Grab to get S$3.4b extra firepower in battle with Uber

SINGAPORE — Grab is raising about US$2.5 billion (S$3.4 billion) in a record round of new fund-raising, the South-east Asian ride-hailing service said on Monday (July 24), in a move to cement its lead over rival Uber Technologies in the region.

Singapore-based Grab will get a massive US$2 billion cash injection from China’s Didi Chuxing and Japan’s SoftBank Group in the largest-ever venture fund-raising in Southeast Asia, joining forces with the two companies instrumental in driving Uber out of China.

The deal cements an alliance between Didi, SoftBank and Grab, which competes against Uber in markets in Singapore and elsewhere in the region. Uber has been expected to sharpen its focus on Southeast Asia after retreating from China last year.

“With their (Didi and SoftBank’s) support, Grab will achieve an unassailable market lead in ride sharing, and build on this to make GrabPay the payment solution of choice for Southeast Asia,” said Mr Anthony Tan, group chief executive and co-founder of Grab.

Grab, which counts Singapore investment fund Temasek Holdings among its investors, also expects to raise another US$500 million from unspecified new and existing backers, it said yesterday. That would give a valuation above US$6 billion, making it the most valuable start-up in Southeast Asia, a person familiar with the matter said. Vertex Ventures, the wholly-owned unit of Temasek that is an existing shareholder in Grab, did not reply to queries from TODAY by press time on whether it will be investing in the current round of fund-raising.

Southeast Asia has become a key battleground for technology start-ups vying for a market of over 600 million people, with a burgeoning middle class as well as a youthful, Internet-savvy demographic. In Singapore, Grab has also partnered taxi operators SMRT Taxis, Prime Taxi, Premier Taxis, Trans-Cab and HDT Singapore Taxi as they take on the largest taxi operator ComfortDelgro.

Transport economist Walter Theseira from the Singapore University of Social Sciences said the new round of funding would allow Grab the “cushion necessary” to engage in price competition in its key markets, as the intense competition among firms has resulted in a “price war”.

He noted that, like other ride-hailing firms, Grab does not appear to be turning an operating profit, owing most likely to the “extremely heavy” competition it faces in several key markets, including Singapore. In the short to medium term, the fresh funds would enable the firm to continue pricing its product low vis-à-vis its rivals, which are using the same pricing tactics.

In the longer run, Dr Theseira said Grab’s objective is almost certainly to build a market position that allows it to either stop underpricing its products or to outlast its major rivals. “That’s almost certainly the motivation behind the investors,” he said.

Grab, which began life as MyTeksi in Malaysia in 2012, said it has a Southeast Asian market share of 95 per cent in third-party taxi-hailing and 71 per cent in private vehicle hailing. It operates private car, motorcycle, taxi and car-pooling services across seven countries in the region, with 1.1 million drivers.

Building on soaring user numbers of its Grab ride-hailing app and GrabPay function, the five-year-old start-up aims to transform into a consumer technology firm that also offers loans, electronic money transfer and money-market funds.

Assistant Professor Terence Fan, a transport specialist with the Singapore Management University, said that because of Grab’s aggressive expansion regionally, it was unclear how profitable the firm is in the countries where it operates, and some markets could be “loss-making”.

Some of the new funding may be used in these markets, he said. And as Grab secures its market position, Asst Prof Fan said the firm might seek a bigger foothold in the mobile-payment business to create a mobile payments gateway. So far, its mobile payments have been confined to its transport services, he noted.  AGENCIES, ADDITIONAL REPORTING BY KENNETH CHENG