Dreamfolks Services IPO review (May apply)

• IPO Details
• Stock Price
• Docs
  • RHP
  • DRHP
  • Anchor Investor Link
• Reviews
• Subscription
• Calculator
• News
• GMP
• Allotment
• BoA
• Messages

Review By Dilip Davda on August 22, 2022

•    DSL is the first mover enjoying a unique place in the segment.
•    It currently enjoys 95% of the market share.
•    A profit-making company at the gross level since inception.
•    Only 10% retail portion only due to negative earnings at PAT level for FY21. 
•    Investors may consider an investment with a medium to long-term perspective. 

ABOUT COMPANY:
Dreamfolks Services Ltd. (DSL) is a dominant player and India's largest airport service aggregator platform facilitating an enhanced airport experience for passengers leveraging a technology-driven platform (Source: F&S Report). Its asset-light business model integrates global card networks operating in India (Card Networks), credit card and debit card issuers (Card Issuers) and other corporate clients, in India, including airline companies (Corporate Clients and along with Card Networks and Card Issuers, the Clients) with various airport lounge operators and other airport related service providers (collectively, the Operators) on a unified technology platform. 

DSL facilitates customers of Clients' (Consumers) access to airport-related services like (i) lounges, (ii) food and beverage (iii) spa, (iv) meet and assist, (v), airport transfer (vi) transit hotels /nap room access, and (vii) baggage transfer, (collectively, the Services). Its dominance is underpinned by facilitating access to 100% of the 54 lounges currently operational in India, and it also enjoys a market share of over 95% of all India issued credit card and debit card (Card Based) access to airport lounges in Fiscal 2022. Additionally, in Fiscal 2022 DSL also accounted for around 68% of the overall lounge access volume in India. (Source: F&S Report). 

Further, as of March 31, 2022, through its partnerships with other service providers, DSL has a global footprint extending to 1,416 Touch-points in 121 countries across the world out of which, 244 Touch-points are present in India and 1,172 Touch-points overseas. It began effective operations in 2013 by facilitating lounge access services for the Consumers of Mastercard and, currently, provides services to all the Card Networks operating in India including Visa, Mastercard, Diners/Discover and RuPay, and many of India's prominent Card Issuers including ICICI Bank Limited, Axis Bank Limited, Kotak Mahindra Bank Limited, HDFC Bank Limited (in respect of debit card lounge program) and SBI Cards and Payment Services Limited. Over the years, it has transformed 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. It has crafted a service proposition to provide Clients with the option of offering a wide-ranging bouquet of Services to Consumers. Currently, DSL facilitates Consumers' access to a host of services: from the doorstep to the airport, within the airport, and again from the airport to the doorstep at the destination. DSL's first mover advantage in the lounge access aggregator industry in India has enabled it to become a dominant player in the industry with a share of over 80% in the domestic lounge access market in India. (Source: F&S Report)

In addition, lounge fees contributed a vast majority of its revenues from operations during Fiscals 2022, 2021, and 2020, contributing 98.68%, 97.25%, and 98.82%, respectively, of total consolidated revenue from operations. During Fiscal 2022, Fiscal 2021, and Fiscal 2020 our average revenue from lounge fees was 98.55% of our total revenue from operations. As of March 31, 2022, it had 60 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
To avail listing benefits and provide a partial exit to a few existing stakeholders, DSL is coming out with a pure secondary offer i.e. Offer for Sale (OFS) of 17242368 equity shares of Rs. 2 each via book building route. It has announced a price band of Rs. 308 to Rs. 326 per share. At the upper cap, DSL mulls raising Rs. 562.10 cr. The issue opens for subscription on August 24, 2022, and will close on August 26, 2022. Minimum application is to be made for 46 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 33% of the post-issue paid-up equity capital of the company. The company has allocated 75% for QIBs, 15% for HNIs, and 10% for Retail investors. 

Joint Book Running Lead Managers (BRLMs) to this issue are Equirus Capital Pvt. Ltd. and Motilal Oswal Investment Advisors Ltd., and Link Intime India Pvt. Ltd. is the registrar to the issue. 

Having issued initial equity at par, DSL issued bonus shares in the ratio of 474 for 1 in March 2018 and 1.2 for 1 in September 2021. The average cost of acquisition of shares by the promoters is Rs. Negligible, Rs. 0.02 and Rs. 0.04 per share. 

Being an OFS, post issue, DSL's paid-up equity capital will remain the same at Rs. 10.45 cr. Based on the upper cap of the IPO pricing, the company is looking for a market cap of Rs. 1703.35 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, DSL has (on a consolidated basis) posted a turnover/net profit - (loss) of Rs. 367.81 cr. / Rs. 31.68 cr. (FY20), Rs. 108.11 cr. / Rs. - (0.15) cr. (FY21) and Rs. 283.99 cr. / Rs. 16.25 cr. (FY22). It suffered a setback in the top line and on a PAT level for FY21 following the pandemic scare. It is now on a recovery path and expects to cross above pre-pandemic levels in the near term. 

For the last three fiscals, DSL has posted an average EPS of Rs. 3.98 and an average RoNW of 30.40%. The issue is priced at a P/BV of 20.72 based on its NAV of Rs. 15.73 per share as of March 31, 2022.

If we attribute FY22 earnings to the post-IPO paid-up capital of the company, the issue is at a P/E of 104.82. Thus issue appears aggressively priced. However, considering fancy and rising trends for Air Travel this Airport Experience Amplifier company stands to reap benefits with its technological service platform and being the first mover of the segment, it is asking for a fancy price, which may hold good for long-term investment. 

COMPARISON WITH LISTED PEERS:
As per offer documents, DSL has no listed peers to compare with. According to the management, at present, it enjoys a virtual monopoly in this segment with a 95% market share.

DIVIDEND POLICY:
The company has not declared or paid any dividend for the reported periods of the offer documents. It will adopt a prudent dividend policy post-listing, based on its financial performance and future prospects. 

MERCHANT BANKER'S TRACK RECORDS:
The two BRLMs associated with the offer have handled 9 public issues out of which, 3 public issues closed below the respective offer price on the listing date.

Dreamfolks Services IPO FAQs