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Tamilnad Mercantile Bank Essentials

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ISIN

INE668A01016

Face Value

₹10.00

Total Share

14,25,11,454

Total Income

₹1,932.94 Cr

Profit After Tax

₹821.91 Cr

EPS

₹57.67

Enterprise Value

-₹376.80 Cr

Book Value

₹347.89

Intrinsic Value

₹1,891.17

Sector

Financials

Sub-sector

Private Banks

Tamilnad Mercantile Bank Growth

About Tamilnad Mercantile Bank

Tamilnad Mercantile Bank ("TMB"), provides personal, corporate, and non-resident Indian (NRI) banking products and services in India. The company offers personal banking products and services, including savings accounts, and fixed and recurring deposits; loan products, such as personal, home, car, two-wheeler, house rent, doctor, education, and pension loans; agriculture jewel and non-agriculture jewel loans, gold over drafts, loan against properties, and loan against sovereign gold bonds; debit and credit cards; and other services, including demat account, Internet/mobile banking, equity trading account, PoS terminals, online bill payment, e-tax payment, mutual fund, and insurance services.
It provides corporate banking products and services, such as business accounts, such as current and super flexi current accounts; loans, including commercial vehicles, traders and service, MSME, rice mill and dhall mill, doctor, genset, and Mahalir loans; microenterprise, pharma trade finance, channel finance, vehicle finance for educational institutions, and secured overdraft; forex services; and other services, such as treasury, e-stamping, and bancassurance.
It also offers NRI banking products and services, including NRI saving, recurring deposit, and term deposit accounts; NRI loans; money transfer services; cards; and online banking services.
TMB was the first private Sector bank to introduce computerization operation at branch level in India and today it’s all branches are networked using FINACLE software of Infosys to achieved 100% connectivity.
Bank currently has 509 full branches throughout India with 12 regional offices and 11 extension counters, 6 central processing centers, 1 service branch, 4 currency chests and 1151 ATM with a total customer base of 4.93 Mn.
TMB was established on 11th May 1921 as Nadar Bank headquartered at Thoothkudi, Tamilnadu and M.V. Shanmugavel Nadar was elected as the first chairman on 4 November 1921.

Tamilnad Mercantile Bank IPO Details

The company got approval for its IPO in August'22, for the fresh issue of 15,840,000 equity shares.
The main objective of the fresh issue of the company is to meet the capital adequacy requirements and they proposed to utilize it towards augmenting its Tier–I capital base to meet its future capital requirements.
Issue break-up: No. of Shares allotted to QIB 11,880,000(75%), NIB 2,376,000 (15%) Retail 1,584,000 (10%)
On 15th Sep'2022 the stock listed at Rs 510 on the BSE, while it listed with a 6% discount on the NSE.

Open Date

5 Sep 2022 at 10:00 AM

Closed Date

7 Sep 2022 at 05:00 AM

Listing Date

15 Sep 2022 at

Tamilnad Mercantile Bank
Price Brand

₹ 500 - ₹ 525

Tamilnad Mercantile Bank
Min Order Qty

25 Shares

Tamilnad Mercantile Bank
Grey Market Premium

₹ 5 - ₹ 5

Tamilnad Mercantile Bank
Fresh Issue No. of Shares

1.58 Cr

Tamilnad Mercantile Bank Retail Subscription Status

6.48x

Tamilnad Mercantile Bank QIB Subscription Status

1.62x

Tamilnad Mercantile Bank NII Subscription Status

2.94x

Tamilnad Mercantile Bank Merger & Acquisition

Acquisition

On 8th June,2007, Federal Insurance Company and a group of private investors from the Nadar community entered into an agreement to acquire 33.58% stake in TMB worth Rs. 1300 Mn from Mr C. Sivasankaran. The respective person will sell 95,418 shares of the bank.

Tamilnad Mercantile Bank Subsidiaries

Bank does not have any group company or subsidiary or associate entity.

Tamilnad Mercantile Bank Business Model

TMB introduced internet banking to customers in 2008 through ‘TMB-Econnect’ and utility payment facility which enabled our customers to pay bills for cable operators/DTH operators, electricity services, mobile phone utility services, other utilities and tax services. With a focus on increasing our existing customer base, the bank has introduced various alternate banking channels such as ATMs, CRMs, internet banking, mobile banking, E-Lobbies, point of sales (“PoS”), banking and debit and credit cards.

Tamilnad Mercantile Bank Revenue Segmentation

Interest/Discount on advance/bills
Income on investments

Interest on balance with RBI and other inter bank funds
Other income

Commission

Tamilnad Mercantile Bank Product & Services

The key cliental of the bank are retail customers, business enterprises and individual customers from rural, semi urban and urban (non metro) centers mainly from southern India.

Asset products

RAM customers

1. Retail asset products - Home loans, Personal loans, Security-backed loans etc.

2. Agricultural customers - Manufacturing, trading and service sector loan products.

3. MSME's - Loans to individual farmers, group of farmers, agriculture businesses.

Corporate customers

1. Working capital funding

2. Term financial funding

3. Foreign exchange business funding in domestic and foreign currencies.

Deposit Products

1. Saving bank account

2. Current account

3. Deposits

Tamilnad Mercantile Bank Assets

As of March'22, Tamilnad Mercantile Bank owns fixed assets of worth 210.84 crore.

Asset	Amount in Rs.(crore)
Premises	49.67
Other Assets(office equipment, computer hardware etc)	161.17

Tamilnad Mercantile Bank Industry Overview

Industry Statistics

The Indian banking sector is known for its stability and ability to somewhat shield itself from external risks and although adverse economic conditions at both the domestic and global level.
Traditionally, public banks have accounted for the major proportion of the banking credit outstanding. However, low profitability, weak capital position, low operational efficiency, and increase in stressed loans in the past few years led to slowdown in their loan growth. As a result, public banks gradually lost market share to private banks, which were relatively well capitalised and had higher degree of operational efficiency.

Public banks which accounted for 71% share in credit outstanding in Fiscal 2015, account for only 59% share in Fiscal 2021. Partial economic slowdown resulted in lower credit growth in Fiscal 2020 for both public and private banks. In FY21, public banks growth slowed to 3%, while private banks were able to grow 9% due to better capital buffers. Therefore, the latter were able to gain further market share.

According to a Survey in 2019, India will become third largest domestic banking sector by 2050 after China and U. S.

The Indian banking sector is significantly under-penetrated which provides immense opportunities for banks and other financial institutions. As of Q4 2020, bank credit-to-GDP ratio stands at 58%.

The banking sector enjoyed healthy deposit growth of ~10% CAGR between FY15-20. With the outbreak of the pandemic in FY21, conserving money became a priority and households reduced their private consumption. The same is reflected in the 23% deposit growth in FY21 (% y-o-y), despite low deposit interest rates. On average, deposit rates declined ~100 basis points (bps) since April 2020.

Bank credit outstanding grew at 7% CAGR from FY15-20. After healthy 10.8% growth in FY19, credit growth slowed to 5.9% in Fiscal 2020 due to a slowdown in economic growth. With Covid-19, this deteriorated further in Fiscal 2021; bank credit grew only 5.4% to reach ₹ 107,749 billion.

Future Prospects

India Banking Market is projected to grow at a double digit CAGR during 2019-2024 owing to rising disposable income, growing digital payment system in the country, growing bank branch networks and entrance of the foreign banks in Indian market.
According to a recent Survey India will become third largest domestic banking sector by 2050 after China and U. S.
According to RBI, India’s foreign exchange reserves reached INR 43 lakh Cr., as of February 5, 2021. According to RBI, bank credit and deposits stood at Rs. 106 lakh Cr. and Rs. 146 lakh Cr. respectively, as of January 15, 2021.
Deposit growth is expected to slow to 6-8% in Fiscal 2022 due to households moving away from bank deposits and increasing consumption. Also, expenses due to the second wave are likely to result in deposit growth slowdown in Fiscal 2022.
Earlier, credit growth in FY22 was expected to be much higher due to faster economic revival. However, the second wave led to realignment in growth expectations. Overall, bank credit outstanding is expected to grow 8-10% in Fiscal 2022. Much of this growth would be mainly driven by retail and agri loans.
CRISIL research expects the entire stress would be recognised till Fiscal 2022-end; Fiscal 2023 would witness typical slippages and recoveries.
As merged banks focus on integration and banks placed under corrective action come out of the PCA framework, credit growth of public banks is expected to lag that of private banks in the medium term. Public banks are expected to grow by 6-8% in Fiscal 2022, whereas private banks are expected to grow 9-11%.

In Fiscal 2022, public banks are expected to witness GNPA increase of ~100 bps due to stress on account of the second wave in Q1 of this Fiscal. Segments such as MSME, microfinance institutions (MFIs) and personal loans are expected to see higher stress.

Government Initiatives

The banking system in India is regulated by the Reserve Bank of India (RBI), through the provisions of the Banking Regulation Act, 1949.
Pradhan Mantri Jan Dhan Yojana (PMJDY), launched in August 2014, is aimed at ensuring affordable access to financial services banking/savings and deposit accounts, remittances, credit, insurance, and pension. As of January 27, 2021, the number of bank accounts opened under it reached 42 Cr. and deposits stood at more than INR 1.3 lakh Cr., of these 65% were in rural and semi-urban areas.

The government and central bank has taken several initiatives to provide relief to borrowers during such challenging times. Major 93 initiatives include ₹ 3 trillion Emergency Credit Line Guarantee Scheme (ECLGS), provision of moratorium and allowing restructuring to corporates, micro, small and medium enterprises (MSMEs) as well as individual borrowers.
NCLT-referred cases in FY22, along with the resolution framework 2.0 announced by the RBI would limit the increase in GNPA levels from 100 bps.

Tamilnad Mercantile Bank Strengths

Capital adequacy ratio of the company is well above 14.9% set by RBI norms.
The bank had achieved a turnover of Rs.18625.7 Cr. in foreign exchange for the year ended March 2022 in terms of forex turnover.
TMB has tie-up arrangements for two-way transactions with IDBI Bank operating in 136 locations, and HDFC Bank operating in 531 locations for the convenience of customers.
Company’s Gross Non-performing assets have decreased from 3.44% in 2021 to 1.69% in 2022.

As of June 30, 2021, company has 509 branches, of which 106 branches are in rural, 247 in semi-urban, 80 in urban and 76 in metropolitan centres.
Company's overall customer base is approximately 4.93 million as of June 30, 2021 and 3.45 million or 69.96% of customers have been associated with them for a period of more than five years and have contributed to ₹ 275,619 million or 67.02% to the deposits and ₹ 179,638.99 million or 57.56% to the advances portfolios as of June 2021.

Tamilnad Mercantile Bank Shortcomings

On account of litigation pending before different high courts in relation to certain transfers of shares, Annual general meetings of the Bank from 1997 onwards could not be conducted regularly, or were convened only under the supervision of the High Court of Madras, after obtaining prior approval and this may adversely affect bank’s reputation, business, results of operations and financial conditions.

37.61% of TMB's paid up equity share capital or 53.59 million equity shares are subject to outstanding legal proceedings which are pending at various forums and, in connection with which, proceedings against the Bank have been initiated by various regulatory authorities, including the RBI, the Directorate of Enforcement, some of whom have imposed and sought to impose penalties on us in the past

TMB will be unable to open new branches unless they are listed and are also required to obtain prior permission from the RBI to open new branches.

Tamilnad Mercantile Bank Opportunities

Due to many government schemes like Pradhan Mantri Jan Dhan Yojana (PMJDY), providing affordable access to financial services to rural India. There is a huge opportunity in rural parts of India.
Tamil Nadu is under penetrated which presents an opportunity for further growth in GDP funded by bank loans. Its bank credit to GDP stands at 53% as compared to 89% in case Maharashtra and 37% for Gujarat during Fiscal 2020.
MSMEs have been key contributors to growth in the Indian economy. With around 63.4 million it is the second largest employment generator in the economy after agriculture, employing over 120 million people. However, credit to MSMEs contribute to only 14% of total banking credit outstanding, indicating a wide mismatch and an opportunity for lenders.
Company has established commercial relationships with a variety of entities for product portfolio expansion and greater customer awareness. They have entered into a service agreement with independent agencies for E-surveillance services, personalized cheque book printing and envelopes, and a mobile ATM vehicle agreement.

Tamilnad Mercantile Bank Threats

Due to inadequate technical infrastructure in rural parts of India and due to Covid-19 restrictions there is a reduction in customer footfall at the bank.
Private bank industry is very competitive and growth strategy depends on the ability to compete effectively. TMB faces high competition from big banks such as SBI, HDFC, Axis bank.

Company is currently significantly dependent on retail, MSME and agri-financing(RAM), customers and any adverse developments in these segments could adversely affect our business, results of operations, financial condition and cash flows. Accordingly, a reduction in or failure to grow our RAM customer base could lead to losses and adversely affect our business and results of operations.

TMB has regional concentration in southern India, especially Tamil Nadu. Any adverse change in the economic, political, or geographical conditions of Tamil Nadu and other states in which they operate can impact their results of operations.

Banks are required to lend a minimum percentage of our Adjusted Net Bank Credit (“ANBC”) to certain priority sectors. Any adverse performance by such priority sectors or any change in the RBI’s regulations relating to priority sector lending or our bank’s inability to meet the priority sector lending targets could attract punitive action from the regulator which may have an adverse impact.