CORPORATE FINANCE & FINANCIAL SERVICES

Emerging Trends

CORPORATE FINANCE & FINANCIAL SERVICES: EMERGING TRENDS

CORPORATE FINANCE & FINANCIAL SERVICES EMERGING TRENDS

Dr. K. Ramulu
Assistant Professor Finance and Accounting School of Management Studies University of Hyderabad.

SP
SPECTRUM PUBLICATIONS
HYDERABAD

CORPORATE FINANCE & FINANCIAL SERVICES: EMERGING TRENDS

First Edition - 2014 Copyright Dr. K. Ramulu All Right Reserved, No part of this book is reproduced are re-written ISBN-13 978-93-82829-42-3 Price: 695.00

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Foreword
Financial services form the backbone of an economy striving for rapid growth and development. The history of financial development of the developing nations point out a close relationship between finance and development. Financial services contribute about 14% to the Gross Domestic Product (GDP) of India. Luxembourg is the financial services powerhouse of the world. The financial services contribute about 60% to the GDP of Luxembourg. France, Germany, Japan, Switzerland, the UK and the UAE have taken noteworthy steps to enhance the contribution of financial services to the GDP . They have carried out fundamental restructuring of the financial services sector and radically transformed the regulatory structure overseeing the financial services sector. In the UK, there were 75 laws governing the financial services sector. The government has replaced the complex regulatory regime through setting up the Financial Services Authority. Such a step has resulted in making London as the global financial centre and reduction in the transactions cost. Germany has modernized its financial services sector through an extensive use of information technology, redefining the laws governing the financial sector and revamping the boards of organizations functioning in the area of financial services. The control and supervision of financial services has gained vital importance in the wake of global meltdown and its aftermath. The financialization of securities and in a much wider connotation the financialization of assets resulted in an economic catastrophe for the US. It is feared that if not overseen and controlled properly it could become a contagion bringing in its fold a large number of countries in the world. I am glad that Dr K Ramulu has touched upon many of these issues in his edited volume titled Corporate Finance & Financial Services Emerging Trends. The contributions in the volume deal with important components of financial services ranging from derivatives, insurance and micro finance to mergers & acquisitions, banking and corporate finance. The volume fills in the void existing in the published literature related to financial services through lucid presentations of the problems and also bringing in the core issues related to frontiers of new knowledge in this area. I compliment of Dr Ramulu for editing the book and the authors of various papers for their scholarly writings. The volume will be useful to policy makers, researchers concerning financial services and the post graduate students in management.

R K Mishra
Senior Professor and Director Institute of Public Enterprises Osmania University Campus, Hyderabad, Andhra Pradesh, India.

Preface
The recent financial crises have highlighted the importance of making intelligent business decisions and the role of corporate finance. Corporate finance touches every aspect of business, from deciding which capital expenditure projects are worth undertaking, to the challenge of shareholder value maximization, raising finance and managing risk. Today, the complex external environment has made corporate finance all the more challenging with the intense competition among the corporate. The technological innovations, fluctuations in interest rates, spiralling inflation, global economic uncertainty, volatile exchange rates, tax laws, ethical concerns over the financial dealings are the challenges staring at the present day finance manager. The growing needs of the corporate sector in meeting the aforesaid challenges were fulfilled by the financial services sector which itself had undergone tremendous transformation in the past few decades and has become a significant player in the global financial system. In the light of these problems and prospects the constellation meet aims to provide a platform to practitioners, consultants, academicians, researchers and students to learn and disseminate information on the emerging trends and contemporary issues in corporate finance and financial services. The experiences of recent years have exposed a range of vulnerabilities in the financial system, calling into question the social value of financial institutions and core financial activities. Policymakers and financial institutions have come a long way in introducing important reforms, but much more work remains before the bonds of trust between the system and society can be repaired. The financial decisions of the firm begin with the choice of a business strategy designed to create value. Finance, the art and science of managing money/funds, affects the lives of every individual and every organization. Global finance being a reality and to achieve an optimal risk-return trade-off in a highly complex world of corporate finance, an integrated strategy is to be designed and implemented by a finance manager. Traditional emphasis on types of securities, fund-raising techniques, and institutional policies is being replaced by intensive study of optimization of investment and financing decisions under conditions of uncertainty. The most significant contributions need to be brought together and synthesized to make them readily available to the students/teachers/researchers. Towards this end, an attempt is made in Corporate

Finance to provide a thorough exposition of the traditional finance theory. The book is designed in 8 parts comprising 37 chapters, stresses up on more than time honoured rules of thumb in analysing why companies and finance managers behave the way they do in financial decision making. From this vantage point, they can then envision the entire panorama of financial setting and the problems and considerations therein. All the material is tied together through the eyes of financial manager. Each financial services and corporate finance functions are identified. The aim of the book is to help and enable the readers in developing an understanding of the entire financial services industry and their practices problems and prospects. The various theories and case studies have been critically and empirically evaluated, studied and compared, with a clear statement of the advantages and disadvantages of each theory, and its contribution in the field of corporate finance and financial services. This volume brings out the compilation of papers which were presented at National Seminar on Corporate Finance and Financial Services-Emerging Trends; organised by the School of Management Studies, University of Hyderabad at the beginning of year 2013. The conference was well attended and articles were presented on various issues and challenges in the area of financial services sectors like merchant banking, derivatives, insurance, capital markets, M&A are predominant. The Conference provided a meeting ground for bankers, Academia, and Professionals from the financial services sector and also Civil Servants. The issues were well debated and various views presented. Organising a National Seminar with over 300 participants is no mean task and we are thankful to the University of Hyderabad for financial assistance under the unassigned grants. Our heart full thanks to all the eminent speakers at the seminar. Thanks are also due to Rahul Publications who took the pains to publish the book. This book would not have been possible but for the painstaking efforts made by the paper contributors. We acknowledge their efforts. Our colleagues at the School of Management deserve special thanks for their support in the conduct of three day National Seminar and encouragement given in bringing out this book.

The book is organised into eight parts. While PART-1 introduces the derivatives consisting of chapters explaining how they are liaison between different types. And also how are they used as hedging mechanism and trends in the derivatives market. PART-II sets forth the corporate finance, which includes financial performance of textile industry, dividend policy. PART- III consisting of 5 chapters covers financial crisis, IPOs, testing the market efficiency etc. PART- VI focuses on financial services like role of merchant bankers, Indian economy and financial service, VC, etc. PARTV stresses up on emerging trends in insurance sector and has five chapters explicating the LIC market share, future and measuring performance efficiency. PART-VI presents the present scenario of micro finance, on competence of MFI and government intervention in MF. PART-VII deals with M&A includes 4 chapters on M&A in private companies, legal diligence etc. Lastly, PART-VIII, on contemporary topics in banking, includes five chapters. First two chapters deal with financial inclusion and the remaining three discussed about transformational mobile banking, BC model and business profitability model. It is intended that this book will serve as a ready reference for those who would delve into the subject further and enhance knowledge in the concerned area.

INDEX
Sl. Title with Author(s) Name No. Page Numbers

PART I : DERIVATIVES
1. Iaison between Commodity and Financial Futures Market in India Dr. T. Satyanarayana Chary & Mr. Shaik. Masood 2 01 to 06

Growth of Commodity Derivatives in Indian Market An Emperical Analysis Prof. G. Sitamber Swamy, K. Damodhar & N. Rajani 07 to 12

The Hedging Scenario in Micro Small and Medium Enterprises (MSMEs) (With respect to the change in RBI guidelines as on 15 December 2011) Dr. Laila Memdani & Karthik Athelli 13 to 22

The Currency Futues Trading in India Repalli. Vinod 23 to 34

Commodity Futures and Spot: A Study of MCX Indices Syeda Rukhsana Khalid 35 to 44

PART II : CORPORATE FINANCE

6 Financial Performance of Indian Textile Industryan Empirical Study on KG Denim Limited Marimuthu, K. N & Dr. Mary Jessica 7 45 to 56

Efficacy Through Working Capital Management (A Study of Venkys India Limited) Mohd Mujahed Ali 57 to 68

Dynamisms of Dividend Policy Mr.Shaik Masood, Navaneeth & Anitha 69 to 76

Trends in Life Insurance Sector A Study Dr. T. Gopi & K. Hanumantha Rao 77 to 87

10.

Corporate Restructuring Theories Types and Modes Mirza Juned Beg & Habib Zafar Khan 88 to 94

PART III : FINANCIAL MARKETS

11. Identifying Bubbles in the Financial Markets and Predicting their Crash Using the Hindenurg Omen Ashutosh Pandit, Dr. Subhash Subramanian & Prof. U.S. Rao 12. Greece Crisis: All is not well Dr. Laila Memdani 13 The Financial Crisis and its Impact on Indian Capital Market M. Vamshi Krishna 14 120 to 130 105 to 119 95 to 104

Testing for Weak-form Market Efficiency in BSE and NSE Using Variance Ratio Tests P Raja Lingam Goud, Anoop S Kumar & Mahesh Nenavath 131 to 146

15

Does Institutional Participation in an Initial Public offerings a Better Signal For Investing? S. Saravanan & Dr. R. Satish 147 to 152

PART IV : FINANCIAL SERVICES

16 Role of Indian Merchant Banks in Managing Public Issues Mrs B. Anusha, Mba, (Ph.D) & Dr. R. Sampath Kumar 17 153 to 161

Impact Of Financial Services In Economic Growth In Developing Countries D.Chaithanya, K.Samatha & K.Anusha 162 to 171

18

A Study on Venture Capital Investment in India J. Madhavi 172 to 180

19

E-Gold: A New Perspective Mohd Mujahed Ali, K. Saichand & V. Ashwini 181 to 190

20

Emerging Merchant Banking Rahela Thanveer 191 to 195

21

Equitable Health Care Financing and Primary Healthcare Infrastructure Development Challenges in the India Context Nenavath Sreenu 196 to 214

PART V : INSURANCE
22 Is LIC of India Losing its Market Share after Liberalization? Mr. Bidyadhar Padhi & Dr Mayadhar Satpathy 23 Whither Insurance Industry in India? P. Deepanvitha, N.Abhinaya, MBA & Mohd.Manzoor Ilahi 24 A Comparative Study of LIC and Private Life Insurers In India P.S.Subha Prada & Dr. K. Ramulu 25 232 To 245 226 to 231 215 to 225

Myopia in Life Insurance Business In India - A Study on Lapsation Suresh Chandra. Ch 246 to 260

26

Measuring Performance and Efficiency Growth of the Selected Indian Life Insurance Companies: A Total Factor Productivity Approach Shri Tapas Ku. Parida & Dr. Debashis Acharya 261 to 270

PART VI : MICRO FINANCE

27 Competence of Microfinance Institutions - A Case Study of Warangal Prof G. Sithamber Swamy & V. Srilatha 28 271 to 288

Government Intervention in Microfinance - Devil or Devine : A Case Study of Andhra Pradesh Ranjani Srinivasan, Madhavi Kodamarty & P. Rekha 289 to 297

PART VII : MERGERS & ACQUISITIONS

29 Mergers and Amalgamations of Private Companies AounkarAnand & Anurag Parihar 30 298 to 308

Legal Due Diligence in Mergers and Acquisitions: The Effects and Implications on Corporate Finance Decisions Ashique Mondal & Riti Basu 309 to 317

31 32

Event Study Analysis: Theory and Evidence From Indian Pharmaceutical Industry Bhanu Pratap Singh & Dr. Alok Kumar Mishra 318 to 324 An Up to Minute of Merger and Acquisition in Indian Design: A Glance with Diverse Vision Pankaj Sevta, Anjali Upadhyay & Nikhil Bansal 325 to 333

PART VIII : BANKING

33 A Study on Financial Inclusion In India Obligation to Opportunity Gajanethi Swathi Kumari 34 Financial Inclusion In India V. Kishore Kumar 35 Transformational Mobile Banking for Financial Inclusion M. Rajanikanth 36 356 to 367 348 to 355 334 to 347

Business Correspondent Model An Innovative Business Practice in Banking Sector B. Renuka 368 to 379

37

A Study on Business and Profitable Models of Financial Inclusions Vandana Samba 380 to 391

38

Commodity Derivatives and Price Prediction through Fundamental and Technical Analysis An Emperical Study in India Ananthnarayan Tripurari 392 to 399