Auction of 5-star hotel Taj Mansingh in limbo, put off for the fourth time

Taj Mansingh hotel
New Delhi Municipal Council's (NDMC) plan to auction iconic five-star property — Taj Mansingh — is headed for the fourth postponement as the civic body and auction advisor SBI Caps have not yet come up with responses to queries raised by prospective bidders. The auction will not be conducted on March 7, though the next date of this exercise is not known. Originally scheduled for January 30, the auction was first postponed to February 7, then to February 21 and again to March 7.

“The auction will not be held on March 7. A next date will be decided soon,” said an official at NDMC. He said SBI Caps is overseeing the process and is handling the issues being raised by prospective bidders. He did not specify the reason for this delay. MSTC, the portal which will conduct the auction, still mentions March 7 as the date of auction.

Hospitality companies evaluating an option to bid for this hotel and Indian Hotels Company, which currently operates Taj Mansingh, have not been informed of any timeline for the auction. “NDMC has not yet responded to the issues raised by prospective bidders in January. The next date of auction is also of no consequence unless the clarifications come”, said an executive at a leading hospitality company.

Prospective bidders in the run-up to the auction had raised several questions, to which the NDMC didn’t come up with satisfactory responses and explanations. One of the issues raised before the NDMC was regarding a condition that restricts the winner from making any structural change or damage to the property. This clause, it is learnt, may make securing various fire and safety approvals tricky for a new operator. These approvals are outside the purview of the NDMC. Interested players have also raised the issue of restrictive nature of the bid criteria which insist that the bidder must have a five-star hotel brand as well as at least five hundred rooms across three properties. That restricts some of the leading global hotel brands present in the country and asset firms from bidding.

Also, as per the bidding criteria, two bidders cannot have a cross-holding beyond five per cent between them. ITC Hotels owns 14.98 per cent stake in EIH (Oberoi Hotels) and as a result, only one of the two could be eligible to bid. Both these companies were keen to bid for the 294-room hotel in Lutyens’ Delhi and had picked up bid documents. Samhi, a hotel asset company backed by Goldman Sachs, was also keen to bid, but it cannot due to non-ownership of a luxury hotel brand. Industry players had argued that these restrictions will limit the participation in auction and impact the value for NDMC.

Indian Hotels had signed a lease agreement with the NDMC for Taj Mansingh in 1976, and two years later the hotel was inaugurated. In 2011, however, the 33-year-old lease ended and a court battle started. Four years ago, the NDMC decided to auction the property, while Tata Group’s IHCL challenged the decision in the Delhi High Court. After much back and forth and several lease extensions, the Supreme Court gave a go-ahead for auctioning the hotel in April last year.