NDMC extends Taj Mansingh lease by a year, new operator soon

FP Staff • December 20, 2014, 12:17:56 IST

The civic body will decide whether the Taj Group will continue to run the property on re-negotiated financial terms or if the property would be auctioned, inviting bids from other interested parties such as ITC, Sahara, Oberio, besides other international majors

NDMC extends Taj Mansingh lease by a year, new operator soon

Indian Hotels Company-managed Taj Mansingh will run under the firm for another year with the New Delhi Municipal Council today deciding to extend the lease. However, a new operator will be chosen within the year through an open auction, The Economic Times reported . The Tatas will have the first right of refusal, as per the report.

The civic body will decide whether the Taj Group will continue to run the property on re-negotiated financial terms or if the property will be auctioned, inviting bids from other interested parties such as ITC, Sahara, Oberoi, besides other international majors.

Taj Mansingh has been operating on the NDMC land in Central district for 33 years. Its lease agreement with the civic body expired last year, and was extended till 12 October , 2012. Indian Hotels paid the civic body 10.5% of its gross revenue annually as rent and has now been asked to pay 17.5% of the annual revenue for the extended period.

While the Tata group may have the first right of refusal, many in the legal fraternity argue there is no such provision for the incumbent in the lease agreement.

“However, the council may allow the Tatas to match the highest bid in the auction,” a report in the Business Standard said today .

The Tatas have been in advanced talks with the Delhi government, the NMDC and Urban Development Minister Kamal Nath to renew the existing lease. Given that Taj Mansingh is a marquee property in Delhi, losing it would be a big blow for the Tatas, not just financially but also strategically.

However, the additional solicitor general of India, R K Khanna, has advocated the public auction as against the renewal of the licence.The methodology which could be adopted in reaching maximum consideration in a normal and fair competition can be public auction.. “Any extension would be a case of fresh grant” as there is no clause in the agreement - between NDMC and Indian Hotels Company Ltd (IHC) - for extension of lease, he observed in his report.

Ernst & Young, which is acting as advisor to the council, has reportedly suggested the advantages and disadvantages of the possibilities which includes calling for an auction and renegotiating the deal.