The chief executive of Indonesian tech giant GoTo has not ruled out merging with rival Grab as he revealed the company’s first annual profit on Wednesday.
GoTo, which runs the Gojek ride-hailing service and is part-owner of ecommerce platform Tokopedia, has reportedly been in talks to be taken over by Singapore-based Grab.
A merger would bring together two of south-east Asia’s biggest tech companies, with a combined market value of $23bn. That would be far below the combined $72bn they were worth at their respective IPOs in 2021 and 2022, with intense competition in the region for ride-hailing and food-delivery services forcing down prices and leading to losses.
GoTo has denied any merger agreement is in place, but in an interview with the Financial Times, CEO Patrick Walujo said he would be open to a deal that boosts returns for the company’s investors.
“I will always be open to anything that is enhancing our shareholders’ return . . . in the long term,” said Walujo, who has overseen GoTo’s transformation into a profitable company.
When asked if he would be open to a deal involving the whole company or parts of it, Walujo said: “This is something that we need to really consider. Because the other thing that’s unique about GoTo is that we are a national champion.”
GoTo had a responsibility to its employees, he added, as well as to building tech capabilities in the country.
Nasdaq-listed Grab and Jakarta-quoted GoTo have explored a merger in recent years, but no deal was ever struck.
Analysts said a combination would reduce pressure on margins faced by both companies due to intense competition in a region of more than 650mn people.
However, any deal is likely to attract regulatory scrutiny as it would involve two of the region’s biggest ride-hailing and food-delivery groups.
GoTo is one of Indonesia’s most successful “unicorns” — start-ups with a valuation above $1bn — attracting early investments from SoftBank and Alibaba. It debuted on the Indonesian stock exchange in 2022 with a valuation of $32bn.
But its share price has slumped 80 per cent since the IPO as intense competition across all its businesses squeezes margins. The group is now valued at just $5.4bn.
Shares of Grab have also declined by more than two-thirds since its IPO through a $40bn deal with a blank-cheque company in December 2021.
Other than Grab, GoTo also competes with Sea Group’s Shopee in ecommerce.
In an effort to achieve profitability, GoTo has scaled back some of its operations in recent years. It sold a controlling stake in Tokopedia to TikTok in 2023 and last year retreated from Vietnam.
On Wednesday, GoTo posted adjusted earnings before interest, tax, depreciation and amortisation — the company’s key profitability measure — of Rp386bn ($23.5mn) for 2024, its first annual profit. Revenue grew 30 per cent, while gross transaction value across all its businesses jumped 58 per cent.
Walujo, who took the helm in 2023, said GoTo’s profitability could be sustained depending on its ability to innovate and “be the lowest-cost player in the market”. The company expects adjusted ebitda to increase to a range of Rp1.4tn-Rp1.6tn this year.
Its part-ownership with TikTok has had a “huge” impact on profitability, he said, with the social media group “pouring [in] a lot of money” and “a lot of resources”, allowing GoTo to focus on ride hailing, food delivery and financial services.
GoTo will continue to concentrate on the Indonesian market, which Walujo said still had huge potential across all three of its core businesses. Outside its home base, the company offers ride-hailing services in Singapore, while Grab operates in eight south-east Asian countries.
Much of the future growth is expected to come from the financial services arm, which offers loans and “buy now, pay later” services, Walujo said.
The unit broke even on an adjusted ebitda level in the fourth quarter of 2024 — one year ahead of GoTo’s initial guidance — and is expected to post adjusted ebitda of at least Rp300bn in 2025.
“Our financial services is growing a lot faster [than our other businesses], and the total addressable market is a lot bigger,” he said.
Analysts have also become more positive on the stock. In a March research note, JPMorgan upgraded GoTo’s stock to “overweight”.
“We believe GoTo’s ebitda trajectory is at inflection point as it is moving to positive territory thanks to the successful outcome of the new turnaround strategy in the past two years with a good balance of growth and profitability,” it said.
