Vangal, foreign investors to sell TMB holdings

Ramesh Vangal and foreign investors backing him have decided to exit the Nadar community-controlled Tamilnad Mercantile Bank (TMB).

The buyers include Kuwait and Brunei sovereign wealth funds, foreign insurers and banks through different special purpose vehicles. "The proposal has been approved by the bank's board and has been sent for approval to Reserve Bank of India," according to a TMB source.

Former Pepsico head Vangal and institutions backing him diluted around 13.09 per cent in the bank over the last three to four months, said the highly-placed source in TMB. This was confirmed by another senior official in the bank, who did not wish to be named.

"We have a photocopy of the share certificate and proof of fund transfers between Standard Chartered Holdings and Vangal, based on which we have sent a recommendation to RBI," said the source. An SPV was floated by Standard Chartered Holdings for the share sale.

Vangal, when contacted, denied any such sale and said: "I am a long-term player and investor in the bank.'' Representatives of TMB said Vangal had furnished a letter to the bank stating that he did not sell the shares.

Vangals's Katra Holdings, which owns 3.64 per cent, and close friend Ravi S Trehan's RST Ltd, which holds 1 per cent, have transferred their stakes to Subcontinental Equities Ltd, belonging to Standard Chartered Holdings, London. Bangalore-based Vector Program, an investment vehicle backed by Vangal, transferred its 4.73 per cent holdings to Star Ship Equity Holdings, created by AXA Group (Western and Southern). Gokul Patnaik sold 3.72 per cent stake to East River Holdings, floated by sovereign wealth funds Kuwait Investment Authority and Brunei Investment Agency.

The value of the transactions could not be ascertained.

In May 2007, a consortium of six foreign and two Indian investors led by Vangal had picked up 24.92 per cent stake in TMB.

Foreign institutional investors in the bank included Kamehameha Mauritius (0.71 per cent), Cuna Group Mauritius (0.71 per cent), FI Investments Mauritius (1.90 per cent) and Swiss Re Investors (3.56 per cent). The shareholding of these investors remains unchanged.

Meanwhile, Rajat Gupta, former CEO of McKinsey, may also be selling his 4.95 per cent stake in TMB, said a source, who declined to be identified.

The bank reported a 57.94 per cent growth in net profit at Rs 45.66 crore in the first quarter ended June 30, from Rs 28.91 crore.

Based in Tuticorin and one of the country's oldest private sector lenders, TMB is largely seen as a Nadar community bank. It has been mired in an ownership battle between brothers Sivanthi Adityan, who runs one of the largest Tamil dailies, Daily Thanthi, and Ramachandra Adityan.

In January, Sivanthi, with the support of Nadar Mahajana Sangam and foreign investors, wrested control of TMB's board. Ramachandra, who fought to retrieve the bank from Sivasankaran's Sterling group, was earlier backed by NRIs and FIs, but later opposed the entry of non-Nadar groups.