06 Apr , 2021 By : Kanchan Joshi
Burger King India informed the exchanges that rating agency ICRA has upgraded the company's long term and short term credit rating to A- & A2 , from BBB & A2 respectively. The rating agency has also revised outlook to stable from negative.
The ratings upgrade takes into account significant improvement credit metrics of Burger King India Limited’s (BKIL or the company) due to prepayment of entire debt on its balance sheet following successful completion of IPO in December 2020.
The company raised fresh equity of Rs600 crore {including Rs150 crore through private placement) during the year, which in ICRA’s opinion will allow BKIL to fund its planned capex in the near to medium term with minimal reliance on borrowings, if any. and hence has provided notable boost to the capitalisation profile over the medium term. The ratings upgrade also considers the recovery witnessed in sales with break-even achieved for the quarter Q3FY21.
The ratings continue to take into account the strong recognition of the Burger King brand worldwide as well as in the domestic market, the company’s demonstrated ability to raise funds from investors and market and its experienced management team, the company said.
The ratings however, is constrained by the company’s exposure to execution risk owing to aggressive expansion plans over the medium term and its muted return on capital employed (RoCE) given the under absorption of fixed costs on account of stabilisation of new stores still a work in process.
The business also remains vulnerable to external shocks such as outbreak of Covid-19 which the industry faced, as well as general demand scenario issues which are linked to performance of the economy.
0 Comment