The public issue of Tamilnad Mercantile Bank received a decent response, getting subscribed 2.10 times so far on September 7, the final day of bidding.
Investors have bought 1.83 crore shares against the offer size of 87.12 lakh shares as per the data available with exchanges.
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Retail investors remained at the fore by booking their quota 5.17 times, while the portions set aside for non-institutional investors and qualified institutional investors were subscribed 2.05 times and 1.11 times respectively.
The private sector lender is going to raise Rs 831.60 crore at the upper end of the price band of Rs 500-525 per share. This is entirely a fresh issue, hence the money will be utilised by the bank for augmenting tier one capital base to meet future capital requirements.
Tamilnad Mercantile Bank is one of the oldest private sector banks in India. In the last three years, the company has generated strong revenue and margin expansion. Due to the central bank’s direction on listing, its branch expansion plan was put on hold, but once listed it will expand the network.
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“The lender 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,” Asit C Mehta Investment Interrmediates said.
However, pending legal matters may impact the bank if the verdict goes against the lender. At the upper end of the price band, the stock is priced at 1.35x its FY22 book value (based on fully diluted post issue equity), said the brokerage while recommending subscribe to the issue from a long term perspective.
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Anand Rathi Research also recommended a “subscribe-long term” rating to this issue, given consistency in the lender’s performance and healthy return ratio.
Tamilnad Mercantile Bank is demanding a slightly higher valuation compared to its peers given that it is outperforming its peers on a majority of financial parameters, the brokerage said.
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Tamilnad Mercantile Bank has strong presence in Tamil Nadu and is focused on increasing presence in other strategic regions. The lender focuses on advances to MSME, agricultural and retail segments which have grown at a compound annual rate of 12.94 percent between FY20-22.
Net interest margin has grown from 3.64 to 4.10 percent from FY20 to FY22 at a compound annual rate of 6.13 percent.
