Tamilnad Mercantile Bank Rs 860-crore IPO opens for subscription today, GMP falls; should you apply-

Tamilnad Mercantile Bank Rs 860-crore IPO opens for subscription today, GMP falls; should you apply?

Tamilnad Mercantile Bank’s IPO opened for subscription today (5 September), at a price band of Rs 500-525 apiece. The public issue will close on Wednesday, 7 September. Tamilnad Mercantile Bank’s IPO is entirely a fresh issue of up to 1.58 crore shares with a face value of Rs 10 each, aggregating to Rs 831.6 crore. At the upper end of the price band, the bank is expected to raise Rs 831.6 crore through the public issue. The Tuticorin-based bank proposes to utilise the proceeds from the issue for augmenting its Tier-I capital base to meet future capital requirements. The lead managers to the issue include Axis Capital, Motilal Oswal, and SBI Capital Markets. Link Intime India is the registrar to the issue.

Ahead of the IPO, Tamilnad Mercantile Bank mobilised a little over Rs 363 crore from anchor investors. The company has decided to allocate 71.28 lakh equity shares to anchor investors at Rs 510 apiece, aggregating the transaction size to Rs 363.53 crore, according to a circular uploaded on the BSE website. Societe Generale, Nomura Singapore, Bajaj Allianz Life Insurance Company, Max Life Insurance Company, Kotak Mahindra Life Insurance Company and Moneywise Financial Services are among the anchor investors. Upon successful listing, Tamilnad Mercantile Bank will join the likes of City Union Bank, CSB Bank, DCB Bank, Federal Bank, Karur Vysya Bank, Karnataka Bank, RBL Bank, and South Indian Bank.

TamilNad Mercantile Bank IPO GMP

As per market observers, Tamilnad Mercantile Bank shares grey market premium (GMP) fell ahead of IPO opening on Monday. The shares of the company are expected to list on stock exchanges BSE and NSE on Thursday, September 15, 2022.

Should you apply for Tamilnad Mercantile Bank IPO?

ICICIDirect: Subscribe for long-term

According to analysts at ICICIDirect TamilNad Mercantile Bank is one of the oldest private sector banks in India with a consistent financial performance and healthy asset quality. “At the upper end of the price band, the bank is valued at ~1.35x 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. We assign Subscribe only for long term rating to the IPO,” the brokerage said.

Yes Securities: Subscribe

“At the upper end of the price band, TMB would trade at an FY22 P/B of 1.4x. For FY22, TMB has delivered an RoA of 1.7% and an RoE of 16.6%. Importantly, given the business model of TMB, we do not see these return ratios as volatile, going forward. Consequently, we find the IPO valuation for TMB as eminently attractive,” the brokerage said in its note.

Religare Broking: Subscribe

According to the brokerage firm report, Tamilnad is well placed to capitalize the growing industry trends given the strong growth potential in geographies where the company is present. “Moreover, the company would focus on improving technology which would help them achieve higher operational efficiency and improve customer experience,” it said. The financial track record has also been good for the company with total income and PAT growth of 7.99% and 41.99% CAGR over FY20-22. Religare Broking has given ‘Subscribe’ rating to the issue. “On the valuation front, Tamilnad is valued at 1.4x pre-issue FY22 Price to Book Value,” it said.

Nirmal Bang: Subscribe

According to the broking firm, TMB has demonstrated a strong track record of successfully growing and managing a granular portfolio with superior asset quality metrics. The lender stands out among the old generation private banking peers on most metrics. “We believe TMB can sustain ROA at around 1.5% levels in coming years on the back of stable NIM at around ~4.0% levels and decline in credit cost to below 1%. TMB is being offered at 1.35x FY22 BV which is at a slight discount to peer banks having similar return ratio profile. Although pending legal issues regarding the bank’s share capital shall continue to be a hangover; considering the quality of business, top quartile earnings profile in the banking industry and reasonable valuations, we rate the issue as ‘Subscribe’,” it said.

Ventura Securities: Subscribe

Tamilnad Mercantile Bank (TMB) is one of the oldest private sector banks in India and among the leaders in its category too. It offers a wide range of banking and financial services, primarily to MSME, agricultural and retail customers. As of FY22, the lender has 509

branches, of which 106 branches are in rural areas, 247 in semi-urban, 80 in urban and 76 in metropolitan centres, with a customer base of around 5.08 million. “We initiate coverage on TMB with a SUBSCRIBE rating and a price target of Rs 843.6 (1.5x FY25), which represents a potential upside of 60.7% over the next 24 months,” Ventura Securities said in its note.

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Tamilnad Mercantile Bank, headquartered at Thoothukudi (Tamil Nadu, India), is among one of the oldest private sector banks in India, with a history of close to 100 years. TMB’s deposits increased at a healthy CAGR of 10.46%. The company’s current account and savings account deposits to total deposits are also competitive among peers at 30.50%.

(The recommendations in this story are by the respective research analysts and brokerage firms. FinancialExpress.com does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)