Taj Mansingh queries ducked at pre-bid meeting
The New Delhi Municipal Council's (NDMC's) plans to auction the luxury hotel Taj Mahal Hotel (popularly the Taj Mansingh, after the road it is on) and handling of pre-bid queries of prospective bidders do not appear well coordinated.
NDMC owns the hotel land. It called a pre-bid meeting last Monday. Such meetings are usually meant to answer all queries and concerns. However, bidders said, most of the written responses to the queries raised in the meeting were disappointing. Twenty- one queries were raised in the meeting and 19 of these had a standard: "No change in tender document," reply.
This is the Council's second attempt to auction the property, after a lukewarm response to the first one last month. While a minimum of three qualified bidders were required for conducting the auction, only one bid was received, from the current operator, Indian Hotels Company Ltd (IHCL).
The Council has brought the same tender again, with no changes in conditions. Some of the queries/requests which were not clarified are listed here. For one, the tender said the evaluation process would give weightage to the entity offering highest revenue share (in per cent). But, the revenue assumption in this case is left to the bidder. There is a concern that player A may offer 25 per cent as revenue share while assuming annual revenue of ~1.5 billion and player B may offer 20 per cent but assume revenue to be ~2.5 billion. In this case, though the offer of B is actually higher in absolute terms, it will have a greater chance of losing. There was a request to modify this.
Another query was on whether the gross revenue calculation will exclude the goods and services tax (GST), interest income from investments made, commission paid to travel agents, etc.
The tender does not specify the minimum number of rooms the next operator will need as part of licence condition. There is a suggestion that it should be not less than 250 guest rooms. The property has 292 rooms but renovation could reduce the number.
Investors also raised concern about the 800 direct/indirect staff with the hotel. There is no indication in the document.
An expert in hotel sector deals said the auction process was being conducted with a 'landlord' attitude. "There is no rent-free period for the winner. The winning firm will have to start paying money to NDMC from Day One, though the actual hotel operation and income could take multiple months to begin," he said. The hotel needs complete renovation and this might take more than a year, during which the guests would have to be shifted to other hotels, said a sector executive. "You cannot re-open it and expect a tariff of ~10,000 per room from day one.''