Singaporean startup Grab marked a net loss of over USD 1 billion for the fourth quarter of 2021 on heavy investment toward growth, showing that profitability remains a key challenge for the super app operator as it faces strong competition.
In its first quarterly results released since listing on Nasdaq in December, Grab on Thursday reported a net loss of USD 1.055 billion for the three months through December, widening from a USD 576 million loss a year earlier. The annual loss reached about USD 3.4 billion, compared with a USD 2.6 billion loss in 2020.
Grab’s core businesses include ride-hailing, food and grocery delivery, as well as digital financial services. The company operates in eight Southeast Asian countries—Singapore, Malaysia, Indonesia, Thailand, the Philippines, Vietnam, Cambodia, and Myanmar—making it one of the most prominent startups in the region along with Singaporean tech peer Sea Group and Indonesia’s GoTo.
Gross merchandise value (GMV), the total value of transactions from services, increased 26% to USD 4.5 billion in the fourth quarter, Grab said. While GMV for ride-hailing dropped 11% due to the spread of the coronavirus, the figure for the delivery segment climbed 52%.
But the growth in GMV came with massive spending for incentives. As a result, the fourth quarter’s accounting revenue—presented as a net of incentives for consumers, drivers, and merchants—fell 44% on the year to USD 122 million.
“Grab preemptively invested to grow driver supply to support strong recovery in mobility demand,” the company said. “Consumer incentives for mobility and deliveries also increased as Grab invested in its category share and [monthly transacting users] growth.”
Consumer incentives, which refer to discounts and promotions offered to consumers, more than doubled to USD 365 million in the fourth quarter.
In a report last week, Singapore’s DBS Group Holdings said that Grab has offered generous driver incentives and consumer discounts since early 2022, looking to make rival GoTo’s mobility business irrelevant in Singapore.
“Grab’s mobility promotions might hurt its margins,” the report said. It also said Grab is losing delivery market share in Indonesia to regional tech rival Sea.
Improving profitability is vital for the company, especially as the shift by central banks to tighter monetary policies resulted in a recent global tech sell-off.
Grab’s Nasdaq listing, achieved through a merger with a special purpose acquisition company, drew much attention from investors, especially as Chinese tech companies were facing regulatory challenges domestically.
But shares have slumped since. Grab’s market capitalization was about USD 20 billion as of Wednesday, only half the value it had expected before the listing.
Looking ahead, 2022 will be “another watershed year for Grab,” CEO Anthony Tan told an earnings webcast Thursday, noting that the company aims to start a digital banking business in Singapore and continue to pursue opportunities in the on-demand delivery segment. “We will continue to focus on the recovery of mobility.”
Grab’s shares dropped more than 10% on Thursday morning in the US following the earnings announcement.