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Tamilnad Mercantile Bank IPO Subscription Status: The initial public offering (IPO) of private sector lender Tamilnad Mercantile Bank, which opened for subscription on Monday, September 5, 2022, got fully subscribed on the second day of bidding.

The IPO was subscribed 1.18 times by 2:42 pm on the second day of bidding. It received total bids for 1,03,17,104 shares across both the stock exchanges against 87,12,000 shares on offer, data from National Stock Exchange (NSE) showed. The IPO had received 83 per cent subscription on the first day on Monday.

The Rs 831.6 crore Tamilnad Mercantile Bank IPO will be available for subscription till Wednesday, September 7, 2022, and the price band of the company has been fixed at Rs 500-525 per share.

The Tamilnad Mercantile Bank IPO comprises a fresh issue of up to 15,840,000 equity shares. The net proceeds from the issue will be utilised for augmenting its Tier–I capital base to meet future capital requirements.

Three-forth of the issue size has been reserved for qualified institutional buyers (QIBs), 15 per cent for non-institutional investors and the remaining 10 per cent for retail investors.

Tamilnad Mercantile Bank is one of the oldest private sector banks in the country with a history of almost 100 years. It offers a wide range of banking and financial services primarily to micro, small and medium enterprises (MSME), agricultural and retail customers.

As of March 2022, the private sector lender has 509 branches, of which, 106 branches are in rural, 247 in semi-urban, 80 in urban and 76 in metropolitan centres. It had a customer base of around 5.08 million as of March 2022. Of which, nearly 80 per cent comprised customers who were associated with the bank for more than five years.

Investors who wish to subscribe to Tamilnad Mercantile Bank IPO can bid in a lot of 28 equity shares and multiples thereafter. At the upper price band, they will be shelling out Rs 14,700 to get a single lot of Tamilnad Mercantile Bank. The shares will be listed on both BSE as well as the NSE.

The applicants also must note that the cut-off time for UPI mandate acceptance is Wednesday, September 7, 2022, upto 5:00 pm, the last day of IPO bidding. If they fail to do so then their application may not be considered.

Axis Capital, Motilal Oswal Investment Advisors and SBI Capital Markets are the book-running lead managers to the offer while Link Intime India is the registrar of the issue.

Before heading into the IPO, the Tuticorin-based bank on Friday raised over Rs 363.52 crore (Rs 3,63,52,80,000) from 21 anchor investors in lieu of 71,28,000 equity shares at Rs 510 each, data from the stock exchanges showed.

The anchor investors include Societe Generale, Nomura Singapore, Bajaj Allianz Life Insurance Company, Max Life Insurance Company, Kotak Mahindra Life Insurance Company and Moneyewise Financial Services among others.

The research teams at IIFL Securities and Reliance Securities in their respective IPO notes have given a “Subscribe” rating to the offer.

IIFL Research in its IPO note said, “At the upper price band of ₹525, Tamilnad Mercantile Bank Limited is demanding a P/E multiple of ~9.1X based on FY22 earnings, while the industry average is 11.85x. With a loyal customer base and focus on improving servicing framework, strong presence in Tamil Nadu with focus to increase presence in other strategic regions, consistent increase in profits and plans of further investment in technology, we a recommend subscribe on the issue with a long-term perspective.”

Reliance Securities in its report noted, “The IPO is valued at 1.6x FY22 Book. TMB is one of the oldest banks with 100+ years of legacy. TMB focussed on diversifying product portfolio to access more client base. It continues to expand relationship banking facilities to increase network. It intends to focus more on fee-based products such as issuing debit cards, credit cards, insurance, online bill payment, DP services, etc. In view of its improving assets quality, lower NPAs, focus on strategic expansion, growing deposit base with a focus on low-cost retail CASA, strong financial track record and valuation comfort, we recommend a ‘SUBSCRIBE’ to the issue.”

The share allotment is likely to take place on Monday, September 12, 2022, and the shares are expected to be listed on Thursday, September 15, 2022, according to the timeline given in the red herring prospectus (RHP).

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