Can Grab’s Listing Pave Success for SEA?

The Southeast Asia ecosystem has recently been abuzz with the news of potential exits of its biggest unicorns. 

The chatter finally came to fruition with the awaited news of its most valuable unicorn Grab finally announcing its exit plans after a long wait. 

However, it is safe to say that it was worth the wait, with Grab announcing a grand de-SPAC, effectively valuing the company at close to US$40 billion, the largest ever for Southeast Asia. 

Humble Start to a Wild Ride

Anthony Tan comes from a family that ran a successful car sales business in Malaysia, which planted the seed for a taxi-booking app. 

He worked on this project with his Harvard Business School classmate Tan Hooi Ling. Together, with a US$25,000 grant from Harvard and their own personal capital, they gave birth to MyTeksi in Malaysia. 

Fun fact – around the same time, there was another ride hailing app started by a Harvard grad. It is now known as the behemoth that is Gojek.

Full Speed Ahead

MyTeksi, quickly gained popularity across not just Malaysia, but the broader Southeast Asia region, expanding from taxis to private cars and bikes. It alleviated pain points faced by consumers in the region’s traffic-clogged metropolitan cities.

Due to this growth, the company shifted headquarters to Singapore in 2014 It changed its name to GrabTaxi, and set its eyes on becoming the dominant ride-hailing app in the region. 

However, just a year later, it saw the entry of Uber in the region. 

Winning a Race

This led to a battle of two giants in gaining market share in the region. 

On the surface, it could have been intimidating going up against Uber. The ride hailing space is one where platform competition can be harsh with network effects driving possible ‘winner-take-all’ dynamics. 

This was a reality that Uber was very well aware of, due to its competition with Lyft in the States, and Didi Chuxing in China. 

Despite this, things played out very differently in Southeast Asia. 

Grab had a head start before Uber in Malaysia, Singapore, Thailand, Philippines, Vietnam and Indonesia, each time beating Uber by anywhere from 6 – 18 months. 

Driving to Win

Over the next years, both players expanded rapidly

They focused on rapid customer acquisition and “growth at all costs” mentality. However, the ways they went about implementing this were different. 

Uber continued to adopt its Western-centric model, using a “plug and play” model for regional markets. Grab, on the other hand, concentrated efforts on localizing versions of its ride-sharing app. In Vietnam, for instance, Grab developed a bicycle-hailing service and in markets like Singapore, rolled out e-wallets. 

This strategy paid off – in 2017, Grab’s driver partners made 1 billion rides across 7 countries in Southeast Asia, cementing itself as the dominant platform. 

In 2018, it was able to acquire Uber’s Southeast Asia operations, the largest deal of its kind in the region.

The little taxi guy had won.

Opening up other pathways

After cementing itself as the leader in ride-hailing, Grab set it ambitions to other verticals, effectively setting itself up to be a “superapp”. 

With the acquisition of Uber Eats and launch of its independent service, GrabFood witnessed a revenue increase of 45x. Today, as per its numbers, GrabFood accounts for a larger contribution of revenue than ride hailing. 

Meanwhile, Grab Financial, its financial services platform, became the only platform to have access to have e-money licenses across six Southeast Asian countries. 

Along with this, it sold over 100 million insurance policies to date, and also received a digital banking license in Singapore, paving the way to become a full-blown neobank. 

A superapp was born.

The light at the end of the tunnel

2020 was no doubt a tough year, with the company having to let go several employees 

360 employees being let go amounting to just under 5% of its staff across different verticals as it continued to cope with the pandemic. Along with this, there were several rumours of a possible merger with Gojek that floated around the ecosystem, but eventually died down.

Despite these challenges, Grab eventually came out strong in March 2021, with a blockbuster announcement that it would be going public via a SPAC. 

The sponsor of the SPAC was an esteemed crossover investor with deep public market relationships and US$16 billion in assets managed. 

This brought considerable cheer in an ecosystem that was longing for a public market since SEA’s in 2018. 

The Road Ahead

As is common is today’s market, there were several questions that came up post the announcement regarding the proposed valuation of ~US$40 billion. 

Detractors argue that flat GMV growth (2020 GMV was US$12.5 billion, compared to 2019 GMV of US$12.2 billion.   Moreover, concerns about profitability were raised, as is natural for low margin delivery and ride hailing companies. 

The investors though, remain bullish, agreeing to a three-year lock-up period upon listing. Proponents also argue that there is an attractive ‘scarcity’ premium that Grab offers foreign institutional investors, giving exposure to the growing wider Southeast Asian region across different verticals, all through one company.   

While items like valuation and others continue to remain, one thing is for certain. 

Grab has been going through a very interesting, sometimes bumpy ride, but has ultimately reached a successful destination, paving the way for other Southeast Asia companies to follow a similar journey.