Dreamfolks Services IPO opens today; here’s what brokerages have to say

The initial public offering (IPO) of Dreamfolks Services opened for subscription on August 24 to raise Rs 562 crore from the primary market. The company has fixed a price band of Rs 308-Rs 326 per share. The lot size of Dreamfolks Services IPO is 46 shares for which one will have to spend Rs 14,996. A retail investor can submit bids for a maximum of 13 lots by spending Rs 1,94,948. The public offer will close on August 26, 2022.

Dreamfolks Services is a dominant player and India's largest airport service aggregator platform, an incubator of the industry with its unique, asset-light, capital-efficient business model. The company’s first mover advantage in the lounge access aggregator industry in India has enabled it to become a dominant player with a share of over 80 per cent in the domestic lounge access market. In addition, it has partnered with various entities to facilitate access to around 57 restaurants and F&B outlets at 18 airports across India. Dreamfolks Services will not directly receive any proceeds from the offer and the entire proceeds of the IPO will be received by the selling shareholders.

Select brokerages have given a ‘Subscribe’ rating to the issue.  Here’s what they have to say.

KRChoksey Shares and Securities | Subscribe

As the air travel industry recovers sharply from the Covid-19 uncertainties, the brokerage is optimistic that the company is well-poised for the upcoming growth opportunities owing to its market dominance. The company has also been expanding its presence in the international air lounge market by improving its touch points. KRChoksey believes 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.

Angel One | Subscribe

In terms of valuations, the post-issue price-to-earnings (P/E) works out to 104.8 times 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. Dreamfolks Services enjoys a 95 per cent market share and enjoys an early mover advantage in the segment. It has been an asset-light business model gaining the preference of air travellers. Further, the company has focused on diversifying and increasing its services portfolio. Thus, the brokerage has a ‘Subscribe’ rating on the issue from a medium to long-term perspective.

Swastika Investmart | Subscribe (Only for high-risk investors)

Despite the asset-light operations, the company has witnessed volatile cash flows due to high receivables. The nature of the issue is OFS which will lead to a 33 per cent dilution of the promoter’s stake and premium valuations (P/E of 104.82 based on FY22 EPS) makes it suitable for long-term investors with moderate to high-risk appetite.

Also read: Dreamfolks Services IPO to open on August 24: GMP, lot size, price band and more