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Nadar-Siva battle rages for control of Tamilnadu Mercantile Bank

A Ganesh Nadar in Bombay

The plight of the Nadars of Tamil Nadu is similar to that of Vikramaditya of the Vikram and Bethal legend, as far as Tamil Nadu Mercantile Bank is concerned.

To recap the tale: legendary King Vikramaditya, in order to fulfil a vow, was required to remove a corpse on a treetop and carry it on his shoulder to another place in silence. Enroute, the spirit of Bethal in the corpse would narrate a whodunit. Then, Bethal would pose a query. The king, if he knew the answer, was bound to respond lest his head breaks into a thousand pieces. But if he does speak out, he would break the vow of silence. And Bethal along with the corpse would fly back to the treetop, leaving the king inches short of his destination! The king would start all over again. And so on and on.

Everytime the Nadars think they have warded off takeover attempts to take TMB back to its destination of normalcy, there would surface yet another predator. And the game of protecting the bank would start all over again.

TMB was started by a group of Nadars in Tuticorin, Tamil Nadu. It was initially called the Nadar Bank and later rechristened Tamil Nadu Mercantile Bank Limited.

Its shares were closely held by the descendants of the original promoters. As a particular group was dominating the show, the rest got fed up.

The disgruntled elements sold 67 per cent of the total shares to the Ruias of the Essar group for Rs 280 million. This fact came out into the open only when the Ruias sent their representatives for the Annual General Meeting.

The Nadars were shocked, and immediately formed a committee to retrieve 'their' Bank.

They moved the Supreme Court. Media baron Sivanthi Aditan was named president of the retrieval committee. The Ruias agreed to sell back the shares to the Nadars when the court verdict went against them.

The Nadars agreed to buy back their shares for Rs 560 million. Under Aditan, efforts were launched to mobilise the funds. The drive ran out of steam by the time Rs 50 million were collected. Aditan resigned.

Another committee was formed with Ramachandra Aditan, Sivanthi's elder brother and a media baron in his own right, as its chairman.

Another meeting was arranged with the Ruias. This time, the price agreed was Rs 1 billion.

The Nadars launched a renewed collection drive and netted Rs 500 million. They decided to pay Rs 500 million to the Ruias, and entered into a written deed to pay the rest within a stipulated time.

A meeting was called -- the mediator was Tamil Nadu Chief Minister M Karunanidhi. At that meeting, instead of Sashi Ruia, Sivasankaran of Sterling Computers turned up!

The Singapore-based Non-Resident Indian claimed that he had bought the shares from Essar!

As against Rs 1 billion agreed upon by the Ruias and the Nadars, Sivasankaran demanded Rs 1.35 billion. The talks broke down.

Meanwhile, Sivasankaran requested the Reserve Bank of India to transfer the shares to his name.

In Tuticorin, the Nadar dominated TMB board passed a resolution stating that the shares should not be transferred to Sivasankaran.

A delegation of Nadars led by the All India Anna Dravida Munnetra Kazhagam general secretary J Jayalalitha met Prime Minister Vajpayee. They requested him to help them retrieve their bank.

Earlier, the RBI had refused to transfer the TMB shares to Essar; a fortnight back, it refused to transfer the shares to Sivasankaran.

Now, Sivasankaran could either approach the Company Law Board or go back to the Nadars.

So far, it has always been the agents of Sivasankaran who had negotiated with the Nadars. This time round, he has written a letter to Ramachandra Aditan asking for a meeting.

A former member of the TMB board, C S Rajendran, says, "The RBI decision was expected." Sivasankaran, it is being said, has been demanding Rs 1.35 billion (some say Rs 2.56 billion). He is currently out of India, and not available for comment.

Sivasankaran, in a letter dated March 10, 1999 to R Aditan, had offered a new deal to the Nadars. He holds 67 per cent of the total shares. He says he will sell 18 per cent of the total shares to the Nadars at the agreed rate of Rs 5,500 per share. The rest, that is 49 per cent, he wants to sell to the financial institutions -- so that he can make his profit.

Financial institutions will be definitely interested because TMB is a highly successful bank. But the Nadars are wary. They do not think it will be viable to run the bank with only 51 per cent of the shares. Money has been mobilised from all over the country and even from the Nadars abroad. So even if two per cent sell out, the Nadars' will become a minority stakeholding.

Rajendran says, "We can allow him to sell only five per cent or a maximum of ten per cent to the FIs."

A member of the retrieval committee, R Chandrasekaran, prefers leaving the issue to be decided upon by arbitrators. Sivasankaran has offered to discuss the matter through a team. He will send a team comprising a chartered accountant, an advocate and two other representatives. The Nadars will send their own chartered accountant, advocate and two other representatives.

Rn Aditan says, "With a CA and an advocate around, there will be substance in the talks. We don't want an endless dialogue."

While Chandrasekaran believes that the earlier price of Rs 1 billion for 67 per cent of the shares is right, Sivasankaran has said that he is willing to sell at a "fair price".

R Aditan says that he expects Sivasankaran to be back in the country shortly, and once he arrives, the discussions will start.

While it looks like the Nadars might be willing to allow Sivasankaran to sell 20 per cent of the total shares to the FIs, outsiders believe that Sivasankaran will not agree to anything less than 30 per cent.

The Nadars have a little more than Rs 500 million in cash in the bank gathering interest for the last one year. R Aditan says, "We can mobilise the rest of the money at a very short notice. We've already contacted the investors. They are just waiting for the deal to materialise."

Whether the Nadars would get back their bank in time, or whether they will tide over the crisis only to bump into a fresh challenge, a la Vikramaditya, this will be clear by next week.

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