Mumbai: After seven years of court cases and political intrigue, the New Delhi Municipal Council’s (NDMC’s) auction for the capital’s iconic Taj Mahal Hotel, or Taj Mansingh has once again been postponed to 18 July. Will this sell-off go the Air India way?
Why didn’t NDMC extend Indian Hotels Co. Ltd’s lease?
The Taj Mansingh was opened in 1978 after Tata group firm Indian Hotels entered a 33-year contract lease with NDMC. After the contract expired in 2011, Indian Hotels operating licence was extended nine times. Finally, in an effort to raise more revenue, NDMC decided to find a new operator through an auction, giving Indian Hotels the right of first refusal. This was challenged by Indian Hotels in the Delhi high court and then the Supreme Court. The apex court gave a go-ahead for the auction, turning down Indian Hotels’s plea to extend its lease term.
What is the current status of the Taj Mansingh auction?
The auction dates for the hotel, also known as the Taj Mansingh, have been revised twice in the last six months. Initially scheduled for 30 January, the auction was postponed after several hoteliers objected to the stringent bidding norms. While 3-4 players were initially believed to be interested in the auction, which was finally held on 20 June, only two ultimately participated. ITC’s bid was eliminated on technical reasons. As Indian Hotels was the sole remaining bidder, the auction had to be annulled.
Why is Indian Hotels challenging the Taj Mansingh auction?
Many hospitality groups have their eye on the luxury hotel, located in a prime area. Losing it would be both a financial and strategic blow to the Tata group.
If the hotel is such a catch, why isn’t anyone bidding for it?
Given NDMC’s auction terms, three Indian firms could be in the fray—Indian Hotels, ITC Ltd and Oberoi Group’s EIH Ltd. The terms were recently revised to let a bidder hold up to 20% in a competing firm which is also taking part in the auction. ITC holds 14.98% in EIH, meaning both can now participate. However, it appears the stringent terms have not found favour with the bidders, leaving only Indian Hotels in the fray for now.
Who are the winners and losers in this long saga?
The winner may be open to interpretation, but the loser is certainly NDMC. A successful auction could generate an upfront amount of Rs 300-400 crore and an annual lease amount of Rs 30-40 crore, according to estimates. NDMC’s annual budget is about Rs 3,600 crore. The push to auction began because it hoped to monetize the asset on better terms. As things stand, that’s not happening.