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Grab Research 8 months 1 week ago #26

  • dsamraj
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Description

Grab is a Singaporean app company founded In 2012 by Anthony Tran and Tan Hooi Ling [2]. Currently Tran serves as CEO [1]. Grab offers a wide variety of products through its app such as taxi services, delivery of restaurant meals, and groceries as well as purchasing tickets and booking hotels [3].

Industry Growth

The e-commerce app industry has seen rapid growth. While certain aspects such as ride-sharing have declined due to the pandemic, other areas such as delivery of groceries and meals has seen rapid growth. Market research from Google, Temasek , and Bain & Co. indicates that in the largest economies in Southeast Asia (Grab’s geographical reach) 33% of current e-commerce customers started only after the pandemic [1]. What is more striking is the retention level of these new customers. Over 90% of these new customers indicated that they intend to continue using e-commerce platforms even after the pandemic subsides. [2] The same research predicts the online commerce industry in the area to amount to $1.2T by 2025. Currently online transactions amount to $620B [1].

Firm Growth and Financing

One advantage Grab has is that certain arms of the business have continued to perform well during the pandemic. One arm of Grab that has done so is Grab Financial. Grab Financial was founded in 2017 and offers online financial services such as banking and wealth management. [4]. Grab Financial’s revenue grew 40% in 2020. Despite this growth, Grab Financial is still not a profitable venture yet. However, investors feel confident in the future of Grab Financial. Grab Financial just had a capital raise of $300M valuing the arm of Grab at $3B. [4]. Hanwha Asset Management was the lead investor on this most recent round of financing. Venture capital firms GGV and Flourish Ventures also participated. [4].With regards to Grab itself the company has undergone 31 rounds of financing and has raised $10.1B [5].  As of Jun 2020, Grab was valued at $14.9B [6]. Observe that the valuation is only 1.5X the cap raise, something a potential investor should note and look into.

Competition and Regulation While Grab faces competitors such as Didi Chuxing, Gett, and iCarsClub [7], Grab is a very solid force in the Singaporean market (and associated areas). As a result Grab has faced attention from regulators looking to prevent monopolistic control. In 2018 Uber and Grab engaged in a merger that soon was picked up by regulators. In September 2018, the Competition and Consumer Commission of Singapore ruled that the Uber-Grab deal had too much market as is (the unregulated merger gave Grab an 80% market share in Singapore), and thus the Commission put in place a series of restrictions and regulations to reduce Grab’s market share. [8]. Grab also paid a $6.4M fine for the merger. Uber appealed the decision by the commission in late 2020. Uber lost the appeal just a few days ago and as a result will have to pay an additional $6.58M penalty, the costs that the CCCS incurred to process and review the appeal. [8].

Potential Merger or Acquisition

This however has not hindered Grab from pursuing other merges and acquisitions. As of December 2020, Grab has announced potential plans to merge or acquire Gojek. Gojek has a similar business model to Grab of ride-sharing and grocery deliveries via an app. Gojek’s main current market is Indonesia. Additionally, Gojek is currently valued at $10B [9]. It remains to be seen how regulators will respond to the potential deal and what will be the impact of the deal.

Conclusion

With a potential merger or acquisition soon to come and growth due to COVID, Grab is an interesting company to watch. Additionally, as part of the Grab-Uber agreement Grab must have an IPO by March 2023 or pay Uber $2.26B in fines [9]. It will be interesting to see how all these
developments play out in the next few years.

Articles for Further Reading (and in part used to create this post)

[1]: (Reuters): www.reuters.com/article/us-singapore-ban...elight-idUSKBN28V09K
[2]: (Crunchbase-1): www.crunchbase.com/organization/grabtaxi
[3]: (Grab): www.grab.com/sg/
[4]: (FT): www.ft.com/content/e5143de1-b7f8-4410-898f-b4f9bdec823d
[5]: (Crunchbase-2): www.crunchbase.com/organization/grabtaxi/company_financials

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Last edit: by dsamraj.

Grab Research 8 months 1 week ago #27

  • dsamraj
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