The initial public offering (IPO) of DreamFolks Services, a dominant player in the airport lounge aggregation industry in India, got a good response from retail investors on August 24, the first day of bidding.
By afternoon, retail investors had bid 6.07 times the portion set aside for them. Bids had came in for 1.17 crore equity shares against an offer size of 94.83 lakh shares.
The IPO had been subscribed 1.24 times, data available with exchanges show. The issue size was reduced to 94.83 lakh shares from 1.72 crore shares after the company raised Rs 253 crore through its anchor book on August 23.
Non-institutional investors had bid for 50 percent of the shares set aside for them, while qualified institutional buyers bought 9,108 equity shares against their quota of 51.72 lakh shares.
DreamFolks Services is looking to raise Rs 562 crore through the issue, with is entirely an offer for sale, at the upper end of the price band of Rs 308-326 a share. The IPO closes on August 26.
Brokerages have given a “subscribe” rating to the offer, given the first-mover advantage in the airport lounge aggregation industry and rising trend of air travel, though the issue is highly priced.
Dreamfolks has a strong business moat due to the flywheel effect led by clients and the operator network. It is a technology-driven platform and an asset-light business, brokerages said.
The company’s revenue is primarily based on the number of unique times customers avail the services.
Its financials were hit in FY21 as the coronavirus pandemic effected as travel industry but with the easing of restrictions, the company recovered in FY22.
Despite a decrease in profit, EBITDA and other financial ratios between FY20 and FY22, the average revenue per passenger in FY22 increased to 800 from 752 in FY20. At the upper price of Rs 326, the issue is aggressively priced at P/E of around 100, Krishna Rana of Sushil Finance Consultants said.
Though fundamentals are overpriced, the company has the first-mover advantage and investors can invest for medium to long-term horizon, experts said.
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