Bankers value Taj hotel at ~1,000 cr

But bids for the Mans ingh property may go up to~3,000crore

Marquee names in the investor community and hospitality industry, both within India and overseas, are busy doing their math this summer on what’s the best price for the Taj Mahal hotel, popularly known as Taj Mansingh, in Lutyens’ Delhi.

Business Standard spoke to top investment bankers and consultants to get a likely price tag for the luxury hotel, which is going under the hammer very soon.

Most bankers gave the value for which the hotel, located at 1, Mansingh Road in the capital, could be auctioned at ~3 crore to ~4 crore a room—usually returns on a per-room basis determine the logical valuation of a hotel.

Going by this assumption, Taj Mansingh, a 294-room property spread over 3.78 acres, could go to another business group or the Indian Hotels Company of the Tatas, current owners of Taj Mansingh, for anything between ~882 crore and ~1,176 crore.

One of the bankers gave a more specific figure. “My estimate is Mansingh will fetch a bid of ~3.5 crore per room,’’ he said. That would mean a valuation of ~1,029 crore for the property.

But, there are also estimates which go beyond normal rules of the game in the hospitality business.

A well-known banker known for astute deal-making told Business Standard that the bids could go as high as ~2,500 crore to ~3,000 crore for Taj Mansingh hotel, which has had an interesting past from the time JED Fonseca was running a 23-room hotel under the name Fonseca Pvt Ltd to the critical role of Ajit Kerkar, then chief of Tatas’ hospitality business, in getting to build a Taj property in Lutyen’s Delhi with Sanjay Gandhi’s help. Bidders could be of three types — hoteliers, high networth individuals and international investors backed by private equity firms, according to industry insiders.

Since the terms and conditions of the upcoming auction are not known yet, numbers are being crunched around several assumptions. For instance, a prominent advisor in the hospitality industry said, the bid would be for a long lease with an upfront deposit, that could be as high as ~400-500 crore. In addition, there could be a revenue-share, as high as 30 to 35 per cent of the top line, payable by the winning brand to New Delhi Municipal Council (NDMC), which owns the land over which Taj Mansingh stands. NDMC had earlier leased the property to Taj for 33 years, after which several extensions were given to Indian Hotels Company. The possibility of Indian Hotels getting into a deal with an investor or a developer for management contract is also not being ruled out. Internationally, most big hotel chains operate under management contract arrangement.