Grab Holdings Limited (NASDAQ:GRAB) could have spent years building out its consumer lending business across Southeast Asia. Instead, it is writing a $1.49 billion check.
DON’T MISS: The Robotaxi Race is Spreading, Can Amazon and Alphabet Turn More Cities into Revenue?
The company has agreed to buy a 60% controlling stake in Atome Financial, the Singapore-based digital finance company behind BNPL loans, consumer cash loans, cards and other lending products. Grab has also agreed to acquire the remaining 40% roughly two years after the first transaction closes, with Atome’s eventual valuation tied to its financial performance. It is a sizable bet, but one that tells investors where Grab is seeing its next leg of growth.
Bull Case
Atome gives Grab an established lending operation spread across several Southeast Asian markets, which can otherwise be complicated to build quickly from scratch. Grab already offers BNPL products in Singapore and Malaysia, and Atome operates across Singapore, Malaysia, the Philippines, Indonesia, and Thailand and has 25 million cumulative transacted users. Its gross loan portfolio stands at about $1 billion as of June 30.
That reach could thus save Grab years of expansion work. President and COO Alex Hungate told Reuters that acquiring Atome would allow Grab to “leapfrog the timeline” for expanding BNPL into the Philippines, Indonesia, and Thailand. Rather than developing credit models market by market and absorbing the losses that can come with refining them, Grab can buy an operation that already has lending infrastructure in place.
READ ALSO: Eli Lilly vs. Novo Nordisk: Has GLP-1 Manufacturing Become the New Competitive Moat?
There is also a funding angle, as Grab operates digital banks in Singapore, Malaysia, and Indonesia, and Hungate said those banks could help lower Atome’s funding costs. Management clearly expects the deal to move the needle, with Grab now expecting its Financial Services segment, including Atome, to reach $500 million in adjusted EBITDA and a gross loan portfolio of more than $6 billion by 2028, subject to the timing of the transaction’s closing. The company also raised its broader 2028 targets alongside the deal. It now expects $1.7 billion in adjusted EBITDA and more than 30% annual revenue growth between 2025 and 2028.
Bear Case
The ambition comes with a meaningful price tag. Grab will pay $1.49 billion in cash for the initial 60% stake, including $260 million of primary growth capital. The deal is being funded entirely from existing cash and is expected to close by the third quarter of 2027, subject to regulatory approvals and other customary conditions.
And $1.49 billion is only the first stage. Grab has committed to buying the remaining 40% approximately two years after the initial transaction closes. The eventual price isn’t fixed and would instead depend on Atome’s revenue and adjusted EBITDA before the second closing, under a framework that puts Atome’s equity valuation between $2 billion and $4.5 billion.
That structure offers some protection because the valuation is linked to Atome’s actual performance. But it also means the ultimate cost of owning the entire company is not yet known. There is another change investors will have to watch, which is that Grab is pushing further into consumer credit, where growth has to be balanced against underwriting discipline. Atome’s existing $1 billion loan portfolio gives Grab immediate scale, but maintaining credit quality as that portfolio expands will matter just as much as growing it.
Conclusion
Grab isn’t buying Atome just to add another feature to its app, but is rather buying time. Atome already has the borrowers, merchant relationships, lending infrastructure, and regional footprint that Grab would otherwise have to build. That can help explain why management is willing to put $1.49 billion of cash behind the first phase of the deal. The attraction is easy to see: a much larger financial-services business without waiting years to assemble it market by market. The trade-off is equally clear, as Grab is committing substantial capital and making consumer lending more important to its future results.
Management has now put numbers around that ambition, which include $500 million in Financial Services adjusted EBITDA and a loan portfolio above $6 billion by 2028. If the transaction closes as planned, those targets will give investors something concrete against which to judge whether buying Atome really was faster and better than building the business alone.
READ NEXT: Can Eli Lilly Catch Novo Nordisk in the Oral GLP-1 Race? AND Abbott vs. Intuitive Surgical: Is Consistent Growth Better Than Premium Growth?
This article is originally published at Insider Monkey.
Hedge Fund Resource Center