Indonesia’s GoTo Goes Public, Market Capitalization of US$32bn

On April 11, 2022, Indonesia’s PT GoTo Gojek Tokopedia Tbk (GoTo) was officially listed on the Indonesian Stock Exchange and raised around US$1.1 billion, making it the third-largest initial public offering (IPO) in Asia and the fifth largest in the world so far this year.

By the day’s end, GoTo’s market capitalization was US$32 billion and saw some 300,000 investors participate in the IPO, a record high for the domestic bourse. Further, GoTo became Indonesia’s fourth-largest company, behind two banks and a state-owned telecommunication firm. The company has plans for an international IPO although the exact timeline has not been made clear yet.

GoTo or GoTo Group was born from a merger of two of Indonesia’s biggest internet companies — ride-hailing and payments giant Gojek and e-commerce leader Tokopedia. The company offers ride-hailing services, delivery, e-commerce, financing, and other services in one super app. As such, GoTo boasts to have 14 million merchants, 2.5 million drivers, and a combined number of actives users (Gojek and Tokopedia) of 100 million.

GoTo’s strong performance indicates the strength of Indonesia’s digital economy, which is home to eight other tech unicorns. The company is the second unicorn listed on the Indonesian Stock Exchange after e-commerce platform Bukalapak, which was listed in August 2021, raising some US$1.5 billion in what is Indonesia’s biggest IPO.

Other Indonesian startups eyeing IPOs in 2022 include booking travel companies Tiket.com and Traveloka, interbank network LinkAja, e-commerce platform Blibli, and courier company J&T Express.

GoTo’s listing stands out amid an IPO slump for 2022

Amid a global economy mired by supply shortages, soaring inflation, high-interest rates, and the Russian invasion of Ukraine, companies have been putting the brakes on planned IPOs.

GoTo’s listing bodes well for tech companies seeking to ride the rapid pace of the internet and mobile penetration in Southeast Asia, a region of more than 650 million people and out of which approximately 440 million are online.

The company plans to use the IPO to bankroll an expansion of its services to more markets, primarily in Indonesia where it does enjoy a leadership position being a homegrown entity. GoTo handled over 414 trillion rupiah (US$29 billion) worth of transactions in 2021, although this still resulted in losses of more than US$556 million from January to July 2021. Like many tech companies in ASEAN, GoTo has yet to make a profit. Before their merger, Gojek and Tokopedia were successful in attracting investments from the likes of Google, Tencent, and Softbank.

At the height of lockdowns due to the pandemic, GoTo saw gross revenue from its on-demand services stall in 2020; after seeing the figures double in 2019 to US$522 million. However, the company received a revenue cushion from its e-commerce arm, which amounted to US$90 million.

Shares in other tech companies in the region have struggled since they started trading. Bukalapak saw its share price surge by 25 percent after its debut but has since lost two-thirds of its value. Shares in GoTo’s main rivals Sea and Singapore-based Grab have also plunged with Sea having decreased by 70 percent since October, and Grab, by two-thirds since it made its debut on the Nasdaq in December through a special purpose acquisition company.

GoTo must convince investors of its business model

GoTo must convince its investors that its business model is fundamentally different from its rival Grab, which also has a super app similar to GoTo. Gojek co-founder Nadiem Makarim and Grab co-founder Anthony Tan were friends at Harvard Business School.

However, unlike Grab, GoTo’s flexible fleet can be used for delivery, food, e-commerce, and ride-hailing under one platform. As such, the company is betting that a customer using its super app for one service, say for package delivery, will stay on to use its other services – such as ordering food. This is further complemented by the app’s GoPay digital wallets, which in turn can help the company understand its customers’ creditworthiness for its third-party financial services like microloans.

Indonesia is home to 20 percent of all fintech companies in Asia and the industry is expected to generate over US$8.6 billion in the next five years, despite its infancy. GoTo has the potential to offer financial solutions to the country’s 92 million unbanked population and 47 million underbanked population. Such high figures can be attributed to the high rate of micro, small, and medium enterprises in the informal sector that are Indonesia’s largest employer, thus resulting in 60 percent of the country’s workforce also under the informal sector.

Many of these small businesses do not have valuable collateral and so many do not qualify for bank loans needed to expand their operations. Companies like GoTo have sought to fill this gap through the use of microloans, which have terms of maturity that are short and small with borrowers usually taking not more than US$100 and which are returned within a few weeks. Further, together with the Tokopedia e-commerce platform, GoTo can get better behavioral insights to better price its loans to merchants and consumers.

GoTo showcases the boon of Indonesia’s digital economy

GoTo’s listing showcases Indonesia’s digital economy boom. According to a report by Bain & Company, Temasek, and Google, the country’s internet economy is expected to have a gross merchandise value (GMV) of US$146 billion by 2025, making it the largest in Southeast Asia.

Since the start of the pandemic, Indonesia saw 21 million new digital consumers, whereby 72 percent were from non-metro areas. E-commerce will be the main driver of growth and can expect a GMV of US$104 billion by 2025. Moreover, the country will see huge growth in online transport and food delivery, from US$6.9 billion in 2021 to US$16.8 billion in 2025, in addition to online media, from US$6.4 billion in 2021 to US$15.8 billion in 2025.

Tax and new rules

In anticipation of this growth in its internet economy, the government imposed a 10 percent value-added tax on digital service providers to reap the tax proceeds of this multibillion-dollar industry.

Further, as part of the new rules, foreign e-commerce organizers that have a substantial presence in Indonesia must now establish a representative office in the country.

Further Reading

• How to Set Up a Representative Office in Indonesia
• Bukalapak Becomes Indonesia’s First Listed Tech Unicorn
• Indonesia’s Batam Receives Two New Special Economic Zones

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