Tamilnad Mercantile Bank IPO GMP, Subscription Status, Financials; Should You Buy on Day 2?

Tamilnad Mercantile Bank IPO Day 2: The initial public offering (IPO) of Tamilnad Mercantile Bank opened for subscription on Monday, September 5. The IPO will close on September 7, according to the draft paper submitted by the company with the market regulator SEBI. The Initial Public Offer received 83 per cent subscription on the first day on Monday with retail category oversubscribed. The Tuticorin-based private sector lender has fixed the price band at Rs 500-525 per share. Private sector lender Tamilnad Mercantile Bank on Friday mobilised a little over ₹363 crore from anchor investors.

Tamilnad Mercantile Bank IPO Subscription Status

The IPO received bids for 72,56,228 shares against 87,12,000 shares on offer, according to data available with the NSE. The quota for Retail Individual Investors (RIIs) was subscribed 1.53 times, while that for Qualified Institutional Buyers (QIBs) received 73 per cent subscription and non institutional investors 58 per cent.

Tamilnad Mercantile Bank IPO: Financials

Tamilnad Mercantile Bank’s net profit has grown at a CAGR of almost 42 per cent between the years ended March 2020 and March 2022, according to Axis Securities. Its deposits increased at a CAGR of 10.5 per cent compared with a peer median of 7.9 per cent during this period, and advances rose 9.9 per cent, the brokerage highlighted in a note.

Tamilnad Mercantile Bank IPO GMP Today

As per market observers, Tamilnad Mercantile Bank shares premium (GMP) have gone slightly up from yesterday to Rs 12 in the grey market today.

Tamilnad Mercantile Bank IPO Should you Subscribe on Day 2?

Most analysts said retail investors should apply for the IPO citing consistent financial performance and healthy asset quality. At the same time, a few are cautious in the short term as they see a couple of risks.

“At the upper end of the price band, the bank is valued at 1.35 times price to book value (after issue) as on 31 March 2022 which looks reasonable. However, a change in management and pending legal proceedings in relation to shareholding remain risks,” said Kajal Gandhi at ICICIdirect.

The broker said investors can apply for the IPO with a long term view. As much as 37.7 percent of equity share capital is subject to legal proceedings, which ICICI Securities said is a key risk. Besides, significant regional concentration in southern India also poses a risk.

“Company’s consolidated revenue growth of 5 per cent over FY20-22 but interest/discount on advances was of 4.1 per cent over FY20-22. It It will be challenging for the bank to grow its business in Tamil Naidu as well as new geographics. Looking at the current valuation of price to book of 1.4 times we believe that near-term positive has been priced in the IPO price. Thus, we have a NEUTRAL rating on the issue,” said Angel One.

Tamilnad Mercantile Bank (TMB) is one of the oldest private sector banks with a history of 101 years, having been established in 1921 as Nadar Bank. The bank offers a wide range of services primarily to micro, small and medium enterprises, agricultural and retail customers.

The shares of the company are expected to list on stock exchanges BSE and NSE on Thursday, September 15, 2022.

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