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Politics, foresight weighed on Taj Mansingh decision

Nivedita Mookerji & Kavita Chowdhury  |  New Delhi 

When the 300-room Taj Mahal Hotel in central Delhi, popularly known as Taj Mansingh, goes for an auction in about a year, some things would have changed within the company and outside.

For one, Cyrus Mistry would be on the hot seat as chairman of the Tata Group, whose Indian Hotels Company operates the hotel (formally owned by the New Delhi Municipal Council, civic body for only the 43 sq km area in the city’s centre, and leased to the Group), instead of Ratan Tata, who retires this December. Also, the Delhi legislative assembly election, slated for November next year and the politics of it, might have a bearing on the future of this iconic property.

While the opposition Bharatiya Janata Party sees the one-year lease extension allowed by the NDMC yesterday as a breach of norms and is threatening protests against it, realty experts called it a smart move.

Anshuman Magazine, chairman and managing director, CB Richard Ellis, an international real estate consulting firm, told Business Standard, “The one-year extension will work in NDMC’s favour, with bids getting even more aggressive.” Adding: “It is an opportunity for the Tatas, who would have a fair chance to continue”, as they have been permitted to match the highest bid price at the auction.

According to Magazine, the luxury hotel is bound to attract high bids because of its prime location. Refusing to guess how much the revenue-sharing percentage would increase at the time of auction, he noted the factors that bidders would consider were the average room revenue (ARR) and the occupancy level.

It’s a good move, agreed Akshay Kulkarni, regional director, hospitality (South and Southeast Asia), Cushman & Wakefield, referring to the lease extension and then an auction. “It allows all parties concerned to give sufficient thought on the way forward.”

Another analyst, who did not want to be named, said the process of auction would take some months, so lease extension had to happen. “Now, due process can be followed and NDMC could arrive at the modalities of the auction, reserve price, deposits, etc, with more time in hand,” he added.

A hotel sector insider says with the first right of refusal, NDMC has ensured a good chance that the Tatas retain the property. “There’s no chance of any other player now,” he felt. “The Group has invested tremendously on the Mansingh hotel, and would not give it away.” It had been reported, however, that the Oberoi group, Sahara, Accor and ITC, among others, were looking at managing the property.

Observers pointed to the political overtones in the NDMC decision to extend the lease by a year. Consisting of largely Congress party members, the only BJP member on the panel is city MLA Karan Singh Tanwar. He had, at the meeting, opposed the consensus to extend the lease.

The only special invitee to the panel, Ajay Maken, the Union sports minister and city MP, has stayed away from the Council since his appointment in 2011. Council members refer to the politics in the Delhi Congress as the reason.

Delhi’s chief minister, Sheila Diskhit, who presides over the Council meetings, had put forward the argument that the lease be extended for another year (it ended last October and was extended), as no tendering would be possible within the next two months. Dikshit also proposed that Indian Hotels Company get the first right of refusal.

Archana Arora, chairperson of NDMC, told the media that the lease was being extended for a year or till the time the auction takes place, whichever is earlier. That gives rise to a “grey area”, analysts said.

The 33-year lease for IHC had expired in October 2011 and was extended. IHC had been paying a revenue share at 10.5 per cent of its turnover for 33 years and this was raised to 17.25 per cent last year. The same rate stays for this year.

IHC’s revenue for 2011-12 was Rs 1,865 crore, up from Rs 1,737 crore in the previous year.

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First Published: Sat, September 29 2012. 00:33 IST