Delhi Taj Mansingh takeover battle: The Tata Group v ITC?
With the Supreme Court allowing e-auction of Delhi's Taj Mansingh hotel, Tatas and ITC are likely heading for a fierce takeover battle. YC Deveshwar-led ITC would make an aggressive bid when New Delhi Municipal Corporation (NDMC) initiates bidding process. Tatas would make a competitive offer for a long-term lease as the hotel's been a huge revenue contributor to its Indian Hotels Company Limited (IHCL).
Tata's hospitality arm Indian Hotels Company has been managing the Taj Mahal Hotel since its opening in 1978 under a 33-year lease contract, which ended in 2011. New Delhi Municipal Corporation, Taj Mansingh's licensor, gave IHCL nine temporary extensions after which it decided to auction it. IHCL approached the Delhi HC, which allowed the property's auction, following which the company moved the Supreme Court.
In Nov'16, IHCL moved the SC questioning the need for NDMC to auction the hotel when it was generating good revenue for the civic body. In Jan'17, the SC gave NDMC six weeks' time and ordered it to review its decision of auctioning the property as it didn't consider the country's two top legal officers -Attorney General and Solicitor General- while making the decision.
IHCL finished the construction of the Taj Mahal Hotel, consisting of about 300 rooms with all other allied facilities, and started commercially operating the iconic hotel from 10 October 1978. After a legal battle lasting for nearly six years, on 2 Mar'17, NDMC decided in a meeting chaired by Delhi CM Arvind Kejriwal to e-auction the hotel at the market rental value.
On 20 April, the SC allowed NDMC to e-auction the 3.78-acre property. Tata, India's largest conglomerate, and tobacco-to-hotels group, ITC, will face off in the bid for the iconic property near India Gate in Delhi. Tatas must vacate the property in six months if they lose out in the auction. If ITC wins, it will be the group's fourth hotel property in Delhi.
The Tatas currently have five hotels in the national capital, including Taj Mansingh, Taj Palace, and three Vivanta properties - Ambassador, Dwarka, and Surajkund. ITC has three hotels in Delhi - ITC Maurya, Sheraton Delhi, and Welcomhotel Dwarka.
ITC's bid to take over Taj Mansingh follows the filing of a Public Interest Litigation in Bombay HC by two top Tata Trusts executives and five others seeking its direction to the Centre to divest its ITC stake. Through five insurance companies and Special Undertaking of the Unit Trust, the Centre holds a third of ITC's stake, worth over Rs. 1 lakh crore.
Tata Trusts and its other arms, including Tata sons, control 39% of IHCL. Interestingly, Shapoor Pallonji Group - whose scion Cyrus Mistry is fighting a legal battle against the Tatas - is building two ITC luxury hotels: ITC Kohinoor (Hyderabad) and ITC Narmada (Ahmedabad).