­Experienced management with long track record of operations
CGEL was incorporated in 2000 and is the flagship company of the Ahmedabad-based ‘City Gold’ group, promoted by Mr. Chimanlal Agrawal and Mr. Sanjay Agrawal. Mr. Chimanlal Agrawal has over four decades of experience in construction, real estate development, and leasing of space, and Mr. Sanjay Agrawal has around two decades of experience in the aforementioned industries. CGEL has been engaged in the business of film exhibition and leasing of space for over two decades through its property, namely, “City Gold, Ashram Road,” which accommodates a five-screen multiplex along with four other corporate tenants. It has recently launched a property by the name of "Citygold Vastral," which accommodates another multiplex with seven screens and space for leasing. Further, the company operates three other multiplexes located at Motera, Kadi, and Bopal. The group generates its revenue from film exhibitions, real estate development, and leasing of space. It has developed more than 25 projects spread over 42 lakh square feet of commercial and residential space in the Ahmedabad region. Further, the company also operates a total of 5 multiplexes under the brand name ‘City Gold‘ across the Ahmedabad region, with 21 screens and a seating capacity of over 4000.

Improving Operating performance
The multiplex segment of the company has shown significant recovery post-COVID. The segment was highly impacted during FY21–22 on account of COVID-induced restrictions. However, after the offset of COVID-19 restrictions, the company's revenue has registered strong growth. Further, revenue growth in FY24 (Estimated) is contributed by additional revenue from the newly launched seven-screen multiplex "CG Vastral." The newly launched G+10-floor property at Vastral has multiplex with 7 screens, and CGEL has leased out 60 percent of the area to reputed companies like Tata's Westside, Reliance Smart, Trends, Footwear, and Shivnetrak Foods on a long-term lease agreement for an average period of 16 years and is in plans to lease out the remaining space to reputed brands, providing long-term revenue visibility.

Healthy financial risk profile
The financial risk profile of CGEL is healthy, marked by a healthy net worth, moderate gearing, and healthy debt protection metrics. The net worth of the company has improved to Rs. 76.50 Cr. as of March 31, 2023, as against Rs. 71.93 Cr. as of March 31, 2022, on account of moderate accretion to reserves. The gearing (debt-equity) is marginally deteriorated but stood healthy at 0.65 times as of March 31, 2023, as against 0.55 times as of March 31, 2022. The gearing of the company is, however, expected to improve and remain low over the medium term on account of the absence of any debt-funded capex plans in the medium term. The total debt of Rs. 49.60 Cr. as of March 31, 2023, consists of long-term bank borrowings of Rs. 39.34 Cr, unsecured loans of Rs. 7.03 Cr, and a short-term working capital limit of Rs. 3.23 Cr. The debt protection metrics of the company stood healthy with an interest coverage ratio, and the DSCR stood at 11.39 times and 9.34 times for FY23, as opposed to 5.20 times and 4.50 times for FY22. The net cash accruals to total debt stood at 0.13 times for FY2023. The total outside liabilities to tangible net worth stood at 0.75 times for FY23 as against 0.63 times for FY22. 

­Renewal risk and customer concentration risk
The occurrence of events such as policy decisions by key clients to shift their offices to another state or decisions regarding outsourcing can impact their willingness to continue their lease agreement. However, this risk is mitigated to some extent, given the strategic location of CGEL’s properties and its existing long-term lease agreement with some of its tenants. In the event of non-renewal by existing lessees,  future cash flows will be impacted, thereby weakening debt protection indicators. In the event of either of the companies deciding to move out or seeking a renegotiation, the rentals are likely to be impacted. Timely renewal or leasing at similar or better terms than the existing agreements will remain a key rating sensitivity factor.

Highly competitive and fragmented nature of industry
CGEL is exposed to lease renewal risk, i.e., while renewing the lease agreements, any significant renegotiations by the lessees can adversely impact the cash flows. Further, CGEL is exposed to intense competition in the film exhibition industry, which is fragmented in nature, as at the lower end there are single-screen theatres while on the top end there are chains such as PVR, Cinepolis, INOX, and Carnival Cinemas, to name a few. Further, there is a need for the timely adoption of technology, like facilities enabling 4D movies, etc. The industry is also exposed to regulatory risk, which is likely to impact the revenue models of players such as CGEL, thereby impacting its operating capabilities.