IPO Review – Dreamfolks

India’s largest airport service aggregator platform, DreamFolks Services, came up with an IPO on August 24 to raise up to Rs. 562 crores via an offer for sale of 1.72 crore equity shares. The issue closes for bidding on August 26. The company enjoys a market leadership position and has the advantage of a head-start in the country’s airport lounge aggregation space.

On the 2nd day of bidding, the retail portion of this issue was subscribed 9.99 times. Seeing a positive response from retail investors, the grey market has also jumped into action with a surge in the premium from Rs. 60 to Rs. 83 within a day. 

Let’s have a look at the details of this IPO and review points that can aid informed investment decisions.

IPO details – Dreamfolks Services

Here are the top details of the IPO that investors should know about:

• IPO dates: August 24 – 26 August 2022
• IPO price band: Rs. 308 – Rs. 326
• Bid lot: 46 shares and multiples of similar quantity
• Issue size: Rs. 562.10 crores
• Equity shares offered for sale – 17,242,368
• Reservation:
  • QIB 75%,
  • Retail – 10%,
  • NII 15%
• Minimum investment amount: Rs. 14,996

About Dreamfolks Services Limited

DreamFolks is a dominant airport service aggregator platform in India. The company has a technological platform that essentially helps in integrating global card networks in India with card issuers and other companies, airline companies with airport lounge operators and related service providers.

They are a dominant player in the industry with a share of over 80% in the domestic lounge access market in India. Apart from a strong presence in India, it also has a global footprint across 121 countries. 

Here are some of the top facts that investors should know about this company:

• The company follows a unique asset-light business model.
• It offers services to all major card networks operating in India.
• Its tech platform enables its clients to further provide a wide range of services through customer engagement and loyalty programs.
• Some of the other services offered by the company include lounges, food and beverage, spa, airport transfer, transit hotels, baggage transfer, etc.

Company strengths

Some of the company’s strengths are:

• Dominant market player with close to 100% lounge coverage across India. This allows exclusive access to credit and debit card programs in key locations in India.
• Long-standing business alliance with various card network providers in India, banks and corporates.
• Continuously rising customer base and insignificant direct cost of customer acquisition.
• Proprietary technology platform enables business scalability.

Company weaknesses

Investors must take note of the below-mentioned drawbacks about the company:

• Majority of its revenues come from one source, that is, card issuers.
• Heavy dependency on the air travel sector. Any impact on the air travel industry, for example, the Covid-19 lockdowns, could mean a significant impact on the company’s operations.
• Heavy reliance on credit/debit cards in circulation and issuance of new cards.
• Potential saturation may be seen in this business within the Indian markets
• Technological dependency of the company could mean susceptibility to cyber-attacks.

Risks involved in Dreamfolks IPO

Here are some of the top risks surrounding this company that IPO investors should note:

1. Limited clientele: The company is heavily reliant on only a few clients who contribute significantly to its revenues. The company’s top 5 clients contributed 84.91% of its total revenues on average through FY22, FY21, and FY20.

2. Relationship with card networks: How the company will maintain relationships with card networks and card issuers will dictate its long-term business sustainability. There is a risk that established card networks and card issuers may not continue to tie up with the company.

3. Dependency on travel sector: Majority of the company’s revenue is directly linked to service usage by passengers at airports. This makes the company heavily reliant on the air travel industry.

Conclusion

Currently, many retail investors apart from institutional buyers have subscribed to the company’s IPO. Investors are hopeful of fetching good returns as the company may benefit from the slowdown in the Covid-19 pandemic. Before investing, however, investors must consider the above-mentioned pros and cons to gauge the overall prospects of the investment.

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