Uber rival Grab to raise $2.5b from Didi, Softbank in largest SE Asia deal

Grab
Grab taxi. Photo: Bloomberg

GrabUber’s largest ride-hailing rival in Southeast Asia, is raising a total of $2.5 billion from investors including China’s Didi Chuxing and Japan’s Softbank Group in the largest single financing in the region, according to a release today.

The Singapore-based company has secured $2 billion and is expecting to raise an additional $500 million from existing and new investors. This new round is estimated to give Grab a valuation of more than $6 million, Reuters reported.

Grab’s big-ticket fundraising comes at a time when its global rival Uber, which has a significant Asia presence, is fraught with challenges related to its workplace culture, among others. The on-demand market is also seeing a broader retreat amid an increasingly tangled web of investors backing Grab, Uber and Go-Jek.

Tiger Global Management is an investor in Uber, Didi Chuxing, Ola and Grab, while SoftBank has invested in each of the three leading Asian companies (Didi Chuxing, Ola, and Grab). Other investors that have backed Grab are Hillhouse Capital – which has stakes in both Didi Chuxing and Uber China – and Chinese Internet majors Tencent and Alibaba, which have common interests in both Didi and Lyft.

Softbank and Didi are expected to help Grab strengthen its foothold in Southeast Asia, where it is by far the dominant on-demand transportation platform with a market share of 95 per cent in third-party taxi-hailing and 71 per cent in private vehicle hailing. The firm will also continue to bolster its mobile payment solution, GrabPay.

“Starting with transport, Grab is establishing a clear leadership in Southeast Asia’s internet economy based on its market position, superior technology, and truly local insight,” said Cheng Wei, founder and CEO of DiDi.

“By deepening our strategic partnership, DiDi and Grab reaffirm our shared commitment to innovating localised solutions to global urban development challenges from the world’s fastest growing marketplaces. Both companies look forward to working together with communities and policymakers across Asia to fully embrace the extraordinary opportunities in the upcoming transportation revolution.”

Grab’s previous investors include China Investment Corp, Coatue Management LLC, GGV Capital, and Vertex Ventures Holdings, a subsidiary of Singapore state investor Temasek Holdings.

Didi became an investor in Grab’s competitor, Uber, when it bought Uber’s China operations in 2016, ending the fierce price war between the two. Didi reportedly invested $1 billion in Uber’s global company as part of the deal.

“We are delighted to deepen our strategic partnership with DiDi and SoftBank. We’re encouraged that these two visionary companies share our optimism for the future of Southeast Asia and its on-demand transportation and payments markets, and recognise that Grab is ideally positioned to capitalise on the massive market opportunities,” said Grab CEO and co-founder Anthony Tan.

Grab is one of the most frequently used mobile platforms in the region with nearly 3 million daily rides. Its mobile app has been downloaded on over 50 million mobile devices, giving passengers access to a fleet comprising over 1.1 million drivers.

Grab offers private car, motorbike, taxi, and carpooling services across seven countries and 65 cities. GrabPay Credits, a cashless top-up payments option, has grown more than 80% month-on-month since its launch in December 2016, the company claims.

Commenting on the tech startup, Masayoshi Son, chairman and CEO of SoftBank said: “Grab is using technology to address transportation and payments, some of the biggest challenges present in Southeast Asia, and we believe Grab is a tremendously exciting company in a dynamic and promising region. SoftBank is excited to deepen this partnership and we look forward to continuing to support Grab’s journey.”

Grab launched a $700 million masterplan for Indonesia – its biggest market – back in February. The master plan covers a range of programs that aim to provide all Indonesians with an “opportunity to move into the digital economy”, including opening a Grab R&D centre in Jakarta to develop technology innovations for the local market.

With its constant expansion activities – it bought Indonesian O2O e-commerce startup Kudo for $100 million earlier this year – Grab Indonesia aims to create five million micro-entrepreneurs by next year. The firm also wants to grow its tech workforce to “a few hundred”, it told reporters.

In Indonesia, Grab competes with homegrown ride-hailing app Go-Jek, which reportedly received $1.2 billion in a round led by Chinese internet giant Tencent in May. The deal was undisclosed and Go-Jek has never confirmed it.

Indonesia is critical to Grab as it is the largest possible market for Grab to expand in the region, outside of the Philippines and Vietnam. A report co-authored by Google last year revealed that Indonesia might account for “more than half of the revenue” of ride-sharing services across the region by 2025.

With Grab unable to expand outside of Southeast Asia and become a supra-regional player – with India and China representing intensive competitive markets and Uber dominating North America and Europe – future growth for Grab depends on Indonesia.

Another area in which Grab and Go-Jek are competing is in the financial space, with Go-Jek and Grab both operating as fintech companies. Go-Jek’s payment service Go-Pay is helping fuel the growth of digital payments wave in Indonesia. This is a market where smartphone penetration approaches close to 50 per cent of Indonesia’s population as of 2016.

Matthew Wong of venture capital database CB Insights notes: “One clever way Go-Pay has driven adoption is by using drivers as a point of sale (drivers ask riders whether they want to store change in the form of Go-Pay). This month, Go-Pay announced it would soon be able to be used for merchant transactions outside of Go-Jek’s own services similar to how Alipay and WeChat Pay can be used in China. Go-Pay is not without competition as rival service Grab has also used the core use case of transportation to drive adoption of its GrabPay.”

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