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Tamilnad Mercantile Bank (TMB), which expects to go for an IPO in the next 6-to-8 months, has appointed SBI Caps as the advisor for the issue.
Even as the bank is awaiting the resolution of a case in the Madras High Court relating to ownership of the bank between two factions of the Nadar community — one of which is backed by a group of foreign investors — the bank has begun doing its “homework” for the public issue, said one shareholder, who is also a member of the bank’s board.
However, refusing to comment on all these developments (as the matter is still sub judice ), K.B. Nagendra Murthy, Managing Director and CEO, said the bank hopes to get the nod from the Madras High Court “very soon” only after which can any concrete plan emerge. “We have only initiated the IPO process.”
He also pointed out that the bank may have to issue some bonus shares before it comes out with an IPO, as the book value of each share (of Rs 10) is over Rs 71,000.
The bank’s paid-up share capital stands at Rs 28 lakh (2.80 lakh shares of Rs 10 each), which works out to a capital-adequacy ratio of 15 per cent. “We actually do not require any additional capital. The purpose of the IPO is to comply with the RBI’s guidance and to broad-base the membership in the board,” he added.
According to another board member, who Business Line spoke to, the shares at present are changing hands at the rate of over Rs 65,000 each, “and, of course, not freely available”.
Should the offer price be around Rs 500/share, the bank has to come out with a bonus issue of 140 shares for every share held in the bank, said a senior research analyst based in Chennai.
The bank, which is one of the most profitable private sector banks in the country, has reported 18 per cent growth in business at Rs 36,500 crore in 2012-13. Net profit grew by over 40 per cent to Rs 440 crore in the year ended March 31, 2013.
Huge dividend
The bank’s board has recommended an all-time high dividend of Rs 1,600 for a share of Rs 10 face value, which works out to 16,000 per cent. However, of this, the bank can pay only Rs 1,350 a share (13,500 per cent of interim dividend), as the final dividend of Rs 250 (2,500 per cent) can be paid only after getting cleared in the AGM. (Even at this rate, the total dividend outgo works out to only a little over 10 per cent of the net profit.)
As the case is still pending in the Madras High Court, the bank could not hold an AGM for the last four years (2009-10 to 2012-13). As a result, even dividends declared during these years could not be fully paid.
Talking on the bank’s growth plans, Murthy said the bank grew “extremely well in the last two-three years, and would like to keep up the momentum”. It will continue to focus on retail business. It plans to expand its network to at least 380 branches from the current 320, and ATMs to 600 from the current 470, during the year under progress.
ravikumar.r@thehindu.co.in
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