IPO hopes for Grab, Gojek, Tokopedia as they surge ahead, Indonesian unicorns may merge

01, Feb. 2021

(Photo courtesy of Tokopedia and Afif Kusuma on Unsplash)
(Photo courtesy of Tokopedia and Afif Kusuma on Unsplash)

JAKARTA, NNA - Three leading Southeast Asian tech unicorns - Grab, Gojek and PT Tokopedia - have started the year with grand plans to power ahead with further expansion and diversification, go public and find a suitor for merger.

Emerging stronger from the pandemic which crippled economies across the region, they have already come of age with growth spurts in recent years after they were formed about a decade ago. They also share some big-name investors like Softbank which have been urged by investors to push for their tie-ups.

Gojek and Grab have already ballooned into decacorns or unicorns with at least $10 billion in value, while Tokopedia wants to move quickly towards that status this year. However, none of them has been profitable yet.

Already, Indonesia's biggest e-commerce player, Tokopedia, is reportedly aiming for a dual listing in Indonesia as well as the United States where its potential Initial Public Offering (IPO) could be worth at least $1 billion.

Started in 2009, Tokopedia said it had hired Morgan Stanley and Citigroup Inc. as advisers to hasten its plan for listing. The announcement followed a news report that Bridgetown Holdings Ltd., a special purpose acquisition company backed by billionaires Richard Li and Peter Thiel, is considering a $10 billion merger deal with Tokopedia.

Investors have been paying close attention to the Indonesian unicorn after its merger negotiation with fellow Indonesian giant Gojek, became more intense recently. Both are already business partners, with Gojek, a ride-hailing and payments company, supplying its delivery service on Tokopedia platform.

Eyeing IPOs, both parties see huge growth opportunities in collaborations and hope to seal a deal soon, according to insiders.

Seen as the most valuable unicorn companies in Indonesia, Tokopedia and Gojek boast a combined valuation of $18 billion.

Worth $7.5 billion, Tokopedia has raised more than $2 billion from companies including Japanese tech investment firm SoftBank Group Corp, global tech behemoth Google, Chinese e-commerce giant Alibaba Group Holding and Temasek Holdings, an investment company owned by the Singapore government.

Valued at $10.5 billion, Gojek began ride-hailing in Indonesia in 2010. Its business evolved to encompass food delivery, digital payments and logistics. Today, it operates in more than 200 cities in five Southeast Asian countries, but Indonesia remains its biggest market.

Gojek Co-CEO Kevin Aluwi told CNBC recently that the company wants to invest more and grow its business further, beyond Indonesia this year.

“We do think that 2021 is going to be a growth year and, more importantly, we spent 2020 really investing in a lot of the business and product and operational fundamentals, such that profitability and long-term sustainability looks meaningfully better year-over-year,” said Aluwi, who declined to comment on the merger proposal.

Gojek, which has been funded by Google, China’s Tencent, and Singapore state investor Temasek, invested $160 million to raise its stake in PT Bank Jago in December to target Indonesia's 83 million who lack bank access.

Gojek had been in merger talks with rival Singapore-based Grab in the past few years. But they hit a deadlock over issues of control and different corporate culture last year. They also faced protests by Gojek riders worried about job losses and obstacles ahead from antitrust regulatory scrutiny.

On Jan. 29, a source told Singapore's The Business Times that both parties have rejected the idea of merger, which fuelled speculation that Gojek is most likely to merge with Tokopedia instead.

This is not surprising as Grab had recently appointed two banks - Morgan Stanley and JPMorgan Chase & Co - to work on its U.S. IPO to pursue its own growth journey. Reuters reported that it could raise at least $2 billion from the offer.

Fierce fighting between the two hail-riding giants in Indonesia has also spilled into the e-wallet arena even as they were trying to thrash out merger issues.

In a Jan. 4 newsletter, Grab company president Ming Maa announced that group revenues have returned to over 100 percent of pre-Covid levels.

Grab is poised to launch digital banking in 2022 after its consortium partnership with telco giant Singtel cliched one of two much coveted Singapore digital full-bank licenses issued, a move that is paving the way for further banking liberalization in the city-state.

Things are really looking up for Grab when it announced on Feb. 1 the successful close of its first senior secured term loan facility, after securing commitments from international institutional investors.

Structured as a five-year term loan B with a principal amount of $2 billion, it is believed to be the largest term loan B facility in the Asian technology sector. It was actually upsized from the original principal amount of $750 million after investors demonstrated strong interest in Grab.

In conjunction with the term loan, Moody’s Investors Services and S&P Global Ratings have issued stable outlook ratings of B3 and B- respectively to Grab, said its press release.

Anthony Tan, group CEO and co-founder of Grab, said, “I am deeply encouraged by the trust placed in us by investors who believe in our mission and recognise the value of our super app platform, as we continue making consistent progress in achieving our growth and sustainability milestones. With their support, we will invest in building a long lasting, multi local services business, so that millions of Southeast Asians can support their families and improve their lives with our everyday services.”

Added its press statement, "Since its founding, Grab has enjoyed significant support from its shareholders. The term loan facility will help broaden Grab's sources of financing and establish a long-term, diversified capital structure."

JP Morgan served as the lead bookrunner while Barclays, Mizuho, MUFG, Deutsche Bank, HSBC and Standard Chartered acted as joint bookrunners.

Meanwhile, news of Grab and Gojek going their separate ways should please those who were dead set against the merger proposal.

Igun Wicaksono, chairman of Indonesian National Presidium for Combined Two-Wheeled Action (Garda), told NNA, "Their merger will lead to a monopoly in the ride-hailing business. This will affect the business and growth of smaller ride-hailing companies and the livelihood of riders."

Yose Rizal, an economist at CSIS, is one of those who support a Gojek-Tokopedia merger. But he hopes that their services after that will not be exclusive to their ecosystem but caters fairly to the whole society.

Analysts believe that an amalgamation between Gojek and Tokopedia can be one of the driving forces for Indonesia's economic recovery from the pandemic which has disrupted many sectors except agriculture last year.

(Photo courtesy of Grab)
(Photo courtesy of Grab)