The issue is entirely an offer for sale (OFS) of up to 1,72,42,368 equity shares with a face value of Rs 2 each by its promoters Liberatha Peter Kallat, Mukesh Yadav and Dinesh Nagpal.
The issue is open for subscription till August 26 (Friday). Investors can make a bid of a minimum of 46 equity shares and in multiples of 46 equity shares thereafter. The anchor book will open on Tuesday, August 23.
The company, which facilitates an enhanced airport experience for passengers, leveraging its technology-driven platform, will not directly receive any money from the issue and the entire proceeds will go to promoters.
The company’s asset-light business model integrates global card networks operating in India, credit card and debit card issuers and other corporate clients, including airline companies, with various airport lounge operators.
Dreamfolks has coverage across 54 lounges across domestic and international airport terminals in Bangalore, Mumbai, Cochin, Ahmedabad and more. It has no listed peers so far.
The company’s service covers the entire journey of passengers from doorstep to the airport, within the airport, and again from the airport to the doorstep of the destination.
It provides services which include lounge access, food & beverages, spa services, airport transfers, baggage transfers, and medical and hotel services.
DreamFolks’ revenue from operations increased from Rs 98.7 crore during fiscal 2017 to Rs 367.04 crore in fiscal 2020, at a compound annual growth rate of 55 per cent.
For the year ended on March 31, 2022, the company had reported total revenue of Rs 283.99 crore with a net profit of Rs 16.25 crore. In the previous fiscal, it had clocked a revenue of Rs 108.11 with a net loss of Rs 1.45 crore.
Up to 75 per cent of the total offer is reserved for qualified institutional buyers, and 15 per cent for non-institutional investors. The remaining 10 per cent stake is allocated to the retail investors.
Equirus Capital and
Investment Advisors are the book-running lead managers to the offer, whereas Link Intime India is the registrar to the issue. Shares of the company will list on both BSE and NSE.
The majority of the brokerages remain positive on the issue due to its asset-light model and growth prospects. However, a few of them suggest that the issue is aggressively priced and investors should bid for it with a long-term view only.
Here is what different brokerage have to say about the initial stake sale of DreamFolks Service:
KR Choksey Research
Rating: Subscribe
The company will benefit from the government initiatives, which will help to increase access to more regional airports, the broker said. “We are optimistic the company is well-poised for the upcoming growth opportunities owing to its market dominance.”
We believe it is significant for the company to grow in the domestic and international lounge services by expanding its partnerships with card issuers and other service providers, it said while assigning a ‘subscribe’ rating to the issue.
Choice Broking
Rating: Subscribe with Caution
The current lounge access market size is very small and is not expected to expand significantly as mentioned in the offer document. Post-pandemic, strong revenue per passenger was the key driver for the top-line growth, but the passenger traffic lagged the pre-Covid highs, the broker said.
“We are forecasting a contraction in the return ratios over FY22-24E. At the higher price band, Dreamfolk is demanding an EV/Sales multiple of 6x, which seems to be on the higher side,” it added with a ‘Subscribe with Caution’ rating to the issue.
Broking
Rating: Neutral
In the last three years, the company’s financials have not been consistent as it got impacted by the pandemic in FY21. Revenue and PAT have seen a de-growth between FY20-22. The company is valued at 104x FY22, the brokerage said.
Religare also flagged high dependence on the travel industry, fewer clients and concentration of revenue as key risks to the issue.
Angel One
Rating: Subscribe in the long run
In terms of the valuations, the post-issue P/E works out to 104.8x FY22 EPS at the upper range of the price band. However, it looks higher mainly due to lower profitability caused by pandemic-led industry-wide issues, said the brokerage.
“The company enjoys 95 per cent market share and has an asset-light mode, gaining the preference of air travellers. The company has focused on diversifying and increasing services portfolio,” it added with a subscribe rating to issue in the medium to long run.
Rating: Only high-risk investors should subscribe
Although the company doesn’t have any competitors in the domestic market, they face competition from large global programs such as Priority Pass, and Dragon Pass which have significant experience and a huge international presence, the brokerage said.
The company has witnessed volatile cash flows due to high receivables, it added. “The nature of the issue is OFS which will lead to a 33 per cent dilution of the promoter’s stake and premium valuations and make it suitable for long-term investors with moderate to high-risk appetite.”
Sushil Finance
Rating: Subscribe for the long term
Despite the decrease in profit, EBITDA and financial ratios between FY20 to FY22, there is an increase in average revenue per passenger in FY22 to Rs 800 from Rs 752 in FY20. At the upper price, the issue is aggressively priced at a P/E of around 100, it said.
“Besides, fundamentals are overpriced; the company has first mover advantage and also rising trend of air travel experience. Investors can invest for medium to long term horizon,” it added.
Jainam Broking
Rating: Subscribe
The company is profitable, has no debt, and the travelling industry is facing tailwinds post-pandemic, it said. The company has no private equity.
“The company has first mover advantage as there are no such companies in India, and its peers are only present in China and UK,” it added with a subscribe tag for the issue. “The valuation of the company is high and it is the only point of concern.”
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
