Dreamfolks Services: A Timely Exit from a Falling

On April 6, 2024, I published a blog titled "Will Dreamfolks Services Become a Multibagger?", where I expressed optimism about Dreamfolks Services Ltd., a leading airport service aggregator in India. At the time, the travel sector was riding a wave of post-pandemic recovery, and Dreamfolks’ asset-light, technology-driven business model appeared poised for growth. The company’s dominance in the airport lounge access market, with an estimated 95% market share for card-based domestic lounge access in 2022, coupled with its diversification into services like golf, spa, and beauty offerings, fueled my bullish outlook.

I initiated a position in Dreamfolks Services at prices ranging between ₹450 and ₹500 from October 2023 to August 2024, confident in its potential to capitalize on rising travel demand and its innovative service expansions. During this period, I sold half my position at approximately ₹525, locking in a healthy profit. However, on February 10, 2025, I made the decision to fully exit the remaining position at ₹350, taking a loss on that portion. This move, though challenging given my initial conviction, proved prescient. As of July 4, 2025, Dreamfolks’ stock price has plummeted to ₹208.25, a staggering 75.5% below its all-time high of ₹850 in August 2023 and down 44.3% year-to-date. This blog reflects on the reasons behind my timely exit, the challenges Dreamfolks now faces, and how recognizing red flags early underscores the importance of disciplined portfolio management.

The Original Investment Thesis: Why Dreamfolks Looked Promising

When I first invested in Dreamfolks, the company was a standout in India’s travel and lifestyle services sector. Established in 2013, Dreamfolks had built a robust platform integrating major card networks (Visa, Mastercard, RuPay, etc.) and banks (ICICI, Axis, HDFC, SBI) with airport lounge operators, offering seamless access to services like lounges, airport transfers, and dining. Its asset-light model, coupled with partnerships across 1,500+ touchpoints in 100+ countries, positioned it as a market leader. The company’s foray into non-lounge services, such as golf courses, beauty services, and railway lounges, suggested a pathway to diversified revenue streams, reducing reliance on its core airport lounge business, which accounted for over 90% of its revenue.

The travel sector’s rebound in 2023, driven by rising disposable incomes and increasing credit card penetration (expected to grow from 3% as per Frost & Sullivan), further bolstered the case for Dreamfolks. With a market cap of ₹1,159 crore and a strong return on equity (ROE) of 35.2% over three years, the company seemed well-positioned to capture the growing demand for premium travel experiences. My optimism was rooted in the belief that Dreamfolks could leverage its first-mover advantage and technology platform to scale its diversified offerings.

Red Flags Emerged: Why I Exited in February 2025

By early 2025, cracks began to appear in Dreamfolks’ growth story. Several factors prompted my decision to exit the stock at ₹350 on February 10, 2025:

• Failure to Diversify Revenue: Despite ambitious plans to expand into golf, spa, and railway lounge services, Dreamfolks remained heavily dependent on its airport lounge business, which contributed 93% of its revenue in FY25. The slow progress in scaling non-lounge services indicated execution challenges and raised concerns about the company’s ability to reduce reliance on a single revenue stream.
• Rising Competition and Market Share Erosion: The entry of new players, particularly airport operators like Adani Airport Holdings Ltd. (AAHL), signaled intensifying competition. Adani, which operates seven major airports in India (Mumbai, Ahmedabad, Lucknow, etc.), began exploring direct lounge access solutions, bypassing aggregators like Dreamfolks. This shift threatened Dreamfolks’ dominant position in the lounge access market.
• Operational and Service Disruptions: A significant warning sign was the temporary service disruption in September 2024, which affected lounge access at 49 lounges across 34 airports. This technical snag, attributed to connectivity issues with operators like Travel Food Services (TFS), exposed vulnerabilities in Dreamfolks’ technology platform and drew public criticism from Adani Airports, which accused Dreamfolks of violating service agreements. The incident eroded trust among clients and passengers, prompting banks and card networks to explore alternative providers.
• Market Dynamics and Client Pressure: Reports surfaced that major banks and card networks, including ICICI Bank, Axis Bank, and Mastercard, were considering direct partnerships with lounge operators, bypassing aggregators. This trend, coupled with the stock’s consistent decline—down 52% over the past year by February 2025—signaled a potential loss of market share and revenue.

Recognizing these risks, I decided to exit the position to protect capital from further erosion. While the decision meant realizing a loss from my entry price of ₹500, it was a disciplined move to avoid deeper losses in a deteriorating situation.

Validation of the Exit: Dreamfolks’ Challenges Intensify Post-July 2025

Since my exit in February 2025, Dreamfolks has faced mounting challenges that have further depressed its stock price and validated my decision:

• Termination of Key Programs: On July 1, 2025, Dreamfolks announced the discontinuation of certain lounge access programs with Axis Bank and ICICI Bank, two of its largest clients. While the company clarified that its overall contracts with these banks remain intact, the closures are expected to have a “material impact” on its financial performance. This development, reported widely, triggered a 4.7% drop in the stock price to ₹225 on July 2, 2025.
• Adani’s Competitive Push: Adani Airports has intensified pressure on Dreamfolks by offering direct lounge access through its app, accepting major debit and credit cards from alternative providers. CEO Liberatha Peter Kallat accused airport operators, implicitly Adani, of using “pressure tactics” to force banks to cut ties with Dreamfolks, threatening to deny cardholder access to lounges unless they partnered directly. This aggressive move by Adani, which controls 35-40% of India’s lounges, poses a significant threat to Dreamfolks’ business model.
• Financial Strain: Dreamfolks’ financial performance has weakened, with a 17.09% decline in net profit to ₹14.94 crore in the March 2025 quarter, despite an 11.75% revenue increase to ₹314.16 crore. The company’s full-year FY25 results showed a 5% profit drop to ₹65 crore, despite 14% revenue growth to ₹1,292 crore. The reliance on lounge services and the loss of key programs have clearly strained profitability.
• Stock Price Collapse: The stock’s downward spiral continued post-July 2025, trading at ₹208.25 as of July 4, 2025, just above its 52-week low of ₹193.60. The persistent negative sentiment, fueled by negative PR and competitive pressures, has eroded investor confidence, as reflected in posts on X highlighting the company’s struggles.

A Disciplined Approach to Portfolio Management

Exiting Dreamfolks at ₹350 was not an easy decision, given my initial conviction in its growth potential. However, as an equity research analyst and portfolio manager, my primary responsibility is to protect capital and act decisively when the investment thesis weakens. By identifying the risks early—failure to diversify, rising competition, and operational vulnerabilities—I was able to exit before the stock’s steep decline post-July 2025. This move underscores the importance of active monitoring, critical reflection, and the willingness to acknowledge when a thesis no longer holds.

Mistakes are inevitable in investing, but the ability to recognize and act on them early is what separates a disciplined investor from the rest. Dreamfolks was once a high-conviction pick, but changing market dynamics and execution challenges necessitated a reevaluation. By exiting in February 2025, I mitigated further capital erosion, preserving resources for better opportunities.

Looking Ahead: Dreamfolks’ Uncertain Future

Dreamfolks faces an uphill battle to regain its footing. The company’s management has emphasized that it is exploring non-lounge revenue streams, such as highway dining and enterprise client partnerships, with a goal to grow topline 2.5x in five years. However, with airport operators like Adani and GMR (managing 80-85% of lounge foot traffic) encroaching on its turf and key clients reevaluating partnerships, the path forward is fraught with challenges.

For investors, Dreamfolks’ current valuation (P/E ratio of 17.64) may appear attractive, but the risks outweigh the potential rewards until the company demonstrates tangible progress in diversification and client retention.

Conclusion

The decision to exit Dreamfolks Services in February 2025 at ₹350 was a testament to disciplined portfolio management. By recognizing the cracks in the company’s business model—overreliance on lounge revenue, emerging competition from Adani, and operational setbacks—I avoided the significant losses that followed the termination of key bank programs in July 2025. As a financial advisor, my goal is to deliver value through rigorous analysis, proactive decision-making, and the humility to pivot when the facts change. Dreamfolks’ story serves as a reminder that even the most promising companies can falter, and staying vigilant is key to preserving and growing wealth. Disclaimer: The views expressed are my own and based on publicly available information. Investors should consult certified financial advisors before making investment decisions.