TMB set to go public

Appoints SBI Caps as advisor, awaits Madras High Court's nod for the IPO

Tamilnad Mercantile Bank (TMB) is set to launch an initial public offering (IPO). For this, it has appointed SBI Caps as advisor. Currently, it is awaiting the Madras High Court's approval for the IPO. The court is set to come out with a ruling on the bank's ownership.

Managing Director and Chief Executive Officer K B Nagendra Murthy said, "Paper work (for the IPO) is done and the red herring prospectus will be ready after the court's approval." While he declined to comment on any time frame, another senior official said the board expected a court ruling in four to five months. Two months from then, the bank would initiate the IPO process.

Murthy said, "It is not for the sake of money that we would go for an IPO; it's more to meet RBI (Reserve Bank of India)'s compliance and expand the board." The bank has also proposed a bonus issue to reduce its current share price, as it is too high.The control and ownership issue has been a stumbling block. Two Nadar groups, along with Ramesh Vangal-led foreign investors (who hold about 26 per cent stake) are involved in disputes related to the bank's shareholding pattern at various courts.

In 1920, the Nadars, a trading community in the South, had set up the bank to cater to the needs of the community.

A source in the bank's board said earlier, foreign institutional investors (FIIs) had infused around Rs 150 crore in the bank, bailing it out when Shiv Nadar, founder and chairman of HCL Technologies and a member of the Nadar community, wanted to sell his stake for cash.

Today, FIIs' investment in the bank has grown three-fold.

On the bank's ownership, Murthy said the matter was sub judice. He said Tamilnad Mercantile Bank had grown well, especially in the last three years.

In 2011, the bank had 253 branches; now, this has risen to 320. During the same period, the bank's business increased from Rs 3,900 crore to Rs 36,000 crore.

In 1922, the first year of the bank's operations, the bank had announced six per cent dividend; in 2012-13, this rose to 16,000 per cent (the bank's share price rose to Rs 63,000 apiece).

On the bank's performance, Murthy said net profit had risen 20.78 per cent to Rs 145.05 core during the quarter ended March, against Rs 120.09 crore in the year-ago period.

He attributed the increase to an improvement in net interest margins (from 4.04 per cent to 4.33 per cent).

"We had some strain on our asset quality. Gross non-performing assets increased to 1.31 per cent from 1.28 per cent and net non-performing assets rose to .66 per cent from .45 per cent on a full year basis," said Murthy.