Taj Mansingh auction on September 28

NEW DELHI: The stage is set for two of India’s biggest hospitality players — Tata’s

Taj Hotels

and

ITC Group

— to go all out for the iconic

Taj Mansingh

on September 28 after the

New Delhi Municipal Council

announced the schedule for its auction.

While Taj will be keen to retain its flagship Delhi property, which it has been famously running since 1978, for ITC it will be a chance to have another feather in its Delhi cap. After three failed attempts, the council has brought down the minimum number of qualified technical bidders to two (from three earlier). It has also relaxed some of the financial conditions of eligibility.

The companies can submit their bids from September 12 to September 20. “We are hopeful that, this time, the auction process will be carried out successfully. The earlier auctions failed to attract bidders as it’s an iconic property and only those with strong financial muscle will take part in the process. This was the primary reason for diluting the eligibity norms,” a senior NDMC official said.

The auction for this prime property, which was leased out to Taj for 33 years in 1978, was first supposed to take place in January. But the stiff eligibility norms ensured that it was a non-starter. The second auction, scheduled for June 19, saw only one eligible bid — from Tata Group’s Indian Hotels Company, with ITC’s bid not being accepted due to technical reasons. NDMC was third time unlucky on July 18 when only two bids — from ITC and Taj — were received.

“SBICAPS suggested a few dilutions for a successful auction. However, members of the council approved only two of them, citing security reasons,” the official said.

A lease period of 33 years means that only very strong players can eye this property. Because if someone else (not Tatas) gets the property, Taj will strip the hotel bare and take out everything like elevators and electric fittings, sources said. Refurbishing a hotel of this size will take at least two years and, then, making it fully operational will require another year.

NDMC has to be given a minimum guarantee fee of about Rs 3 crore per month in the first year by the new operator, an amount that rises every year. So, in the first three years itself, the new operator will pay over Rs 100 crore as minimum due to NDMC. Adding the investment made, it gives them less than three decades to recover the investment.