The Hindu Business Line : TMB plans public issue, internal restructuring

Chennai June 11 A 13-year-long saga of stake-sale controversy in Tamilnad Mercantile Bank ended last month, when seven foreign investors bought out the holding of Mr C. Sivasankaran.

With a networth of Rs 760 crore and total business of Rs 10,067 crore, Tamilnad Mercantile Bank is one of the more profitable old private sector banks in the country.

Growth had been stunted to some extent by the controversy surrounding ownership. Now with that problem gone and with a new professional at the helm of affairs, TMB is like a just-unshackled racehorse.

Mr G. Narayana Moorthy, former General Manager of Canara Bank and Chief Vigilance Officer, Indian Overseas Bank, joined Tamilnad Mercantile Bank as Managing Director on December 1.

In an interview to Business Line, which had to be strictly about the bank and not shareholding, he spoke about how he proposes to take the bank forward. Excerpts from the interview:

TMB has a paid-up equity of Rs 28 lakh and reserves of Rs 759 crore. Is there a plan to capitalise the reserves?

Yes, we are thinking of a bonus issue, but the proposal is yet to be formally placed before the board.

With a capital adequacy ratio of 16.77 per cent, you may not need to raise capital, but would you come out with a public issue in order to give your new investors an exit route?

We are indeed thinking of a public issue. It is not only to give an exit route to our new investors, who are anyway here for the long term, but also in order to let the market discover the true worth of the bank. Also, while our funds position is comfortable, we have to lay the ground for the big plans we have that include acquisitions.

What is the size you have in mind?

Details are being worked out and have to be cleared by the board. I expect our IPO to hit the market by January 2008.

What are the changes you brought in after taking over as MD?

Well, business has grown pretty well. Total business, which had grown by Rs 172 crore in the first eight months of the financial year, grew by Rs 1,566 crore in the next four. After taking charge as the Managing Director, my first task was to boost the morale of the staff and to get them work to the full potential. We held extensive meetings with the staff in all branches and told them that the bank was on a high growth trajectory. But mere talking will not do — we promoted close to 100 people, but held back their orders until they cleared up all the backlog at their respective desks. Our message was clear — work hard, reap rich rewards. Today the staff are electrified.

We also introduced a host of deposit products that have brought in about Rs 500 crore.

In addition, we recruited close to 200 people at the clerical level and are in the process of taking a 100 more. This is in addition to about 20 people at the senior levels. We are on the verge of appointing nine agricultural officers, seven chartered accountants for various specialised functions, two General Managers and two Deputy General Managers.

But the growth in net profit has been modest? (Rs 105.78 crore against Rs 101.19 crore for 2005-06).

That was because of higher provisions for depreciation of investments. Our operating profit has gone up by 19 per cent.

What are your plans for the future?

I mentioned the IPO and listing. We are also restructuring the operations of the bank. We have a robust technology base, all our 173 branches are under core banking solutions (Finacle). The number of branches will rise to 225 by the end of the year and all the new branches will also be under CBS. On the back of this, we will introduce a number of technology-based products. Internet banking, and online loan application are to be brought in soon.

To strengthen the processes, we are introducing software products. For example, we're getting `Loan Automated Process System' (LAPS) software, for scrutinising loan applications. This cuts down the scrutinising time. We are introducing BankMart, a software for alerting potential defaults. We are tying up with a company called FINO for hand-held devices for biometric identification for use mainly in rural branches.

You mentioned restructure. What's that?

It is an internal restructure, meant to make way for better focus. The plan is subject to RBI's approval, but what we envisage is the bifurcation of the credit department into metro and non-metro regions, with each under a General Manager. Treasury, legal and business planning divisions have been shifted from Tuticorin to Chennai. Till now the bank had only one General Manager; but now we will have five. There will be more empowerment of staff down the line for loan sanctions.

More Stories on : Interview | IPOs | Restructuring | Private Banks

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