SSP Group to partner with K Hospitality Group to enter Indian food market

The company agreed to create a joint venture where it will buy a 49% stake for £57.9m in Travel Food Services, an operator of food and beverage concessions in travel locations in India, from the Kapur Family Trust, SNVK Properties and KAPCO Caterers, which are part of K Hospitality Group and subscribe for new shares in TFS.

The FTSE 250 company will first buy a 33% stake for about £39m by the end of February 2017, and then buy further 16% stake for about £18.9m by the end of 2018, depending on the performance of the business which will be satisfied out of existing debt facilities.

The joint venture, subject to conditions and regulatory approval, is expected to be earnings enhancing in the first full year of operation and to exceed the company’s cost of capital by the third year following acquiring the first 33% stake.

SSP chief executive Kate Swann said: "This partnership is in line with the strategy we set out at our initial public offering [in July 2014]. We have been looking for the right entry point into this exciting growth market and are delighted to have found an excellent partner in TFS.

“TFS brings a well-established business with a strong portfolio of brands. The combination of SSP's international expertise in the travel sector and TFS' strong local presence will provide an excellent platform for future growth in the Indian market."

Revenue for TFS was £41.7m and earnings before interest, tax, depreciation and amortisation (EBITDA) was £8.3m for the year ended 31 March, with net assets of £25.6m.

In the year ending 31 March 2017, TFS is expected to benefit from the inclusion of the recent buyout of some joint venture partners, the contribution of new units opened in 2016 and ongoing growth in like-for-like sales, adding about £3m to EBITDA.

Sunil Kapur, chairman of K Hospitality, added: "SSP's international experience and proven track record, coupled with our knowledge and position in the region, means that we have a winning partnership to create a strong proposition for growth."

TFS operates about 170 food and beverage units in India including at six airports in domestic and international terminals, a number of airport lounges and railway stations, while also operating outlets at Muscat airport in Oman. Its brand portfolio includes as KFC, Krispy Kreme, Pizza Hut, Coffee Bean and Tea Leaf.

Shares in SSP Group were up 0.27% to 330.60p at 0815 BST.