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Dreamfolks Services Limited (DFSL) - SUBSCRIBE

It is a dominant player and India's largest airport service aggregator platform facilitating an enhanced airport experience to passengers leveraging a technology driven platform. Company follows an asset light business model that integrates global card networks in India, card issuers and other corporate clients in India, including airline companies with various airport lounge operators and other airport related service providers on a unified technology platform. DFSL facilitates the customers of its clients to access the airport related services such as Lounge, Food & beverages, Spa, pick up and drop service amongst others. Company has 100% market share in facilitating 54 lounges currently operational in India and it also has over 95% market share of all India issued credit and debit cards access to the airport lounges.

Positives: (a) Dominant player in the airport lounge aggregation industry in India with strong tailwinds (b) Strong relationships with clients in card network and card issuer space (c) Evolving services portfolio leading to increased cross selling benefits for clients and indirectly increasing client stickiness for the company (d) Asset and human resource light business model providing ability to scale business with less incremental cash deployment.

Investment concerns: (a) Business possesses high key man risk (b) Slowdown in Travel Industry (c) High Client and Revenue Concentration (d) Threat of airport lounge operators forward integrating and tying up directly with card networks and card issuers

Outlook & Valuation: 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 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 longterm perspective

Company background

DFSL is a dominant player and India's largest airport service aggregator platform facilitating an enhanced airport experience to passengers leveraging a technology driven platform. Company follows an asset light business model that primarily integrates global card networks in India, card issuers and other corporate clients in India including airline companies with various airport lounge operators and other airport related service providers on a unified technology platform. Company has tie up with all the 5 card networks in India including Visa, Mastercard, Diners/Discovery and RuPay, also the company has tie-ups with India’s largest card issuers such as HDFC Bank, Kotak Mahindra Bank amongst others. DFSL facilitates the customers of its clients to access the airport related services such as Lounge, Food & beverages, Spa, pick up and drop service amongst others. Company currently has 1,416 total touchpoints of which 244 touchpoints are in India and 1,172 are outside India. Through these touchpoints company facilitates its services to the customers of its clients.

Diverse range of Services:

1) Lounge Access: DFSL has 100% coverage of operational lounges in Indian airports, and it offers a unique value proposition to its clients by enabling access to the Consumers to a network of all operational airport lounges in India. As of March 31, 2022, company had exclusivity to provide access to 12 domestic lounges across 11 airports in India constituting around 22.22% of the total access of the domestic lounges for India issued credit cards and debit cards. Revenue from lounge access services contributed on an average 98.55% over FY20 to FY22 to the top line.

2) Food and beverage offerings: DFSL had tied up with various entities to facilitate access to around 57 restaurants / F&B outlets at 18 airports across India. 3) Spa Services: Consumers can avail of specified massage therapies such as head, neck and shoulder massage, and foot reflexology. DFSL facilitates access to this service in tie-up with O2 Spa Salon Private Limited.

4) Airport transfer services: DFSL facilitates airport transfer, i.e., airport ‘pickup and drop’ facilities in 47 cities across India and in 145 cities outside India, as of March 31, 2022

5) Baggage Transfer: DFSL has tied up with a service provider to provide baggage pick-up and drop-off facility to and from airports across Bengaluru, Hyderabad, Mumbai, and New Delhi

6) Other: In addition to providing Services at airports, DFSL has also, in the current Fiscal, forayed into the railways sector and, company has entered contracts to provide lounge access at 8 railway stations in India.

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