After an initial jump on Thursday, shares of Grab slumped more than 20% in their Nasdaq trading debut after the ride-hailing and delivery app merged with U.S. blank-check firm Altimeter Growth Corp in a special purpose acquisition company—or SPAC—deal valued at $40 billion, the largest ever. The $4.5 billion Grab raised in the deal makes it the largest IPO by a Southeast Asian company in U.S. history.
The listing caps a rapid ascent for the startup that entrepreneurs Anthony Tan and Tan Hooi Ling launched as MyTeksi in Malaysia less than a decade ago. The pair, who are unrelated, founded the company with $25,000 that included prize money they’d won by entering their ride-hailing idea in Harvard Business School’s New Venture Competition in 2011.
Nine years and $12 billion in investments later, Singapore-based Grab now operates in nearly 470 cities across eight Southeast Asian markets, employs 700,000 drivers, and offers food delivery, payments and financial services—in addition to ride-hailing—to 187 million users.
Grab hopes its public debut will shine a “big spotlight” on the region and its market opportunities, says company president Ming Maa. Driven by its young, digitally-savvy and mobile-first populations, Southeast Asia is “on the cusp of a digital revolution,” says Maa.
But now that Grab is a public company, investors will be watching to see whether it can maintain its lofty goal of being an all-in-one-super app, wean its drivers and users off promotions, and—at some point—turn a profit. On Wednesday evening, Fortune spoke with Singapore-based Maa via video call about Grab’s business strategy and its plans ahead.
Fortune: Can you walk me through Grab’s plans to become profitable? Grab’s third quarter results last month showed losses of $988 million, despite steady growth in gross merchandise value (GMV), which ballooned to a record $4 billion in Q3. Market research firm Euromonitor said in a July report that a key weakness is Grab’s big spending on advertising, promotions and incentives, and that a challenge going forward is whether the company can make money and maintain customer loyalty without such discounts.
Maa: We don’t see profitability and growth as mutually exclusive. In Q3, we posted our third consecutive quarter of record GMV growth. We’ve also made very good strides on improving our economics. Our mobility segment has been positive since Q4 2019 and our margins are industry-leading [in that sector].
Our deliveries business—which is much younger at three years old—is already breaking even in a majority of our markets.
Our key is driving our super app strategy, which allows us to cross-sell new services when we roll them out, while maintaining discipline around our marketing costs. [It] also allows [Grab] drivers to earn more via [new] income opportunities [when ride-hailing is down] and helps us maintain discipline around [spending on] driver incentives. So the super app is really key to driving the new economics of our business.
Grab has several different business segments—which ones are your top priorities at the moment?
If you think about the long-term opportunities within Southeast Asia, [we’re] focused on three. The first is around continuing to deepen our delivery business. Whenever someone’s hungry, wants a restaurant meal, groceries to cook at home or potato chips for a snack on a Friday night, we want them to think of Grab first. So we’ll continue investing in deliveries.
The second is all around financial inclusion—continuing to drive affordability and accessibility of our financial services products. The way we do that is focusing on microinsurance, microlending and microsavings products that [are more] affordable [for the consumer in Southeast Asia]. The analogy I like to use is that in the U.S. you can buy a toothpaste that’s eight ounces; but in developing markets, they usually sell one ounce or two ounce toothpastes. We’re doing the same thing—creating bite-sized toothpastes for financial services.
The digital bank opportunity is very exciting. [Last year, the Monetary Authority of Singapore awarded Grab and telecommunications partner SingTel a license to set up a digital bank, which will launch next year]. Even in a developed country like Singapore, when you speak to consumers and SMEs on the ground, there’s a tremendous amount of underserved opportunities. Affordability, accessibility, and transparency is really key. And we want to make digital banking as easy as ordering a Grab ride.
Lastly, [we] continue to build infrastructure to support e-commerce, whether through our logistics network providing on-demand deliveries—we now operate the largest driver delivery network—or through our “buy now, pay later” services, which is very important in [this] region [since] credit card penetration is very low, at 10%. So for the remaining 90% of the population, this is the solution.
How will Grab fare against regional competitors? Indonesia’s GoTo—another Southeast Asian super app that formed this May when ride-hailing giant Gojek merged with e-commerce platform Tokopedia—is often cited as one of Grab’s most formidable regional competitor.
We’ve been blessed to have good competitors for the last nine years. Frankly, competition is good for consumers and the overall market. But we’re the only company that operates a regional super app. We got to where we are by focusing on tech investments. We invested quite a bit in our own mapping and routing. In some countries, there’s these little alleyways that aren’t on the maps. This helps us deliver items to people faster and more reliably than other companies. It’s also core to thinking about developing a shared driver fleet; what allows us to create the largest delivery network at the lowest cost. And the lowest cost delivery network is what drives long-term sustainability.
Can you share more about Grab’s plans in the year ahead? Will the company expand to more markets in Asia, or worldwide?
We are absolutely laser focused on Southeast Asia. It’s just day one of many long-term opportunities here. We want to drive the adoption and penetration of digital services here.
Has all the uncertainty surrounding the new Omicron COVID variant changed Grab’s strategy or outlook for the year ahead?
[In September], we did [write] down our forecasts for the year. But keep in mind that this was in a market environment where we had the Delta variant coming across Southeast Asia. We had a series of lockdowns [here]. Our revision was really out of an abundance of caution, rather than any weakness in the business itself.
It’s a bit too early to tell [about Omicron]. What’s changed in recent months is that we’ve seen vaccinations improve dramatically. We’ve seen most governments transition from a [zero-COVID] policy, which required strict lockdowns, to a policy of living with COVID as an endemic part of life. We’re starting to see cities open up, which is positive and will lead to a more constructive environment for the end of 2021 ,as well as leading into 2022.
This story has been updated to reflect Grab’s slump in later trading on Thursday.
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