Tata’s Taj Hotels Loses Bid to Extend Lease on Iconic Delhi Siteby and
Delhi High Court rejects Indian Hotels’ plea on Taj Mansingh
Company had sought an extension of its license to run hotel
The Delhi High Court rejected a plea by Indian Hotels Co. to extend the lease on an iconic New Delhi hotel, adding to the company’s woes just days after Cyrus Mistry was ousted as Chairman of parent Tata Sons Ltd.
A two-member bench -- Justices Pradeep Nandrajog and Pratibha Rani -- upheld a single-judge bench order that Indian Hotels was not entitled to oppose an auction by the New Delhi Municipal Council, which owns the property that is located on Mansingh Road and overlooks India’s presidential palace. Indian Hotels -- which runs the Taj group of hotels -- had leased the land for 33 years, and the lease ended in 2011.
Indian Hotels had hoped to avoid bidding for the 292-room, 11-story property in an auction as it looks to pare 26 billion rupees of debt. Mistry wrote in an Oct. 25 e-mail, accessed by Bloomberg and addressed to Tata Sons board members, that his predecessor Ratan Tata had left a large debt overhang at the company with foreign acquisitions and the purchase of a Mumbai hotel “at a highly inflated price.” Ratan Tata replaced Mistry on Monday, driving down the shares of Tata group companies including Indian Hotels.
“After the explosive comments in Cyrus Mistry’s letter, today’s court verdict adds to investor anxiety,” said Jagannadham Thunuguntla, head of fundamental research at Hyderabad-based Karvy Stock Broking Ltd. “There’s a lot to digest, and people will wait for the dust to settle before making any investment decisions.”
The court also rejected Indian Hotels’ plea for a right to first refusal in case an auction is eventually held, saying it might discourage other bidders. Indian Hotels can now appeal the decision in the Supreme Court.
Shares of Indian Hotels fell as much as 11 percent on Thursday, the most in four years, and changed hands at 115 rupees, down 3.9 percent, at 12:15 p.m. in Mumbai. The stock is the worst-performer after Torrent Pharmaceuticals Ltd. in an index of mid-cap companies.
Indian Hotels acquired the former Hotel Sea Rock in Mumbai for 6.8 billion rupees in 2009, and was then forced to write down “nearly its entire net worth over the past three years,” Mistry wrote in his Oct. 25 e-mail. The company tore down the hotel and had planned to turn it into a luxury property, a process that has yet to begin.