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In 2021, grab banks on financial services and delivery to cross the final line.
Valerie Law is a freelance writer.
30 June 2021
Superapp and ride-hailing unicorn from Southeast Asia Grab, which plans to list on the Nasdaq later this year, will have to overcome a number of roadblocks before being able to do so.
Aside from the audit difficulties that forced the business to postpone its merger with Altimeter SPAC until Q4 this year, the company faces other challenges, as detailed in DealStreetAsia’s newest DATA VANTAGE analysis on Grab.
In the slow lane, mobility
The COVID-19 epidemic and the resulting movement control restrictions in important Southeast Asian countries have wreaked havoc on Grab’s Mobility vertical, which was the company’s principal business until 2019.
As a result, Grab’s Mobility segment’s Gross Merchandise Value (GMV) fell 36.2 percent year over year in Q1 2021. Grab may struggle to reach its $4.2 billion GMV goal for the vertical in 2021.
However, when governments ramp up vaccination campaigns, a strong comeback is possible in the fourth quarter of this year or early in 2022. Grab expects its Mobility business to generate $6.1 billion in gross merchandise volume (GMV) in 2022, up 7% from pre-pandemic levels in 2019.
Grab’s consolidated GMV of $3.6 billion in Q1 2021 reflects a 5.2 percent year-on-year increase, putting it behind schedule to meet its anticipated 2021 GMV projection of $16.7 billion.
Grab’s GMV in Q1 2021 was 21.5 percent of the entire year’s projected GMV ($16.7 billion), indicating that it has some catching up to do in the coming quarters. The silver lining is that user spend, as measured by GMV per monthly transacting user (MTU), increased by 33% year over year.
Total Payment Volume is the figure for financial services.
Financial services and deliveries are two new growth engines.
Grab’s Deliveries vertical surpassed its expected annual growth rate of 36.4 percent in Q1 2021, with GMV of $1.7 billion, up 49 percent year on year. This is attributed to increased consumer spending on food delivery and the debut of GrabMart in early 2020.
In the first quarter of 2021, GrabMart’s gross merchandise volume (GMV) climbed by 21% over the previous quarter (actual GMV was not disclosed). Grab’s recently announced regional agreements with Watsons and Don Don Donki are likely to have aided the company’s efforts. Grab has worked with Yummy Corp in Indonesia to assist food businesses expand and launch new delivery-only brands.
Grab’s Financial Services division appears to be following annual growth expectations as well, reaching its highest quarterly TPV to date in Q1 2021, with year-on-year growth of 17%.
Grab expects its financial services division’s TPV to reach $11 billion in 2021, representing a 23.6 percent year-over-year increase. As it debuted new lending products in Q1 2021, loan disbursals via the on-Grab platform, i.e. disbursed directly by Grab, climbed 45 percent year over year.
Its insurance division, too, saw tremendous growth, with gross written premiums more than tripling year over year as sales of mobility-related products (such as driver insurance) soared.
The race to become EBITDA positive has begun.
Grab intends to focus on financial services as a key development area.
Given the extended runway, financial services is unlikely to make the group EBITDA positive anytime soon.
Instead, Grab is counting on the transportation vertical’s positive EBITDA and the Deliveries vertical’s positive EBITDA to bring the group’s EBITDA into the black by 2022.
The influence of GoTo
Gojek and Tokopedia merged to become GoTo Group, Indonesia’s largest tech company, posing a potential challenge to Grab. The e-commerce behemoth has over 100 million monthly active users, 11 million online businesses, and a 99 percent penetration rate in all of the archipelago’s districts.
Gojek is projected to dethrone Grab as the preferred partner for same-day and rapid delivery, a position it has held since forming a strategic alliance with Tokopedia in April 2017.
Because GoTo’s fintech branch, GoPay, would replace OVO as Tokopedia’s official payments partner, Grab’s financial services company may suffer as a result of the deal. Grab and Tokopedia are co-investors in OVO, but Tokopedia will have to sell its full investment in OVO after the merger, according to a contract inked with OVO shareholders.
GoPay will be able to cross-sell or package its other financial services to Tokopedia clients in the future.
GoTo’s digital bank strategy under its subsidiary, Bank Jago, will benefit from the acquisition as it has access to a larger captive market through Tokopedia’s platform.
Grab, on the other hand, has yet to enter the Indonesian banking market.
Emtek Group (PT Elang Mahkota Teknologi), an Indonesian media and technology conglomerate, may replace Tokopedia as Grab’s strategic partner in Indonesia. Emtek owns a controlling position in Bukalapak, the country’s third most popular online marketplace, and is funded by the Sariaatmadja and Salim families.
We likened Grab to Sea Ltd. and China’s Meituan in our value debate because both companies operate in numerous verticals and have a similar regional footprint. We also looked into the worth of Grab’s various verticals.
DealStreetAsia – DATA VANTAGE subscribers have exclusive access to The Unicorn Report: Grab. To gain access to our database of thousands of Singapore-registered firms, as well as our whole set of reports and DealStreetAsia’s unique stories and interviews, subscribe/upgrade now. Still undecided? For only $299, you may get a one-month trial.
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