DREAMFOLKSNSEFebruary 12, 2025

Dreamfolks Services Limited

6,196words

52turns

6analyst exchanges

4executives

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Management on call

Liberatha Kallat

CHAIRPERSON AND MANAGING DIRECTOR

Giya Diwaan

CHIEF FINANCIAL OFFICER

Balaji Srinivasan

EXECUTIVE DIRECTOR AND CHIEF TECHNOLOGY OFFICER

Sandeep Sonawane

CHIEF BUSINESS OFFICER

Key numbers — 40 extracted

6.7%

ial year '25, the two main revenue drivers that is the air traffic and credit card growth grew by 6.7% and 13.7%, respectively. Dreamfolks revenues grew by 14.5%, beating industry growth on account of

13.7%

'25, the two main revenue drivers that is the air traffic and credit card growth grew by 6.7% and 13.7%, respectively. Dreamfolks revenues grew by 14.5%, beating industry growth on account of addition

14.5%

traffic and credit card growth grew by 6.7% and 13.7%, respectively. Dreamfolks revenues grew by 14.5%, beating industry growth on account of addition of new clients. Our strategic focus of expanding

11.8%

ers leading to a slight change in our volume mix, which put some pressure on our gross margins to 11.8% in 9MFY25. However, this is in line with our gross margin guidance of 11% to 13% for FY25. Our

11%

our gross margins to 11.8% in 9MFY25. However, this is in line with our gross margin guidance of 11% to 13% for FY25. Our adjusted EBITDA margin stands at 7.9% in 9MFY25. We are witnessing structura

13%

oss margins to 11.8% in 9MFY25. However, this is in line with our gross margin guidance of 11% to 13% for FY25. Our adjusted EBITDA margin stands at 7.9% in 9MFY25. We are witnessing structural chang

7.9%

line with our gross margin guidance of 11% to 13% for FY25. Our adjusted EBITDA margin stands at 7.9% in 9MFY25. We are witnessing structural change by our bank clients as part of the spend-based pro

100%

bringing our total domestic airport lounge touchpoints to 76. This expansion ensures we maintain 100% coverage at Indian Airports, reaffirming our commitment to providing comfort and luxury to travel

rs,

touchpoints. We have introduced new golf clubs in Maharashtra for one of the leading card issuers, offering opportunities for networking. The total number of golf courses in our network now stands

6.9%

tlook for India's travel industry is highly optimistic with WTTC projecting the sector to grow at 6.9% annually and expand to $512 billion by 2028. This growth will be driven by a blend of socioeconom

512 billion

stry is highly optimistic with WTTC projecting the sector to grow at 6.9% annually and expand to $512 billion by 2028. This growth will be driven by a blend of socioeconomic dynamics, technological progress

4 crore

with state governments. Under the modified UDAN scheme, 120 airports will be connected and carry 4 crores new passengers in the next 10 years, which will significantly boost regional connectivity, foste

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Guidance — 7 items

Liberatha Kallat

opening

“However, this is in line with our gross margin guidance of 11% to 13% for FY25.”

Liberatha Kallat

opening

“This growth will be driven by a blend of socioeconomic dynamics, technological progress and strategic government initiatives, fostering substantial expansion.”

Liberatha Kallat

opening

“Under the modified UDAN scheme, 120 airports will be connected and carry 4 crores new passengers in the next 10 years, which will significantly boost regional connectivity, fostering economic growth by enhancing trade, tourism and investment opportunities across underserved areas.”

Deepali Kumari

“And also with services like baggage wrapping and coffee at mall being introduced, how do you plan to scale and integrate these offerings?”

R Sen

“Now given a significant portion of this revenue is linked to the footfalls with tie-ups with airlines, do you see a plan to insulate any airline-driven pricing pressure or any potential renegotiations of partnerships given this interesting dynamic that is shaping up?”

Liberatha Kallat

“So if you actually see, all these airline lounges are actually out now, and because they do not want to have multiple lounges, there are only one lounge or max there will be 2 lounges, which would be dedicated, one would be just for the business class or the first class passengers and one is dedicated to the loyalty cardholders, which is primarily the one what we are running.”

Shreyans Mehta

“One, I mean, in terms of employee cost, should we assume this is the peak and probably this would be the run rate going forward?”

Risks & concerns — 8 flagged

During this period, bank clients continue to increase the minimum spending threshold on cards, thereby maximizing their return by spending money on the right set of users leading to a slight change in our volume mix, which put some pressure on our gross margins to 11.8% in 9MFY25.

— Liberatha Kallat

Gross profit margin saw a marginal decline due to the reasons highlighted by Liberatha in her speech earlier.

— Giya Diwaan

So if you look at 2 aspects of risk, so out of your INR 1,200 crores of revenue, your main business is from lounge access, right?

— Kaustav Bubna

And then the second question is on risk is, there's been this concern, and I think I've heard it in your call also before, where analysts are asking, if GMR and Adani set up their own lounges, how does this impact the business of Dreamfolks?

— Kaustav Bubna

Now given a significant portion of this revenue is linked to the footfalls with tie-ups with airlines, do you see a plan to insulate any airline-driven pricing pressure or any potential renegotiations of partnerships given this interesting dynamic that is shaping up?

— R Sen

So have you thought about that as a risk?

— R Sen

So it will actually not impact or there is no risk in terms of if there are airline lounges coming.

— Liberatha Kallat

So I don't see that it is a challenge from the competition there.

— Liberatha Kallat

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Q&A — 6 exchanges

I just have a couple of questions. Like what are the key drivers behind the company expansion beyond the airport lounges? And how do you see this segment evolving? And also with services like baggage wrapping and coffee at mall being introduced, how do you plan to scale and integrate these offerings?

Balaji Srinivasan

How do you see the segment evolving? And third question... Okay. So sir, I'm asking what are the key drivers behind the company expansion beyond airport lounges? And how do you see this segment evolving? Okay. So I think it was mentioned that our two main vectors which decides our top line growth, One is the air traffic growth and the second is basically as to how much is the credit card industry growing every month-on-month or maybe for that matter year, so these are two big vectors that drives fundamentally our top line. Okay. And sir, what is the strategy for increasing revenue from non-air

So I wanted to understand your view on the competitive threat that a player like Priority Pass poses to Dreamfolks. Also wanted to understand when we see Priority Pass cards, you see that Priority Pass has its own card, it's not like you have an HDFC card and then your lounge access is permitted through that HDFC card. They give a separate Priority Pass card, right? So I just wanted to understand the business model difference. How do they've created a brand so they can do that. How do you see your business evolving in that regard? And, what is Dreamfolks strategy to battle competitive threats

Liberatha Kallat

Sure. So firstly, just to tell you that, yes, Priority Pass is a 30-plus year old company in the market. And I think the way Dreamfolks actually came up in the market was to create a differentiator, and the differentiator was primarily not to give a separate card, but to actually give the benefit on the same credit or the debit card. So that was the biggest difference. So Priority Pass was already existing in India. It's not that they are a competition which has come now or recently. They were always there. However, because of the differentiator what we created in terms of the technology, in a

So India's aviation sector is witnessing like a consolidation right, where Indigo and Tata's have kind of literally dominated 85% of the domestic market. Now given a significant portion of this revenue is linked to the footfalls with tie-ups with airlines, do you see a plan to insulate any airline-driven pricing pressure or any potential renegotiations of partnerships given this interesting dynamic that is shaping up?

Sandeep Sonawane

So frankly speaking, I mean, 2 airlines operating in India versus 5 airlines actually doesn't change or rather to that extent, doesn't impact us at all because we are driven by the industry. I mean, air traffic as such as opposed to a combination of one company along with the other or the interplay between them. So to that extent, it doesn't matter because ultimately, whether you choose an airline A or an airline B, the consumer sitting inside the plane is my consumer. So really it does not impact, I mean, the merger or 85% contribution of the 2. The reason I was asking that question because I

So my question is that for facilitating airport lounge access, we are diversifying from banks to other enterprises like airlines, OTAs. So what would be the contribution of these enterprises currently? And second, that we have also started offering membership ranging from 7,000 to 1 lakh Dreamfolks membership. So how is this picking up? And is this a similar model to Priority Pass membership model?

Sandeep Sonawane

Okay. So, I'll answer the first question. In the next 4 to 5 years, we envisage the business coming out of enterprise would be close to 20% on a top line. So that continues to be our model, and that will help in terms of also improving our margin. No. But what I'm trying to ask is that even within facilitating airport lounge access, which is currently like 93% of our revenue, how much is our dependence on banks? And what is the proportion of other OTAs and other enterprises contributing? Yes. So yes, close to 95% of our business, to be frank with you, is coming from banking or networking type

I missed on the reason for the lower gross margin for this quarter?

Sandeep Sonawane

So, we did mention that banks are going and increasing their threshold, the spend threshold for the consumer. I mean a case in point would be that a very known bank, which had a limit of INR 35,000 per quarter, increased it to INR 75,000 per quarter, and that actually reduced dramatically the volumes. And when all these kinds of changes happen, Shreyans, you would really appreciate the kind of volumes that we are managing. There is definitely a change in the volume mix that happens, and because of which there is always a slight correction that happens in terms of gross margins, which are tempo

Thank you all for joining our earnings call today. We hope your queries have been answered. For any further queries or information, please contact our Investor Relations team at EY. On behalf of the company, I thank you all once again for your time and participation. Do take care of yourself, and goodbye. Thank you.

Management

Speaking time

Sandeep Sonawane

Moderator

Liberatha Kallat

Shreyans Mehta

Deepali Kumari

Kaustav Bubna

Balaji Srinivasan

R Sen

Giya Diwaan

Kunjan

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Opening remarks

Liberatha Kallat

A very good evening, everyone, and thank you for joining us on the earnings conference call for the quarter and 9 months ended 31st December 2024. We announced the financial results earlier today, and I hope you had a chance to go through the results, investor presentation and press release, which are available on the Stock Exchanges and on the company's website. During the 9 months of financial year '25, the two main revenue drivers that is the air traffic and credit card growth grew by 6.7% and 13.7%, respectively. Dreamfolks revenues grew by 14.5%, beating industry growth on account of addition of new clients. Our strategic focus of expanding our services beyond travel to lifestyle services will provide tailwinds to our top line growth in the coming years. During this period, bank clients continue to increase the minimum spending threshold on cards, thereby maximizing their return by spending money on the right set of users leading to a slight change in our volume mix, which put som

Sandeep Sonawane

Thank you, Liberatha. Let me take you through the strategic vision that is guiding the company forward as well as the updates for the quarter. Dreamfolks focused on growth and diversification through three key drivers that is client addition, wide range of services and geographical expansion within India and globally. Our goal is clear to continue leading as a dominant travel and lifestyle services aggregator. In the realm of services, we have made significant strides. The contribution of services other than India Airport lounge has increased to 6.9% in the first 9M FY '25, which was at just 5.2% in the same period last year. This remarkable growth is a direct result of our commitment to expanding our service offerings. We are also excited to announce the new services, one of them being coffee as a benefit at the malls. At Dreamfolks, we are dedicated to continuously enhance the customer experience in meaningful ways. This complementary service is designed with an intent of elevating t

Balaji Srinivasan

Thank you, Sandeep. I'll give an update about our technology platform. As you may be aware, our platform is designed and aimed at providing our clients and their end consumers the visibility of their benefits, provide access to such benefits, the choice of access mechanism and the host of services while at the same time getting an excellent consumer experience and the superior technology stack as the underlying core of such enablement of multiple services we have at our company. As Sandeep mentioned, we are seeing a trend that our clients are continuing to do more deeper integration with us and are leveraging our platform’s for spend-based options and other tools for existing products and new product launches. Many of you may have already used our web access product, the consumers can register the card, keep the benefits and the services that is available on that card, for example, lounges, meet and assist and other services. They can also take the utilization on such card and eventual

Giya Diwaan

Thank you, Bala, and a very good evening to everyone. I truly appreciate your presence today. This quarter marks new milestones in our ongoing progress. It reflects our collective efforts and foreshadows future opportunities. We navigated challenges, achieved successes, and adapted to change, all while adhering to our core values. The financial results we'll review today are not merely data points. They demonstrate our commitment and the positive impact we are delivering to our clients and the industry. I will begin by giving you the quarterly highlights first, followed by the 9-month period. Revenue for the quarter stood at INR 340.1 crores, an increase of 11.5% from INR 305.1 crores in the corresponding quarter of the last year. Gross profit stood at the same level at INR 38.3 crores as compared to Q3 FY '24. Gross profit margin saw a marginal decline due to the reasons highlighted by Liberatha in her speech earlier. Adjusted EBITDA stood at INR 25.8 crores as compared to INR 29.7 cr

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