Tuticorin-based private sector lender Tamilnad Merchantile Bank (TMB), which started off as a Nadar community bank 90 years ago, is all set to go public.
The bank, which has been fighting an ownership battle between two factions of the Nadar community, one backed by foreign investors, including serial investor Ramesh Vangal, for quite some time now is awaiting Bombay and Madras high courts nod, besides the RBI to clear the decks before hitting the Dalal street.
The bank has been in the eye of storm with the board constantly witnessing infighting between nominees of brothers Sivanthi and Ramachandran Adityan, representing interests of the two Nadar groups. While Sivanthi aligned with foreign investors, Ramachandran opposed the entry of foreign shareholders.
AK Jagannathan, managing director and CEO of TMB, said, “We want to go public and the IPO will happen once all the issues pertaining to the ownership tussle cleared by the courts and apex bank, paving the way for convening of the pending two AGMs for the year 2009-10 and 2010-11. The Bombay High Court in October 2010 had directed the TMB not to hold its annual general body meeting (AGM) till the RBI took an appropriate decision on the issue of transfer of shares held by Ramesh Vangal-led overseas investors and a few resident investors. The HC had also restrained the bank from taking any major policy decision except incurring expenditure for the purpose of conducting regular business.
In March, the RBI declined to acknowledge more than 5% out of the stakes held by the Vangal-led group of investors, citing the reason that those investors were acting as a group.
Jagannathan said,” Since the RBI was of the view that the bank should go for listing, we are planning to go public and the size of the issue and other details will be decided once courts clear the ownership issues. As we are adequately capitalised, the issue of fund raising does not bother us”. The bank’s shares are rumoured to be selling anywhere between R35,000 and R50,000 in the market. As of now the bank has touched R28,000 crore and by the end of the current fiscal it hopes to close with R31, 000 crore. “We will be focussing on retail, housing and small traders in tier II & tier III cities,” he said.
TMB, founded by members of Nadar Mahajana Sangam in 1921 was originally registered on May 11 1921 as Nadar Bank under the Indian Companies Act, 1913. MV Shanmugavel Nadar was elected as the first chairman on November 4, 1921. Ownership troubles for the bank started in 1994 when some disgruntled Nadar shareholders sold off their stake to the Essar Group, a business group outside the community. Four years later, the Essar Group sold off its stakes to Sivasankaran.
In 2007, the Nadars managed to raise funds to buy back about half of Sivasankaran’s stake. He sold the rest to a clutch of foreign investors led by Vangal. He, with his Katra Holdings led a slew of foreign and domestic investors, including former McKinsey chief Rajat Gupta, who bought just a shade less than a 34% stake from C Sivasankaran. They rumoured to have paid close to R25,000 per share. By September 2010, there were rumours that Vangal plans to sell off his shares . But on the same day, the board received a letter from Vangal who claimed that he was still holding the shares. In the GM held in January 2010, foreign investors along with Sivanti Adityan group won the AGM round with the re-election of six board members.