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Fate of Tamilnad Mercantile Bank IPO to be decided by SAT

Minority shareholders of the bank have cited concerns over the offer for sale being scrapped. (Photo: Mint)Premium
Minority shareholders of the bank have cited concerns over the offer for sale being scrapped. (Photo: Mint)

The fate of Tuticorin-headquartered Tamilnad Mercantile Bank Ltd’s (TMB’s) upcoming initial public offering (IPO) is in the hands of Securities Appellate Tribunal (SAT) as minority shareholders of the bank have approached the tribunal against the public offer.

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MUMBAI : The fate of Tuticorin-headquartered Tamilnad Mercantile Bank Ltd’s (TMB’s) upcoming initial public offering (IPO) is in the hands of Securities Appellate Tribunal (SAT) as minority shareholders of the bank have approached the tribunal against the public offer.

Three shareholders, Robert and Ardis James Co, East River Holdings Ltd, and Swiss Re Investors (Mauritius) Ltd are seeking a stay on the public offer. The bank’s public offer goes live on 5 September. The shareholders have cited concerns over the offer for sale (OFS) being scrapped and the Securities and Exchange Board of India’s (Sebi’s) decision making process in approving the public offer.

“As shareholders they are concerned about how the IPO approval process was rushed despite there being legal concerns and overhang on the bank’s shares," said a lawyer with direct knowledge of the matter. The matter was slotted to be heard on 6 September. However, senior counsel Janak Dwarkadas, appearing on behalf of shareholders sought an urgent hearing since the public offer opens on 5 September. SAT will hear the matter on Friday.

The bank had originally planned an OFS and fresh issue of shares when it filed the draft red herring prospectus (DRHP) in September 2021. However, subsequently, the bank scrapped its decision on the OFS. The investors argued that the bank needs to file a fresh DRHP with Sebi, according to an executive and the lawyer mentioned above. Sebi, however, did not find merit in the argument and did not ask the bank to file a fresh DRHP and allowed it to go ahead with its public issue. This led the three investors to file petitions before SAT to adjudicate if the bank can go ahead with its listing next week.

Half a dozen foreign institutional investors together own 23.2% of the bank, according to the DRHP.

The OFS was scrapped because of a legal overhang on some of shares of the bank.

“To push a set of public and retail investors into this judicial flotsam is ill-advised. If it were a large issue that dwarfed the size of the existing litigations, it was still worth the risk. However, with 37.61% or 53.6 million shares subject to legal wranglings and held in abeyance, how do you even price for this overhang and legal uncertainty?" asked Institutional Investor Advisory Services India, the Mumbai-based proxy advisory firm, in a note dated 31 January.

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