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Grab’s US$750 Million Funding: Implications For Singapore Stock Market Investors

Local newswire The Straits Times recently reported that ride-hailing app developer Grab has received US$750 million in funding from investors that include the Japan-based mobile company SoftBank.

This is also Grab’s largest funding round to date. Grab may be a private company, but this development could have implications for stock market investors in Singapore.

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First implication: On shopping in Indonesia

Grab would be using the capital it has raised to invest in its services across the South-east Asia region, with Indonesia being a focus. Some of the company’s investments in the country include its mobile payment system, GrabPay.

Grab has found some strong partners to work with for expanding GrabPay in Indonesia – they include Mandiri, Indonesia’s second-largest bank, and the Lippo Group, which controls Indonesia’s largest listed property company.

The partnership with Lippo will allow shoppers to use GrabPay at Lippo’s various retail outlets, such as department stores, hypermarts, cinemas, and more.

The Lippo Group has a listed entity in Singapore’s stock market, which is Lippo Malls Indonesia Retail Trust (SGX: D5IU). The real estate investment trust owns 19 retail malls and seven retail spaces in its portfolio and they are all located in Indonesia.

Second implication: On travel in Singapore

Let’s now move closer to home.

The services provided by Grab’s ride-hailing platforms compete with traditional taxi service providers in Singapore, as well as fellow ride-hailing technology company Uber. Companies in our local stock market that are in the taxi business include ComfortDelGro Corporation Ltd (SGX: C52) and SMRT Corporation Ltd (SGX: S53).

European think tank Brugel once studied the impact of Uber on the US taxi market. It found that demand for New York taxis fell by 8% from 2012 to 2014; Uber had entered New York in 2011. In Uber’s birthplace, San Francisco, taxi demand had dropped by a stunning 65% two years after Uber drove into the scene.

Uber and Grab have been cutting fares for their services in Singapore. Grab’s latest US$750 million capital raise gives it even more firepower to invest in its technology or lower prices if it so desires. In fact, Grab had lowered its fares earlier this month, a few weeks before it announced its latest fund raising development.

Grab has also showed data pointing to how its ride services could cost less than its competitors for certain journeys.

The big question now is, how would the taxi market’s incumbents – listed companies such as Comfortdelgro and SMRT – respond? The government has tried to level the playing field by announcing in April, licensing requirements for private hire car drivers in Singapore. But, would it be sufficient?

As it stands, the Singapore National Taxi Association had already complained back in April that a reduction in fares by the likes of Grab and Uber “[are] an unhealthy and unsustainable business strategy.” With Grab having received a massive new influx of cash, developments in Singapore’s taxi market would be interesting to observe.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Ong Kai Kiat owns units in Lippo Malls Indonesia Retail Trust.