The combination of Gojek and Tokopedia, two leading Indonesian platforms, is no surprise.
It has been telegraphed for a while and became a necessity once Grab – Gojek’s closest equivalent in southeast Asia – opted out of a merger with its Indonesian counterpart and instead opted to boost its capital through a special purpose acquisition company (Spac) listing.
The new business, to be called GoTo Group, has a lot going for it.
In combination, its legacy businesses had gross transaction value of more than $22 billion through 1.8 billion transactions in 2020, with 11 million merchant partners and 100 million monthly active users supported by a registered driver fleet of two million.
Gojek is Indonesia’s leading ride-hailing, mobile services and payments platform, and an important fixture more widely in southeast Asia; Tokopedia is a tech-smart e-commerce company – toko means shop in Bahasa.
Between them their investor base includes Alibaba, BlackRock, Facebook, Google, KKR, PayPal, Temasek, Tencent and SoftBank; powerful friends, indeed.
Whatever the outcome, the new payments business … will be well-placed in one of the world’s most compelling markets
At Euromoney, our interest in these platforms is always on the financial services side: the way groups such as Gojek and Grab – and Alibaba, Tencent and Paytm – use their e-commerce or mobile chat footprints to underpin nimble and powerful payments businesses that displace the mainstream operations of retail banks.
And in this respect, there may be a challenge ahead.
Euromoney has written in detail about the payments arm of Gojek, GoPay, which is a digital payments business and an engine of microfinance with some interesting and distinctive methods of engaging with the village level of financial inclusion.
But Tokopedia also has a fintech arm, including payments, banking and credit, investments, lending and credit scoring, and it has a stake in Ovo, a digital payments service and a unicorn in its own right – Indonesia’s fifth, in fact; Gojek and Tokopedia are among the others.
The challenge here is that Indonesia has a track record of not wanting one operation to control two banking organizations.
One sees this with its attitude towards foreign investors. When Singapore’s Temasek developed large stakes in both Bank Internasional Indonesia and Danamon, it is understood it was told to sell out of one. In fact, it sold out of both eventually.
Potential problem
Domestically, Bank Indonesia has no problem with consolidation; the country’s leading lender Mandiri started out in life as a forced merger of four failed banks, after all.
But it doesn’t like anything that looks like a monopoly, and having Ovo and GoPay under the same umbrella may prove a problem.
Approached by Euromoney, Gojek’s representatives told us that GoTo was “focused on remaining compliant with Bank Indonesia regulations” and pointed out that Tokopedia is a minority investor in Ovo, not the controlling shareholder.
“Tokopedia is considering divesting its stake as well as other options in compliance with Bank Indonesia regulation and to best serve GoTo’s customers.”
If that happens, Ovo could find itself in play. And perhaps Grab, newly cashed up from its Spac raising, could be interested?
Ovo is 30% owned by Lippo Group, which is partnered with Grab, and there are links in place already. But since Grab is a payments service in its own right in Indonesia, perhaps the same issues could arise. And does GoTo want to let a business as well-positioned as Ovo go to the opposition?
Whatever the outcome, the new payments business – GoTo Financial, to be led by Andre Soelistyo, who will also be CEO of GoTo Group – will be well-placed in one of the world’s most compelling markets.
Indonesia’s 270 million people are not, on average, wealthy, but a middle class is gaining strength and scale at a rapid pace. A young population comfortable with the smartphone as a method of financial transaction will also be helpful.
“We will use our combined scale to increase financial inclusion in an emerging region with untapped growth potential,” says Soelistyo.
Happy investors
Meanwhile, the underlying investors are happy; without scale, they ran the risk of seeing their investment diminished. Some companies, such as Sequoia Capital, were early investors in both these companies.
“There is no modern internet company, in any part of the world that I’m aware of, that has such deep ownership of so many categories at the same time,” says Shailendra Singh, managing director at Sequoia Capital (India) Singapore, of the new company.
And next, those investors will get a mechanism to exit.
Talks are already under way for a public listing in Indonesia, possibly in combination with Nasdaq, aiming at getting as close to possible to the $40 billion valuation Grab will achieve through its Spac deal.
Getting there would require a valuation double that of the combined organizations today: Gojek is worth about $10.5 billion; Tokopedia $7.5 billion. So perhaps it will take the Spac route, too.
Either way, Goldman Sachs, adviser to Gojek, and Citi, in Tokopedia’s corner, will no doubt be eyeing that mandate.
