Fri, 22 Mar 2019

GrabTaxi grabs a stake in OYO: Is India next?

ANI
10 Dec 2018, 17:37 GMT+10

By Lee Kah Whye

Singapore, Dec 10 (ANI): Towards the end of last week, Singapore-based ride-hailing firm GrabTaxi Holdings Pte. Ltd. (or simply Grab) confirmed rumours swirling around the tech community the whole week that it had taken a significant stake in India's largest hospitality company, OYO Rooms. Grab is the leading ride-hailing company in Southeast Asia with presence in 8 countries and 3.5 million daily users of its platform.

The Gurugram-headquartered OYO was founded 5 years ago by a then 19-year-old Ritesh Agarwal in Rayagada in the eastern state of Odisha. It started as a website that facilitated the listing and booking of budget accommodation and has since morphed to a network of some 10,000 franchised or leased hotels spanning 350 cities across six countries. The hotels, mainly in the budget segment, are mostly in its home market India, and China. The other countries it has ventured into arethe UAE, Nepal, Malaysia and Indonesia.

In its last funding round in September 2018, it raised US$1 billion valuing the company at US$5 billion. Softbank's Vision Fund is a major investor in both OYO and Grab.

Grab was founded in 2012 by Harvard classmates Anthony Tan and Tan Hooi Ling and started life as taxi booking app "MyTeksi" in Malaysia. Before Grab, Anthony was head of marketing in his family car business which holds the distributorship of Nissan cars in Malaysia. Ms Tan was working as a consultant in McKinsey and Co.

Grab moved its headquarters to Singapore in 2014 and has never looked back.

In March 2018, after an intense and financially damaging battle,Uber sold its Southeast Asian operations to Grab in return for a 27.5 per cent equity stake, effectively turning Grab into the only ride-hailing service in the region.

After closing its August 2018 round of funding where Toyota was the lead investor, Grab was valued at US$11 billion, cementing its title as the most valuable start-up in Southeast Asia.

Grab is presently a lot more than merely a taxi hiring app. Under various brands prefaced by "Grab", it is now into car-pooling, ride-sharing, coach and bus hiring, shuttle services, bicycle rentals, food delivery and last-mile courier and package delivery services. The plethora of services has led to complaints from users that its app is cluttered and difficult to use.

Besides building and expanding its own services, Grab has made strategic investments in various technology outfits. Other than OYO, its next biggest investment is its reportedly close-to-$100 million bet in Indonesia-based offline payment network Kudo in April 2017. It has also put money into artificial intelligence and autonomous driving technologies.

Although Grab has not publicly stated its motivation for investing in OYO, observers are speculating that it is to support its "GrabPay" service which it sees as the main vehicle for its next phase of growth. GrabPay is Grab's digital payment ecosystem emulating China's Alipay and WeChat Pay. It would, therefore, not be a surprise if GrabPay becomes the preferred mode of payment for OYO customers. Its stake in OYO will give Grab exposure to the vast India and China markets.

The strategic benefit for OYO is access to the 650 million digital-savvy consumers in the fast-growing Southeast Asia market where it can partner Grab to help it expand into. The hospitality sector is not entirely new to Grab as it has recently partnered online travel agency, Booking.com to offer deals to its users.

So, will an alliance with OYO lead to Grab dipping its toes into the highly competitive and lucrative Indian ride-hailing market which is dominated by Uber and Ola?

There have been persistent rumours for some time now that Grab is preparing an entry into the Indian ride-hailing market. However, if true, they will be well-advised to tread cautiously.

India represents a fast-growing market with much potential. Rides using similar platforms have risen almost 10-fold in to 700 million in 2017 from when Uber first entered the market in 2013. However, India is unique and quirky and that is only speaking in general. There are localisation challenges to navigate from state to state, city to city and town to town. Many of these are difficult to fully appreciate and comprehend especially for foreigners.

Furthermore, the market has settled down with two players commanding 95 per cent of the market remaining after the exit of smaller players.Grab will do well to remember the costly war of attrition it fought with Uber for the Southeast Asian market. India, if it so chooses to enter, may be a much tougher battle to win. (ANI)

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