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Absurd Taj bidding rules PDF Print E-mail
Friday, 15 December 2017 03:17
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Instead of increasing number of bids, NDMC reducing them

 

The first rule of any auction, needless to say, is to ensure the maximum number of bidders, of course while ensuring there are no fly-by-night operators and also that those in the fray have relevant experience. Yet, for reasons best known to it, the New Delhi Municipal Corporation (NDMC) which owns the Man Singh Road property in the capital that is on lease to the Taj group of hotels right now, seems to be limiting the number of bidders. After fighting a long court battle with the Taj which did not want to vacate the property after its lease ran out some years ago, NDMC got the right to hold an auction. Yet, according to the tender documents just released by NDMC, a host of potential bidders won’t be able to make a play for the hotel. And this is not just because of net worth restrictions, which are a sensible thing to put into any tender since the new winner will need funds to refurbish and run the hotel.

According to the terms, the bidder has to own or operate, in the previous five years, not less than 500 rooms in a maximum of five 5-star hotels/resorts. And if the bidder is doing so with an affiliate, the bidder itself must have at least three hotels/resorts with a 5-star rating and at least 100 rooms per hotel. This will ensure real estate developers or private equity players or global hotel chains that are not already in India will not be able to bid for this marquee property. According to a news report in The Economic Times, NDMC has done this because of a bad experience with non-hotel players in a previous bid and to prevent “money laundering and black money investments”.

Why this should be the case is not clear. A hotel experience is important but when airports like Delhi and Mumbai were being bid out, it was enough that the technical partner had the requisite experience with building and operating airports—that is why, groups like GMR and GVK were able to win the bids for these airports, and no one can claim these airports are inferior to some of the best globally. Yet, if the criterion was as strict as it has been made for the Man Singh Road property, neither groups would have even been allowed to bid. NDMC has to realise that, were PE funds, for instance, allowed to bid, they would have tied up with hotel chains to build/run the hotel—no one is going to keep the plot vacant or not try to do their best with the hotel. Since the aim has to be to maximise the auction bids, it is not clear why NDMC didn’t do its best to ensure this.

 
 
 
 
 

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