Tata Buy in NYC
India Today — June 14, 2005

The Taj Group buys a premium hotel in Manhattan for $50 million in a bid to reposition itself as a luxury chain in the US.

If all goes well, from July 1 the Indian tricolour will replace the Canadian flag atop the entrance to The Pierre, a luxury hotel in mid-town Manhattan, New York. The Taj Group is buying the hotel for an estimated $50 million (Rs 220 crore).

This deal may prove third time lucky for the Tatas who had lost out on their two previous bids to acquire a five-star property in New York. Three years ago, the Taj Group made an unsuccessful $130 million bid for the Carlyle Hotel in Manhattan, which has played host to John F. Kennedy and Princess Diana and in more recent times to UK Prime Minister Tony Blair. Two years ago, the group nearly acquired the Inter-Continental Hotel located along the southern border of Central Park but was outbid by Donald Trump.

Krishna Kumar, chairman of Taj Group of Hotels and a director in Tata Sons who spearheaded the bids on all three occasions, says, "It is a landmark transaction for us. We will alter the amenities, especially to import the touch and feel of India."

The Pierre cost the Tata Group considerably lower than the $100 million-plus it was looking to fork out for the previous two acquisition attempts. This is largely because The Pierre is part of a clutch of 80 apartments-most of them owned by super rich people like Michael Eisner of Walt Disney-run by a cooperative. As a result, there cannot be an outright acquisition of the property and the Tatas settled for a 30-year lease at a commensurately lower cost.

The deal is expected to be funded by the war chest of $150 million that the Tatas have set aside from the Foreign Currency Convertible Bonds (FCCB) issued in 2002. "Either we will use the FCCB money or raise other instruments. The driving force would be the interest rate," says Kumar.

For the Taj Group this would be a second coming to the US. It had, from 1981 to 1999, managed three-star hotels in Manhattan (Lexington) and Chicago (Executive Plaza). But a decision to reposition itself as a luxury hotel chain in the US led the group to hunt for a five-star property.

The acquisition dovetails with the Tata strategy to increase its presence in the global market. "It is not so much globalisation as it is about becoming an international company. To be a strong player in your home market, you have to be a global player," says Kumar.

But more than that, the move is in also a statement on the new India-globally competitive and ready to take on foreign rivals on their turf.