Grab banks on financial services, deliveries to drive past the finish line in 2021

Southeast Asian superapp and ride-hailing unicorn Grab, which is eyeing a Nasdaq listing later this year, must navigate many speed bumps before it can finally list in the US.

Besides the audit issues, that forced the company to delay its merger with Altimeter SPAC to Q4 this year, there are other hurdles it must clear, as discussed in DealStreetAsia’s latest DATA VANTAGE report on Grab.

Mobility in slow lane

The Mobility vertical, which was Grab’s mainstay business until 2019, has been reeling from the COVID-19 pandemic and the subsequent movement control restrictions in core Southeast Asian markets.

As a result, Gross Merchandise Value (GMV) in Grab’s Mobility segment was down 36.2% year-on-year in Q1 2021. Grab may find it hard to hit the $4.2 billion GMV that it targets for the vertical in 2021.

However, a strong recovery is possible in the final quarter of the year or early 2022, as governments step up vaccination drives. Grab has projected its Mobility segment to reach $6.1 billion in GMV in 2022, representing a 7% growth from the pre-pandemic levels of 2019.

At the group level, Grab’s Q1 2021 consolidated GMV of $3.6 billion represents a 5.2% year-on-year growth, putting it slightly behind target in achieving its projected 2021 GMV and (off-Grab) TPV totaling $16.7 billion.

The GMV in Q1 2021 accounted for 21.5% of the full year’s GMV projection, which means Grab has some catching up to do in the subsequent quarters. The silver lining, though, is user spend, measured as GMV per monthly transacting user (MTU), which saw an increase of 33% YoY.

Figures for financial services are Total Payment Volume.

Deliveries, financial services are new growth engines

In Q1 2021, Grab’s Deliveries vertical exceeded its estimated annual growth rate of 36.4%, booking a GMV of $1.7 billion, representing growth of 49% YoY. This is due to higher spending on food ordering by consumers, and the launch of GrabMart in early 2020.

GrabMart’s GMV in Q1 2021 increased 21% quarter-on-quarter (actual GMV was not disclosed). Grab’s announced regional partnerships with Watsons and Don Don Donki, are likely to have helped. In Indonesia, Grab also partnered Yummy Corp to help food businesses expand and create new delivery-only brands.

Grab’s Financial Services segment, too, appears to be tracking annual growth projections, recording its highest quarterly TPV so far in Q1 2021 with year-on-year growth of 17%.

Grab projects that the total TPV of its financial services division will touch $11 billion in 2021, clocking a growth of 23.6% YoY. Loan disbursals via the on-Grab platform, i.e disbursed directly by Grab, increased 45% year-on-year as it launched new lending products in Q1 2021.

Its insurance segment, too, demonstrated strong growth with gross written premiums increasing three-fold year-on-year, as Mobility-related product sales (ie. driver insurance) increased.

 

Race to become EBITDA positive

Grab has plans to make financial services its major growth area.

 

However, financial services is unlikely to make the group EBITDA positive anytime soon, given the long runway.

Instead, Grab is depending on the positive EBITDA achieved in its mobility vertical, and the expanding Deliveries vertical to pull group EBITDA into the black by 2022. Grab said in April that its Deliveries vertical has achieved segment EBITDA positive in five out of six countries it operates in.

GoTo’s impact

The merger between Gojek and Tokopedia to form Indonesia’s largest tech company, GoTo Group, poses a threat to Grab within Indonesia. The e-commerce giant boasts over 100 million monthly active users, 11 million online merchants, and 99% penetration in districts throughout the archipelago.

Gojek is expected to replace Grab as the preferred partner for instant and same-day deliveries, a privilege the latter has enjoyed since it forged a strategic partnership with Tokopedia in April 2017.

Grab’s financial services business may see a dent as a result of the merger as GoTo’s fintech arm, GoPay, will replace OVO as Tokopedia’s official payments partner. Grab and Tokopedia are co-investors in OVO, but according to a contract signed with OVO shareholders, Tokopedia will have to divest its entire stake in OVO after the merger.

The merger will also benefit GoTo’s digital bank strategy under its subsidiary, Bank Jago, as it gains access to a wider captive market under Tokopedia’s platform.

Grab, meanwhile, has yet to make a major move into banking in Indonesia.

Indonesia’s media and technology conglomerate Emtek Group (PT Elang Mahkota Teknologi) may replace Tokopedia as Grab’s strategic partner in Indonesia. Emtek, which is backed by the Sariaatmadja and Salim families, holds a controlling stake in the country’s third most popular online marketplace Bukalapak.

In our valuation discussion, we compared Grab with Sea Ltd. and China’s Meituan, as both operate in multiple verticals like Grab, and have a similar regional footprint. We also explored the valuation of Grab’s various verticals.


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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.