IPO Analysis: Dreamfolks Services – Dalal Street Investment Journal

The price range of the issue has been set at Rs 308 to Rs 326 per share.

initial public offering Rating: Invest for the long term

On the subject:

Dreamfolks Services (DSL), an airport services aggregator, floats its initial public offering (IPO) of shares with a par value of Rs 2 per share. The price range of the issue has been set at Rs 308 to Rs 326 per share. The issue size is Rs 562 crore and the entire issue is available for sale.

The Dreamfolks Services IPO is entirely an Offered For Sale (OFS) of up to 1.72 million shares by promoters Liberatha Peter Kallat, Dinesh Nagpal and Mukesh Yadav. The public offering will represent 33 percent of the company’s paid-up share capital after the offering.

The opening date of the IPO is August 24, 2022 and the IPO will end on August 26, 2022. The lot size of the IPO market is 46 shares and multiples thereof. A retail investor can apply for up to a maximum of 13 lots (598 shares or Rs 194,948) in the upper price range.

IPO opening date	24 Aug 22
Closing date of the IPO	26 Aug 22
problem type	Book built edition IPO
face value	₹2 per share
IPO price	₹308 to ₹326 per share
marketless	46 shares
Minimum order quantity	46 shares
listing at	BSE, NSE
problem size	17,242,368 shares of Rs2*
	(cumulative up to ₹562.12 Cr)*
offer for sale	17,242,368 shares worth ₹2 (total up to 562.12 Cr)*
Offered QIB Shares	Not less than 75% of the offer
offered to private investors	No more than 10% of the offer
Offered NII (HNI) shares	No more than 15% of the offer
*In the upper price segment

About the company:

DSL is India’s largest airport services aggregator platform, enabling enhanced airport experiences for travelers using a technology-driven platform. On a single technology platform, its business model integrates international card networks operating in India, credit card and debit card issuers and other corporate customers in India, including airlines, with various airport lounge operators and other service providers (collectively, the Operators). . Airport-related services such as lounges, food and beverage, spa, meet and assist, airport transportation, transit hotel/bedroom access, and baggage transfer are more easily accessible with DSL. Its dominance is supported by the fact that it offers access to all 54 airport lounges currently in operation in India. Additionally, as of FY2022, it has a market share of more than 95 percent of all credit and debit cards issued in India. Additionally, DSL accounted for nearly 68 percent of all lounge access in India in FY2022.

As of today, it offers services for all card networks operating in India, including Visa, Mastercard, Diners/Discover and RuPay, as well as many of the country’s famous card issuers, including ICICI Bank Limited, Axis Bank Limited, Kotak Mahindra Bank Limited, HDFC Bank Limited (in relation to the Debit Card Lounge Scheme) and SBI Cards and Payment Services Limited. The company began facilitating lounge access for Mastercard customers in 2013 and is currently operating. It has evolved over time from an airport lounge access aggregator to a provider of end-to-end technological solutions for the creation and delivery of services that enhance the airport experience.

Additionally, lounge fees accounted for a significant portion of operating income in fiscal years 2022, 2021 and 2020, accounting for 98.6 percent, 97.25 percent and 98.82 percent of total consolidated operating income, respectively. The Company’s average lounge fee revenue for FY22, FY21 and FY20 was 98.55 percent of total operating revenue. There were 60 people on the payroll as of March 31, 2022.

Financially

The company’s turnover was Rs 367 crore in March 2020 while it was Rs 248 crore in March 2019. The disruption of the COVID-19 pandemic in the airline industry has caused revenue to fall to Rs 106 crore in FY21. The most recent turnover in FY22 was Rs 283 crore. If we disregard the Covid year, the company’s revenue has posted a three-year CAGR of -0.083 percent. Operating margins for FY19 and FY20 were 9.4 percent and 12.3 percent, respectively. For FY22, operating margins are down to 8 percent. Even the net profit margin fell from 8.6 percent in FY20 to 5.8 percent in FY22. Earnings per share fell drastically from 66 in FY20 to 3.1 in FY22. In FY22 the company generated a net profit of Rs 16 crore which compares very poorly to pre-Covid figures.

Companies’ receivables days are rising steadily and their FY22 working capital performance was below average. However, the company’s ROE and ROCE seem okay. ROE is 22 percent and ROCE is 26 percent for FY22. In addition, the company’s net cash flow position for FY22 is negative at Rs (9) crore.

However, these numbers stem from the fact that domestic passenger traffic is still 40 percent below pre-pandemic levels at 84 million passengers. If air traffic recovers to normal levels, both the company’s sales and profits can improve dramatically in the future.

details	For the past year/period (₹ in crore)
period ends	March 31, 22	March 31 21	March 31, 20
total revenue	283	106	367
profit after taxes	16	(1)	32

*Stand alone base

Rating and Outlook

The IPO is being offered at a P/E of 104.82 based on FY22 earnings. The theme is quite expensive. Assuming air traffic recovers to pre-pandemic levels, companies’ profits can rise dramatically, and their 95 percent market share also suggests a bright future for expansion. Therefore, it is prudent to maintain a long-term perspective when applying for an IPO, and IPO gains may not be exceptional.