The long suspense over control of the Tamilnad Mercantile Bank (TMB) ended on Thursday, with the Sivanthi Adityan-led group filling nine of the 10 elected posts on the 13-member board of directors.
Under high court supervision, the 86th and 87th annual general meetings were held here on Thursday and the Adityan group won all eight contests; one more post was left vacant. Another member elected from an earlier AGM was to continue; that post was not up for election.
Of the other three members on the board, two are nominees of the Reserve Bank of India and one is the managing director, also approved by the RBI.
“The bank now has a full-time board, which is good. All policy issues will be addressed and we will have a clear roadmap for the future,” said Nagamal Reddy, the MD.
Since July 2008, when the election of eight members of the board was challenged in the HC, the bank, which reported a net profit of Rs 52.96 crore for the half-year ended March 2009 and over Rs 1,000 crore of accumulated profit, has been functioning with only three directors, including G Nagamal Reddy, managing director and chief executive officer, and two Reserve Bank of India (RBI) nominees. These members were only authorised to take operational decisions. Any policy decision, including a public offer of shares or a bonus issue, was out of their purview.
Over the past decade-and-a-half, the bank, headquartered in the southern port town of Tuticorin, has had two factions of the Nadar community — the Nadar Mahajana Sangam and a group headed by B Ramachandra Adityan, a former executive director – fighting for board control. A third group of foreign investors was also eying control of the bank.
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The first battle for the TMB board was fought with the Essar group. The two shareholder groups at TMB, unable to wrest control, were preparing to sell their 25 per cent stake. When it emerged that Shashi Ruia of the Essar Group had bought shares accounting for 67 per cent of the paid-up capital and was eyeing management control, the Nadar community approached RBI.
The regulator stepped in and rejected the deal, ruling that an industrial group could not run a bank. Ruia agreed to sell back the stake to the community, but at a very high price. Then another investor, Chinnakannan Sivasankaran, bought the Essar stake for around Rs 65 crore and started negotiations with the Nadars to sell it back — but for Rs 155 crore. For over 10 years, the community struggled to pay him off, but could garner only half the money. Sivasankaran sold back half the stake.
By 2007, things became more complicated, with foreign investors led by Ramesh Vangal and his associates, including Ravi Trehan and former global managing director of McKinsey, Rajat Gupta, picking up nearly 25 per cent stake in the bank. But, Vangal’s attempt to get his nominees on the board met with stiff resistance from the Nadars, who feared outsiders would take control of the community bank.
Things came to a boil in July 2008, when, following court orders, TMB held its 83rd and 85th annual general meetings (AGMs) on the same day and the 84th AGM did not take place due to the court’s direction..
Last November, the HC cleared the way for the 86th and 87th annual general meetings, to be held under the chairmanship of s retired judge. Both were held on Thursday. “The bank now has a full-time board, which is good. All policy issues will be addressed and we will have a clear roadmap for the future,” said Nagamal Reddy, the MD.