The rating agency has also revised its outlook on the same to 'stable' from 'negative'. ICRA said that the ratings upgrade takes into account significant improvement credit metrics of Burger King India (BKIL) due to prepayment of entire debt on its balance sheet following successful completion of IPO in December 2020.

The company raised fresh equity of Rs 600 crore 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 capitalization profile over the medium term.

The ratings upgrade also considers the recovery witnessed in sales with break-even achieved for the quarter Q3FY2021. The company reported an operating profit of Rs 0.3 crore on an operating income of Rs. 163.2 crore in Q3FY2021 compared to an operating loss of Rs 52.4 crore and Rs 10.2 crore on an operating income of Rs 38.3 crore and 96.7 crore in Q1FY2021 and Q2FY2021, respectively.

Nevertheless, the company's ability to sustain the revenue growth trajectory and thereby the profit margin will remain a key monitorable.

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 stabilization 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.

The stable outlook on the ‘[ICRA]A-‘ rating reflects ICRA's opinion that BKIL will continue to benefit from healthy growth prospects of the QSR (Quick Service Restaurant) industry and acceptability as a well-recognized burger brand with wide range of offerings in India.

Burger King set shop in India in November 2014 and has been among the fastest expanding quick service restaurant chains in the country. It is promoted by QSR Asia. The company is the national master franchisee of Burger King in India, with exclusive right and license to develop, establish, operate and franchise Burger King restaurants in India.

Shares of Burger King were listed on the stock exchanges on 14 December 2020 at Rs 115.35, a premium of 92.25% to the initial public offer (IPO) price of Rs 60. The IPO of Burger King India was subscribed 156.65 times.

The company posted a net loss of Rs 29.03 crore in Q3 FY21, higher than net loss of Rs 21.73 crore in Q3 FY20. Net sales dropped 28.4% to Rs 163.19 crore in Q3 FY21 as against Rs 227.92 crore in Q3 FY20.