<article><p>This week, Toyota came in big, investing US$1 billion into Grab, allegedly valuing Grab at more than US$10 billion.</p></article>

<p>This week, Toyota came in big, investing US$1 billion into Grab, allegedly valuing Grab at more than US$10 billion.</p>
<p>“Early investors must have made a lot of money,” says the chatter in many of the Whatsapp and WeChat groups.</p>
<p>Well, probably yes for early investors, but for PE investors who began betting big on the ride-hailing firm in second half of 2015, the paper returns are yet to be ‘huge’.</p>
<h3><strong>Astronomical return is yet to come</strong></h3>
<p>Let’s do some maths.</p>
<p>To date, Grab has raised US$5.1 billion according to what has been successively announced in the public domain. Of course, the announced financing includes debt, and some of the PE investments have not been announced.</p>
<p>But let’s just assume US$5.1 billion is equity investment. Collectively the return will be about 100% – with the later investors accounting for less.</p>
<p>Do not forget that <em>Uber now owns 27.5% of Grab</em>, with no cash injection.</p>
<h3><strong>Profitability</strong></h3>
<p>That said, Grab has reached an inflection point – there is no major competition in most of the markets in Southeast Asia, a chance for it to truly demonstrate (and increase) its value.</p>
<p>Profitability is not difficult – when you are dominating the market. Easy Taxi became profitable in Peru in 2015, where it occupied between 85%-90% of the market share. Many users, especially in Singapore, are complaining about Grab’s ‘surging’ prices.</p>
<p>Who would not test the profitability limit in this time window of no competition? This is a perfectly rational business decision. The good thing about ride-hailing is that you can always reverse the excesses if they do not work – all you need to do is offering vouchers and users will forgive you.</p>
<h3><strong>The real potential</strong></h3>
<p>In addition to profitability, this is also a good time for Grab to start focusing on building value, including GrabPay, insurance and maybe eventually driverless cars,leveraging the excellent use case of ride-hailing.</p>
<p>If any of the above becomes successful, Grab’s value will be far more than US$10 billion.</p>
<p>While this is a big ‘if’ from execution point of view, Grab is in a much better position than any of existing or potential rivals to realise this.</p>
<p><span style="color: #000080;"><strong>This story was first published on Momentum Works and has been republished on DEALSTREETASIA with permission. </strong></span></p>
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Investors speculate on value of Grab. Toyota invests US 1 billion Grab valuing it at more than US $10B. Uber owns 27.5% of Grab.

Guest Post | How much is Grab worth, really?

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