The Outsider
White Knights
Over the years, the movement to retrieve TMB from the feared outsiders had thrown up its own Nadar leaders. In the vanguard, though not always shoulder-to-shoulder, were two brothers: Sivanthi Adityan, who runs the largest selling newspaper in Tamil Nadu, Daily Thanthi, and his older brother Ramachandra Adityan, who runs a less spectacularly successful newspaper business.
Sivanthi Adityan’s initial efforts fizzled out, Ramachandra Adityan continued to champion the cause for more than a decade. His detractors saw his dedication as cover for his desire to build a business empire to rival his younger brother’s; whatever his motives, Ramachandra Adityan’s next move started the third war for TMB.
The elder brother struck a deal with Vangal and his consortium. They were meant to be white knights holding their stake on behalf of the community. The 8.6 percent holding still with Sivasankaran, was transferred to the custody of Ramachandra Adityan, to be sold to community members. This looked like a resolution.
“TMB represents an opportunity to invest behind the Nadars, a respected, successful Tamil local community. With scale and professionalism, TMB can become a major banking platform, an HDFC of the South,” says Vangal.
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Image: Raju Patil for Forbes India
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CASTE IRON: T. Rajakumar a new Nadar director at TMB, is not able to take charge | |
There were protests against Vangal, but that was almost taken for granted. Nobody was prepared for what followed.
Reversal of Roles
In a bizarre turn of events, all the parties to the dispute changed their stands. Vangal fell out with Ramachandra Adityan, who promptly reverted to his anti-outsider position; neutral members of the caste say that each felt that the other would take control of the bank and stall his agenda. An assortment of Nadars, including the Sivanthi Adityan group and some large shareholders who had spoken against Vangal, began supporting him. They figured they could increase their strength.
“It has turned to family war,” said a lawyer representing Ramachandra Adityan.
Things came to a boil in July last year, when TMB held successive annual general meetings after missing them for three years due to the wrangling. The pro-outsider group walked away with eight seats on the 13-seat board. RBI nominees apart, there were two seats left. The group of new investors would have easily won the two seats, but the outgoing board members, all anti-outsiders, blocked the formation of the new board with resolutions over voting rights of the new investors and a volley of court cases. This is the tangle that continues till date. The AGM for 2007-08 has not been held and the next one will miss its deadline too.
“I am supposed to be attending board meetings,” says T. Rajakumar, a new director, “but in the last many months, I am only making trips to court.”
The Nadars must find a resolution. Time is not on their side: the economic slowdown will put the bank’s performance under pressure. In time, it will be sidelined by nimbler, more robust competitors.
Unshackling TMB
Which way should the Nadars take TMB? Let us consider Path A. This is the opening up option. Traditionally, Nadar merchants have been TMB’s main customers.
“We have to take a call on that. We can’t forever be bankers only for traders and merchants,” says MD Nagamal Reddy. The bank can also look outside for capital and talent. The benefits are obvious.
The bank will have access to a much larger pool of investors and can thus fund its growth into new business areas. And it can attract the best professionals. Its success so far has come from doing business with known faces in its own backyard. “To grow, it will have to look beyond the four walls,” says Vangal.
Some in the community think so too. “I think it is okay for others to pick up stake in the bank,” says S.R. Arvind Kumar, a new Nadar director who is waiting to take charge. “But the majority ownership should be within the community. The bank cannot depend on just one community, but let this go on for 10 to 15 years.”
Some welcome a bigger say for shareholders. “So far, the board had only people who did not have a real stake in the bank,” says S. Ashok, the first community member to sell stake to an outsider, through his 1994 deal with Essar.
The key challenge of choosing to open up is protecting the community focus of the bank. Outsiders may not relate to the idea of serving one caste and may bring business school top graders to implement a Wall Street model. TMB could collapse under the impact. The Nadar roots are its social capital. It can’t afford to lose that.
Path B is the fire-wall option. While this will keep the bank within the inner circle, the risks are many. Not all Nadars bank only with TMB. As their businesses grow, their banking needs cross boundaries. They need a wider array of services. If TMB isn’t able to meet those needs, it will lose them.
The new directors say they will vote for a bonus share issue once they take charge. That will spread out the reserves, Rs. 858 crore, over a bigger share capital than the current Rs. 28 lakh.
The bank has also been planning an initial public offering. That would help reveal the real price of the share that Shashi Ruia bought first at Rs. 3,000 each and for which Vangal and friends had to pay Rs. 24,182. But it is a decision only a full board can take. “There is no question of even talking about IPO in the present situation,” says Reddy.
Vangal has promised not to interfere with the operations. In fact, he says he will boost the Nadar focus. “One of our key tasks would be to look for a higher share of business from the community members and ultimately, from others.”
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