BackDreamFolks Services garners ₹253 cr from anchor investors ahead of IPO on Aug 24. Should you subscribe?
The issue is entirely an offer for sale of up to 1.72 crore equity shares. The subscription in the IPO will be from August 24 to August 26. The company plans to raise between ₹531 to ₹562 crore from this public issue.
PremiumIndia's largest airport service aggregator platform, DreamFolks Services garnered ₹253 crore from anchor investors on Tuesday ahead of its initial public offering (IPO) launch on August 24. The issue is entirely an offer for sale of up to 1.72 crore equity shares. The subscription in the IPO will be allowed till August 26. The company plans to raise between ₹531 to ₹562 crore from this public issue. A host of mutual fund houses, insurance companies, and investment banks were among anchor investors. Majority of the analysts have given a ‘subscription’ recommendation on the IPO.
The IPO was open for anchor investors on August 23.
As per data on BSE, under the IPO, a total of 77,59,066 equity shares were allocated to anchor investors at the upper price band of ₹326 per share aggregating to ₹252.95 crore.
Among the anchor investors, Smallcap World Fund was the largest bidder for 28.46% of the total portion offered, Aditya Birla Sun Life Small Cap, Aditya Birla Sun Life Multicap, Invesco India Multicap Fund, and Sundaram Mutual Fund A/C Sundaram Services Fund were among top five investors.
Other anchor investors are - Abakkus Growth Fund - 2, Kuber India Fund, Malabar India Fund, Mirae Asset India Sector Leader Equity Fund, Quant Mutual Fund - Quant Value Fund, Saint Capital Fund, Elara India Opportunities Fund, Matthews Asia Funds Asia Small Companies Fund, PNB Metlife India Insurance Company, Societe Generale, Segantii India Mauritius, Vikasa India EIF I Fund, and BNP Paribas Arbitrage.
The IPO will comprise of an offer for sale (OFS) where promoters of the company will offload 1,72,42,368 equity shares. The promoters are Liberatha Peter Kallat, Dinesh Nagpal, and Mukesh Yadav.
The IPO has a price band of ₹308 to ₹326 per equity share.
75% of the total issue is reserved for qualified institutional buyers (QIB), while 15% of the total IPO size is offered to non-institutional investors, and the remaining 10% to retail individual investors (RII).
Equirus Capital and Motilal Oswal Investment Advisors are acting as the book-running lead manager of the IPO.
DreamFolks Services is a dominant player and India's largest airport service aggregator platform facilitating an enhanced airport experience to passengers leveraging a technology-driven platform.
Should you subscribe to the Dreamfolks Services IPO?
Vikrant Kashyap, an analyst at KR Choksey in the IPO note said, ". On the upper price band of INR 326 and EPS of ₹3.11 for FY22, the P/E ratio is 104.8x. The company has seen a 90.7% CAGR growth in a number of touch points over FY18-22. The number of clients has also seen a growth of 119.7% CAGR, with cities increasing to 536 from 23 cities. Despite the impact of Covid-19 in FY20-21, the company has seen consistent growth in the business momentum. Dreamfolks has also been focusing on increasing its overseas presence with 1,172 touchpoints from zero presence till FY20. The company has been improving its broad base by expanding its access across India & overseas. The company will also benefit from the government initiatives like Udaan, which will help to increase access to more regional airports."
Further, Kashyap said, "As the air travel industry recovers sharply from the Covid-19 uncertainties, we are optimistic 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 touchpoints. We believe 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. As a result, we recommend that DreamFolks Services Ltd IPO be rated 'SUBSCRIBE.'"
Meanwhile, Purves S Chaudhari analyst at Angel One said, "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. DFSL enjoys a 95% market share and enjoys an early mover advantage in the segment. It has been an asset-light business model gaining the preference of air travelers. Further, DFSL has focused on diversifying and increasing its services portfolio. Thus, we have a SUBSCRIBE rating on the issue from a medium to long-term perspective."
In its note, Jainam Broking recommended to SUBSCRIBE to this IPO on the following parameters - the company is profitable has no debt; traveling industry facing tailwinds post-pandemic; valuation is high and it is the only point of concern; has First Mover advantage as there are no such companies in India its peer is only present in china and UK; and it has no private equity.
Moreover, Swastika in its research note said, "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'."
Dreamfolks Services does not have any listed peer companies for comparison of performance as it operates in an industry that is in its nascent stages. Therefore, there are limited numbers of operators in this industry.
Post the IPO, Dreamfolks Services will be listed on BSE and NSE.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.
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