Market liked our 'unique business model': DreamFolks founder on stellar listing

Country’s first aviation services-related public issue in many years, Dreamfolks made a robust debut on bourses on Tuesday with its shares listed at a premium of around 55 per cent compared to its IPO price.

The scrip got listed at Rs 505 on the BSE against the issue price of Rs 326. Likewise, it opened at Rs 508.70 on NSE. Earlier, the issue, which was open for subscription from August 24-26, got a massive response from investors with a 56.68 times oversubscription.

India’s largest airport services aggregator debuted on the exchanges seven years after low-cost carrier (LCC) IndiGo’s public issue in October 2015.

Commenting on the robust market listing, founder & managing director, Dreamfolks, Liberatha Kallat told Business Today that there was a robust moat in the company.

“Dreamfolks is the solution that we have built. We also have exclusive lounge contracts and strong relationships built over the past nine years. There’s a complete moat!”

Dreamfolks enjoys a 95 per cent market share in the airport lounge business.

She further added that the market has liked its unique business model, which is also the first of its kind in India, the world’s third largest domestic aviation market. Many weren’t wholly aware of the model when the company first started interacting with potential investors.

Sharing her views on the aggregator business model with BT, Kallat added that since the business is driven by the debit and credit programmes, it had multiple drivers.

“One would be on the credit card issuance. Today, 60 million cards have the eligibility of accessing lounge facilities. When we started, the lounge penetration by cardholders was less than 1 per cent but today it has grown to 8 per cent,” she said.

Kallat asserted that with an increased credit card penetration happening in India, awareness regarding the benefits accruing from credit cards was also growing. The second driver in the Indian market was the coming up of new airports.

“Airports too have understood the benefits of the lounge business’ contribution to their revenues. And not only that, the other end-to-end services that we have added in our portfolio, starting from baggage transfers, meet-and-assist, airport transit and spas, would be the reason for the growth in coming years,” Kallat added.

Unique business model

When queried on details of the business model, Kallat said they raised an invoice to banks for complimentary lounge access sought by card members every month. Similarly, lounges also raised a consolidated invoice to the company for any transactions done by card members at their facilities.

“Whatever transactions are happening from the cardholder the invoicing is raised to the banks or card members depending on the category of the card or the card network. Meanwhile, lounges also raise invoices to DreamFolks,” she said adding the company presently did not have any competitors in the country.

Internationally, however, they would be competing with Priority Pass and Dragon Pass. Kallat was, however, confident that their ability to understand the client's requirements and address their needs would support them in the global market as well.

With forecasts of non-metro routes driving the next phase of growth of the Indian aviation industry, the company claimed that it already had a presence in Tier II and III city airports offering lounge facilities.

With nine lounges at eight railway stations across the country, viz. Paharganj Gate (New Delhi), Ajmeri Gate (New Delhi), Madurai, Ahmedabad, Sealdah, Agra Cantt, Jaipur and Varanasi, the company has also forayed into the railway segment.

In response to a separate BT query regarding proceeds of the stake sale not being ploughed back into the business, the company in a statement claimed, “The IPO is entirely an Offer for Sale (OFS) of 1,72,42,368 equity shares wherein the promoters are diluting 33 per cent out of their 100 per cent shareholding. Post the issue, the existing shareholders will hold 67 per cent.”