Grab: superapp secures superior price

Grab is often referred to as south-east Asia’s answer to Uber, the US ride-hailing app. In reality, the Singapore-based start-up is Uber, DoorDash and Ant Financial all rolled into one. Its superapp status in the region, along with the abundance of blank-cheque money sloshing about, have helped Grab secure a punchy valuation despite hefty losses.

The company is merging with a special-purpose acquisition company, or Spac, backed by Altimeter Capital. The deal will pave the way for a US listing at an enterprise value of $31bn. That is equivalent to about 25 times 2020 net revenue — or twice that of Uber’s valuation. The company last raised money in 2019 at a post-money valuation of $16bn. 

Grab has expanded from ride hailing into meal and grocery delivery. Now it is pushing into financial services. It is betting that the region’s young, mobile population will use it for everything from booking rides to taking out insurance and loans. The business boasts 25m monthly active users across nearly 430 cities in eight countries.

Growth has not come cheap. Grab made a net loss of $2.7bn on $1.2bn of net revenue in 2020. It does not expect to be ebitda positive until 2023.

Even that may be optimistic. The reason? Gojek. Grab and its Indonesian rival have been locked in a fierce, costly battle for dominance across south-east Asia. The two briefly held merger talks. A deal would have reduced cash burn and created a regional tech powerhouse.

Instead, armed with $4.5bn in extra cash from the Spac deal, Grab is likely to ramp up the battle. Confident of victory, Altimeter has agreed to a three-year lock up of its stock. The fact that shares in Grab’s Spac, Altimeter Growth, continue to trade at more than $10 a share, shows Wall Street is giving the superapp the benefit of the doubt.

The price is steep, but the growth story is appealing. Opportunities of this size are rare.

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