A regional , which drew international anchor investors including Nomura Holdings Inc. and Societe Generale SA for its initial public offering, is poised to raise about $100 million amid various challenges it is facing.
Tamilnad Mercantile Bank Ltd., whose history stretches back over a century, is considering pricing 15.84 million shares at 510 rupees ($6.38) a share, near the bottom of a marketed range, according to a person familiar with the matter. The IPO, which was oversubscribed by nearly three times, closed Wednesday and trading is slated to start Sept. 15.
Deliberations are ongoing and the pricing of the share sale isn’t finalized, said the people, who asked not to be identified as the matter is private.
The demand to invest in the Tamil Nadu-based bank hasn’t been deterred by minority shareholders’ objections and various curbs imposed on it. The lender needs permission from a high court to hold annual shareholder meetings and has been restricted by the central bank from opening new locations. Last week, minority shareholders’ appeals to halt the IPO citing concerns about the sale got dismissed by an agency within the country’s securities regulator.
Yet, almost half of Tamilnad Mercantile’s IPO shares have been taken up by 10 anchor investors. Besides Nomura Singapore Ltd. and Societe Generale, local firms like Bajaj Allianz Life Insurance Co. and Max Life Insurance Ltd. are also buying shares.
The “legal entanglements” of the bank “essentially deprive post-IPO shareholders” of their rights, Hetal Dalal, president and chief operating officer at the Mumbai-based proxy advisory firm Institutional Investor Advisory Services, said. The regulators “must recognize that allowing such banks to list only diminishes the trust of investors in our markets and in the regulatory regime”.
A spokesperson for Tamilnad Mercantile Bank said “price discovery is a regulatory process” which its board of directors will be undertaking in discussion with its advisers on the IPO. It didn’t comment on the controversy surrounding the initial share sale.
Restrictions
In January 2020, the Reserve Bank of India issued a risk assessment report on Tamilnad Mercantile Bank after an inspection raised concerns about its governance, transparency and compliance. On top of limits on opening new branches or entering fresh businesses, the regulator also froze the compensations of the bank’s managing director and chief executive, as well as stopped dividend payments.
The curbs on opening new branches remains, and there was no assurance that the restriction would be lifted after its shares are listed, the lender, which now has more than 500 branches, said in its offering documents.
The bank also wasn’t able to hold timely meetings or get shareholder approvals in 2020 and 2021 for amendments of its articles of association or the appointments of directors, the documents state. This year in June, the bank finally managed to conduct a meeting for the recent three years but there’s no certainty the lender can obtain approvals for similar gatherings in the future.
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