Rating Rationale
May 20, 2025 | Mumbai
Dreamfolks Services Limited
Long-term rating reaffirmed at 'Crisil BBB+/Stable'; 'Crisil A2' assigned to short-term bank debt; Rated amount enhanced for Bank Debt
 
Rating Action
Total Bank Loan Facilities RatedRs.145 Crore (Enhanced from Rs.95 Crore)
Long Term RatingCrisil BBB+/Stable (Reaffirmed)
Short Term RatingCrisil A2 (Assigned)
Note: None of the Directors on Crisil Ratings Limited’s Board are members of rating committee and thus do not participate in discussion or assignment of any ratings. The Board of Directors also does not discuss any ratings at its meetings.
1 crore = 10 million
Refer to Annexure for Details of Instruments & Bank Facilities

Detailed Rationale

Crisil Ratings has assigned its ‘Crisil A2’ rating to the short-term bank facilities of Dreamfolks Services Ltd (DSL). and reaffirmed its ‘Crisil BBB+/Stable’ rating on the long-term bank facilities of the company.

 

The rating continues to reflect the established market position and healthy financial risk profile of DSL. These strengths are partially offset by susceptibility of revenue to changing credit card schemes and volatile operating margin.

Analytical Approach

Crisil Ratings has evaluated the standalone business and financial risk profiles of DSL.

Key Rating Drivers & Detailed Description

Strengths:

  • Established market position: SL has established its position as a facilitator between airport lounge service providers and clients. The company operates through more than 3,000 touchpoints in over 100 countries. It pioneered the concept of airport lounge access in India, accompanied with services such as meet and assist, wellness services, airport dining, airport transfer, transit hotels/nap room access. Revenue reported a compound annual growth rate (CAGR) of ~68% for the past three fiscals and is estimated at Rs 977 crore for the first nine months of fiscal 2025. Operating income is estimated at Rs 1,200-1,400 crore for fiscal 2025 and expected to grow 15-20% over the medium term, driven by rising passenger traffic with addition of airports across the country as the government focuses on infrastructure expansion. Diversifying into new segments such as highways, railways, lifestyle, food and beverage, golf courses and tie ups with RedBeryl, Grey Wall and VFS Global will help boost scale up operations and maintain strong market position going forward.

 

  • Healthy financial risk profile: Financial risk profile should remain supported by management stance to rely on internal accruals only for the business requirements with no reliance on external debt. Further, it is supported by steady accretion of reserve and the absence of any large, debt-funded capital expenditure (capex) as DSL operates in an asset light industry. The capital structure has been comfortable, with gearing of 0.00 time as on March 31, 2025 and projected at of 0.01 time as on March 31, 2026. Working capital debt is nominal as the operations are well managed through credit from vendors and internal cash accrual. Consequently, bank lines were utilised sparingly over the 12 months through March 2025, providing sufficient financial flexibility. Nominal dependency on debt will keep debt protection metrics healthy, too, with interest coverage ratio expected at 80-100 times and NCAAD ratio at 90-100 times over the medium term.

 

Weaknesses:

  • Susceptibility of revenue to changing credit card scheme: Operating income of DSL is susceptible to changing credit schemes as credit card companies are now focusing on offering services based on spending (higher the spend, higher the eligibility to avail of service). Further, the network operators tend to limit the full pass on of the increased costs by lounge operators for 1-2 months. To mitigate the risk, the company has continuously added banks to its clientele and diversified its service offerings to expand market presence by dealing with all major customer-friendly banks in India. Steady revenue growth amid stable operating margin would remain a key rating sensitivity factor.

 

  • Volatile operating margin: The operating margin has been consistently declining to 8.4% in fiscal 2024, from 12% in fiscal 2023; it further reduced to 7.4% during the first nine months of fiscal 2025 and is projected at 8-9% over the medium term. There has been sizeable onboarding of employees to manage the increased number of touchpoints to 3,000+ in fiscal 2026; benefits for this may be visible only from fiscal 2026. The company has also penetrated into new segments such as highway dining, coffee, food and beverages outlets, lifestyle and ultra luxury experiences. Stability in the operating margin while maintaining growth in these new segments with prudent working capital management remains a key monitorable.

Liquidity: Adequate

Liquidity should remain supported by the ample surplus available in cash accrual and bank lines. Bank limit utilisation was just around 8.08% for the 12 months through March 2025. Cash accrual is projected at Rs 70-80 crore per annum, against yearly debt obligation of Rs 0.2-0.5 crore over the medium term. Current ratio stood healthy at 2.3 times on March 31, 2024.

Outlook: Stable

DSL will continue to benefit from its established market position, aided by increasing domestic and international air traffic and diversifying into other value added services.

Rating sensitivity factors

Upward factors:

  • Steady revenue growth per fiscal while maintaining the operating margin at 8-9%, leading to higher-than-expected net cash accrual
  • Sustenance of healthy financial risk profile amidst efficient working capital management

 

Downward factors:

  • Decline in operating income or operating margin falling below 5%, resulting in lower-than-expected net cash accrual
  • Stretch in the working capital cycle leading to high dependence on external debt and thus moderation in financial risk profile

About the Company

DSL was incorporated in April 2008 by Mr Mukesh Yadav, Mr Dinesh Nagpal and Ms Liberatha Kallat. Based in Gurugram (Haryana), the company is India's largest airport service aggregator platform. It provides services such as lounges, food and beverages, spa, meet and assist, airport transfer, transit hotels/nap room access and baggage transfer. Clients include major card networks, banks, online travel agents, airlines and enterprises.

Key Financial Indicators

As on/for the period ended March 31

Unit

2024

2023

Operating income

Rs crore

1,134.97

773.24

Reported profit after tax (PAT)

Rs crore

69.68

72.55

PAT margin

%

6.14

9.38

Adjusted debt/adjusted networth

Times

0.00

0.01

Interest coverage

Times

82.02

77.36

Any other information: Not applicable

Note on complexity levels of the rated instrument:
Crisil Ratings` complexity levels are assigned to various types of financial instruments and are included (where applicable) in the 'Annexure - Details of Instrument' in this Rating Rationale.

Crisil Ratings will disclose complexity level for all securities - including those that are yet to be placed - based on available information. The complexity level for instruments may be updated, where required, in the rating rationale published subsequent to the issuance of the instrument when details on such features are available.

For more details on the Crisil Ratings` complexity levels please visit www.crisilratings.com. Users may also call the Customer Service Helpdesk with queries on specific instruments.

Annexure - Details of Instrument(s)

ISIN Name Of Instrument Date Of Allotment Coupon Rate (%) Maturity Date Issue Size (Rs. Crore) Complexity Levels Rating Outstanding with Outlook
NA Fund-Based Facilities NA NA NA 130.00 NA Crisil BBB+/Stable
NA Non-Fund Based Limit NA NA NA 15.00 NA Crisil A2
Annexure - Rating History for last 3 Years
  Current 2025 (History) 2024  2023  2022  Start of 2022
Instrument Type Outstanding Amount Rating Date Rating Date Rating Date Rating Date Rating Rating
Fund Based Facilities LT 130.0 Crisil BBB+/Stable 12-05-25 Crisil BBB+/Stable 19-03-24 Crisil BBB+/Stable   -- 21-12-22 Crisil BBB/Positive Crisil BBB-/Stable
Non-Fund Based Facilities ST 15.0 Crisil A2   --   --   --   -- --
All amounts are in Rs.Cr.
Annexure - Details of Bank Lenders & Facilities
Facility Amount (Rs.Crore) Name of Lender Rating
Fund-Based Facilities 6 ICICI Bank Limited Crisil BBB+/Stable
Fund-Based Facilities 34 ICICI Bank Limited Crisil BBB+/Stable
Fund-Based Facilities 40 HDFC Bank Limited Crisil BBB+/Stable
Fund-Based Facilities 50 DBS Bank Limited Crisil BBB+/Stable
Non-Fund Based Limit 15 HDFC Bank Limited Crisil A2
Criteria Details
Links to related criteria
Basics of Ratings (including default recognition, assessing information adequacy)
Criteria for manufacturing, trading and corporate services sector (including approach for financial ratios)

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