The foreign investors, who control 25% stake in the Nadar community-controlled Tamilnad Mercantile Bank (TMB), now appear to have a say in the affairs of the bank.

A Madras High Court-appointed retired judge, who chaired the bank’s annual general meeting on Wednesday, has counted the voting rights of the entire foreign shareholding in electing its six board members. And, the results announced on Thursday saw the six retiring board members being re-elected suggesting a victory for an influential Nadar leader Sivanthi Adityan and the foreign investors backed by him.

This has gone against the demand by a section of the Nadar community that voting rights of the foreign shareholders must be capped at 10% as they were seen acting in concert, and hence violating RBI norms.

The bank has been a battleground between brothers Sivanthi and Ramachandran Adityan, who has opposed the entry of foreign shareholders. Ramachandran Adityan had put up new board candidates in the election hoping to oust existing members, who were due to retire by rotation. The continuation of these board members, who were to retire on a rotational basis, is being seen as a move in favour of the foreign investors and Sivanthi Adityan.

The faction led by Sivanthi Adityan supports the investors consortium led by former Pepsi Co head Ramesh Vangal. The investors in this group include former McKinsey MD Rajat Gupta, Ravi S Trehan, Vector Program, Swiss Re Investors, among others.

Talking to VCCircle on the outcome of the AGM, Tamilnad Mercantile Bank managing director G Nagamal Reddy said, “after a long time, the spotlight has come on business. With a full board, we hope to close all pending decisions related to branch expansion, recruitments, staff promotions, investment policy and capital-raising.”

While the Nadar camp holds majority stake and serves the community, the bank may be now open to expand its business boundaries. TMB is looking at raising a sum of Rs 1,000 crore over the next year to meet business requirements, said Reddy, adding, the bank will finalise the capital-raising route--which could be rights issue, IPO or any other mode--in a month.

The present issue started when the Ramachandran Adityan faction challenged the appointment of eight board members - who according to media reports backed his brother Sivanthi Adityan and the foreign investors - in Madras High Court last year. In November this year, the court allowed the board continuation pending elections at the AGM.

Katra Group Chairman Ramesh Vangal said, today's developments revealed that most of the shareholders, both Nadar and foreign, were on the same page. “Shareholders wanted to leave behind a fractitious past and help build the bank's bright future. I have great respect for the Nadar community who are commercially-savvy. And, as an investor, I am in it for the long haul," he told VCCircle.

Foreign investors bought shares in the bank from Sterling Group's C Sivasankaran three years back. Earlier, in 1994, there was an attempt to sell two-thirds of the bank to outside the Nadar community, which was opposed by the members. Some seven outfits of the Essar Group had tried to buy the TMB shares, which was not approved by RBI. Later, C Sivasankaran-led Sterling Group bought the stake from Essar, which was later sold to both the Vangal-led foreign investor group and the members of the Nadar community.

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