The Tamilnad Mercantile Bank Story|Business Strategy|Case Study|Case Studies

The Tamilnad Mercantile Bank Story

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Case Details:

Case Code : BSTR017
Case Length : 6 Pages
Period : 1998 - 2002
Organization : Tamilnadu Mercantile Bank
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Banking and Finance

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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The Nadar/Ruias Tussle

TNMB was incorporated as 'Nadar Bank' in 1921 and it became a scheduled bank in 1935. In 1962, the name was changed to 'Tamilnad Mercantile Bank.' The bank's major shareholders were G Kathiresan, and Vetrivel of Tuticorin Spinning Mills (TSM) - 23%, C S Rajendran of Ayannar Coffee - 8%, VVD oil Mills - 3%, Sivakasi Ayya Nadar - 4%, Virudhunagar MSP Group - 13% and ARARS, Tuticorin - 3%, and the remaining 46% was held by the public.

From just 4 branches in Tamil Nadu in 1947, by 2001TNMB had 6 regional offices, 14 extension counters and 163 branches, spread all over India. Of the 163 branches, 140 branches were fully computerized. The profit had increased from Rs 6,984 in 1921 to Rs 0.505 million in 1971 and to Rs 500 million in 2001. Due to the high profitability, the bank's reserve base reached Rs 2.76 billion by 2001. In March 2001, its Earnings Per Share (EPS) was around Rs 1772 - the highest among all private sector banks. The bank's performance over the years attracted the attention of the Essar Group, which was planning to enter the banking business as part of its diversification plans. The Ruias had reportedly bought the stake in TNMB by taking advantage of in fighting between the promoters of the bank...

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The Nadar-Siva Tussle

Siva launched Sterling Computers Ltd. in 1983, which produced personal computers (PC) for Indian and international markets. The company went public in 1989, and by 1990, it had become India's fourth largest PC producer.

In 1998, Siva promoted DishnetDSL Ltd. to provide Internet services in India. He also promoted cellular telephone services Sterling Cellular in Delhi and Aircel Ltd. in Tamil Nadu. The group also had plans to enter the satellite television business in India and had incorporated Sterlingsat Television Limited in Mauritius, Singapore, and Sivasat TV Comm Limited in Chennai. In October 1997, Siva sold 80% of Sterling Computers' equity to the Ruias. The Ruias gave the 67% stake in TNMB to Siva as part consideration as against a total price of Rs 2.12 billion. This deal shocked the Nadars, who vehemently opposed the validity of the stake transfer to Siva. According to the deal between the Ruias and Kathiresan, the Ruias were to sell their stake only to the Nadars...

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