About the bank
With a nearly 100-year existence, Tamilnad Mercantile Bank Ltd. (TMBL) is one of India’s oldest and most prestigious private sector banks. It offers a wider range of banking and financial services primarily to micro, small and medium enterprises (“MSME”), agricultural and retail customers (“RAM”).
Issue Details/Capital History:
| Tamilnad Mercantile Bank IPO Date | Sep 5, 2022 to Sep 7, 2022 |
| Tamilnad Mercantile Bank IPO Face Value | ₹10 per share |
| Tamilnad Mercantile Bank IPO Price | ₹500 to ₹525 per share |
| Tamilnad Mercantile Bank IPO Lot Size | 28 Shares |
| Issue Size | 15,840,000 shares of ₹10 (aggregating up to ₹831.60 Crore) |
| Fresh Issue | 15,840,000 shares of ₹10 |
| Issue Type | Book Built Issue IPO |
| Listing At | BSE, NSE |
| QIB Shares Offered | Not less than 75% of the Net Offer |
| NII (HNI) Shares Offered | Not more than 15% of the Net Offer |
| Retail Shares Offered | Not more than 10% of the Net Offer |
| Company Promoters | TMB is a professionally managed bank and does not have identifiable promoters. |
Financial Performance:
In terms of financial performance, TMBL reported total income/net profits of Rs. 3992.53 cr. / Rs. 464.89 cr. (FY20), Rs. 4253.40 cr. / Rs. 654.04 cr. (FY21) and Rs. 4656.44 cr. / Rs. 901.90 cr. (FY22), during the course of the previous three fiscal years. As a result, it has consistently increased its income and earnings over the years.
The bank has posted an average EPS of Rs. 47.72 and has an average RoNW of 13.80% during the past three fiscal years. The price of the issue is 1.35 at a P/BV based on its Rs. 389.47 per share post-IPO NAV and at a P/BV of 1.40 based on its Rs. 374.41 per share NAV as of March 31, 2022.
The asking price is at a P/E of around 9.22 if we attribute FY22 earnings on fully diluted paid-up equity capital following the IPO.
Analysis
Positives
- Mr. K V Rama Moorthy MD and CEO of the bank has more than 40 years of experience in the banking industry
- He also worked with large bank such as United bank of India for a long duration
- Despite the disputes and legal proceedings against the bank, Mr. K V Rama Moorthy managed to clock a healthy profit CAGR for the bank
Negatives
- Contingent liabilities are more than the net worth of the company
- Contingent liability amounts to 87,976 million whereas the net worth of the company is around 53,357 million as at March 2022.
- 37.73% of paid-up equity share capital is subject to outstanding legal proceedings which are pending at various forums and, in connection with which, proceedings against our Bank have been initiated by various regulatory including the RBI, the Directorate of Enforcement, some of whom have imposed and sought to impose penalties on the bank.
- Currently, bank has no Chairman
- Bank had previously sought RBI approval for the appointment of Balakrishnan Prabaharan (one of the independent Directors of the Bank) as part-time chairman of the Bank but RBI declined to provide such approval, the Board of Directors of the Bank does not presently have a chairman.
- Additionally, the Bank appointed Vijayadurai B. as the Bank’s part-time chairman by resolution dated August 18, 2022, and also filed an application with the RBI on August 20, 2022, asking for approval for such an appointment (approval still awaiting from RBI)
- Complaints to prevent the bank from undertaking IPO?
The former director has filed a writ petition before the High Court of Madras seeking to prevent the Bank from undertaking the Offer
Also the bank has received multiple complaints from former directors and shareholders of the Bank regarding disclosures in the Draft Red Herring Prospectus and invitations to participate in the offer for sale,
Conclusion
Taking all the financials and GMP into consideration there are numerous reasons one should not have to apply to this first and foremost the GMP(grey market premium) is very less that is only rupees 25 (4.76%) which is very less for the listing gains this means the public is not interested in this company further bank has no CEO and the market sentiments till 7th September is too negative and this will be listed on exchanges on 15th September and GMP will go down and this IPO will be listed at par or discount.
For more information visit: https://www.jagannath.org/
Ms Bhawna Thakran
Assistant Professor
JIMS, Kalkaji
