Dreamfolks Stock Collapse Explained: Bank Exits, Adani Pressure, and Margin Squeeze

Dreamfolks Stock Collapse Explained: Bank Exits, Adani Pressure, and Margin Squeeze

Overview of Dreamfolks Services Stock Performance

Dreamfolks Services Ltd. (NSE: DREAMFOLKS), India's largest airport services aggregator, has experienced a significant decline in its stock price throughout 2025. 

As of August 29, 2025, the share price closed at ₹139.34, down approximately 2% from the previous session but reflecting a broader year-to-date drop of over 62% from its 52-week high of ₹522.15 (reached on September 6, 2024). 

The stock is now trading 49% below its IPO price of ₹326 (from August 2022) and has lost about 70% from its all-time high. 

Market capitalization stands at around ₹727-735 crore, classifying it as a small-cap stock in the tourism and hospitality sector.

The decline has been sharp and sustained, with the stock hitting multiple record lows in July and August 2025 (e.g., dipping to ₹158.50 in early July and further to around ₹123-135 by late August). 

This follows a pattern of volatility, including a 20-21% crash in early July alone. 

While the company reported solid Q1 FY26 results (net profit up 24% YoY to ₹21.28 crore on revenue of ₹348.95 crore, up 9% YoY), external pressures and operational risks have overshadowed these positives, eroding investor confidence.

Key Reasons for the Stock Price Decline

The downturn stems from a combination of client-related disruptions, competitive threats, financial pressures, and recent supplier issues. 

Below is a breakdown of the primary factors, supported by recent developments:

Closure of Key Client Programs with Major Banks (July 2025 Impact)

On July 1, 2025, Dreamfolks disclosed that certain programs with major clients Axis Bank and ICICI Bank—two of its largest partners—were terminated effective that date. 

While overall contracts remain valid, the discontinued programs (primarily lounge access tied to specific card categories) are expected to have a "material" negative impact on revenue. Lounge services account for ~93% of the company's FY25 revenue, making it highly dependent on bank partnerships.  This led to an immediate 20% tumble in three sessions (July 1-4, 2025), with shares falling from ₹236.55 to ₹189.70. 

The stock extended losses, dropping 33% in July alone.  

Analysts note that banks are shifting to spend-based lounge access models (e.g., higher spending thresholds for eligibility), reducing volume for aggregators like Dreamfolks. 

This trend, combined with cost-cutting by issuers, has capped free lounge perks on entry- and mid-level cards, which form the bulk of usage.  

Evidence: 

Exchange filings and reports from PTI (June 2025) highlighted banks like ICICI, Axis, and Mastercard exploring direct ties with lounge operators, bypassing aggregators. 

This erodes Dreamfolks' moat, as it holds ~90% market share in domestic card-based lounge access but faces disintermediation.

Stake Sales by Major Investors (July 2025 Pressure)

On July 4, 2025, Motilal Oswal Mutual Fund sold 2.70 lakh shares at an average price of ₹211.14 (worth ~₹57 crore), while Bajaj Finance offloaded 3.09 lakh shares at ₹196.32 (₹61 crore). 

HRTI Private also sold 2.61 lakh shares (₹51 crore). These block deals signaled waning institutional confidence, accelerating the sell-off.  

The stock was already down 51% in the six months prior, and these sales pushed it to a record low of ₹166.40 by July 9, 2025.  

Promoter holding remains stable at 65.7%, but public shareholding (30.5%) and mutual fund stakes (down to 3.09% as of June 2025) reflect reduced interest. 

FII holding is low at 0.66%.  

This contributed to a 65% annual decline by mid-2025, with technical indicators like RSI at 19.7 (deeply oversold) and trading below all key moving averages (5-day to 200-day).

Historical Service Disruptions and Competitive Shifts (Ongoing from 2024)

A September 22, 2024, service outage disrupted lounge access for thousands of customers across banks and networks, resolved the next day but damaging trust. 

Airport operators like Adani (managing 7 airports) cited violations of service agreements, and franchisees like Travel Food Services (TFS) threatened legal action. 

This prompted banks to seek alternatives, with GMR, Adani, and TFS (controlling 80-85% of lounge footfall) pushing for direct partnerships.  

Competition intensified with TFS's IPO and new entrants, weakening Dreamfolks' position as the third-party aggregator.  

Recent Supplier Exit Notices and Legal Risks (August 2025 Development)

On August 29, 2025, Dreamfolks received exit notices from key suppliers: 

Adani Digital and Semolina Kitchens (effective September 15, 2025) and Encalm Hospitality (November 1, 2025). 

The company has filed a petition in the Delhi High Court against Encalm under the Arbitration Act for injunctions. 

Services remain uninterrupted for now, but discontinuation could cause "material operational and financial impact."  

Mitigation includes accelerating global lounge expansion (1,700+ touchpoints across 121 countries) and diversifying into non-airport services (e.g., highway dining, visa facilitation via VFS Global, e-SIMs). 

Financial and Operational Pressures  Margin Compression and Costs: 

FY25 saw revenue growth of 14% to ₹1,292 crore but net profit flat/declining 5% to ₹65.43-69.68 crore due to higher employee costs (up to 3.3% of revenue) and investing activities (up 207% YoY to ₹45.9 crore). 

Q4 FY25 profit fell 17% YoY to ₹14.94 crore amid rising operational expenses. EBITDA margins contracted in past quarters (e.g., 500 bps drop in Q1 FY24 due to maintenance charges).  

Working Capital Strain: 

Days increased from 44 to 63, signaling inefficiencies. ROE dropped to 22.78% in FY25 from 46% in FY23.  

Broader Sector Headwinds: 

Travel stocks (e.g., Easy Trip Planners, IRCTC) are down 20-50% from highs due to slowing air traffic growth and economic slowdowns. Dreamfolks' asset-light model is vulnerable to client churn.  

CRISIL Ratings (July 2025) reaffirmed facilities at ₹145 crore but placed them "under watch with negative implications," citing program closures. 

Revenue growth is projected at 15-20% medium-term via diversification, but margins below 5-9% could trigger downgrades.

🔻In Short  Core Reasons for the Decline

1. Termination of Key Bank Programs

ICICI Bank and Axis Bank—two major clients—deactivated Dreamfolks' lounge access programs effective July 1, 2025. These programs were central to Dreamfolks' revenue stream, and their closure has triggered serious concerns about future earnings.

2. Stake Sales by Institutional Investors

Prominent entities like Motilal Oswal Mutual Fund and Bajaj Finance sold significant stakes in July. 

This kind of exit signals internal doubts and erodes investor confidence.

3. Rising Competition from Adani Airports

Adani, India’s largest private airport operator, is entering the lounge business directly, potentially bypassing aggregators like Dreamfolks altogether. This threatens Dreamfolks’ core business model.

4. Margin Pressure Despite Revenue Growth

While top-line growth exists, rising costs and pricing pressure are squeezing margins. Analysts are questioning the company’s ability to sustain profitability.

5. Technical Breakdown & Panic Selling

The stock has plunged over 68% from its 52-week high, hitting a record low of ₹166.40. Volume spikes during sell-offs suggest institutional exits and panic among retail investors.

Chart -  Dreamfolks Services Ltd. 

Disclaimer: 

This content is for educational and informational purposes only. 

It does not constitute financial, investment, or professional advice. 

Readers should consult a SEBI-registered financial advisor before making investment decisions. 

The author is not liable for any losses or decisions based on this information.