Tamilnad Mercantile Bank IPO: Issue oversubscribed 1.77 times so far on final day of bidding

The initial public offer (IPO) of Tuticorin-headquartered Tamilnad Mercantile Bank was oversubscribed 1.77 times on the final day of bidding today. As of 11:06 am, the initial share sale received bids for 1,54,22,820 shares against 87,12,000 shares on offer, according to data available with the BSE. The quota for Retail Individual Investors (RIIs) was booked 4.40 times, while that for Qualified Institutional Buyers (QIBs) received 98 per cent subscription and non institutional investors 1.60 times.

The public issue, which would conclude today, opened for subscription on September 5. The private sector lender mobilised over Rs 363 crore from anchor investors ahead of its IPO.

IPO price band:

Tamilnad Mercantile Bank has fixed the IPO price band at Rs 500-525 per share for the Rs 832 crore public offer. The bank would be issuing 1.58 crore new equity shares of Rs 10 face value in the IPO, nearly 10 per cent of its equity shares.

Tamilnad Mercantile Bank doesn’t come under the SEBI norm of 25 per cent minimum public shareholding as it is already completely owned by shareholders.

All of the six foreign shareholders — Robert & Ardis James Company (4.95 per cent), Starship Equity Holdings (4.72 per cent), Subcontinental Equities (4.64 per cent), East River Holdings (3.72 per cent), Swiss Re Investors Mauritius (1.90 per cent) and FI Invest Mauritius (1.48 per cent) — would have to retain their holdings for the next six months after the IPO.

The equity shares are expected to list on September 15.

Grey market premium:

Market participants said the Tamilnad Mercantile Bank IPO grey market premium (GMP) today is at Rs 25. It implies that the grey market is expecting the lender to list around Rs 550 (Rs 525 + Rs 25), which is around 4.76 per cent higher from the IPO’s upper band price of Rs 525 per equity share.

Brokerages’ take on the IPO:

Analysts on Dalal Street are bullish on the IPO of Tamilnad Mercantile Bank. 

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.