Its more about management bandwidth. Trying to do too many things take away focus from their core business. This is my primary concern about unrelated expansions where none of their core strengths can be leveraged.
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It’s the same business. Just on roadways. How does it matter.
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i agree… but the company’s has thrived on doing new stuff and some click some dont… thats the way they do business…
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Who will pay for this facility? Same card issuers ?
Clearly a bad news for the company
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True. This business is completely disrupted, Adani being largest airport operator. Others airport operator like GMR may follow suite soon.
While the services has been restored and contract seems to be in place. the company is going to face tough times if Adani has started getting into their territory… now it is anybodys guess whether to stay invested or exit.
Honestly I latched here, coz it was promising growth.
But now I feel, business doesn’t have no barriers to entry.
They command market share, but the premises belong to other players, they can directly operate with banks cutting dreamfolks gradually as middle man. If they find the business attractive.
It’s a confusing state, but I wonder what does MOTilal oswal know, they keep on increasing stake quarter after quarter
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I wonder if the business has longevity, they airport operators can gradually cut aside dreamfolks and operate with card issuers directly once existing contracts come to expiry , in a phased manner.
Banks/card network may not comfortable to deal with too many airport operators as most of the power would be the airport operator.
In the current scenario banks need to deal with 1 or 2 major aggregators and the power is with the banks.
Management had answer this in the Conall of Q1FY25, by saying, DFS is a channel partner for Adani-owned lounges. So, Adani is not directly becomes a competitor for them.
Honestly I am not convinced, as Adani One ICICI Credit Card offering low annual fee than DFS Membership fee.
As DFS is diversifying its business services, only time will tell.
Disc: Holding Very small Amount of Shares for Long.
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It is a platform which is bringing together issuers and asset owner for easy transactions for a small fee. Replicating the network at low cost would be a challenge. Why would anyone switch for a marginal benefit, with each passing year it would become more difficult to replace the platform.
DFS is adding more services every few months to strengthen the platform - how much does it take for them to expand into highway lounges (already have issuers, card holders, technology) - they have more bargaining power than the new players - more to offer at lower cost
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Dreamfolks Services Ltd Q2FY25 earnings call summary:
- Highway dining: Benefits based on consumer cards. Issuer will communicate to consumer about outlets where cards can be used.
- Highway dining service is an asset lite model where it is managed by third party.
- Airport lounge footfall is 5.29 Mn for H1FY25.
- At least a year until banks will lift restrictions from their credit cards to spend more on lounge services. Company management unable to comment to revenue commitments from the past.
- Recent technical glitch: Ongoing international integration with a client due to which there was a glitch. Upgrade cycle issue.
- Increase in trade receivables by 140Cr. This was due to cost increase from client. Client exhausted budget for customer expenses.
- Don’t want to be dependent on one client or one service. Long gestation period to see improving revenue from corporate (4-5 yrs).
- Decline seen in customers using lounge services. One bank increased its spending limit on lounge services from Rs. 35,000 to Rs. 75,000.
- Gross margin guidance will remain unchanged i.e. 20%. Will it be reduced? Here management refused to comment.
- Company is providing benefits to card holders. However, service also depends with airlines, corporate, OTS. However, majority sales are from complimentary card holder. Amazon was also selling cards with 25% discount to access the lounge.
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Key negative statement from concall is the potential downward revision in revenue growth targets. They had initially guided for 25% which seems to be at big risk now. Business model so far is dominated by what credit card companies determine as benefits and any reduction or pull back in benefits would impact their core model. That’s also probably one of the reasons why it does not fall in a MOAT category even though it has 90% market share in lounge business.
Overall concall was disappointing and revenue growth drop indication should reduce the PE and some of the other valuation parameters by 20% in my view.
I invested recently with 5% of my PF value with the thesis that revenue would continue to grow at 25% and margins having stabilized might bump up by couple of % over a period of 2-3 years. Anti thesis was the fact that card companies continue to pull back benefit and that seems to be playing out still so the view has gone wrong.
Hoping that card companies are at the last stage of reducing benefits which hopefully should stabilize the numbers and probably after a year the growth comes back to 25%. I guess am hoping agaisnt hope now. Anticipating some pain but might stay invested. Over a very long term probably betting on India story where travel in general increases significantly which should continue to benefit the company model.
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After listening to the con call, i took an exit on Monday. It seems that the pain will continue for long as banks keep on raising the minimum spend required to get lounge accesses.
As stated in the call one bank doubled the spend criteria from 35k to 70k directly. In my opinion to get lounge access nobody is going to spend unnecessarily such a huge amount.
Growth is going to get slow down in the coming quarters
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It was quite evident that it is high risk company… (at that price)… if it corrects 50% more then it is worth the risk…
More than a year has passed since this debate, significant opportunity loss along with capital loss in such a roaring bull market. For small investors, our first loyalty should be towards our capital. Credit card loyalty can be bought anytime. Just kidding.
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Despite the data pointing otherwise, if we go to Lounges in any Airport, we always find that they are full. This would lead to the following scenario. Many Airports will start having multiple lounges, Freebie Lounges, Business Class Lounges, Premium Lounges etc which increases TAM. In Mumbai also saw an exclusive Amex Lounge etc. With many new Airports coming up, this may be pre-empted with multiple Lounges set up ab initio.
Also Indigo is starting Business Class which may increase people getting Lounge Access. We know that getting Business Class tickets is tough which means there is lot of demand for that.
Since Credit Card Cos are going through business pain, they may curtail spends and this would hit the freebie seeking card holders. Is there a possibility of that being replaced by Large Enterprises getting into a tie up with Dreamfolks for providing access to their employees free Lounge Access ?
All in all, if the number of Airport visitors is increasing, wont Dreamfolks gain in proportion notwithstanding the current pain.
Disc : Invested and taking a longer term view basis the growth potential of Lounges.
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Dreamfolks doesnt have control over the number of lounges in the country or the incentive customers have to use these lounges. The two players who matter are the banks providing these incentives and the airport operators who would build these lounges. For an airport operator, retail is the most profitable segment and large airports (30mn+ traffic) already have more than one lounge. Dreamfolks does not control its own growth
Restrictions are going to tougher going forward, from the above article spend limit for certain cards is more than 20000 for BOB cards & 50000 for Yes bank cards.
This will impact the footfall, management is also cautious about this. I think tough times are still ahead.
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