Dreamfolks Services Limited (DREAMFOLKS.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Dreamfolks Services Limited Q2 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. From the management, we have with us Ms. Liberatha Kallat, Chairperson and Managing Director; Mr. Balaji Srinivasan, Executive Director and Chief Technology Officer; Mr. Shekhar Sood, Chief Financial Officer; Mr. Sandeep Sonawane, Chief Business Officer. I now hand the conference over to Ms. Liberatha Kallat, Chairperson and Managing Director, for the opening remarks. Thank you, and over to you, ma'am.

Good evening, everyone, and thank you for joining us for the Dreamfolks Quarter 2 and Half Yearly FY '26 Earnings Call. As we reflect on the second quarter of financial year '26, this period is defined by significant transition and resilience. We have navigated a pivotal period in our journey, one defined by strategic evolution and purposeful transformation. The quarter saw us take decisive steps to realign our business with the changing dynamics of the industry, including the thoughtful transition of key business streams that have served us well in the past. These were not just necessary decisions, but forward-looking ones, guided by a clear vision of where the industry is headed and where Dreamfolks can create the most enduring value. While the impact of these decisions would be visible in our numbers in the short term, but the actions we have taken have strengthened our foundation and positioned Dreamfolks for its next phase of growth, one that is more diversified, resilient and in sync with the aspirations of the modern travelers and experience-driven consumers. Dreamfolks forward strategy is closely aligned with the evolving landscape of India's travel industry, one defined by rapid railway modernization, accelerated highway development and the growing appetite for international travel and premium lifestyle experiences driven by rising disposal incomes. These transformative trends collectively create a strong demand for premium lounge access and lifestyle services across railway stations, highways and international destinations, catering to the needs of today's discerning and globally connected travelers. Before we dive deeper into the results for the quarter ended September 30, 2025, I'm delighted to announce our recent acquisition of Ten 11 Hospitality LLP, which marks a significant milestone in Dreamfolks growth journey, having redefined travel and lifestyle hospitality in India by democratizing lounge access and serving over 11 million passengers in FY '25. Dreamfolks is now poised to bridge the premiumization gap that exists in railway travel with more than 7.15 billion passengers using Indian railways in FY 2024, '25 and large-scale infrastructure upgrades underway. The railway Lounge segment represents a substantial and fast emerging growth frontier. Through the acquisition of Ten 11 Hospitality, which has a presence at key railway lounge locations such as Chennai, Mumbai and Vadodra, with Chennai already operational and the other 2 sets to commence soon. Dreamfolks secures direct ownership and operational control over premium railway lounge infrastructure. This strategic move reinforces our integrated travel ecosystem and accelerates long-term value creation. By vertically integrating lounge operations, we strengthen our partnership across the value chain, enhance service liability and mitigate the business risk associated with third-party dependencies, while laying the groundwork for rapid expansion into additional high-traffic railway hubs across the country. Talking about our performance in the quarter ended 30th September 2025, our revenue for the quarter stood at INR 205.5 crores. Gross profit came in at INR 29.2 crores with a margin of 14.2%. EBITDA came in at INR 16.1 crores with a margin of [indiscernible] and PAT came in at INR 11.2 crores at a margin of 5.5%. While our revenues experienced a decline, our gross EBITDA and PAT margins have shown healthy year-on-year expansion. Our strong balance sheet continues to provide the financial resilience and flexibility needed to invest in technology, pursue strategic partnerships and drive growth, both organically and through selective inorganic opportunities. In response to this shift, Greenfolks is executing a well-defined strategic shift build around 4 key pillars, which are global expansion, client diversification, premium lifestyle services addition and technological transformation, which will help in positioning us strongly for a long-term and sustainable growth. Our efforts on global expansion have also started reaping benefits. All the major lounges in the Southeast Asia and Middle East markets are now under our coverage. Our monthly global lounge transaction volume has already more than doubled from Q1 FY '26, and we expect it to grow manyfold in the coming quarters. We now have 900-plus global airport touch points outside India. On the client diversification side, we are focused on creating strong recurring revenue streams with high retention. Over the past year, we have added more than 30 new enterprise clients across the fintech, travel and lifestyle sectors. To enhance engagement and loyalty, we are offering curated bundles that include global lounge access, social club membership, coffee at the mall, benefits, travel dining and a range of wellness and entertainment services, enabling our partners to deliver differentiated experience to their customers and employees. We continue to reduce dependency on one service by scaling adjacent and innovative offerings such as access to members-only social clubs, golf, railway lounges, coffee at the mall and highway dining, all designed to serve the modern traveler and urban customer beyond airport touch points. Our non-lounge services also continue to grow, validating our strategy of evolving from a lounge aggregator into a broader travel and lifestyle experiences platform. Our premium offering access to members only social club was also made live with one of the leading global brands during the quarter. As we expand our service portfolio, we are also accelerating investments in our backbone, our tech infrastructure, ensuring our platform becomes increasingly agile, scalable and aligned to the dynamic needs of our partners. Our new offerings are designed to meet the rising demand for premium everyday conveniences and lifestyle experiences. By continuously expanding our service portfolio, we are evolving the customer value proposition for our clients and their customers from just travel-focused services to a comprehensive travel and lifestyle mobility ecosystem. We will soon see a huge upgrade in the benefits being offered by the credit card companies. Moving on, during the global fintech fest in October 2025, we executed a major strategic pivot, leveraging our core aggregation capabilities to expand our direct-to-consumer and digital offerings. This comprehensive initiative was headlined by 3 critical launches. First, the introduction of the Dreamfolks Club 2.0, our premium B2C membership platform. This represents a significant shift from being purely travel-centric to becoming a holistic lifestyle platform, consolidating global lounge access with a comprehensive suite of benefits, including social club membership, golf privileges and wellness services, significantly broadening our addressable market and driving sustainable margins. Second, we reinforced our fintech integration strategy through our partnership with WSFX Global Pay ForEx card. This initiative strategically embeds our extensive lounge and travel privileges such as meet and assist and airport transfers directly into the payment ecosystem, ensuring a seamless integrated experience for travelers using ForEx and travel payment solutions. Finally, we collaborated with the card company to power wallet, India's first premium digital wallet of PPI rails. This [indiscernible] product gives access to elite experiences, including our global airport lounge access and premium experiences across the entire consumer life cycle. Now coming to the industry dynamics. Over the next 4 years, India's credit card issuance is projected to double to approximately 200 million cards by FY '28, '29, supported by nearly 15% CAGR. Credit card transactions volume and value are both expected to expand by 21% and 18%, respectively. India's premium private club market is expanding rapidly, driven by rising affluent consumers seeking exclusive high-quality lifestyle and network experiences. The sector is projected to grow from INR 576 crores in 2024 to INR 941 crores by 2029 at a close of 18% CAGR. These clubs are evolving from recreational venues to sophisticated community hubs for socializing, business, wellness and fine dining. With the continued growth in the high net worth households, demand for premium membership-based lifestyle offerings is set to accelerate further. The global lounge industry is also expected to grow significantly. Global passenger traffic is forecasted to exceed 12 billion by 2030, driven by growth in APAC and Middle East regions. The global airport lounge market is also projected to grow at 14.1% CAGR from 2025 to '33, fueled by business travelers, leisure passengers and airline loyalty membership. The already talked and railway lounge industry is expected to see a boom in the coming years due to the government's initiatives to modernize the railway network of the country as well as increasing awareness of the consumers. INR 2,400 billion CapEx is allocated to railways in FY '25. Also, India is expected to account for 40% of global rail activity by 2050. We intend to play a key role in exploiting these industry macros, and we are well positioned to take advantage of the same. To summarize, while this quarter's financial performance reflects a period of transition, we view it is a stepping stone towards stronger, more diversified growth. The coming quarter may continue to reflect the short-term impact of recent industry disruptions affecting lounge access to select locations in India. However, we remain confident in our ability to navigate this space effectively. Our global lounge business continues to scale rapidly and with the introduction of new wage benefits on credit cards and enterprise programs, we are well positioned to regain momentum and deliver sustainable growth in the quarters ahead. At Dreamfolks, we are not merely facilitating travel, we are reimagining how people experience moments, comfort and lifestyle across the world. We are excited about the opportunities that lie ahead and remain deeply committed to shaping the future of premium travel and lifestyle experiences alongside our partners, clients and investors. Thank you for being part of this journey. Over to you, Sandeep.

Thank you, Liberatha. As we look back at the second quarter of FY '26, it stands out as a defining phase of transition and determination. This quarter has challenged us in ways few others have in the past as we navigated fundamental changes in our industry landscape, reassessed our operating model and made the strategic decisions to scale down a legacy revenue stream that once played a central role in our business. These choices were made thoughtfully and with conviction, shaped by forward-looking view of market evolution and clear understanding of where our competitive strengths will deliver lasting advantage. Dreamfolks was incepted with the vision of redefining travel services. And over the years, we have successfully established ourselves as industry leaders. Today, the company has evolved into a comprehensive travel and lifestyle benefit platform, continually broadening the portfolio of services. Our strong and long-standing client relationship continues to be part of our biggest asset. We are further strengthening these partnerships by working closely with our clients to jointly develop new CVP models that go beyond conventional airport offerings. We have also recently launched our revamped club membership. It is a step in manifesting our founding belief to make premium travel and lifestyle experiences accessible to all aspirants. We are now extending premium travel and lifestyle benefits like access to members-only club, golf, railways, lounges, global lounges, beauty and grooming, health care, et cetera, to a wide range of customers. During the second quarter, one of our premium offerings, access to members-only clubs has been made available to one of the global banks premium customer. We continue to build a strong and expansive network. Our global footprint also expanded, now offering access to over 900 global airport touch points worldwide, ensuring seamless travel experience for our customers wherever they go. Geographical expansion continues to be at the core of our strategic pillar. Within India, we are deepening our footprint across emerging cities and travel hubs, benefiting from rapid infrastructure development and increasing aspirational travel. Internationally, we now enable access to 100-plus countries through 3,000-plus touch points spanning lounges, wellness experiences, golf access, meet and assist and other premium services. This broad network not only enhances our customer reach, but also strengthens our business resilience, allowing us to diversify demand across markets and platforms. In Lifestyle access services, our golf portfolio showed strong momentum. We added 200 new touch points, expanding our global network to 850-plus clubs and increasing our Indian presence to 73 clubs. Our new premium services like coffee at malls, where more than 100 outlets have gone live in the second quarter and access to 3,000-plus members only social club are also becoming increasingly popular. In summary, the 4 pillars, which are global expansion, client diversification, premium lifestyle service addition and technological transformation form the foundation of our forward strategy. They reduce category dependence and open up pathways for sustainable high-margin growth. Q2 FY '26 has been a quarter where we have made a paradigm shift in our business strategy and our approach going forward. As we continue to execute with clarity and discipline, we remain confident in our strength of our platform, the depth of our partnership and the directions we are heading to. Over to you, Bala.

Thank you, Sandeep. I'm pleased to share how our strategic investments in technology and innovation are driving tangible results, enhancing client solutioning and consumer experience and optimizing operational performance and thus reinforcing our position as a trusted partner across multiple industries. We are at an inflection point in our technological evolution. Our strategic transformation is built on a modern cloud-based platform that enables rapid solutioning and fast go-live for our clients. Critically, we are integrating artificial intelligence and machine learning models into our tech framework and thus unlocking new capabilities in personalization, analytics and automated operational processing. The recent updates has elevated our platform from a purely benefit aggregation tech to a consumer value proposition designer, allowing our clients to leverage it as a strategic differentiator. -- allowing them to deliver specific, intuitive and personalized experiences for our clients increasingly digital-first consumers. The adaptability of our in-house tech positions us for sustainable growth as we expand our client and service base into new verticals and geographies. A particularly powerful capability is our machine learning-driven intelligent orchestration system, which gives our clients unprecedented flexibility in personalized service selection, pricing and consumption. This tech leverages the tools to enable dynamic selection and combination of both traditional as well as the new and the next-generation services, allowing clients to target and configure solutions for specific consumer cohorts that align precisely with their objectives, preferences and budget parameters. This strategy leverages our fundamental competitive advantage, a platform that is already class-leading with technologies like cohort-based benefits, spend-based models, usage-based models, fungibility of benefits, benefit aggregation, et cetera, and which is already integrated into our client ecosystems. Now I will hand over to Shekhar for an update on the financials.

Thank you, Bala, and a very good evening to everyone. I will begin by giving you the Q2 FY '26 highlights first. The company reported a revenue of INR 205.5 crores compared to INR 316.9 crores in Q2 FY '25. Gross profit stood at INR 29.2 crores in Q2 FY '26 as compared to INR 39.2 crores in Q2 FY '25. Gross profit margin was at 14.2% in Q2 FY '26 compared to 12.4% in Q2 FY '25. Adjusted EBITDA was at INR 15.6 crores compared to INR 25.4 crores in the same quarter of the last year. Adjusted EBITDA margin was at 7.6% as against 8% in Q2 FY '25. Profit after tax was at INR 11.2 crores as compared to INR 16 crores in the same quarter of the last year. PAT margin is at 5.5% in Q2 FY '26 from 5.1% in Q2 FY '25. We continue to have a strong balance sheet with our net worth currently at INR 33.1 crores, up by 25.8% compared to the same time last year. Our cash and cash equivalent balance as at quarter end stood at INR 141 crores. Now moving to highlights for the H1 FY '26. The company reported a revenue of INR 554.5 crores against INR 637.7 crores last year. Gross profit for H1 FY '26 was at INR 75.8 crores from INR 76.8 crores in H1 FY '25. Gross margin was 13.7% in H1 FY '26 versus 12% in H1 FY '25. Adjusted EBITDA for the H1 FY '26 was at INR 46.1 crores as against INR 51.1 crores in the same quarter last year. Adjusted EBITDA margin was at 8.3% in H1 FY '26 as compared to 8% in H1 FY '25. PAT stood at INR 32.5 crores in H1 FY '26 and INR 33.2 crores in H1 FY '25. PAT margin in H1 FY '26 was at 5.9% versus 5.2% in H1 FY '25. The diluted earnings per share for H1 '26 stood at INR 6. Our commitment to delivering sustainable growth remains strong, supported by key factors: a robust financial history and an agile tech platform. These trends, combined with strategic initiatives, promise a reliable long-term revenue stream. Now with that, I would like to close my remarks, and we are happy to open the floor for questions.

[Operator Instructions] Our first question comes from the line of Ashish [indiscernible] , an investor.

I have 2 questions here. First of all, I want to congratulate the team who is working very hard in this difficult time you have gone through over the last -- I mean, H1, and you are trying your best. So that's good. One observation was our employee cost as compared to last quarter of the same period, it has slightly came down. Are we doing any specific changes there to reduce the employee cost? Or it is because of these changes in the -- I mean, segment we are doing? Second question is our cash and bank balance have gone down almost by, I believe, INR 90 million, put together cash and bank balance. overall cash flow also in working capital almost about INR 41 crores as invested into operation. So I want to ask about the reason for this 2.

Okay. So for the employee cost, if you see like majorly, there is a reversal for the ESOP cost for the employees who had left. And so that's a major thing that is there. Otherwise, like there is no other headcount is leaving or something like this is nothing happening. Mostly the things are in control, and this is what we see. Employees are fully confident on Dreamfolks. Regarding your second point, which you are asking for cash and cash equivalents. So here, if you would -- you have to see the cash and cash equivalents in complete, including the investment. So on the investment front, so there are investment that we have done in the debt mutual fund. So that is there. And coming to another question, which was regarding payment of the creditors. So yes, so as per the MSME Act, we have to release our payments to the vendors. So all the small vendors and other vendors, they were made the payment as per the schedule. So that's why you see that there is a payment happening on the creditors front. However, on the trade receivable front, we are yet to receive our funds. So in the 30 days or like in the similar time period, we will be getting the inflows. So that's why you would see that even compared to last quarter, in total, when you will see all these cash and cash equivalents, including with the investments, then the fund flow has actually increased. So now it stands at nearly INR 141 crores as compared to last quarter, it was only INR 48 crores. And we will see this trend happening because if you would have analyzed our balance sheet more and deeper, our current liabilities have reduced quite a lot, whereas our receivables, so we will just be now collecting the money and then our cash flow will keep on increasing. And if you would have seen our net worth also, so it stands at INR 333 crores in [consol] numbers. So we are about to reach to that balance even in fund flow.

Okay. That is helpful. And just one more suggestion. On Page 13 of Investor Relationship, the India's map, the [indiscernible] is not shown as a part of India. So please take care going forward. That's it.

[Operator Instructions] Our next question comes from the line of Nilesh Doshi from Prospero Tree Asset Management.

First of all, I would like to say best luck to the team of Dreamfolks for their success in the company's transformation. It's happened in the business. So I like your courage and transformation process. I would like to know what percentage of revenue in the quarter 2 is from the airport lounge access, number one. Number two, do we have still any contract live with the domestic airport lounges or we are completely exited from that business? That is my first question. And second, are we shifting our asset-light model to asset-based model because just recently, we have acquired some stake in the company, which our launch [indiscernible].

So the majority of the business or the revenue is from the India airports itself in Q2. So that is to respond to your first question. Your second question in terms of the continuation of the business in airports in India domestic lounges. So I would say that you would have actually seen and we actually communicated to you that, yes, the domestic program is discontinued. However, our contracts with all our bank partners are still live, and that's the only reason what we were mentioning about initiating or starting the new services, what we were speaking about. And you will start seeing that in a couple of months, these programs will also go live. In terms of our lounge business, the global lounges are growing. And yes, our same clients which were working for our domestic lounge are also migrating and working with us closely for the global lounges as well. To your question about the business, which is an asset-light and now we are moving to a different business. So to talk about this, I would say that, yes, as a company, we have actually taken this move, one, because we have also learned one of the biggest things in terms of the risk to the business because the dependency on the operator was huge. Secondly, right now, in terms of investment into railways would not be as heavy what it would be at the airport lounges. So that is also one of the things we thought that, okay, and it is the right time right now because it is at a very initial stage in terms of privatization, in terms of getting the infrastructure changes at the railways. So at a minimal cost, I think we are entering at this point. And I think this will actually secure and we would be risk-free in the business what we are getting into.

So can we expect the same run rate of quarter 2 in the coming quarter? Or will it be much more less than the INR 205 crores?

It would be much lesser because as I told you that the majority of the volume is from -- in Q2 is from domestic airport lounges. So of course, the Q3 will not have these numbers. It would -- the top line will drop.

All the best from my side and be confident, definitely, we will rise again.

Our next question comes from the line of Mehul Panjwani from [indiscernible].

I would like to understand what kind of investments we have made in the railway segment because I'm not aware.

Yes. So we have done investment of INR 11.46 crores.

Okay. And what have we invested?

Yes, so we have acquired a stake of 50.01% with the effective control there.

So I'm still -- I'm not still clear what asset we purchased?

So if you actually look at the lounges, these are taken on lease. So it is in the same model the way the airport lounges are. So the airport actually gives on lease for 9 to 12 years. Similarly, it's the same process at the railways. The railways is giving it to the operator to -- on lease for -- starting from 5 years to 7 to 9 years onwards. And that property on lease is then given to the operator. The operator actually builds the lounge and then also -- I mean, takes care of the operations as well. So the whole and sole business at that place during the lease period would be with that operator.

Sorry, I'm not able to hear you...

Sorry, you were asking something.

Yes, I was just trying to clarify, ma'am. So in this case, when you said the operator for the railway sector, are we the operator or we are the -- I mean, what is our goal? is it the operator?

Yes. So Ten 11 is the operator, which company where we have actually done the acquisition. So yes, now we become the operator.

Okay. And we have -- how much stake have we bought in Ten 11?

It is 50.01%.

50.01%. Okay. And how much -- what kind of access does it give -- I mean, are we present in which cities in the railways?

So presently, it is in Chennai, Mumbai and Vadodra. So Chennai is an operational lounge. Mumbai should be operational in the next 10 to 15 days and Vadodra in, I would say, in a couple of months.

Okay. Okay. And ma'am, so if I understand correctly, so the same banks will be having their clients coming here to these lounges, and we would be serving these clients, right? Is that correct?

Yes. So it is not just going to be limited to the card holders only. There would be walk-ins and there were other programs as well. So yes, it would be in the similar lines the way the bank program is. which we were already running it from past 5 years. So if you actually see railways was also part of our lounge program.

How long we have been in the railway lounges?

So we were running this for almost 5 years now.

Okay. And it was at Chennai?

No. So there are a total of 12 railway lounges where we had partnered. But now this company where we have done the acquisition, they own and operate the lounges in 3 locations. So Chennai is the one which is operational presently, yes.