevant authorities. Compliance with regulatory
requirements would be crucial, and the merged entity would need to address any antitrust concerns.

f) Challenges: Integrating two large and complex organizations can pose challenges, including
cultural differences, technology integration, and management restructuring. Ensuring smooth
integration and minimizing disruptions to business operations would be key priorities for the
management team.

g) Financial Impact: The financial impact of the merger would depend on various factors such as the
exchange ratio, valuation of assets and liabilities, and potential synergies realized. Shareholders of
both HDFC Ltd and HDFC Bank would need to evaluate the terms of the merger and its potential
impact on their investment.

h) Customer Experience: Maintaining and enhancing the customer experience would be paramount.
The merged entity would need to ensure continuity of service, seamless integration of systems, and
effective communication with customers throughout the transition period.

The merger of HDFC Ltd and HDFC Bank on June 30, 2023, created the world's fourth-largest
bank. The merger has had several impacts, including:
Shareholders
HDFC shareholders will receive 42 shares for every 25 shares of HDFC, while existing HDFC
shareholders will own 41% of HDFC Bank. The merged HDFC Bank will have 7.53 billion
outstanding equity shares, with 1.85 billion shares of HDFC converted to 3.1 billion shares for
HDFC Bank.

Loan to deposit ratio

HDFC Bank's loan to deposit ratio (LDR) increased to 110% from 85% before the merger.
Yield on assets
Yield on assets increased from 7.9% in March 2023 to 8.3% in December 2023.
Net interest margins
Net interest margins from interest-earning assets decreased from 4.1% to 3.4% as low-yield
mortgage loans were transferred.
Balance sheet size
58
As of March 31, 2023, the merged bank had a balance sheet size of Rs 32 lakh crore, second only
to the State Bank of India's Rs 55 lakh crore.

a) Current size – HDFC Bank boasts of more than 6,300 branches across the country catering
to nearly 3,000 cities and towns. More than half of the bank’s branches are strategically
located in semi-urban and rural areas. This will benefit the merged entity through product
offerings surrounding affordable housing.

b) Deal size – The merger has resulted in a combined balance sheet of nearly Rs. 17.87 lakh
crores. Post the merger, the combined entity’s net worth is estimated to be Rs. 3.3 lakh
crores, thus making HDFC Bank nearly double the size of ICICI Bank. The merger will
also enable the merged entity to carry out underwriting at a substantially larger scale.

c) Opportunities – 70% of HDFC customers were not associated with HDFC Bank. With this
merger, the bank will gain from significant cross-selling opportunities.

d) Competition – This merger will place the combined entity in a very strong place to be
capable of countering competition and will further make the mortgage business more
59
 competitive.

e) Mortgage scale – HDFC Bank’s mortgages saw a CAGR of 24.5% standing at Rs. 702.2
billion in 2021. The merger will now result in the firm’s loan book having large
contributions from mortgages as these will account for nearly 33% considering the segment
is rapidly growing.

f) Management – The merged entity will be led by HDFC Bank’s CEO Sashidhar Jagdishan.

How did HDFC and HDFC Bank customers benefit from the merger?

The HDFC and HDFC Bank merger is being described as a coming together of equals. The
customers of both organizations will therefore be the biggest beneficiaries. The merged entity will
benefit from the synergies of these two organizations. For instance, the mortgage business will
have access to low-cost bank funds. This will ensure that HDFC continues to remain competent in
the mortgage lending business.

With this merger, HDFC’s shareholders will get HDFC Bank’s 42 shares for every 25 shares of
HDFC. While existing shareholders of HDFC will have 41% ownership of HDFC Bank, HDFC
Bank will become an entirely publicly owned bank.

60
HDFC is a housing lender. It lends to you and me, traditionally called “retail”. This is about 77%
of their loans. It also lends money to builders who get to build houses and other purposes such as
Loans against property etc. Mortgages, which are about giving money to people who primarily use
it to buy houses, have three characteristics: They are long in duration, up to 20 years, and they
have a low-interest rate (typically 6.8% to 8%) and a generally low risk of default.

HDFC Bank, on the other hand, has a large number of personal loans (credit card outstandings,
personal loans, loans against deposits etc.). It also has a large number of auto loans. Here, you can
imagine that most loans are short in duration (even auto loans close in 7 years max), have a higher
interest rate, and have a relatively larger risk of default. HDFC Bank doesn’t normally lend
directly for home loans. It sells loans for HDFC and its parent and then repurchases some of the
loans, which they use for priority sector lending.

When they merge, the whole thing becomes a larger entity with all this exposure added up. HDFC
Bank has over 16.6 lakh cr. of lending, and HDFC has about 6.2 lakh cr.

61
What the HDFC Bank merger really means for investors

HDFC Bank is largely retail loans; their mortgages tend to be what they buy from HDFC itself.
HDFC is mostly individual mortgages, but they have about 23%, over ₹ 140,000 cr. – of lending to
corporates, builders, and commercial buildings.

HDFC has about 4,000 employees and uses distribution through HDFC Sales, its subsidiary, which
has 11,000 employees. HDFC Bank, on the other hand, has 170,000 employees, and it’s the larger
entity.

The cost of funding will reduce somewhat. HDFC itself has a higher cost of borrowing, at 6.7%.
HDFC Bank is at 4.2% because of all the money you good people leave in your bank accounts for
(mostly) free and all those corporate accounts. Imagine that a merged entity will get loans at a
lower rate, getting a higher “NIM” (Net interest margin). Note, however, there are other things to
consider – that HDFC Bank has to keep part of the money raised through deposits in SLR and
CRR which are very low yielding products. We’ll talk about this later, but the merged entity will
have a lower cost of borrowing, closer to what HDFC Bank gets now.

All the subsidiaries of HDFC (such as the Mutual Fund AMC, the life insurance company, the
general insurance company, and many others) will now be subsidiaries of HDFC Bank. This will
probably require a go-ahead from various regulators, but it brings HDFC Bank in line with other
large banks like ICICI, Axis, and SBI, which own such subsidiaries. Basically, if you go to a
branch, the bankers sell you these products anyhow, but now the bank will make greater revenues
as they will own a part of the subsidiaries’ profits. This may not be good for customers, but it’s
positive for shareholders.

. Banks are limited in lending purely by capital. If they have ₹ 100 and they have to maintain a
15% capital adequacy ratio, they can lend only ₹ 650 or so. (15% of 650 is ₹ 100).

. The ₹ 650 is “Risk-weighted assets”. If you lend ₹ 1000 to the government, it needs no capital
(risk weight of zero), so any amount is fine. If you lend for a personal loan, the risk weight might
be 100%. (so you can lend ₹ 650 to personal loans, max).
. But if you lend to low-cost housing (less than ₹ 30 lakh loan amount), you have a risk weight of

62
35% to 50%. That means you could lend a higher amount (₹ 1300) to low-cost housing.

. In fact, no matter how much the housing loan is if about 1/4th of the amount is paid by the
borrower (loan to value of 75%), then the max-risk-weight is 50%.

. This is a huge incentive for banks to lend to housing. If they earn a 2% net interest margin in
housing, it’s equivalent to a 4% NIM in other loans (such as credit cards etc.)

. This allows banks to lend at such a low rate to housing. (Versus credit cards where the risk
weight is 125% and other retail loans where the risk weight is 75%) .

63
Valuation wise: what happens?

HDFC Bank currently gets a price that is 3.8x book. HDFC itself gets a price that is less than 2.6x
book. HDFC bank gets the higher price because of relatively higher growth in its business, the
higher effective NIMs, etc.

Valuing its Subsidiaries

You cannot simply value the subsidiaries at their face value. Take, for example, HDFC, which
owns 52% of the listed HDFC AMC. As a mutual fund sponsor, HDFC must retain at least 40%
ownership, but we can expect a minimum of 50% to remain owned. Therefore, the valuation can
only be applied to the remaining 2%. This will not significantly alter a per-share valuation.

Along similar lines, HDFC needs to maintain its presence in the insurance business for a long
duration. This sector will likely continue to require capital, so valuing the shareholding at market
value isn’t feasible. However, since these subsidiaries are profitable, they will contribute to
increasing the bank’s book value.

64
This merger is not going to change things overnight. It will take a few quarters to see some change:

Most synergies are already in place; no major changes are expected

No major impact on book value because of the addition of HDFC’s subsidiaries (AMC, Insurance,
Broker, etc)
HDFC Bank can now directly lend for housing, thereby deriving various income streams like
interest and fees
The increased focus on housing loans reduces capital requirements, thereby maximizing income
Regulatory requirements necessitate investment in low-yield avenues, reducing the net interest
margin
The merger is more about succession and answering the question: Who after Keki Mistry and
Deepak Parekh? The answer seems to be: Ask HDFC Bank, who will run the show after the
merger.

65
PVR AND INOX MERGER:

a) Financials: Examining the financial health of both companies, including their revenue,
profit margins, debt levels, and cash flow. This would help assess the potential synergies
and financial impact of the merger.

b) Market Share: Analyzing the combined market share of PVR and INOX in the cinema
exhibition industry. A merger could potentially strengthen their competitive position
against other players.

c) Regulatory Approval: Assessing the likelihood of regulatory approval for the merger,
considering antitrust regulations and any potential concerns regarding monopolistic
practices.

d) Synergies: Identifying potential cost savings and revenue synergies resulting from the
merger, such as operational efficiencies, shared resources, and cross-selling opportunities.

e) Customer Impact: Evaluating how the merger would affect customers, including ticket
prices, service quality, and overall customer experience.

f) Brand Integration: Considering how the two brands would be integrated post-merger,
including whether they would operate separately or under a unified brand identity.

66
 g) Employee Considerations: Examining the impact on employees, including any potential
redundancies, relocations, or changes in job roles.

h) Stock Market Reaction: Predicting how investors and the stock market would react to the
merger announcement and analyzing the long-term implications for shareholder value.

i) Long-Term Strategy: Assessing how the merger aligns with the long-term strategic
objectives of both companies and whether it would create sustainable value for
shareholders over time.

j) Risks and Challenges: Identifying potential risks and challenges associated with the
merger, such as integration issues, cultural differences, and unforeseen market changes.

The climax of the movie, ‘Indian multiplexes', ended in the merger of two lead players—PVR and
INOX Leisure Ltd —resulting in a giant that will have more than 50 percent share of the Indian
multiplex screens.
Experts believe this merger will likely take over six months as it will be subject to approvals from
the National Company Law Tribunal (NCLT), stock exchanges, Securities and Exchange Board of
India (SEBI), Competition Commission of India (CCI) as well as shareholders.

DETAILES OF THE MERGER

The merged company will be named PVR INOX. While the existing properties will continue to
use their respective brands, the new screens will be branded PVR INOX. The boards of both PVR
and INOX have approved this merger on a share-swap basis, and INOX shareholders will receive 3
shares of PVR for 10 shares of INOX.

“Based on the share-swap arrangement, INOX valuation has been pegged at Rs 6,400 crore (EV
per screen of Rs 10 crore) whereas PVR is currently trading at a valuation of Rs 11,000 crore (EV
per screen of Rs 12 crore)”, a report from Elara Capital said.

After the merger, INOX promoters will own a 16.7 percent stake, while PVR promoters will have

67
a 10.6 percent stake in the combined entity.

Scale brings muscle

PVR currently operates 871 screens, spread over 181 properties across 73 cities in India. INOX, on
the other hand, operates 675 screens through 160 properties in 72 cities. The merger of the two
largest players will create 1,546 screens in the merged entity, spread across 341 properties in 109
cities.

“It provides substantial bargaining power over the entire ecosystem, including customers, real-
estate developers, content producers, technology service providers, the state exchequer and
employees,” a report from JM Financial said.

According to a report from Nirmal Bang Institutional Equities, the merged entity has tied up a
large part of the retail real estate pipeline, with each having more than 1,000 screens lined up over
the next 5-10 years. This could be the biggest competitive advantage for the merged entity. Also,
the merged entity has the best real-estate locations in all major urban centres in India. This can
help it raise rates even higher.

There will be synergies in revenue as well as costs. “On the revenue front, we believe the biggest
synergy benefit will be in the form of higher pricing power in advertising for INOL, whose
advertising revenue per screen was 35 percent below PVR's in FY20. We now see it narrowing far
quickly,” the report said.

On the cost side, corporate costs are expected to fall but there may not be much incremental
operational cost cuts since operations were already lean for both the companies, post the pandemic.
The merged entity can bring in more savings on the rentals part as it will have better negotiating
power with the mall operators.

68
Encouraging trends, post pandemic

Post the relaxations in pandemic-induced restrictions, both PVR and INOX have seen a strong
reopening, aided by big-ticket releases from Bollywood, Hollywood and also the regional industry.
According to a report from global brokerage, CLSA, the average ticket prices have risen and even
F&B (food & beverage) spending per head has gone up, compared to the pre-COVID levels. The
CLSA report also points out another encouraging trend -- in December 2021, both PVR and INOX
had achieved almost 90 percent of their December 2019 revenues.

69
OTT threat:

Historically, the management has been dismissive of the threat posed by OTT platforms. However,
for the first time, it acknowledged the threat and the need to create scale to fight the onslaught.
“Despite the huge opportunity for growth in screen additions, the management has acknowledged
the threat posed by OTT platforms to occupancies and screen-level profitability metrics,” a report
from Motilal Oswal said.

However, CLSA believes that over-the-top (OTT) streaming services in India present limited risk
to multiplexes as even during the lockdowns, only 40 films went directly to OTT.
Both theatres and OTT will co-exist. “The OTT challenge, in our view, is a storm in a tea cup.
While we are cognizant of the threat, we think it is exaggerated as the economics of taking a movie
directly to OTT for a reasonable budget movie that will find a theatrical release is not compelling,”
a report from Nirmal Bang Institutional Equities said.

In case a movie goes directly to OTT, it is likely to get a modest 15-20 percent return on the cost
of production. On the other hand, if it's a theatrical release first, the OTT revenue gets enhanced if
the movie is a reasonable success.

70
71
72
Findings: -

Tata Steel had announced a bonus: -

Series 1
30

25

20

15

10

0
Announcement Day Record date Credit Day after 2 Months

Series 1

According to the analysis and is no significant change in the stock price during the event.
Tentatively the main reason behind the no change can be due to less volatility and less
participation in the stock market during those days and less knowledge.

A bonus issue generally has a positive impact on the stock price of a company, especially in
the short term. This is because a bonus issue increases the number of shares outstanding without
any change in the company's underlying assets or earnings. As a result, the market value of
each share decreases, making them more affordable for investors. Additionally, a bonus issue
is seen as a positive signal by the market, as it reflects the company's financial strength and
confidence in its future growth prospects.

73
Tata Steel acquired NatSteel: -

Series 1
30

25

20

15

10

0
Announcment Deal After 2 Months

Series 1

The stock price effect of the Tata Steel acquisition of NatSteel was positive, indicating that the
market viewed the acquisition as a good strategic move for the company.

Following the announcement of the acquisition in April 2004, Tata Steel's stock price rose by
around 5%. The stock price of NatSteel also increased by around 30%, reflecting the premium
that Tata Steel paid for the acquisition.

After the completion of the acquisition in July 2004, Tata Steel's stock price continued to rise
steadily over the next few months, indicating that investors were positive about the company's
growth prospects following the acquisition. By the end of 2004, Tata Steel's stock price had
increased by over 50% compared to the start of the year.

Overall, the stock price effect during the Tata Steel acquisition of NatSteel was positive,
indicating that investors believed the acquisition would create value for the company and
improve its growth prospects in the global steel industry.

74
The company changed its name: -

Series 1
37

36

35

34

33

32

31

30
Announcement day Implementation day After 2 Months

Series 1

According to the analysis we see there was drastic change in the stock price after and name
change the stock rise from 32 to 36 i.e. 11% approx. it gave a positive impact the investors and
the company image. But after the positive gain we see a profit booking zone during the 2 month
period after the change.

the stock price of the company was not significantly affected. The stock price continued to
fluctuate in response to market conditions, and there were no major changes that could be
attributed to the name change. However, the name change was seen as a positive move by
investors and analysts, as it signaled the company's intention to become a global player in the
steel industry.

TISCO changed its name to Tata Steel Limited in 2005 to reflect its growing global presence
and aspirations. The name change was seen as a positive move by investors and analysts, but
it did not have a significant impact on the company's stock price.

75
Tata Steel had announced a rights issue: -

Series 1
90

88

86

84

82

80

78

76
Record Date Issue Day Closing Day After 2 Months

Series 1

After the announcement of issue and record date we see a drastic change in the stock price. The
stock fell from 89 to 81 i.e., 9% approx. and after the issue day to closing day and stock was
on a range bound from 91 to 80. And after 2 months there is no significant change in the stock
price.

However, in general, the announcement of a bonus issue by a company can have a positive
effect on its stock prices. This is because the rights issue is seen as a positive signal by investors,
indicating that the company is financially strong and confident about its future growth
prospects.

But in this case, we see that there is significant change in stock price during rights issue.

76
Tata Steel acquired Bhushan Steel: -

Series 1
90

80

70

60

50

40

30

20

10

0
Announcement day Deal day Renamed day After 2 months

Series 1

The acquisition of Bhushan Steel by Tata Steel had a positive effect on the stock price of Tata
Steel. After the acquisition was announced in March 2018, the stock price of Tata Steel initially
saw a decline due to concerns over the high acquisition cost and the potential impact on the
company's balance sheet. However, as the market absorbed the news and recognized the
potential benefits of the acquisition, the stock price began to recover.

By the time the acquisition was completed in May 2018, the stock price of Tata Steel had
already started to climb, and it continued to rise steadily in the following months. The
acquisition was seen as a strategic move that would help Tata Steel to strengthen its position
in the Indian steel industry and expand its product portfolio, which contributed to the positive
sentiment around the stock.

There was no drastic change in the stock price during the event but we there a up move of stock
price by 28% approx. after 2 months.

Overall, the acquisition of Bhushan Steel had a positive effect on the stock price of Tata Steel,
with the stock price increasing by around 25% in the six months following the completion of
the acquisition.

77
 Conclusion: -

Corporate restructuring is a significant event for any company, and it can impact the stock
prices of the company in various ways. In the case of Tata Steel, the company went through a
significant restructuring process, which had a substantial impact on the company's stock
prices.

My research indicates that Tata Steel's stock price initially experienced a sharp decline
following the acquisition of Bhushan Steel. However, over time, the company's stock price
recovered and even outperformed the market average.

This suggests that while corporate restructuring can have short-term negative effects on stock
prices, the long-term impact can be positive if the restructuring leads to improved operational
efficiency, increased profitability, and overall growth for the company.

One of the key takeaways from your research is that the success of a company's restructuring
efforts can have a significant impact on its stock price. In the case of Tata Steel, the acquisition
of Bhushan Steel was a strategic move to expand the company's global footprint and increase
its scale of operations. However, the acquisition resulted in a significant increase in debt,
which initially led to a decline in stock prices.

Despite the initial negative impact on the stock price, Tata Steel was able to successfully
integrate Bhushan Steel into its operations, reduce its debt levels, and achieve operational
efficiencies. As a result, the company's stock price recovered and even outperformed the market
average over the long term.

The merger of HDFC Ltd. and HDFC Bank on July 1, 2023, created the fourth-largest bank in the
world, and the third-largest in India, after JPMorgan Chase, the Industrial and Commercial Bank of
China, and Bank of America. The merger also increased the merged entity's market capitalization
78
to over Rs 18 lakh crore, and potentially generated profits of close to Rs 50,000 crore. This merger
marks an important milestone in the Indian financial sector. HDFC Bank is now poised for a new
era of growth and dominance.

The merger of PVR and INOX in February 2023 created the world's fifth-largest multiplex chain,
with 1,646 screens across 341 properties in 109 cities. The new properties are branded as "PVR
Inox", while existing properties retain "PVR" and "Inox" branding. The combined entity has 20%
of the current market size and almost 50% of the revenue.

The merger is also expected to benefit the Indian film industry. The combined company will have
a stronger bargaining power with film producers and distributors, which could lead to lower ticket
prices and better quality movies for Indian audiences.

79
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