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A majority of the shareholders present at the Tamilnad Mercantile Bank’s annual general meeting here came down heavily on a proposed Initial Public Offering (IPO), stating that they are ready to fund the bank's capital requirements as also buy back the shares held by financial institutions (FIs).
They estimate the cost of FIs’ holding at over ₹600 crore.
Asserting that they are ready for a compromise to buy back the stake from the FIs, S Vaikundarajan, promoter of VV Minerals, said: “We will not let this bank, promoted by and for the Nadar community go out of our hands.”
At its AGM (for six years from 2009-10) at Thootukudi in Tamil Nadu, the members opposed the IPO, stating that this will open the door once again to outsiders.
While management sources contended that the IPO would help meet the bank’s CAR (Capital Adequacy Ratio) requirements, the shareholders refused to allow the motion. They sought the AGM’s Chairman — a court-appointed Judge — to remove the proposal from the agenda. However, the Chairman declined to do so, and said he will take it on record the floor’s objection to the proposal.
The bank has been in the spotlight ever since Essar Group acquired a stake in it. Business tycoon C Sivasankaran later bought 95,418 shares (around 33 per cent stake) from Essar Group, but sold them.
Show-cause notice The transaction with the FIs attracted 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) 1999.
Bank sources say the FIs and NRIs bought the shares at ₹24,000 apiece in May 2007. They are currently worth around ₹93,000/share.
The FIs and the NRIs stake is around 42 per cent, including a 19 per cent voting right.
“Once we did the mistake by letting outside investors, we don’t want to do the mistake again,” said Chandrasekaran, one of the shareholders.
Vaikundarajan said his community members, who spent over ₹7,000 crore on ads to TV channels every year, could easily mop up funds for capital.
Bonus shares The shareholders have also asked the bank to increase the proposed bonus shares from 500:1 to 1500:1 and opposed the re-appointment of the existing auditors.
The results of today’s election for 10 board members were not made public as the Court had instructed the Chairman to submit the results in a sealed cover to it.
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