Is South-east Asia on the verge of a wave of tech IPOs?

– Bukalapak’s $1.5bn listing is set to be Indonesia’s largest-ever IPO

– Backdrop of rapid growth in the digital economy during the pandemic

– Potential to unleash a wave of South-east Asian tech listings

– M&A remains strong as the region’s digital economy continues to grow

A record initial public offering (IPO) from Indonesian e-commerce platform Bukalapak underscores the growth of South-east Asia’s digital economy during Covid-19, and has the potential to trigger further tech listings in the region’s maturing market.

The company, which runs an online marketplace primarily for small and medium-sized enterprises, is expected to raise $1.5bn by the time it lists on the Indonesian Stock Exchange on August 6, according to local and international media reports.

If confirmed, this will be Indonesia’s largest-ever IPO, surpassing mining company Adaro Energy’s $1.3bn listing in 2008.

In an indication of increased interest in the country’s e-commerce sector as a whole, the company had initially expected to raise $300m, an estimate which subsequently rose to $800m and ultimately $1.5bn.

The third-largest player in Indonesia’s $40bn e-commerce market – valued at $6bn, behind local giant Tokopedia and Singaporean tech multinational Shopee – Bukalapak posted a 26% rise in revenue last year, as pandemic-affected Indonesians increasingly turned to online platforms.

Despite this encouraging growth, the company nevertheless recorded a net loss of $93m in 2020, although this was considerably lower than 2019’s loss of $193m.

Some analysts have questioned the company’s IPO valuation, given its size and market share, while others attribute the elevated figure to robust investor appetite for South-east Asian tech firms, which are widely seen as having significant growth potential.

Taking Indonesia as an example, the country’s e-commerce market grew by 54% last year, according to a report from Google, Temasek and consultancy Bain, and is projected to reach $83bn by 2025.

A wave of tech IPOs?

Given interest in the region’s tech scene, Bukalapak’s IPO could signal a number of similar listings in the near future as the market matures.

GoTo, the result of a May merger between Tokopedia and Indonesian super app Gojek, is expected to list domestically in the coming months, followed by an IPO in the US next year. With an estimated value of $25b-30bn, the company is Indonesia’s most valuable start-up, and is widely expected to raise up to $2bn in pre-listing funding.

Elsewhere, on July 24 Singapore-headquartered online real estate portal PropertyGuru, which operates in Malaysia, Indonesia, Thailand and Vietnam in addition to its home market, announced a deal to list on the New York Stock Exchange via a special purpose acquisition company (SPAC).

As OBG has explored, SPACs – essentially shell companies set up by investors to acquire a private company and enable it to go public without having to go through a traditional IPO – are an increasingly popular vehicle for South-east Asian tech firms to fast-track listings.

Indeed, last month Grab, the region’s most valuable tech unicorn, announced it plans to go public in New York in the fourth quarter of this year via a $40bn merger with a SPAC.

M&A activity remains strong

While public listings are the latest step for a number of rapidly expanding tech companies in South-east Asia, other major players are pursuing different strategies in their quest to gain market share.

There has been substantial merger and acquisition (M&A) activity in South-east Asia’s tech space. For example, as part of a move into financial services by the region’s leading super apps, last year Grab purchased wealth-tech start-up Bento, while Gojek acquired Indonesian point-of-sale firm Moka and Vietnamese e-payment start-up WePay.

More recently, used car marketplace Carsome became Malaysia’s first unicorn earlier this month after agreeing to a deal to purchase fellow car advertising network iCar Asia. This comes amid reports that Carsome is evaluating plans to list in the US later this year.

The expansion of the region’s broader digital economy has also seen some new players enter the market.

Earlier this month Malaysian low-cost airline AirAsia announced that it would buy Gojek’s Thai business in a $50m stock swap deal.

The purchase, which includes Gojek’s ride-hailing, food delivery and payments operations, comes one week after AirAsia applied for a digital banking licence in Malaysia, and aligns with the company’s plans to develop its own super app and digital businesses while the majority of its fleet remains grounded due to Covid-19-related travel restrictions.

Elsewhere, e-commerce and logistics provider Flash Group recently became Thailand’s first unicorn start-up after raising $150m in additional funding. When making the announcement, company officials said the financing will be put towards increasing Flash Group’s financial services and expansion into other ASEAN markets.