DreamFolks Services IPO: GMP jumps after strong retail subscription. Should you apply?
Premium- DreamFolks IPO GMP today is ₹83, which is ₹23 higher from its yesterday's morning GMP of ₹60 per equity share, say market observers
DreamFolks Services IPO: The initial public offer (IPO) of DreamFolks Services Ltd opened for subscription on 24th August 2022 and the public issue will remain open for bidding till 26th August 2022. The public offer worth ₹562.10 crore got fully subscribed on day one of bidding. However, the issue received strong response from the retail investors as retail portion of DreamFolks Services IPO got subscribed 7.93 times after day one of bidding. This strong response by retail investors has influenced grey market as well. As per the market observers, shares of DreamFolks Services Ltd are available at a premium of ₹83 in grey market today.
DreamFolks Services IPO GMP
According to market observers, after strong response by retail investors to the public issue, DreamFolks IPO grey market premium (GMP) surged from ₹60 to ₹83 in just one day. They said that for last two days, secondary market mood has remained positive and it has influenced the grey market as well. However, the most dominating reason for sharp upside move in Dreamfolks IPO GMP today is strong response by the retail investors on day one. They said that the grey market premium may further rise as market mood is expected to remain positive in near term.
What this GMP means?
Market observers said that DreamFolks IPO GMP today is ₹83, which means grey market is expecting that DreamFolks IPO listing would be around ₹409, around 25 per cent higher from its price band of ₹308 to ₹326 per equity share. They said that such a sharp rise in DreamFolks IPO GMP today signals strong listing premium for the investors.
However, stock market investors said that GMP is not an ideal indicator of listing premium from a public issue because it has nothing to do with the financials of the company.
DreamFolks Services IPO: Apply or not?
On DreamFolks IPO review, Swastika Investmart research report says, "DreamFolks will be one of the biggest beneficiaries of the aforementioned theme due to its first mover advantage and dominant position in the lounge access market (68 per cent share in terms of volumes). Further, it has significant exclusivity for India-issued credit and debit card programs in key locations. The biggest competitive advantage for the company is its network effect; the tie-up with all the 54 lounges in India enables it to provide a one-stop solution to its clients and strengthen its position between the clients and the lounge operators. Additionally, the company has created a proprietary technology platform that ensures scalability. Although the company doesn’t have any competitors in the domestic market, they face competition from large global programs such as Priority Pass, and Dragon Pass which have significant experience and a huge international presence. Despite the asset-light operations, the company has witnessed volatile cash flows due to high receivables. Finally, the nature of the issue is OFS which will lead to a 33% 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. And therefore, we recommend a "SUBSCRIBE" rating only for “High Risk Investors".
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Giving 'subscribe' tag to the public issue, Reliance Securities says, "DreamFolks Services Ltd has a strong business revenue potential over next decade on the back of a) Healthy air traffic growth, b) Increasing issuance of credit cards and c) Better awareness of usage of cards for lounges and higher penetration from current low level of ~5%. In view of strong business moat, healthy recovery in Air Passenger traffic, increase Lounge services, multi-fold revenue growth potential, unique asset light and efficient business model, we recommend SUBSCRIBE to the issue."
DreamFolks IPO details
The public issue is available for bidding at a price band of ₹308 to ₹326 per equity share and it will remain open for bidding till 26th August 2022. After day one of bidding, DreamFolks IPO subscription status informs that the public issue has been subscribed 1.96 times whereas its retail portion has been subscribed 7.93 times. The public issue is proposed for listing on both NSE and BSE and tentative DreamFolks IPO listing date is 6th September 2022. The issue is 100 per cent OFS in nature.
The company’s financials were impacted in last two years due to pandemic led restriction on air travel, although it recovered in FY22 to some extent, particularly in 2HFY22. It is likely to record healthy growth over the next 3-5 years on the back of increasing air passenger traffic, increasing usage of airport lounges with better awareness and chunk of new card issuance. It reported revenue of ₹2.8bn in FY22, up 2.7x YoY after 71% YoY decline in FY21, while EBITDA increased to ₹225mn in FY22 from an EBITDA loss of ₹4mn in FY21 and EBITDA of ₹451mn in FY20. PAT for FY22 stood at ₹163mn, as against net loss of ₹15mn in FY21 and PAT of ₹317mn in FY20. RoE for FY22 was at 19.8 per cent as against 48 per cent in FY20. Company would record strong revenue growth in FY23E and FY24E with strong recovery in domestic travel coupled with resumption of international air travel. Its margins would surpass previous peak with better operating leverage, as it has sizable fixed cost component.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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