As more technology companies plan to offer their shares to the public in initial public offerings (IPO), market analysts have called for more profitable business practices rather than focusing on gross merchandise value (GMV).

On-demand technology service Gojek, online marketplace Tokopedia and online travel start-up Traveloka are some of the tech companies that plan to go public. The timeframe remains unclear as they strive to polish their financial performances prior to becoming publicly listed companies.

“The company must first have a profitable business so the investment risk would be smaller,” Tokopedia CEO William Tanuwijaya told an audience during an event held by the Finance Ministry in Jakarta on October 29.

Tokopedia, one of five Indonesian unicorns with valuations of more than $1 billion, has yet to reveal its latest financial performance, except to announce that it aims to reach a break-even point next year. It currently handles more than six million merchants with projected GMV of more than 220 trillion rupiah ($15.6 billion) this year.

Tokopedia aims to contribute up to 1.5 per cent to the country’s gross domestic product (GDP) this year. “With Tokopedia’s big responsibility, we are planning to go public in the Indonesia Stock Exchange and stock exchanges abroad,” he added, without revealing further details.

Technology stocks have become the most anticipated share offerings worldwide as investors consider the business to be more resilient and less exposed to economic cycles since tech companies lead digital transformation trends.

Among the most anticipated share offerings for global investors were by Silicon Valley’s ride-hailing apps Uber Technologies and Lyft Inc and by image sharing website Pinterest, Reuters reported.

‘To become a global company’

For Indonesian tech companies, dual listings seem to be the preferred option. Apart from Tokopedia, Traveloka and Gojek also plan to list their shares in two countries, including Indonesia.

“Listing in the US will have its benefits but we want to have the option to have some sort of local listing so perhaps dual listing will be a good structure,” Traveloka Group president Henry Hendrawan said in an interview with Reuters, declining to comment on its valuation or timing of any potential IPO.

Traveloka, backed by US travel giant Expedia, Chinese online retailer JD.Com and Singapore state wealth fund GIC Pte Ltd, claims 35 million active users in seven countries and has raised over $900 million.

“One of the reasons to launch an IPO under a dual listing scheme is to become a global company,” Gojek co-CEO Andre Soelistyo told a limited media briefing in Jakarta, although he declined to disclose details of the companies’ plans.

Gojek’s user base is expected to shift to be half from Indonesia and half from its overseas presence, the co-CEOs briefed local media editors on Thursday. Today, Indonesian users’ share dominates at 80 per cent.

Gojek, which has a $9.5 billion valuation backed by Google, Tencent and Sequoia Capital India Investments – among many other investors – currently handles two billion transactions per year with two million drivers and 400,000 merchant partners.

“We agree with those who say that we should stop burning money,” said Andre when asked about a price war with Gopay’s e-wallet competitors through cashback offerings, adding that customer incentives would be gradually phased out to ensure the company’s profitability.

‘Expanding and growing’

Separately, hotel booking and management platform RedDoorz may also turn to the capital market as an alternative to raise funds to finance the company’s future business expansion.

RedDoorz Indonesia country head Mohit Gandas said recently that the Singapore-based tech-travel start-up was focusing on growing its business so that it would be ready to launch its IPO in 2022 or 2023.

“We can’t share more details right now on the IPO because we’re still focusing on expanding and growing our business in Indonesia and other countries in Southeast Asia,” Gandas said.

RedDoorz planned to increase the number of properties it managed from 1,200 to 1,500 by the end of this year. It also planned to triple its number of properties to between 4,500 and 5,000 across Southeast Asia next year, of which about 70 to 80 per cent would be in Indonesia, said country marketing director Sandy Maulana.

In light of the burgeoning tech industry, economists and market analysts have called for more profit-and-loss-oriented business practices by technology companies around the world rather than that they focus on GMV, which has long been an indicator for start-up valuations.

GMV measures total sales volume transactions through digital platforms, which most of the time act as mediators for transactions rather than as direct sellers. Meanwhile, revenue comes from the income of doing business as the mediator, through fees or advertising.

“I don’t believe in GMV because if someday there is a global recession, that source of financing will decline. So if the business model continues to burn money, of course the model will have a limit,” renowned Indonesian economist Chatib Basri said.

“If they rely only on raising funds, someday when there is a sudden shock in which funding is stuck, they will no longer be able to burn money and the impact will be systemic,” said Chatib, a former finance minister with academic experience at Harvard University and the Australian National University, in a discussion organised by Tokopedia.

BNI Sekuritas’ head of equity research, Kim Kwie Sjamsudin, told the Jakarta Post that investors would be interested in the tech IPOs as they seek new sectors with relatively high growth.

“It will, however, boil down to valuation at the end,” said Kim, adding that valuations would rise should the companies’ have high growth potential.

Contacted separately, Sucorinvest Asset Management director Jemmy Paul said investors appetites would depend on the companies’ business models and valuations, adding that start-ups must first become profit-oriented and have certain sources of income to go public.

“The first thing we should consider is whether the valuation makes sense, particularly with the start-ups’ losses [caused by high promotional expenditures and discounts] and the second thing is how big their prospects would be in the future in terms of the source of income,” Jemmy told the Post.

THE JAKARTA POST/ASIA NEWS NETWORK