DreamFolks Services Limited’s Rs 562 crore IPO opens today for subscription. Just ahead of the opening of the subscription window, DreamFolks Services has managed to raise Rs 252.9 crore from 18 anchor investors, including marquee global as well as domestic names. Societe General, Mirae Asset India, BNP Paribas Arbitrage, and Aditya Birla Sunlife are some of the investors who have picked up a stake in the company via the anchor portion of the issue. The DreamFolks IPO opens today and will remain open for subscription till Friday, August 26. The issue is the second IPO to enter primary markets in recent weeks.
About the IPO
DreamFolks IPO is entirely an Offer For Sale (OFS) by existing shareholders of the company and does not include a fresh issue of equity shares. The lack of fresh issuance shows that the company will not receive any funds from the IPO. The Rs 562 crore raised will go to the selling shareholders. Currently, the promoters of the company own a 100% stake in DreamFolks Services. However, post IPO, the same will come down to 67% with public shareholding in the company rising to 33%. Investors can bid, beginning today in the price band of Rs 308-326 per share, in a bid lot of 46 shares and in multiple thereafter. Shares of the company will list on the stock exchanges on September 6.
Anchor Book sees decent interest
Through the anchor route, Smallcap World Fund has bought 22,08,598 equity shares of the company for Rs 72 crore. Aditya Birla Sun Life Small Cap Fund has purchased 6.13 lakh shares worth Rs 20 crore. Other investors include Invesco India Multicap Fund, Abakkus Growth Fund, Quant Mutual Fund, PNB Metlife India, Societe Generale, and BNP Paribas Arbitrage, among others.
Asset light business model
DreamFolks is an airport service aggregator platform providing services such as Lounge Access, Food & Beverage offerings, Spa Services, Meet & Assist, Airport transfer services, Transit Hotels, Baggage transfer, and much more. “Company follows an asset-light business model that integrates global card networks in India, card issuers and other corporate clients in India, including airline companies with various airport lounge operators and other airport-related service providers on a unified technology platform,” said AngelOne in a note. While DreamFolks is a Dominant player in the airport lounge aggregation industry with strong relationships with clients, and evolving services portfolio, analysts do see some concerns. A slowdown in travel, threat and high client and revenue concentration are some of the risks.
The company is profitable with a net profit of Rs 16 crore in the previous fiscal year. Revenue of DreamFolks has, however, seen its revenue drop from Rs 367 crore in financial year ending March 2020 to Rs 282 in the last financial year. The positive outlook for air travel, however, bodes well for the company. “The Indian market is expected to grow at almost 6X from around 175 million air travelers in 2019 to around 1 billion travelers in 2040 as compared to the expected global growth of 2X to a total of 10 billion passengers in 2040,” HDFC Securities said.
Should you subscribe?
Analysts at KR Choksey have a subscribe rating on the firm. “On the upper price band of Rs 326 and EPS of INR 3.11 for FY22, the P/E ratio is 104.8x. The company has seen a 90.7% CAGR growth in a number of touch points over FY18- 22. The number of clients has also seen a growth of 119.7% CAGR, with cities increasing to 536 from 23 cities,” they said. “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. As a result, we recommend that DreamFolks Services Ltd IPO be rated ‘SUBSCRIBE,” analysts added.
AngelOne too has a Subscribe rating valuing the firm at 104.8x FY22 EPS post issue. “It (DreamFolks) has been an asset-light business model gaining the preference of air travellers. Further, DFSL has focused on diversifying and increasing its services portfolio. Thus, we have a SUBSCRIBE rating on the issue from a medium to long term perspective,” AngelOne said.