TUTICORIN , TAMIL NADU: The Reserve Bank of India has asked the Tamilnad Mercantile Bank (TMB) to list its shares through an IPO, a top official of the bank said on Friday. "We are one of few unlisted banks in the country and the Reserve Bank of India wants us to get listed as soon as possible .... We would be considering this proposal provided a couple of pending cases are resolved," A K Jagannathan, managing director and chief executive officer of the Nadar-dominated , Tuticorin, Tamil Nadu-based bank, said. He was speaking after the release of the bank's results.
The RBI suggestion is important as a few weeks ago the banking regulator had declined to acknowledge the sale of a 33.54% stake by well-known serial entrepreneur C Sivasankaran to a group of investors. The group's members included Rajat Gupta, former McKinsey chief, and Ramesh Vangal , the former Asia Pacific president for PepsiCo Foods . The investors were acting as a group, the banking regulator said and asked them to cut their stake to about 5%.
TMB was one of the many community banks that were set up in the 20century in many parts of the country to finance local entrepreneurship and take care of community needs. Over the years, it became successful and started attracting attention from corporate and takeover artists like Sivasankaran. The Essar Group tried to get a foothold but were rebuffed. Siva, who belongs to the Nadar community, also could not get full control and decided to sell to the
Vangal-led group a few years ago.
The issue has got more complicated now due to a shareholder's suit in the Madras High Court challenging the RBI's order. The shareholder alleged that the central bank's order is vague since it did not include B Ramachandra Adityan and his family members as part of the Vangal-led group. Asked whether the IPO would be the way for these investors to cut their stake to 5%, Jagganthan said the bank can go for IPO on its own and it is up to the investors to decide what they want to do.
"After the Reserve Bank of India order , the bank's hands have been freed to make key operational decisions . Now the annual general meeting holds the key, where the proposals for IPOs, bonus and rights issue can be made. However , there are a few lawsuits in courts which have to be settled to go ahead with the annual general meeting," he added. After the Reserve Bank of India order, the bank had planned to conduct its annual general meeting on June 15. On a thin equity of Rs 28.45 lakh, Tamilnad Mercantile Bank has reserves of Rs 1,366.02 crore and the book value of the Rs 10 share is at Rs 48,022 a share as of March 31.
The bank has been roiled by ownership tussles for two decades but the latest round does not seem to have affected its performance in the past year. In fiscal 2011, the bank's net profit rose 35.97% to Rs 250.90 crore, while business grew 23.17% to Rs 24,679 crore. The net interest margin was at 4.25%, while gross NPA was 1.30%. The bank has declared a dividend of Rs 1,000 per share for fiscal 2011, up from Rs 800 a share last year, pending shareholders' approval
The RBI suggestion is important as a few weeks ago the banking regulator had declined to acknowledge the sale of a 33.54% stake by well-known serial entrepreneur C Sivasankaran to a group of investors. The group's members included Rajat Gupta, former McKinsey chief, and Ramesh Vangal , the former Asia Pacific president for PepsiCo Foods . The investors were acting as a group, the banking regulator said and asked them to cut their stake to about 5%.
TMB was one of the many community banks that were set up in the 20century in many parts of the country to finance local entrepreneurship and take care of community needs. Over the years, it became successful and started attracting attention from corporate and takeover artists like Sivasankaran. The Essar Group tried to get a foothold but were rebuffed. Siva, who belongs to the Nadar community, also could not get full control and decided to sell to the
Vangal-led group a few years ago.
The issue has got more complicated now due to a shareholder's suit in the Madras High Court challenging the RBI's order. The shareholder alleged that the central bank's order is vague since it did not include B Ramachandra Adityan and his family members as part of the Vangal-led group. Asked whether the IPO would be the way for these investors to cut their stake to 5%, Jagganthan said the bank can go for IPO on its own and it is up to the investors to decide what they want to do.
"After the Reserve Bank of India order , the bank's hands have been freed to make key operational decisions . Now the annual general meeting holds the key, where the proposals for IPOs, bonus and rights issue can be made. However , there are a few lawsuits in courts which have to be settled to go ahead with the annual general meeting," he added. After the Reserve Bank of India order, the bank had planned to conduct its annual general meeting on June 15. On a thin equity of Rs 28.45 lakh, Tamilnad Mercantile Bank has reserves of Rs 1,366.02 crore and the book value of the Rs 10 share is at Rs 48,022 a share as of March 31.
The bank has been roiled by ownership tussles for two decades but the latest round does not seem to have affected its performance in the past year. In fiscal 2011, the bank's net profit rose 35.97% to Rs 250.90 crore, while business grew 23.17% to Rs 24,679 crore. The net interest margin was at 4.25%, while gross NPA was 1.30%. The bank has declared a dividend of Rs 1,000 per share for fiscal 2011, up from Rs 800 a share last year, pending shareholders' approval
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