Tamilnad Mercantile Bank: Should buy, sell or hold after muted listing?

The century-old private lender was listed at Rs 510 on BSE, exactly the issue price, whereas its debuted at a discount of 3 per cent Rs 495 on National Stock Exchange (NSE) in comparison to the given issue price.

In tandem with the benchmark indices, Tamilnad Mercantile Bank further extended its losses and dropped to Rs 481-markets, roughly 6 per cent lower, before making a marginal recovery.

However, analysts remain positive on the private lenders despite its muted debut at the bourses and suggest that investors should hold the counter for a longer run. However, any fresh entry at current levels shall be avoided, majority of them said.

Santosh Meena, Head of Research,

said that the precarious legal challenges, the lack of complete clarity on the management’s long-term performance, and less than stellar subscription numbers are some of the reasons for its negative listing.

Those who applied for listing gains can maintain a stop loss of Rs 470, he said. “Long-term investors should wait for some quarters to let the dust settle, and in the meanwhile, we suggest investors go for other existing listed banks.”

A day before listing, shares of Tamilnad Mercantile Bank were trading at a premium of Rs 10-12 in the grey market, signalling a flat listing for the south India focussed lender.

Echoing the similar opinion, Ajit Mishra, Vice President (Research),

Broking said that investors should hold the stock for the longer run, but fresh entry should be avoided.

“Existing investors, who applied for the issue, shall wait for the expansion and plans to play out in the coming weeks,” he added. “The books of lenders are clean and the fundamentals are sound for TMB.”

Incorporated in 1921, TMB is among the oldest private sector banks in India, having 509 branches as of March 31, 2022. The bank is focused and concentrated in South India but is now diversifying into other states as well.

Astha Jain, Senior Research Analyst at Hem Securities said that investors with high risk appetite can continue to hold the shares for a longer run as the growth prospects remain strong, but it is not an opportune time for fresh entry.

The Rs 807.85-crore initial public offering (IPO) of Tamilnad Mercantile Bank, which was sold in the range of Rs 500-525 apiece, received a dull response from investors as it was subscribed 2.86 times.

The quota reserved for retail bidders was subscribed 6.48 times while the quotas reserved for non-institutional investors (NIIs) and qualified institutional buyers (QIBs) were subscribed 2.94 times and 1.62 times, respectively.


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