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We at Jobaaj reported the details of the IPO of Tamilnad Mercantile Bank, but the same faced an issue on Friday. A group of minority investors had filed an appeal with the SAT to put a stay on it.
But what happened?
Three shareholders: Robert and Ardis James Co, East River Holdings Ltd & Swiss Re Investors (Mauritius) had sought a temporary hold against the IPO of the Tuticorin-based bank late on Friday.
Earlier, when the bank's DRHP was approved by market regulator SEBI, the IPO was a combination of a fresh issue and an OFS (offer for sale). Albeit minor, there was an option for existing shareholders to offload their stakes in the bank.
However, when the price band for the IPO was decided, it was also announced that the entire IPO would be a fresh issue, which ended up with the aforementioned 3 shareholders acting against it.
The trio approached SEBI, arguing that the Bank needed to file a fresh IPO to account for the change in the public offer. SEBI, however, found their argument baseless and allowed the Bank to go ahead with its public issue.
Not satisfied with SEBI's judgement, the trio approached the SAT i.e. Securities Appellate Tribunal, which hears cases against SEBI. They were concerned about the IPO being rushed even though the company had several legal proceedings against it. However, SAT agreed with SEBI's views on the matter and rejected the plea.
Back up, legal proceedings!?
Yes! Between June 2018 & May 2021, the RBI imposed penalties to the tune of Rs 7.35 crores for not adhering to rules around the issue and pricing of shares, deficiencies in regulatory compliance on fraud classification & certain cybersecurity incidents. During that time, the Central Bank also restricted the bank from opening a new branch.
In 2021-22, the Enforcement Directorate (ED) attached shares worth Rs 294 crores of ex-Chairman N Muthu in a probe linked with FEMA law violations.
So what should we do?
Barring legal proceedings, the bank has legacy value, a loyal customer base, and a focus on improving its services. Moreover, the bank announced that it had managed to raise Rs 363.53 crores from 10 anchor investors. So, investing in the Bank's IPO, which goes live on 5th September, is not a bad decision.
Article by Aman Agarwal.
This news piece is brought to you in association with Jobaaj.com
