DreamFolks Services IPO: Grey market premium jumps 15% on strong demand

The 3-day initial public offering (IPO) of Dreamfolks Services continues to do well on the second day of subscription. As of 12:00 pm, the overall issue was subscribed over 3 times, led by retail investors, non institutional investors (NIIs) and qualified institutional buyers (QIBs) with 12.09 times, 2.64 times, and 0.26 times, respectively. The issue is open till Friday, August 26.

In the grey market, shares of Dreamfolks Services were trading at Rs 75 per share, which implies listing at Rs 401 per share against the upper price band of issue price. The shares jumped over 15 per cent from Rs 65 per share in the grey market after a strong retail response, shows data by IPO Watch. The company has set the price band of the IPO in the range of Rs 308 to Rs 326 apiece. The issue is entirely an offer for sale (OFS) of up to 1.72 crore equity shares with a face value of Rs 2 by its promoters.

"The small retail portion of 10 per cent, favourable secondary market conditions, recovery in primary markets, and the company's monopolistic market position in the airport lounge aggregation industry is fueling strong attraction among investors," said Manan Doshi, co-founder of Unlisted Arena.

At present, the company facilitates all the 54 lounges operational in India and enjoys market share of over 80 per cent in the domestic lounge access market. Therefore, analysts at ICICI Direct believe that the company's future growth potential in the air travel and lounge industry would act as a favourable subscription for investors. Hence they recommend a 'subscribe' for listing gains.

On the flipside, the rich valuations and lower margins cast a shadow on the public offer, warn analysts. "Since the Rs 562 crore Dreamfolks Services IPO is 100 per cent OFS, it will continue to elude QIBs and NIIs. Despite Ebitda margins declined by 430 basis points (bps) during fiscal year FY20 to FY22, the issue is over-valued at 104.8 times of FY22 P/E of the IPO's upper price band. Hence, we share the 'unsubscribe' stance on the counter," said Vinit Bolinjkar, Head of Research, Ventura Securities.

Likewise, analysts at Religare Broking, too, believe that the company's financials have not been consistent as it got impacted by the pandemic in FY21. Both revenue and profit-after-tax (PAT) saw a de-growth of 12 to 28 per cent CAGR between FY20-22. The brokerage firm shares a 'neutral' rating on the counter.

Earlier, the airport aggregator platform services garnered Rs 253 crore from anchor investors, with a host of mutual fund houses, investment banks, insurance institutions among the lineup. Among the lot, Smallcap World Fund was the largest bidder for the 28.4 per cent of the total offered portion. Aditya Birla Sun Life Small Cap, Aditya Birla Sun Life Multicap were among the other top three investors.

The IPO allotment will be finalised on September 1, 2022 and is likely to list on the exchanges on September 6, 2022.