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The Rediff Business Special/A Ganesh Nadar

The accord of June 24 between the Nadar community of Tamil Nadu and
the Sterling Computers group of non-resident Indian businessman C Sivasankaran brings the curtain down over the five-year-long duel for the control of the Tamilnad Mercantile Bank.

Days before the MoU was annouced in Madras, a large share-holder and an ex-director, C S Rajendran of Tuticorin, said, ''The Nadars who initially sold the shares are demanding that the shares should be returned to them. This is no big deal. Let them pay Rs 1.55 billion and take back their shares. If they can't pay -- they should back off.''

The Nadar-Siva war for TMB is perhaps the first of its kind in the annals of corporate India. At no time did a particular community fight so relentlessly to wrest a business for "sentimental reasons".

The Nadars have achieved what they set out to do, but at a heavy cost. A bank whose majority shares were sold for Rs 280 million is being handed back today for a princely sum of more than Rs 1 billion.

The last time the Nadars negotiated, the agreed price was about Rs 1 billion. The entire burden, though, will not fall on the Nadars because all the shares being bought back are not going to the Nadars.

The Nadars, even as they take possession of the shares held by Sivasankaran, will sell 16 per cent of the shares to the Unit Trust of India for Rs 450 million. (UTI has yet to agree on the price). The Nadars will be keeping 51 per cent of the shares and paying Rs 1.10 billion. Sivasankaran has 67.23 per cent of the shares.

Now that the memorandum of understanding has been signed, Sivasankaran will hand over the entire shares along with proxy forms to the Nadars.

The Nadars had earlier collected money from the investors promising a share for Rs 5,500. Now the new price will be around Rs 7,500. The money which was collected last year, is lying in the bank.

Interest accruing will benefit the investor. After paying the advance, the Nadars have to pay the balance of Rs 900 million in nine months. For the first three months, there won't be any problem. For the remaining six months, they have to pay 15 per cent interest to Sivasankaran, a condition set by him.

The Nadars insist they will pay interest only after the bank management comes into their hands. Surprisingly, the majority in the bank board is retained by the Nadars who sold their shares. Their argument: "As the RBI has not transferred the shares -- we are still the owners.''

The last meeting between the Nadars and Sivasankaran took place in Adyar Park -- a five-star hotel in Madras. The draft for the MoU was prepared by Swadeshi Jagran Manch convener S Gurumurthy. Sivasankaran chose political commentator and journalist Cho Ramaswamy to argue his case during the negotiations.

Sivasankaran wanted to appoint Ramaswamy as the escrow agent for the deal. Sivasankaran wanted to deposit the shares with him till the Nadars paid. But the Nadars argued, ''If you cannot trust Ramachandra Aditan (in the photograph alongside) who will you trust?' Aditan is the chairman of the Nadars Investors Forum. He is also a press baron and elder brother of Indian Olympic Council member Sivanthi Aditan.

Sivasankaran agreed to make Aditan the escrow agent. The shares will be given to him personally and not to the Nadars as a whole.

There is a clause in the MoU that if the Nadars do not come up with the money in nine months -- they have to return the shares.

The Nadars have over Rs 500 million in the bank. A few big investors had withdrawn their money because the deal was getting delayed. They are expected to put back the money now.

The existing investors -- those who invested last year at the earlier price of Rs 5,500 -- will now have to pay about Rs 7,500. New investors will have to pay Rs 500 more. The difference is due to the accrued interest on the amount lying in the bank.

So far the money has been raised on sentiment alone. The balance will be raised again on emotion alone.

After paying Rs 200 million as advance, the Nadars are planning to make a part payment in six months to lessen the interest burden.

Management control of the bank is a top priority for the investors forum. They need control as they wish to issue bonus shares and a rights issue to encourage the investors. Otherwise, asking people to buy a Rs 10 share share for Rs 7,500 will not be easy.

They are planning a general body meeting of all shareholders to reconstitute the board on which there are already two vacancies. These are likely to be filled up by Ramachandra Aditan and another person. Three more are expected to retire in the near future. If the investors forum can fill these five places, it will have the necessary majority on the board.

The Nadars were small-time traders and agriculturists. Apart from a few prominent exceptions like Shiv Nadar of Hindustan Computers -- recently ranked among the Forbes dollar billionaires as richer than Kumarmangalam Birla of the A V Birla group -- and the Aditan brothers, the rest are traders. The Nadars have no significant presence in the corporate world, one reason for their insistence on wresting TMB back into their fold.

The bank was initially promoted by the Nadar Mahajana Sabha. It also provided a lot of employment to the Nadars. Most of the money for setting up the bank was raised from small investors. The first nine directors were well known Nadars of that time. They were not large shareholders. Over the years, five families bought a majority of the shares at Rs 20.

At that time, even the Nadar Mahajana Sabha had 10,000 to 12,000 shares. The government issued an order saying that public institutions should not hold shares. They sold the shares at Rs 25.

In the beginning, Soundarapandi Nadar of Virudhunagar sought to push the bank to higher levels in the banking industry. He was an estate owner and belonged to the Justice Party. At that time, he was even more powerful than the legendary Nadar, K Kamaraj, Congress leader and later chief minister of Tamil Nadu. Soundarapandi Nadar's door-to-door canvassing yielded positive results.

The Nadar community identifies itself with the bank so much that a few no-so-well-off members of the sect went out of their way to buy one or two shares. All for the community's sake. Some others pitched in money, more in the form of donations, says Ramachandra Aditan.

Tuticorin Rajendran says, ''Suppose a public park is dirty. You find out who donated the land. If you tell the descendants of the donor that the park is dirty, they will take steps to clean it. It's a normal human reaction. The Nadars are coming together because the TMB was started by them.''

Says R Chandrasekar of Coimbatore, a member of the forum, ''It was sentiment alone they gave us money, with no certificate in hand, no shares, nothing.''

There are 25,000 shareholders as of now; more are expected to join. "It will remain a community-owned bank for the service of all," says shareholder.

Former legislator S N Ramaswamy Nadar says, ''We went around telling people that we must rescue the bank from the clutches of the Northerner -- after all it was started by Nadars for our betterment.''

So intense is the love for the bank that the Nadars will not appreciate if investors from other communities and regions seek to buy TMB shares, as one Parsi journalist (who sought all but four shares) in Bombay realised recently. A member of the investors forum had said, ''We are selling only to the Nadars. If we wantto sell to others, we would have let the bank to remain with Essar or Sivasankaran.''

The Nadars are keen on approaching Finance Minister Yashwant Sinha so that he can encourage the UTI to buy 16 per cent of the shares.

Till the entire amount is collected, the shares will remain with Ramachandran Aditan. ''Our integrity is at stake -- we have to return the shares if we don't pay in nine months -- I cannot give a share every time somebody pays,'' says Aditan.

A small price is being added to the share price for legal expenses. All other expenses are borne by the committee members themselves.

There are 17 cases pending in the court. All will become redundant once the RBI okays the deal. Now that the deal has been inked yesterday, mobilisation of money will be done on a vast scale. Home to home. Person to person. All within the Nadar community.

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