The IPO market has been buoyed after a 75-day drought of primary problems that ended with Sirma SGS Technology’s IPO. Sirma SGS responded well to the IPO as well as good listing performance. The second IPO of Dreamfox Services Limited also received a very strong response from all categories of investors, viz., QIBs, HNIs, and retail. It is against this background that Tamilnad Mercantile Bank has announced its IPO plan.
The Tamilnad Mercantile Bank has a recognition of more than 100 years, established in the year 1921. TMB primarily caters to the retail and MSME segments, which are its major focus areas in terms of lending books. Tamilnad Mercantile Bank has a 509-branch network and a customer base of over 5 million. Here’s what you should know about Tamilnad Mercantile Bank’s upcoming IPO.
Seven things to note in Tamilnad Mercantile Bank’s IPO?
The Tamilnad Mercantile Bank IPO opens for subscription on the coming Monday, i.e., September 5, and will be purely in the form of an issue of shares. Here are the main takeaways.
1) Tamilnad Mercantile Bank Limited was incorporated in the year 1921 at Thoothukudi in the state of Tamil Nadu. TMB has a strong portfolio of deposits and loans from a diverse client base. Its lending portfolio is mainly divided into retail loans, MSME loans for small businesses, and agriculture. Out of the overall network of 509 branches, Tamilnad Mercantile Bank has the largest 369 branches located in the state of Tamil Nadu. The remaining branches are spread over 15 states and 4 union territories.
2) Like most banks, Tamilnad Mercantile Bank also needs to raise capital continuously to maintain its Tier-1 capital ratio. This is the main objective of this new issue. In addition, since Tamilnad Mercantile Bank is not listed yet, they are also reaping the benefits of being listed by having better visibility, reach, and market-based valuation for bank. Its greatest strength is the healing and deep domain skills it has created in the local market. The bank is not only reaping the benefits consistently, but the profits are also growing at a faster rate than the median growth in banking.
3) Tamilnad Mercantile Bank Limited’s initial public offering (IPO) begins on September 5 and closes for subscription on September 7. The basis for allotment of the IPO will be finalized on September 12, while the refund will be initiated the next day, on September 13. The demat credit will be received on September 14, while the issue will be listed on the NSE and BSE on September 15. The IPO of Tamilnad Mercantile Bank will be allocated 75% to QIBs (Qualified Institutional Buyers), 15% to NII/HNIs, and 10% to retail investors.The minimum investment lot in the IPO will be 28 shares. Retail investors can invest a minimum of 1 lot and a maximum of 13 lots (364 shares) with an investment of Rs. There is an investment of 191,100. In the HNI/NII category, smaller HNIs can invest between 14 lots and 68 lots, and large HNIs can invest up to 69 lots without any upper limit.
4) Tamilnad Mercantile Bank’s IPO will be a completely new issue of shares. The total issue size includes a fresh IPO of 1.584 crore shares in the price band of 500₹ to 525₹ per share. At the upper end of the price band, the problem size is Rs. Works up to 831.60 crores. Tamilnad Mercantile Bank shares have a face value of ₹10 per share. Since the bank is professionally managed, it does not have any identifiable promoter group.
5) In the last two years, between FY20 and FY22, Tamilnad Mercantile Bank’s net profit increased from 465 Cr to 902 Cr.During the same period, Tamilnad Mercantile Bank’s total revenue stood at Rs. 3,993 crore to Rs. 4,657 crore, up to Rs. The Tier-1 capital of the bank is already at 20.46%, against the statutory requirement of 11.5%. Between FY21 and FY22, Tamilnad Mercantile Bank’s gross NPAs fell to 1.69% from 3.44%. The CASA ratio has improved to 30.5%, although it is much lower than similar private banks in India.
6) As it is a new problem, it will reduce equity. If the new issue amount is also included in the existing capital base, the total indicated market cap of Tamilnad Mercantile Bank post issue would be approximately 8,313 crore. The stock is worth about 9.22 times its historical earnings.The PE ratio should be more attractive on a forward basis.
7) Axis Capital, Motilal Oswal Investment Advisor, and SBI Capital Markets will lead the offering.The Link of Time India Private Limited will be the Registrar of Issues.
The Indian IPO market is witnessing a banking IPO for a very long time. With its education and continued growth, proper valuation should leave room for the upside for investors.