Chennai, Sep 6 (IANS): With 37.61 per cent of its paid up equity share capital or 53.59 million equity shares are subject to outstanding legal and regulatory proceedings including a 1:500 bonus issue Tamilnad Mercantile Bank (TMB) has filed its Draft Red Herring Prospectus (DRHP).

The bank has filed DRHP for a premium initial public offer (IPO) of up to 15,840,000 equity shares of face value of Rs 10 each - fresh issue of 15,827,495 equity shares and an offer for sale of 12,505 equity shares by six equity shareholders.

The offer will constitute 10 per cent of the post-offer paid-up equity share capital.

Currently TMB has an equity base of about Rs 142.51 crore.

According to DRHP, the allotment of 15,132,000 equity shares as bonus issue in the ratio of 1:500 to 41 members is held in abeyance due to reasons including, among others death of the members, outstanding legal proceedings, discrepancies in transfer deed and non-registration of instrument of transfers by TMB.

With regard to the 1:500 bonus issue, TMB had paid a penalty of Rs 6 crore for issuing bonus to six non-resident entities holding the Unacknowledged Shares which had been the subject matter of the RBI Order.

The TMB has said in its risk factors – 37.61 per cent of its of 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 Reserve Bank of India (RBI), the Directorate of Enforcement, some of whom have imposed and sought to impose penalties.

Further the issue of share transfers made to Katra Holdings and others without RBI permission and the fine slapped on TMB by the Enforcement Directorate (ED) last year is also pending.

Last year, the Special Director, ED (southern region), had imposed a penalty of Rs 11.33 crore on TMB for recording in its books the transfer of 46,862 shares of the bank in the names of seven foreign entities -- RST Limited (wholly owned by Ravi S. Trehan), Katra Holdings Limited (wholly owned by Ramesh Vangal), GHI I Limited (wholly owned by Rajat Gupta), Kamehameha (Mauritius) Limited, FI Investments (Mauritius) Limited, Cuna Group (Mauritius) Limited, and Swiss Re Investors (Mauritius) Limited.

The above seven entities were not approved by the RBI for acquiring the shares of TMB.

A further penalty of Rs 5.66 crore was imposed on TMB for its act of recording in its books the subsequent transfer of 27,289 shares out of the above 46,862 shares in the names of two foreign entities -- Sub-Continental Equities Ltd, Mauritius, and Robert & Adris James Company Limited, Mauritius, without the permission of the RBI.

Penalty was also imposed on the directors of the TMB Board who had approved the recording of the transfer of shares of the bank.

The TMB is yet to pay the penalty and the matter is pending.

"We cannot assure you that these matters will be resolved in a timely manner or at all and any adverse developments in such proceedings could result in the imposition of injunctions or penalties or require us to incur significant costs to contest any of which could have a material impact on our reputation, business, financial condition and results of operation," the bank said in DRHP.

The Tuticorin headquartered bank has been in the news for a long time for disputes over transfer of shares between various parties.

As regards the objects of the IPO, TMB said that the net proceeds are proposed to be utilised towards augmenting its Tier-I capital base to meet future capital needs owing to its growth.

According to TMB, as of June 30, 2021, it has 509 branches, of which 106 branches are in rural, 247 in semi-urban, 80 in urban and 76 in metropolitan centres.