FRENCH food services giant Sodexo is acquiring Radhakrishna Hospitality
Services Group (RKHS), Indiaâ€™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 Indiaâ€™s complex but evolving food services industry. The organised sectorâ€™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 â‚¬ 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. â€œThis relationship with Sodexo will create sustainable employment opportunities and growth for a country that needs it the most. Ownership shift is not an issue. Itâ€™s about creating an institution and creating jobs in every service area,â€ Mr Sethe said.
â€œRKHS 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,â€ 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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