Ending a nearly seven-year uncertainty, Indian Hotels Company Ltd (IHCL) has retained its landmark property on central Delhi’s Mansingh Road in an e-auction where it fought off competition from fierce rival ITC Hotels. The company which runs the Taj Group of hotels, confirmed the development in a stock exchange filing but did not give any more details. According to media reports, IHCL will pay New Delhi Municipal Corporation (NDMC) nearly 79% more in monthly license fee to operate the hotel for another 33 years.
IHCL will pay ₹7.03 crore per month as license fee to NDMC or roughly 32.5% of the hotel’s gross turnover, according to media reports. It was earlier paying a monthly license fee of ₹3.94 crore or 17.25% of gross turnover to NDMC. The company has been running the hotel since 1978.
IHCL’ s lease for the hotel popularly known as the Taj Mansingh, expired in 2011 and since then it has fought a bitter litigation with the NDMC. After getting an extension for the first two years since its lease expired, IHCL moved the Delhi High Court first in 2013. The battle reached all the way to the Supreme Court and it was only in April 2017 that the apex court ordered for an e-auction for the Taj Mansingh.
Through 2018, NDMC has been trying to e-auction the property but lack of bidders meant its earlier attempts were unsuccessful. It was only last month that NDMC decided to dilute the eligibility criteria which allowed the e-auction to be held on September 28.
IHCL operates seven more properties in New Delhi including the Taj Palace on Sardar Patel Road, next to ITC Maurya. However, the proximity of the Taj Mansingh to centre of the city makes it the most important one for IHCL in New Delhi. However, with the company posting ₹147.77 crore of net profit on revenues of ₹2,583.95 crore in the 2017-18 fiscal, whether the extra outgo for the Taj Mansingh is justified remains to be seen.
The stock markets certainly approved of the deal as IHCL’s shares closed the day 5.29% higher on the BSE at ₹135.45.