Tamilnad Mercantile Bank files DRHP for proposed IPO
Tamilnad Mercantile Bank (TMB), is one of the oldest banking institutions in South India with a pedigree of more than 100 years. Now, Tamilnad Mercantile Bank has filed its draft red herring prospectus (DRHP) with SEBI for its proposed Rs.1,000 crore IPO. TMB is a profitable bank with gross NPAs well under control. It has a fairly strong base in semi-urban and rural segments of the state of Tamil Nadu.
The issue will predominantly be a fresh issue with a very small component of OFS by some of the early investors. In fact, out of the total offering of 1,58,40,000 (1.584 crore) shares, the fresh issue of shares will be 1,58,27,495 shares. In other words, 99.9% of the total IPO is a fresh issue and the OFS will just consist of 12,505 shares. The total size of the issue is estimated to be Rs.1,000 crore.
The bank’s financials have shown good traction in the financial year FY21. For example, net profits were up 48% at Rs.603 crore as compared to Rs.408 crore in FY20. The company also saw its deposit base grow by 11% to Rs.40,970 crore. The bigger progress was on the asset quality front.
The gross NPAs fell from 3.62% to 3.44% in FY21 and the bank has not seen any substantial slippage in the asset quality numbers. However, the IPO proceeds will be used to boost the capital adequacy ratio to be in sync with their aggressive asset book expansion plans.
Unlike most South-based smaller banks, TMB does not have any identifiable promoter family and the business is managed by professional managers. The company is yet to finalize the terms of the issue which will be done only after the SEBI approval is received.
TMB IPO will have 75% allocation to QIBs, 15% to Non-Institutional Investors and only 10% to retail investors. The issue will be lead managed by Axis Capital, Motilal Oswal and SBI Caps while Link Intime will be the registrars to the IPO.
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