Indonesia’s GoTo Group is in advanced talks to sell its fintech arm, GoTo Financial, to a Japanese investor, sources close to the discussions told DealStreetAsia.

The potential sale of GoTo Financial, which includes GoPay and BNPL service GoPay Later, follows GoTo’s earlier move to deconsolidate Tokopedia before the e-commerce unit was acquired by ByteDance.

Meanwhile, merger discussions between GoTo and Grab, which resurfaced this year, are progressing, with Grab having begun due diligence on GoTo’s accounts, contracts, and operations, according to people familiar with the matter.

The process, led by one of the Big Four accounting firms—KPMG, PwC, Deloitte, or EY—is expected to take four to six months.

Sources indicate the companies and their shareholders are also evaluating the potential structure and value of the deal.

Fintech Growth and Deal Implications

GoTo CEO Patrick Walujo, who has a stake in GoTo Financial through Bank Jago, is actively involved in negotiations.

His firm, Wealth Track Technology, owns 11.68% of the digital bank, alongside PT Metamorfosis Ekosistem Indonesia (29.8%, owned by Jerry Ng) and GoPay’s parent entity, PT Dompet Karya Anak Bangsa.

GoTo Financial remains a key growth driver, benefiting from Indonesia’s low consumer loan penetration.

The fintech unit posted gross revenue of 1.2 trillion rupiah (US$73 million) in Q4 2024, a 95% year-over-year increase, with full-year revenue reaching 3.7 trillion rupiah (US$224.7 million).

The segment turned adjusted EBITDA-positive in Q4, though it still posted a full-year loss of 467 billion rupiah (US$28.3 million), 70% lower than the 1.6 trillion rupiah (US$96.96 million) loss in 2023.

GoTo’s overall net loss for 2024 stood at 5.5 trillion rupiah (US$334.45 million), significantly lower than the 90.5 trillion rupiah (US$5.5 billion) loss in 2023.

Analysts suggest that the merger is likely to focus on ride-hailing, leaving financial services and food delivery separate due to their differing business models.

GoTo shares are up about 15% in 2024 to date, with shares rising as much as 6.3% on March 18 before closing 5.1% higher, even as the broader Indonesian stock market saw its worst decline since 2011.

Regulatory Hurdles and Market Response

Regulators in Indonesia and Singapore are expected to scrutinise the merger over competition concerns, similar to the Grab-Uber deal in 2018.

The Indonesia Competition Commission (KPPU) has flagged potential risks related to pricing and driver incentives, while Singapore’s Competition and Consumer Commission (CCCS) will also review the deal.

A potential Grab-GoTo merger would create a dominant player in Southeast Asia’s on-demand services market—which includes ride-hailing and food delivery—raising monopolistic concerns, analysts said.

Sources suggest Grab may offer 100-110 rupiah per GoTo share, a premium over its recent stock price but well below its IPO valuation.

One scenario under consideration is an all-stock purchase, with Grab valuing GoTo at over US$7 billion.

Grab’s shares closed at US$4.39 last Friday, down from its US$13.06 IPO price.

Grab posted a Q4 2024 profit of US$11 million, down from US$15 million in Q3, while its adjusted EBITDA rose to an all-time high of US$97 million, improving by US$61 million year-over-year.

Both companies have seen their growth slow from previous triple-digit rates, as inflation and high interest rates weigh on consumer spending in the region.

If approved, the merger could unlock cost synergies and scale benefits, strengthening investor confidence in Southeast Asia’s tech sector.

However, regulatory approvals remain a key hurdle, and the final deal structure is still evolving.

Featured image credit: Edited from Freepik