DreamFolks Services to debut on bourses today, experts predict healthy listing

Qualified institutional investors took the lead, buying shares 70.53 times the allotted quota. The portion set aside for non-institutional investors was subscribed 37.66 times and retail investors put in bids 43.66 times the shares reserved for them.

"Considering excellent response from QIB & HNI, we assume listing would be above Rs 420 levels, which translates to more than 29 percent premium over the upper end of the IPO price Rs 326," Prashanth Tapse, Senior VP Research at Mehta Equities said.

Strong listing gains seem to be justified and sustainable, though the issue was aggressively priced as secondary market sentiments had improved, he said. The company also has the first-mover advantage in the segment with a unique, asset-light and capital-efficient business model benefiting in long run.

Astha Jain, a senior research analyst at Hem Securities, expects DreamFolks to list at a premium of more than 35 percent.

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DreamFolks is the largest airport lounge access provider in India, with a  market share of over 95 percent in FY22 of all India issued card-based access to domestic lounges in India.

It has coverage across 54 operational airport lounges constituting 100 percent of airport lounges in India, as of March 2022. It has tie-ups with all the five card networks operating in India including Visa, Master Card, Diners/Discover and RuPay.

Some of India's largest card issuers such as ICICI Bank, Axis Bank, Kotak Mahindra Bank, HDFC Bank (debit-card lounge programme) and SBI Card are among the company’s key clients

Its ability to scale up its business requires minimal incremental capital deployment, resulting in high operating leverage. This is one of the key reasons that the company has a strong track record of delivering consistent growth along with high capital efficiency, Jain said.

Aayush Agrawal, Senior Research Analyst at Swastika Investmart, believes DreamFolks is a proxy play on the rising air travel in India and due to its dominant position, it is poised to grow exponentially.

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The grey market premium is indicating a promising and strong listing performance, he said.

Rajnath Yadav, Research Analyst at Choice Broking also thinks, going by the subscription data, the company is likely to give a respectable return on the listing.

Yadav had assigned a "subscribe with caution" rating for its public issue last month. "The lounge market is targeted to the elite class and thus the overall market size seems to be small. Post-pandemic, strong lounge access revenue per passenger was the key driver for DreamFolk’s top-line growth, but the passenger traffic to the lounges lagged the pre-Covid highs. And as per our estimate, the passenger traffic is expected to exceed the pre-Covid levels only in FY25. Moreover, we are forecasting a contraction in the return ratios over FY22-24E," he reasoned.

DreamFolks recorded strong performance in FY22 due to a low base in FY21 that was affected by the Covid wave. Overall, it has recorded a negative 28 percent CAGR in profit and revenue grew at a CAGR of (12 percent) during FY20-FY22.

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