IHC, ITC to fight for Delhi’s Taj Mansingh next Friday

The auction for leasehold rights to Delhi’s iconic Taj Mahal hotel (popularly known as Taj Mansingh after the road it is located on) might take place as early as next Friday.

The New Delhi Municipal Council (NDMC), civic body for the 42 sq km in the city's centre where the land is located and the hotel’s legal owner, has got the minimum required of two bids. Indian Hotels Company (IHCL), part of the Tata Group and current operator of the 292room property has bid; so has rival group ITC. Thursday was the last day for bidding. “Once the NDMC evaluates the technical bids, it can hold the e-auction on September 28,” said a sector official.

Earlier this month, NDMC decided to relax the auction conditions, after two unsuccessful rounds. Based on those two lukewarm responses, it reduced the minimum number of qualified technical bidders to two for a successful auction, from the earlier

three. And, eased some of the earlier financial conditions for eligibility. The threeyear average revenue required for a bidder was brought down to ~3.5 billion, from ~4 billion previously. Bidders were allowed to include the 2017-18 financial year.

The lease period, 33 years in the first two tenders, was not changed. Also retained was the bid security amount of ~250 million. Nor did NDMC change the financial expectation from the property. The hotel operator will have to assure a minimum revenue share of 17.25 per cent and a minimum fee of ~29.64 million a month, with a clause for escalation. There is also an upfront non-refundable fee of ~533 million. NDMC is seeking a performance security of ~355 million as well. None of these was changed.

NDMC estimates the bidder which emerges successful in the auction will have to invest ~2.84 billion in refurbishing the hotel, operational since 1978. The winning firm will have to start paying money to NDMC from Day One, even if actual hotel operation and income take months more to begin.

IHC signed a lease agreement with NDMC in 1976 and the 292-room property was inaugurated two years later. In 2011, the 33-year lease ended. When NDMC decided to auction the rights, IHC challenged the decision at the high court here. After several lease extensions, the Supreme Court approved the auction last April.