DreamFolks Services IPO fully subscribed on Day 1, retail quota booked 6.6 times

The initial public offering (IPO) of Dreamfolks Services, the largest airport service aggregator platform in India, was fully subscribed on the first day of the share sale as it received bids for 1.4 crore shares against an issue size of 94.83 lakh shares, getting subscribed by 1.48 times. The issue, which is completely an offer for sale (OFS) by existing promoters, received an overwhelming response from retail investors, with the quota set aside for them subscribing by 6.64 times.

The quota reserved for retail investors received bids for 1.14 crore equity shares against their allotted portion of 17.24 lakh shares. The portion set aside for qualified institutional buyers was subscribed 0.14 times, while non-institutional investors have bought 25.86 lakh of the 18.43 lakh shares reserved for them, which amounts to 0.71 times, as per the latest data available on the National Stock Exchange (NSE).

The company has reduced issue size to 94.83 lakh shares from 1.72 crore estimated earlier after it successfully raised ₹253 crore through its anchor book on August 23. The issue is completely an offer for sale (OFS) by the promoters - Mukesh Yadav, Dinesh Nagpal, and Liberatha Peter Kallat. Liberatha Peter Kallat, the chairperson and managing director of the company, holds 33% shareholding in the company. Non-executive directors Mukesh Yadav and Dinesh Nagpal own 34% and 33% shares, respectively.

The company has fixed offer price at ₹308 to ₹326 per equity share. Bids can be made for a minimum of 46 equity shares and in multiples of 46 shares thereafter. The floor price is 154 times the face value of the equity shares and the cap price is 163 times the face value of equity shares.

Most of the domestic brokerages such as Angle One, ICICI Direct, Jainam Broking limited, Swastika Investmart Ltd, and KR Choksey Securities Ltd have recommended a “Subscribe” rating to Dreamfolk Services’ IPO.

Analyst at Angle One has given a “Subscribe” rating to the IPO from a medium to long term perspective, citing that Dreamfolks has 100% market share in facilitating 54 lounges currently operational in India and it also has over 95% market share of all India issued credit and debit cards access to the airport lounges. The company’s focus on diversifying and increasing its services portfolio also augur well for the stock.

“In terms of valuations, the post-issue P/E works out to 104.8x FY22 EPS (at the upper end of the issue price band). However, the multiple looks higher mainly due to lower profitability caused by pandemic led industry wide issues,” Angle One said in a report.

ICICI Direct has also assigned “Subscribe” rating to Dreamfolk’s IPO, saying that the company has a unique, asset light, capital efficient business model. “The company enjoys over 95% market share) in card based lounge access with its asset light business model. While valuation based on FY22 looks stretched, the full business recovery will be visible from FY23. Given the monopolistic nature of business and further growth potential in the air travel and credit card segment, we recommend SUBSCRIBE to this issue for listing gains,” it said in a report.

Dreamfolks Services is a dominant player in the airport lounge aggregation industry in India with strong tailwinds. It has an asset-light business model that integrates card networks, card issuers and other corporate clients with various airport lounge operators and other airport related service providers on a unified technology platform. It provides airport-related services such as lounge access, food and beverage, meet and assist, transit hotels/nap room access, baggage transfer, spa services, airport transfer services.