India's largest airport service aggregator platform DreamFolks Services will float its maiden public issue for subscription today, with a 'thumbs up' from analysts, given its market leadership and first-mover advantage in airport lounge aggregation space in India with very low competitors, asset-light business model, strong proprietary technology platform, and strong relationships with clients in card network and card issuer space.
The company intends to raise up to Rs 562 crore through its public offer of more than 1.72 crore equity shares at the upper end of the price band of Rs 308-326 per share.
Also read - Dreamfolks Services mops up Rs 253 crore from anchor investors ahead of IPO
The public issue is entirely an offer-for-sale by promoters, hence the main objects of IPO are to gain benefits from listing the equity shares on the stock exchanges, and enhance the company's visibility and brand image. The company will not receive any money from the offer selling.
In terms of valuations, the post-issue P/E (price-to-earnings) works out to 104.8x FY22 EPS at the upper band of Rs 326 per share, the analysts said.
The multiple seems to be on the higher side mainly due to lower profitability in FY21 caused by pandemic-led industry wide issues. However, "DreamFolks enjoys a 95 percent market share and enjoys early-mover advantage in the segment. It has been an asset-light business model gaining the preference of air travelers. Further, DreamFolks has focused on diversifying and increasing its services portfolio," Purves S Chaudhari of Angel One said.
Thus, the brokerage has a subscribe rating on the issue from a medium to long term perspective, he said in its report dated August 23.
DreamFolks started off its operations in 2013 by facilitating lounge access services for consumers of Mastercard and now provides services to all card networks operating in India, including Visa, Mastercard, Diners/Discover and RuPay.
Also read - DreamFolks Services IPO | 10 key things to know before you subscribe to the issue
It also provides services to many of India's prominent card issuers, including ICICI Bank, Axis Bank, Kotak Mahindra Bank, HDFC Bank (in respect of debit card lounge program) and SBI Card.
Over the years, it has transformed itself from being an airport lounge access aggregator to an end-to-end technology solutions provider for designing and delivering services that enhance the airport experience. Apart from lounge services, it also provides other airport related services such as food and beverages, spa, and pick-up-and-drop service.
It has a global footprint extending to 1,416 touch-points in 121 countries worldwide, out of which 244 touch-points are present in India, and 1,172 touch-points overseas (from zero presence till FY20), as of March 2022.
The company enjoys a dominant position in the segment with a share of over 80 percent in the domestic lounge access market, while it has over 95 percent market share of all India issued credit and debit card access to the airport lounges.
DreamFolks has also partnered with various entities to facilitate access to around 57 restaurants and food & beverages outlets at 18 airports across India.
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DreamFolks has seen an annual average growth rate of 90.7 percent in a number of touch points over FY18-22. The number of clients has also seen a 119.7 percent CAGR, with its footprints widening to 536 cities from 23.
Despite Covid-19 in FY20-21, the company has seen consistent growth in the business momentum, Vikrant Kashyap of KRChoksey Research said. It reported a profit of Rs 16.25 crore for the year ended March 2022, against loss of Rs 1.45 crore in previous year which impacted by second Covid wave.
Consolidated revenue from operations for FY22 stood at Rs 282.50 crore, increasing by 167.4 percent due to low base in previous year. It recorded a profit of Rs 31.68 crore in FY20 on a revenue of Rs 367 crore.
The company has been improving its broad base by expanding its access across India and overseas. It will also benefit from government initiatives such as Udaan, which will help increase access to more regional airports. As the air travel industry recovers sharply from the pandemic uncertainties, KRChoksey Resarch stays optimistic about DreamFolks. The company is well-poised for the upcoming growth opportunities owing to its market dominance, it said.
The company has also been expanding its presence in the international air lounge market by improving its touchpoints. KRChoksey believes it is significant for DreamFolks to grow in the domestic and international lounge services by expanding its partnerships with card issuers and other service providers.
As a result, the brokerage recommended a 'subscribe' rating for DreamFolks Services IPO, Vikrant Kashyap said.
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