Analysts on Dalal Street are bullish on the initial public offering (IPO) of Tamilnad Mercantile Bank (TMB) which hit the primary market on September 5. The lender is one of the oldest and leading private sector banks in India, with a history of close to 100 years. It primarily focuses on RAM segment (retail, agriculture and MSME), which constitutes around 88 per cent of total advances as of March 2022. TMB has built a strong presence in Tamil Nadu, with 369 branches and 949 ATMs as of March 2022. Total branches are 509 of which 247 are in semi-urban, 106 in rural, 76 in metro and 80 in urban areas.
The public offer got subscribed 6 per cent on the first day of the offer till 12.08 pm. The public offer has received bids for 5,49,388 shares so far against 87,12,000 shares offered by the bank. TMB has fixed a price band of Rs 500- Rs 525 for the ongoing public offer, which will close on September 7, 2022.
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Brokerage Hem Securities said, “The bank is bringing the issue at price-to-book multiple of 1.40 times on FY22 PAT basis. Although, the bank has a strong legacy, loyal customer base and has focus on improving its servicing framework. Bank with its strong presence in Tamil Nadu and focus to increase presence in other strategic regions is consistently growing its deposit base with a focus on low-cost retail CASA. Also, with its strong asset quality, underwriting practices and risk management policies and procedures and consistent financial performance, we recommend “Subscribe” on the issue for the long term.”
ICICIdirect and Asit C Mehta Investment Interrmediates have given a ‘Subscribe for long term rating to the public offer. ICICIdirect believes that at the upper end of the price band, the bank is valued at around 1.35 times P/BV (post issue) as on March 31, 2022, which looks reasonable. However, a change in management and pending legal proceedings in relation to shareholding remain risks.
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On the other hand, Asit C Mehta Investment Intermediates said, “TMB can be a good investment avenue owing to its better growth with healthy asset quality, robust risk management system, equipped with basic retail banking infrastructure, and sizeable market to grow. However, pending legal matters may impact TMB if the verdict goes against the bank.
Meanwhile, IPOWatch showed that the grey market premium (GMP) for Tamilnad Mercantile Bank was around Rs 35 in the afternoon over the upper price band of Rs 525.
