Alibaba (BABA) to Invest $3B in Grab, Boost Asian Presence

Alibaba Group Holding Limited BABA is making every effort to bolster presence in Asia by strengthening investments in varied territories.

This is evident from its latest talks with Grab Holdings, which is an Indonesia-based ride-hailing services company. Reportedly, Alibaba is in talks to invest approximately $3 billion in Grab in order to buy some of its stake, held by Uber Technologies Inc.

The investment will expand Alibaba’s presence in Southeast Asia. The China-based e-commerce giant first invested in Southeast Asia in Lazada in 2016.

The recent investment in Grab could boost the user growth of Alibaba’s e-commerce subsidiary, Lazada.

In addition, we expect international expansion to back its momentum going forward. Further, the company’s investment in Grab will strengthen transportation initiatives.

Alibaba Group Holding Limited Price and Consensus

Alibaba Group Holding Limited Price and Consensus

Alibaba Group Holding Limited price-consensus-chart | Alibaba Group Holding Limited Quote

Indonesian Ride-Hailing Space Holds Promise

Per a report from Statista, the ride hailing and taxi segment in Indonesia is expected to generate revenues of $5.3 billion in 2020. Further, the figure is likely to reach $11.1 billion by 2024 at a CAGR of 20.6% between 2020 and 2024.

Additionally, user penetration is projected at 22.3% and 23.7% for 2020 and 2024, respectively.

Alibaba will be able to foray into this market by investing in the widely popular and efficient, Grab.

The competition between Grab and its primary rival, Gojek, is likely to intensify if the deal materializes.

Further, if the investment plans materialize, Alibaba will be up against Amazon AMZN, Alphabet GOOGL, JD and Tencent, which are all making efforts to increase investments in this space, in an attempt to reap benefits from this promising market.

Strengthening Asian Footprints

Apart from ride hailing services, Grab has expanded into financial services, food delivery and mobile payments over the last few years.

Based in Singapore, Grab is the largest provider of ride-hailing services in Southeast Asia. It operates in Singapore, Japan, Cambodia, Vietnam and four other countries in the region.

Consequently, Alibaba’s latest investment interest is expected to strengthen its presence in the abovementioned areas of the Southeast Asian countries.

We believe Alibaba’s growing investment in Asia is likely to yield good returns in the long run, as the emerging Asian countries hold immense growth potential on the back of improving proliferation of smartphone and Internet.

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