Delhi's iconic luxury hotel Taj Mansingh up for auction on September 28

After two unsuccessful attempts at auctioning Delhi’s iconic luxury hotel Taj Mansingh, the capital’s civic body NDMC has decided to invite bids once again with a partly relaxed criteria. Based on the lukewarm response to the previous two tenders, the council has brought down the minimum number of qualified technical bidders to two for a successful auction, from three in the previous two tenders. It has also relaxed some of the financial conditions of eligibility.

The body has decided September 28, 2018, as the next date for e-auction, according to an advertisement floated on Saturday. Prospective bidders can do a site visit of the hotel from September 3 to 6. The agency will conduct a pre-bid meeting on September 7. The last date for submission of bids is September 20.

On June 7, the date for submission of bids in the previous unsuccessful round, the NDMC had received a single bid from the current operator, Indian Hotels Company. On July 9, the second attempt attracted two bids — one from Indian Hotels and the second from ITC.

According to the clause of these two tenders, the auction could have been held only in case of minimum three qualified bids for the asset. This criterion has now been relaxed. Besides this, the average revenue requirement from prospective bidders has been brought down. The three-year average revenue required now is Rs 3.5 billion as compared to Rs 4 billion earlier. Bidders can include financials of FY18 as well.

The lease period, which was 33 years in the first two tenders, has not been changed. The bid security amount of Rs 250 million also stays unchanged. NDMC has retained most of the financial expectations from the property. The next operator will have to assure a minimum revenue share of 17.25 per cent and a minimum guarantee fee of Rs 29.64 million per month, with a clause for escalation. There is also an upfront non-refundable fee of Rs 533 million. NDMC seeks a performance security of Rs 355 million as well. None of these has been changed.

The cold response from the hotel industry to the first two auctions was unexpected, especially at a time the sector is seeing an uptrend. However, industry experts said it is not an attractive proposition given that a new player will find it challenging to make money after making heavy investments of almost Rs 3 billion in renovating the 40 year-old hotel and committing a minimum income to NDMC.

In spite of a relaxation in certain conditions, the actual number of bidders is not expected to expand, making the auction a two-way fight between Indian Hotels and ITC.