Ajcon Global IPO report on Tamilnad Mercantile Bank
Tamilnad Mercantile Bank Limited (“TMB”) was incorporated on May 11, 1921. TMB, headquartered at Thoothukudi (Tamil Nadu, India), is one of the oldest and leading old private sector banks in India, with a history of close to 100 years. The Bank offers a wide range of banking and financial services primarily to micro, small and medium enterprises (“MSME”), agricultural and retail customers (“RAM”). As of March 31, 2022, the Bank had 509 branches, of which 106 branches are in rural, 247 in semi‐urban, 80 in urban and 76 in metropolitan centres. TMB has built a strong presence in the state of Tamil Nadu, with 369 branches and 949 automated teller machines (“ATMs”) and 255 cash recycler machines (“CRMs”), 91 E‐Lobbies, 3,939 PoS as of March 31, 2022. The Bank's overall customer base is approximately 5.08 million as of March 31, 2022 and 4.05 million or 79.78% of its customers have been associated with the Bank for a period of more than five years and have contributed to ₹350,14.23 Crore or 77.93% to its deposits and ₹ 21,902.22 Crore or 64.90% to its advances portfolios as of March 2022. As per the CRISIL Report, the Bank had the second highest Net Profit for Fiscal 2022 amongst its Peers, and its Return on Assets was also higher at 1.66% compared to a median 0.80% for its Peers for Fiscal 2022. The Bank's Return on Equity ratio, stood at 16.58% in fiscal 2022, while its peers reported a median of 8.30%. TMB is also well‐capitalised with a tier‐1 capital adequacy ratio of 20.44%.
Valuation and Outlook
At the upper end of the price band of ₹525, the Company's IPO is valued at Price/Book Value of 1.35x at post IPO FY22 Book value, which we believe is decent considering its strong fundamentals. We recommend "SUBSCRIBE" to the issue due to the following factors.
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