Carlyle set to invest $300 mil. for Kakao

Kakabo Mobility's homepage / Screen capture from the company

By Lee Min-hyung

Logo of Kakao Taxi, a taxi ride-hailing app operated by Kakao Mobility

Carlyle Group is set to invest $300 million (335 billion won) in Kakao Mobility's pre-initial public offering (IPO) capital expansion. Both sides are expected to sign a final deal no later than the end of February.

According to the investment industry, the U.S.-based private equity firm (PEF) was recently accepted as a major investor for the Kakao affiliate's capital increase plan. Under the deal, Carlyle is expected to secure a 10 percent stake in the technology services firm.

Two other PEFs are known to have taken part in the bidding for Kakao Mobility's pre-IPO fundraising, prior to Carlyle being named. UBS, a U.S.-based investment bank, is advisor for the deal.

Carlyle set Kakao Mobility's corporate value at around 3 trillion won.

Kakao Mobility operates the nation's largest taxi-hailing app, Kakao Taxi, and dominates the market. The company started out as a transportation platform service provider, but has since expanded to developing autonomous driving platforms.

As the company continues widening its research into more diverse areas, it has sought to draw more capital from investors to expand liquidity.

The exact timeline of the firm's planned IPO has not been fixed, but market analysts remain optimistic over its growth potential coming from the brand power of its affiliated taxi-hailing service.

KTB Investment & Securities analyst Kim Jin-goo expects the number of the firm's affiliated taxi licenses to surge to over 46,000 by 2025, triple the 16,000 as of 2020.

Sales from Kakao Taxi's affiliated taxis reached 538 billion won last year, and the figure is expected to rise steeply to more than 3.33 trillion won by 2025 on a rosy market outlook, according to Kim.

“We expect Kakao Mobility to achieve a corporate value of more than 5 trillion won,” the analyst said. “The core business model of the company is the branded mobility business powered by affiliated taxis.”

Kakao Taxi has a market share of around 80 percent in the nation's ride-hailing market.

This is not the first time the company has attracted a huge investment from a global PEF. In 2017, the company received 500 billion won from TPG of the U.S. and Japan-based ORIX Capital.

Expectations are also growing that Kakao Mobility will be able to achieve a major turnaround in 2021 after reporting years of operating losses. The company reported an operating loss of 22.1 billion won in 2019, but is on track to narrow this down. In 2020, it is estimated to have had an operating loss of around 9 billion won.

The company has had to report billions of won in losses for the past few years due to its strategy of expanding market share first through aggressive marketing and investment.

But the firm is widely expected to report an operating profit in 2021 amid its ever-growing market influence.