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FRENCH food services giant Sodexo is acquiring Radhakrishna Hospitality Services Group (RKHS), India’s pioneer in the food and facilities management sector, in a transaction valued at over $100 million, or roughly Rs 520 crore. 

It is believed that a formal deal was clinched following marathon meetings with RKHS founder promoter Raju Sethe parked in Singapore in the past few days.

The transaction gives Sodexo a big leap over its international peers Compass and Aramak in a significant emerging market like India. RKHS, with about 20,000 employees across 22 states, reported $84 million revenues during the financial year ended March 2008. BMR Advisors were the sole advisors to Radhakrishna on this deal.

The deal catapults Sodexo to clear leadership in India’s complex but evolving food services industry. The organised sector’s penetration in the domestic catering and facilities management market is just around 15%, which throws up opportunities for significant upsides in the future. RKHS has seen its annualised revenues jump nearly 30% in recent years.

Sodexo, with annualised revenues of over € 13.6 billion and presence in over 80 countries, has been operating in the domestic market for almost a decade with the eponymous meal coupons being the most visible element of its business locally.

Mr Sethe will become the non-executive chairman of the combined entity. He will continue to own and manage his food retail business under Radhakrishna Foodland separately. “This relationship with Sodexo will create sustainable employment opportunities and growth for a country that needs it the most. Ownership shift is not an issue. It’s about creating an institution and creating jobs in every service area,” Mr Sethe said.

“RKHS is a leader in food and facilities management services by a distance. It remained a profitable business even as it scaled up operations nationally, in what is a fragmented and complex market. In context, the transaction is a big statement coming from a global major like Sodexo,” said a partner at BMR Advisors.

This probably explains why the valuation surprised deal street observers, who were betting on a Rs 400-450 crore transaction mirroring the top line of Radhakrishna Hospitality.

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