Mumbai : The fate of Tuticorin-headquartered Tamil Nadu Mercantile Bank Ltd (TMB)’s upcoming initial public offering (IPO) is in the hands of the Securities Appellate Tribunal (SAT) as minority shareholders of the bank have approached the tribunal against the public offering.
Three shareholders, Robert and Ardis Gems Company, East River Holdings Ltd., and Swiss Re Investors (Mauritius) Ltd., are seeking a moratorium on the public offering. The bank’s public offer will go live from September 5. Shareholders have expressed concern over the scrapping of the Offer for Sale (OFS) and the decision-making process of the Securities and Exchange Board of India (SEBI) in approving the public offer.
“As shareholders they are concerned about how the IPO approval process has been expedited despite legal concerns and the bank’s shares dominating,” said a lawyer with direct knowledge of the matter. The matter was to be heard on September 6. However, senior advocate Janak Dwarkadas, appearing for the shareholders, sought urgent hearing after the opening of the public offering on September 5. SAT will hear the matter on Friday.
The bank had originally planned an OFS and fresh issue of shares while filing the draft Red Herring Prospectus (DRHP) in September 2021. However, later, the bank reversed its decision on the OFS. According to an executive and the counsel mentioned above, the investors argued that the bank needs to file a fresh DRHP with SEBI. SEBI, however, did not find merit in this argument and did not ask the bank to file a fresh DRHP and allow it to go ahead with its public issue. This prompted three investors to file a petition before SAT to see if the bank can go ahead with its listing next week.
According to the DRHP, half a dozen foreign institutional investors together own 23.2 per cent of the bank.
The OFS was terminated due to a legal overhang on certain shares of the bank.
“It is not advisable to push a group of public and retail investors into this judicial flotsam. If it was a larger issue that truncated the size of existing lawsuits, it was still worth the risk. However, with 37.61% or 53.6 million shares subject to legal wrangling and withholding, how do you even price for this overhang and legal uncertainty? 31 January.
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