SINGAPORE : When Ant Group, previously Ant Financial, goes public simultaneously in Shanghai and Hong Kong in the next days or weeks, it will be the largest IPO of all time.
Media reports speculate that Ant will have a market value of at least USD200 billion upon listing and that value may skyrocket once it starts trading. If this happens, Ant will have a market capitalisation which is more than twice of esteemed financial institutions like Citigroup and Morgan Stanley, and three times that of HSBC Holdings.
Ant said it generated USD 17 billion in revenue in 2019 up 40 per cent from 2018 and a profit of around USD2.5 billion. For the first six months of 2020, it made USD 3 billion in net profit on revenue of USD10.5 billion, netting it an astonishing profit margin of around 30 per cent.
Ant, the rebrand of Alipay, started as a humble mobile payment platform created by Alibaba, China's e-commerce giant. It is what is now known as a "super app".Super apps are all-in-one mobile-based software application on which one can perform a plethora of tasks without toggling out of it. They are closed ecosystems.
These days, depending on the app, you can hail a ride, order takeaway food, shop online, book a hotel, buy cinema tickets, buy airline tickets, buy insurance, perform banking transactions, trade in the financial markets and the list goes on.China is where super apps first started becoming popular. Alipay together with its main competitor WeChat Pay, dominate 90 precent of the Chinese mobile payment market. iMedia Research estimates that this market is worth about USD52 trillion and there are about 790 million active users in China of such payment platforms.
Value of transactions is growing at a rate of about 20 to 30 percent every year.WeChat, owned by China technology conglomerate Tencent, started as a messaging app. It has now over one billion active users of its messaging platforms. In addition, people can book rides, order food delivery, play video games, make payments, shop online and even buy insurance on the app.In Singapore, the most popular super app is Grab. On the Grab app, you can among other things book transport services, shop online for various items including groceries, buy insurance, book hotels, buy attraction tickets and order food delivery.
Grab is valued at a more modest USD15 billion compared with Ant. It first started as a taxi-hailing app in neighbouring Malaysia. It has now expanded to other Southeast Asian countries including Cambodia, Indonesia, Myanmar, Philippines, Thailand and Vietnam, and also Japan.Its closest competitor, Gojek, started in Indonesia and is valued at USD 10 billion. Singapore, Vietnam, Thailand, and the Philippines are the other countries Gojek operates in.Both Grab and Gojek are startups which are privately owned. Industry analysts say they are both unprofitable.
During the height of the COVID-19 enforced economic shutdown, super apps in Southeast Asia were not spared the resultant financial fallout as consumption of services tumbled. With transport services the main revenue driver for the two main players, they were hit especially hard as people stayed at home.However, the bright spot is that the lockdown accelerated the digitalisation trend. As consumers avoided leaving their homes unnecessarily for fear of catching the virus, they were getting used to the online platforms, buying essential items and ordering food online.
Even as the lockdowns lifted, this behaviour appears to have persisted and people are continuing to use digital services. These apps will very soon be providing new services for example banking, wealth management, selling cinema ticket, accommodation and flights.Morgan Stanley researcher Mark Goodridge estimates that the size of the super app market in Southeast Asia is currently worth about USD 4 billion. This is expected to accelerate almost six times to USD 23 billion by 2025. He adds that the future of super apps will be driven by fintech, digital banking and e-commerce, besides ride booking, ride-sharing and food delivery which are the main services today.Huge investments are however still required for the Southeast Asian super apps. Winners in the Southeast Asia super app race need to have access to more capital. In his report, Goodridge suggests that these companies will have to fork out twice the money they have already spent.
During the 2010-19 period, USD 257 billion was invested by Chinese companies in their super apps compared with USD 43 billion spent by their Southeast Asian counterparts. Based on a per capita comparison, this works out to USD 184 invested per person in China compared with USD 75 per person in Southeast Asia.The huge investments that will be required would apply anywhere else including India.In India Paytm is already offering some services alongside its payment offerings.
However, it is far from becoming a super app.The game-changer would be when the two giants of Indian industry, Reliance and Tata Sons launch their super apps.India's Tata group says its working on building a super app that combines its disparate consumer businesses. Tata's individual companies span Indian Hotels, Titan jewellers, Trent fashion stores, groceries, airlines, electronic goods and even a joint venture with Starbucks.According to Mint newspaper, Tata is talking to Walmart for a USD 25 billion investment in a super app which they hope will launch in December or January combining fashion, lifestyle, electronics retail, food, groceries, insurance and financial services as well as digital content and education.
Walmart's Flipkart already boasts e-commerce, games and video including importantly mobile payment services PhonePe.Reliance Industries has already persuaded the likes of American investment firm KKR, Google, Silver Lake Partners, Intel and Qualcomm to take a stake in its Jio Platforms, is rumoured to be in discussions with Facebook to invest in a new super app. Its advantage is that its Jio Networks has nearly 400 million mobile users.
It also already has a payment platform JioMoney as well as a leading shopping presence in the form of Reliance Retail. With the anticipated deal with Facebook, it would not be a surprise if this combination also emerges as a formidable player in the Indian super app space.
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