Tamilnad Mercantile Bank set for IPO

Details after court decides annual general meet date, says MD

Tamilnad Mercantile Bank (TMB) is in transition. With brand-building efforts, a new managing director and chief executive officer, the bank expects to go for an initial public offering (IPO) soon.

However, its timing can only be decided once the court tells the annual general meet date. The lender is planning to seek shareholders' approval for the IPO at the meet. The legal tangle is due to a fight over management control between Sivanthi Adityan and brother Ramachandran Adityan.

Nagendra Murthy, who took over as MD and CEO this month, said: "We are almost ready for an IPO. Paperwork, brainstorming and groundwork have been done. As soon as the meet date is announced, a decision on whether to go in for a dilution, an offer for sale will be taken. Beyond this, I cannot comment."

The Tuticorin-based lender, set up in the 1920s, will continue to be conservative, but will target young customers, he said.

"The main focus will be on improving low-cost deposit, which was not the focus for the last few years. Improving CASA (current account, savings account) will help the bank bring down interest rate for borrowers, and will also help improve profitability."

Tamilnad Mercantile Bank, predominantly community-based, was set up to finance the needs of the trader community of Nadars. The new MD said the tag might not be suitable now. "It is appropriate to say the bank was founded by a community, but it is not run by, or dependent on it, any more. None of the MDs and CEOs in the recent past were from the community.”

Today, the top five borrowers are not from the community and today the bank has started recruiting people from the north for their respective state branches."

Murthy refused to disclose the holding pattern of the bank, which has been in the midst of the ownership tussle between the two groups. "The matter is subjudice and also with the regulator. I cannot comment on anything related to the board." But he said the issue has held up the annual general meeting, and important decisions such as share sale and dividend.

The bank had reported 24.93 per cent growth in net profit at Rs 313.46 crore in 2011-12 and has set a target of Rs 500 crore by 2015 with business of Rs 62,000 crore and compound annual growth rate (CAGR) of 30 per cent.

"This year we want to close with total business of Rs 40,000 crore and profit of Rs 400 crore, as against Rs 32,229 crore and Rs 313.46 crore, respectively, in 2011-12. The long-term target (in two and a half years) is total business of Rs 50,000 crore, in other words CAGR of 30 per cent.

"Though it will be challenging, we are optimistic and confident we can achieve our goals," the managing director said.

"The bank aims to have one per cent of total business as net profit and increase in net interest income by 20 per cent every year."