Below is a very interesting article by Finshot markets this morning..on Dreamfolks..might help in reassessing your position in the stock, be it short, medium or long term. Mostly, it is inclining towards the growth potential with massive opportunity, and the story seems plausible.
(Warning- long post due to the length of the article)
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“Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.”
Well, you can add one more company to that list — DreamFolks Services, a company that owns no lounges.
Hold on, we’ll explain what we mean. Now if you’ve ever lazed in an airport lounge in India, chances are that your entry to the lounge was managed by this company. In fact, out of 52 lakh passengers who stepped into a lounge in FY22, DreamFolks managed the experience for 35 lakh people. That tallies up to a market share of a whopping 68%.
But the key word here is “managed”. Because the company does not own these lounges. DreamFolks is what you’d call an “airport lounge aggregator”. Yup, there’s an aggregator for everything!
So if you look at the fine print on your credit or debit card, it may say something about lounge access. And if your card does extend this benefit, you’ll probably find DreamFolks at the other end helping you access the lounge. The company ties up with card networks like Mastercard (their very first client in 2013). And also, with banks that issue these cards. And then, the company provides the tech that connects the cardholder to the lounge operator across India.
But wait…why does anyone need DreamFolks for this, you ask? If I know there’s a lounge at the airport, can’t I just walk in and get access to it? It’s not like Airbnb that helps me “discover” spaces or experiences, so why have an intermediary?
That’s true. But a disaggregated lounge experience could come with its own set of complications. Let’s explain. Imagine you have a card issued by a bank that permits you one lounge visit a month. Anything more than that, and you’ll have to pay up ~₹1,000. Also, the lounge visit is only for you and you can’t take any guests along.
Anyway, on the 1st of September, you visit a lounge in Bengaluru airport managed by Company X. Your monthly quota of visits is done!
Now let’s say you’re at the Mumbai airport on the 26th of September. You have time to kill before your flight and you head to the lounge as usual. Now the lounge there is managed by a different company. Say Company Y. And this time your friend is tagging along too.
How will Company Y know that you’ve already made a visit that month? Or that the card doesn’t permit a plus one. It’s just a lounge operator, not a tech wizard. Or will your bank track this and send a message to all airport lounge operators saying, “1 visit for September is done!”? Imagine the banks fiddling with all this information for all their customers! It would be a nightmare.
And that’s where DreamFolks steps in with its tech. At the front end, it validates and provides immediate lounge access. Or denies it if you’ve exceeded your quota. It’ll then tell the lounge operator to charge you the full price. And at the back end, it helps the operator and bank account tag rewards associated with any lounge spending.
The great thing about this model is that DreamFolks doesn’t have to shell out money to set up lounges. It doesn’t have to spend truckloads to acquire customers like you and me — that’s the banks’ headache. It simply works as a tech intermediary. It’s pretty smart.
But the biggest attraction? Well, DreamFolks runs a virtual monopoly!
Yup, there’s no other domestic player quite like it. There are only 54 domestic lounges in India today and DreamFolks enables access to all of them. It’s also an exclusive partner to 12 separate lounges. And there’s the fact that it has also tied up with over 1,000 international lounges. In fact, there might just be two other global players who’re doing the same thing — Priority Pass and Dragon Pass.
And nearly 99% of its revenues for DreamFolks accrue when you visit a lounge and swipe your card.
But it’s not just lounge aggregation that DreamFolks enables.
Imagine you’re a privileged member of a bank. You decide that it’s time for a trip and you make your booking. Your bank knows that you’re travelling so they call you up and ask you if you need an airport pickup and drop off too. You’re pleased with the service and say yes. But obviously, the bank’s job isn’t to get involved in all of this. So, who do they call? Well, Dreamfolks.
DreamFolks wants to be at the front and centre of everything associated with a traveller’s airport journey. As DreamFolks’ tagline says, “It’s Your Airport Experience Amplified”.
Anyway, you know how we hype up every business in India by saying, “low penetration”, right? Food delivery has room to grow because of low penetration. Asset management companies will grow because people are just waking up to investing opportunities.
Well, it could the same thing in DreamFolks’ case.
For starters, there’s something called air travel propensity. Simply put, it measures the frequency of travel i.e. how often do people travel within the country each year. And India posts some of the lowest figures at moment. If people choose to fly more, they could use the lounges more too.
Then there’s also the bit about credit card penetration which is only at 3% — an abysmal figure even when compared to our peers like Brazil or China. If credit card penetration picks up, DreamFolks could benefit from it too. For instance, 90% of lounge access is attributable to benefits extended by credit cards. So if there are more credit cards going around, it could lead to more people eventually availing of lounge benefits too.
And when you put these together, you’ll get an expectation of how the “lounge market” in India is expected to grow. According to estimates by Frost & Sullivan, over the next five years, we could see a 10 times jump from the ₹400 crore value today. That means the lounge market could be worth over ₹4,000 crores by FY27.
So it looks like DreamFolks is in the right place at the right time.
But the question also on everyone’s mind is this. Will the stock fall from the 30,000 feet it’s soaring at?
You see, investors jumped to lap up the shares during the IPO probably because there is really no other company like it in the Indian markets. And it popped over 55% on listing day. But now that the chatter has died down, everyone seems to be realizing how richly valued the stock is — Monopoly or otherwise.
Has the company embedded itself so firmly in the minds of its clients that no competition can dethrone it? Or is the Indian aviation story overhyped?
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