Everyone knows at least one guy who can’t stop talking about how they sleep on recliners, watch movies and bask in the glory of a free buffet at the airport because their dad has a cool credit card.
While they scuffle at our peasantry, they are unaware that their so-called “free” stuff is actually making someone money, and they just got listed on the exchange!
Whether you get free access to airport lounges or not, even you can make some money off them now!
DreamFolks Services debuted on the NSE at a share price of Rs. 508, a 56% premium over its IPO issue price of Rs. 326, in a blockbuster listing.
Yet, who among us had even heard of DreamFolks before their IPO, and what do they do?
What is DreamFolks? ⛅
When you visit an airport, you can take advantage of a number of services to make your journey better, some of these being:
Getting you (and your excess baggage) to the airport
Assisting you with check-in
Giving you access to a lounge, dinner, or even a spa before your flight
Assistance in a new city, language assistance, or a transit hotel for your connecting flight
The majority of these services are packaged with a variety of items for travellers; some are freebies from the ticket you purchased, your credit card provider, your sim provider, or even your tour package.
Now imagine if one company connected those luxuries to your credit card, your ticket or your travel package - that is what DreamFolks is!
How Does It All Work? 🔎
Let's say you can avail a complimentary dinner before your flight, thanks to your credit card, so you visit the lounge at your airport. You’re greeted with a warm smile and a credit card machine that makes you swipe, without hesitation (because only a rupee or two get deducted).
Every time you swipe, DreamFolks gets a commission from your credit card company! DreamFolks in turn then compensates the lounge by giving them a cut of cheese (and for all the costs they incur for serving you that large buffet).
This applies to all services you use at the airport, not just meals; DreamFolks is paid for each unique service you use there. Dreamfolks receive an average payment of Rs. 800 per person, of which it retains roughly Rs. 130 (roughly 16%).
The rest, of course, goes to the service provider, to cover all the costs and to make a margin on top of that.
The best part? DreamFolks doesn’t actually own or operate any of these services. It is a mere middle-man, facilitating these services. Hence, they require very few assets and people to make this work - 60 people, to be precise!
It operates in a sector of the economy that is still developing and where there aren't many players. Take lounges, for example. Their business covers 54 active airport lounges - which are literally all of the airport lounges in India.
All this sums up to one number that matters - 95% - their market share in this industry across the country. These are the perks of making the right friends in the right international banks and credit card companies.
Clear Skies Ahead 💨
There are several reasons why DreamFolks could do well as a stock, and you could make some money on top of getting those free meals.
New Airports, New Lounges
By 2024, 200 brand-new airports, with additional lounges bringing the total to 204 (from 54), are anticipated to open in India, and DreamFolks intends to retain their monopoly, connecting them to Tier-2 and Tier-3 cities as well.
No Cap (On Prices)!
With the DGCA removing the cap on ticket prices, the competitive spree among airlines will fuel further air travel due to slashed prices, allowing passengers to set aside a portion of their disposable income to spend on amenities like lounges and other services.
The dominance displayed by Low-Cost Carriers and Ultra Low-Cost Carriers might pave the way for the services that DreamFolks mediates, as part of loyalty programs or additional charges on the ticket.
Cards on The Table
At 3%, India currently has a very low credit card penetration rate. Due to the impact of the pandemic, rising incomes, and new fintech players, it is anticipated that the digital economy and cards will become increasingly prevalent. DreamFolks' prospects will improve as lounge access is usually bundled with cards.
What Could Go Wrong? 🥊
DreamFolks is primarily reliant on card operators and issuers, with lounge access-related services, accounting for a sizable portion of its revenue (98%). Therefore, card usage and new cards being issued are integral to its survival for now.
Over the past three years, the top 5 clients (ICICI Bank Limited, Axis Bank Limited, Kotak Mahindra Bank Limited, and HDFC Bank Limited) have contributed 85% of the company's overall operating income.
Not Another Wave
The company has a clear dependence on the air travel industry, and a situation like COVID-19 could easily send things off course, leading to a drop in revenues (COVID saw a 71% drop in revenue).
Take Off ✈
From being a company not many people had heard of, to listing at an above-average premium in a volatile market, DreamFolks has surely shaken some leaves (and wallets) into making its presence felt. To think that they could be the reason that Indian airports get a better name for themselves, and we can finally eat something other than overpriced burgers!