Shareholders oppose proposed IPO of TMB

Community members say they are ready to buy back shares held by FIIs, NRIs

Majority of shareholders who attended annual general meeting (AGM) of Tamilnad Mercantile Bank (TMB) on Friday objected the proposed initial public offering (IPO) and said they were ready to fund the bank’s capital requirements and buy back shares from the foreign investors (FIs).

According to estimates, FIs share buyback may cost around Rs 600 crore. In the last AGM, held some six years ago, FIs-backed group had secured control of the bank’s board.

At the AGM (for six years starting 2009-10) in the port city of Thoothukudi, some shareholders said an IPO would open the doors for the outsiders. “The bank was started for the purpose of developing Nadar community which was deprived of various services including banking. The bank should continue to focus on the same,” said V V Minerals chairman S Vaikundarajan, who is in the race to be on the board of TMB. While the bank management said the IPO would help TMB meet regulator’s capital adequacy ratio (CAR) requirement, majority of shareholders said they were ready to invest in the bank. These shareholders also asked the court-appointed chairman of the AGM to remove the IPO proposal from the list of agenda. The chairman, however, declined the request and said he will only record the fact that majority of shareholders in the meeting objected to the proposal.

The bank, which was started in 1921, was initially known as Nadar Bank before being renamed as Tamilnad Mercantile Bank. The bank has been mired in ownership tussles. Ever since businessman C Sivasankaran sold his stake to FIs, several disputes have occurred. The transaction also led to a show-cause notice from the Enforcement Directorate to TMB and Standard Chartered Bank, among others, for contravention of the Foreign Exchange Management Act (Fema).

According to bank sources, FIs and NRIs bought the shares for Rs 24,000 per share in May 2007. At present, the bank’s share is trading at around Rs 93,000 a share in private market. FIs and NRIs hold around 42 per cent stake in the bank, including 19 per cent voting right.

“Once we committed the mistake of letting outsiders invest. We don’t want to repeat the mistake,” said Chandrasekaran, one of the shareholders.

“We are ready for a compromise and ready to buy the stake of from the FIs. Money is not a constraint. Community members can buy the stake and can fund the bank for future growth,” said Vaikundarajan.

T Rajakumar, one of the shareholders and a senior community member, said Rs 600 crore may be required to buy back the shares from FIs and NRIs.

The shareholders have also asked the bank to increase the proposed bonus shares from 500:1 to 1500:1. The results of the election held at the AGM, to select 10 board members, were not made public since the court-appointed AGM Chairman was asked to submit the results in a sealed envelop.