The iconic Taj Mansingh auction has been in the news for over a year now since Taj Group’s 33-year lease expired in 2010. While after the initial expiry the Taj Group managed to get a number of extensions on the lease, in 2015 the New Delhi Municipal Corporation (NDMC) decided to auction the property.
Picture Courtesy: Taj Hotels
Even at that time, the Tatas said that there was no need to go for an auction and IHCL would be willing to give the best revenue share possible for the prime Delhi property. However, the Supreme Court of India gave a go-ahead to NDMC to proceed with the auction.
The initial e-auction was expected to begin in November 2017 and allowed the Tatas and their subsidiary companies to participate in the bid. The bidding terms so far have been very stringent, ensuring that most international hospitality firms could not participate in the tender. For instance, the lease period for the property will continue to remain for 33 years. Additionally, the participants are required to put a bid security amount of INR 400 crore (US$ 56 Million). On top of this, the new operator is required to commit to a minimum guarantee fee of INR 3 crores (US$ 422K) per month; an amount that could escalate in the future. Therefore in the first 3 years, even when the hotel may be under refurbishment and generating no revenue, the new operator will be liable to pay INR 100 crores (US$ 14 Million) to the NDMC.
As a result, after three failed auction attempts the NDMC has finally relaxed a few criteria to attract new potential bidders. The minimum annual turnover from the initial INR 400 crores (US$ 56 million) has been reduced to INR 350 crores (US$ 49 million). Also, the municipality body has reduced the requirement of minimum bidders from three to two. The first auction had only one bidder, the Taj Group. The second auction had two, namely ITC and Taj Group.
Taj Mansingh Auction date set for September 28, 2018
The iconic hotel is all set to go under the hammer for the fourth time in September 2018. NDMC has set September 12, 2018, as the last date to submit the bid and looks like that the battle will be between ITC and Taj Hotels again.
No change in the 33 year lease period and monthly rentals means that global hospitality companies may not want to take the risk to participate in the Taj Mansingh auction. However, in an industry that is moving to an asset-light business model, it will be interesting to see who else does the new bid attract.
Do you think we will have a winner at the end of this round of bidding for the Taj Hotel? Do share your views.
A monthly payout of INR 3 crore is ridiculous. The profit for the operator will get tremendously squeezed. Sadly, the location, and history of the hotel is so powerful, that bids will come in. I dont see this going anywhere but IHCL, unless ITC decides to showcase its cigarette based money power.