Indian Hotels, ITC bid for Taj Mansingh
The road to auction of New Delhi’s iconic five-star hotel Taj Mansingh seems unending for the New Delhi Municipal Council (NDMC). The NDMC’s second attempt to auction the property has attracted only two bids, one less than the minimum three required to take the auction process ahead. Besides, Indian Hotels Company, the current operator, tobacco-to-FMCG conglomerate ITC is learnt to have submitted bids on Monday. AJAY MODI writes
The road to auction of Delhi’s iconic five-star hotel Taj Mahal (popularly known as Taj Mansingh) has been a rough one for the capital’s civic body, New Delhi Municipal Council (NDMC). NDMC’s second attempt to auction the property a month after the first failed move has attracted only two bids, one less than the minimum three required to take the auction process ahead.
Besides, Indian Hotels Company Ltd (IHCL), which is the current operator, tobacco to-FMCG- conglomerate ITC is learnt to have submitted bids on Monday.
NDMC, according to the tender conditions, would have conducted the auction on July 18 had it managed to get a minimum of three bids.
The auction process for Taj Mansingh will have to be conducted again on a future date that will be decided by NDMC, said a person familiar with the developments. The tender rules said the auction process will be annulled in case the process attracts less than three bidders.
Interestingly, NDMC last month successfully completed the auction process for two lesser-known and smaller properties in the capital – The Connaught and Hotel Asian International – also built on NDMC land.
On June 7, the first date for receipt of technical bids, NMDC had received only one bid for Taj Mansingh from IHCL, forcing it to suspend the process. It, however, decided to call for fresh bids using the same tender conditions and on Monday got two bids.
In spite of a relaxation in certain conditions in the second tender floated by NDMC in April, a number of hotel companies did not qualify.
Some said the responses to queries raised by prospective bidders in pre-bid meeting were not satisfactorily answered. Companies said the tender conditions were too ‘restrictive’.
Take the issue of bid security amount for instance. The tender said if a bidder is found to have failed to meet the eligibility conditions specified in the tender documents, the security amount shall be forfeited by NDMC as ‘ liquidity damages’. This bid security amount is ~250 million.
Some companies also said the financial demands of NDMC from the winner was on the higher side.
The next operator of this property will have to assure a minimum revenue share of 17.25 per cent and a minimum guarantee fee of ~29.64 million per 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. The lease period for the property was kept at 33 years, the same duration awarded to IHCL over four decades ago, in 1976.