IPO analysis Of DreamFolks
IPO analysis Of DreamFolks
By Amaan Ahmad Ansari
GLOBAL AIR TRAVEL MARKET
The Global aviation sector had taken a hit due to the COVID-19-induced lockdowns, however, the revival phase has begun. Global airlines are planning to resume their long-haul routes, especially driven ones. This holds good for the Indian domestic market also; it is interesting to note that a few Indian Tier-2 and Tier-3 airports have surpassed the Pre-COVID traffic numbers. The Indian Aviation is expected to recover faster than expected, it is important to note that May 2022 Domestic Traffic numbers have optimistic growth towards reaching Pre COVID passenger numbers at an accelerated pace.
The volume of global air passengers was around 1 billion in 1990 and it increased 4X times to surpass 4 billion passengers in 2019. During the past three decades, the global aviation sector has witnessed 6 key incidents14 that decelerated the growth of passengers. The 6 incidents were:
•Gulf War 1990
•Asian Financial Crisis 1997
•World Trade Center terrorist attack of 9/11- 2001
•SARS pandemic of 2003
•Financial Crisis 2008
•Global COVID 2019 pandemic
DreamFolks
The main business model of DreamFolks is to act as a service provider between the lounge operators on one side, and banks, card networks, airlines, and corporates on the other end. DreamFolks acts as a vital link for banks for their credit & debit card sales and customer engagement programs, and for airlines to manage customer loyalty and retention.54 Main advantage of their business model is that the customer does not have to exclusively subscribe to memberships. Similarly, airlines that do not offer lounge access as part of the fare, can still manage customer loyalty by providing them access as an option. DreamFolks is a dominant player that has 100% lounge coverage in India with significant exclusivity
for India-issued credit and debit card programs in key locations. DreamFolks also leverages technology and offers the solution through Omni channels such as App based access, tracking live benefits on each card. The technology-driven solutions of DreamFolks is one of the key elements that enable its clients to provide value-added services to their end customers as a part of their customer engagement and loyalty management programs.
Revenue Model
It generates a significant share of our revenue on a per Pax (Per Passenger) basis which is recognized through the swipe or tap of a credit/debit card by the Consumer on our platform. Under this arrangement, It charges a specified fee from the Client for each instance of the use of our Services by the Consumers i.e., It charges a pre-determined amount on a Consumer availing the Service.
In addition, it also levies annual membership fees, integration costs, platform fees, etc. It raises their invoices for our Clients on a monthly basis.
Valuation
Dreamfolks is in the Asset light model with approx 3-4 Sales to Capital Ratio. Company is highly correlated with traveling & tourism as it provides various types of services to the passenger such as Lounge, spa, food, meet & assist, etc. It ties up with the Credit/Debit card providers as their loyalty program. The company is the market leader in this segment. I am assuming that it will remain a market leader in the future in my valuation.
I give a slightly higher Discount Rate because of the fluctuation in the business with the slowdown in the economy. Its business is very sensitive according to me as the company has not recovered fully at the pre-Covid level in terms of Per Passenger and Sales.
The growth rate is fair in my view because the industry overview data that is given by the company is very very optimistic. For instance, look at the below figures.
