The initial public offering (IPO) of Tamilnad Mercantile Bank (TMB) was fully subscribed on its second day on Tuesday. The offer received bids for 13.3 million shares, against the IPO size of 8.712 million shares, getting subscribed 1.53 times.

Retail investors booked their quota 3.61 times, and non-institutional investors booked 1.27 times their reserved portion. The lender has fixed the price band at Rs 500-525 per share. The offer will conclude on Wednesday.

The issue size was reduced to 8.712 million shares from 15.8 million shares after a healthy response to the anchor book. The bank had planned to raise Rs 831.60 crore through its public issue, of which Rs 363 crore has been raised from the anchor book on September 2.

TMB intends to use the net proceeds from the offering to increase its tier-I capital base to achieve its capital requirements. The lender has 50.8 million customers, nearly 85% of whom are from Tamil Nadu. It also has a presence in Delhi, Gujarat, Maharashtra, Karnataka, and Andhra Pradesh.

According to Nirmal Bang Equity Research, TMB has a strong track record of successfully growing and managing a granular portfolio with superior asset quality metrics. The bank stands out among the old generation private banking peers on most metrics, and can sustain ROA at around 1.5% levels in coming years on the back of stable NIM at around 4.0% levels and decline in credit cost to below 1%, it said. “Although pending legal issues regarding the bank’s share capital shall continue to be a hangover, considering the quality of business, top quartile earnings profile in the banking industry and reasonable valuations, we rate the issue as ‘Subscribe,” it said.

TMB had initially planned an offer for sale (OFS) by existing investors, which was later withdrawn and the bank proceeded with a fresh issue.

The decision not to go ahead with the OFS was questioned by six foreign institutional investor shareholders at the Securities Appellate Tribunal (SAT). The SAT, however, dismissed the appeals on September 2.

The six shareholders, whose ownership of shares has been contested by the Reserve Bank of India (RBI), had earlier filed writ petitions in the Bombay High Court to direct the Securities and Exchange Board of India to instruct the bank to include their shareholding in the offer for sale. The shares held by these shareholders were considered ineligible for being offered for sale to the public, with the RBI having directed the bank to ensure that the shares are not transferred.

Only six eligible shareholders holding 12,505 shares had expressed their desire to sell their shares in the offer for sale, based on which the draft red herring prospectus had been filed. However, it was later withdrawn citing delay in the IPO.

According to the management of TMB, after the IPO, the bank’s capital adequacy ratio will increase from 22% to 25%.