Traveloka announced on Thursday that it has garnered another funding round led by Indonesia Investment Authority (INA), followed by BlackRock, Allianz Global Investors, Orion Capital Asia and several other investors.

Roshan Raj Behera, the Southeast Asia partner of Indian management-consulting company Redseer, said that INA’s decision to invest in Traveloka did not pose any major risks for the sovereign wealth fund (SWF) entity, even though the recipient is not a state-owned enterprise (SOE). 

“I do not foresee any major risks with this investment,” Behera told The Jakarta Post on Thursday evening.

“[Traveloka] has demonstrated strong execution capabilities by coming out stronger from the COVID-19 pandemic. Competition is already very concentrated within a few players given the pain inflicted by the pandemic,” said Behera, explaining how this round of funding would allow Traveloka to tap into the resurging online travel agent (OTA) segment as well as further cementing its market position.

Concurring with Behera, Momentum Works CEO Jianggan Li said that Traveloka is one of the most reputed OTA players in Indonesia, one that is aspiring to create a superapp and that has branched into food delivery, health as well as financial services.

“Although some investors have been debating Traveloka’s worth, nobody else has built an inventory of hotels as deep and comprehensive in Indonesia as Traveloka. Moreover, we don't see larger internet platforms such as Shopee and GoTo being able to break into the travel space as well,” Li told the Post on Thursday.

“[SWFs] have been investing in late and even growth-stage start-ups. While the valuation can be debatable, the value and competitive moat for companies at this stage should be really clear. At the end of the day, a sovereign fund, as professional investors, would know its mandate well and stick to that mandate,” Li added, saying that he did not see major risk in this investment either.

Read also: Political goals control Indonesia’s sovereign wealth fund

In a press release announcing the investment, INA CEO Ridha Wirakusumah said he believes that Traveloka is Indonesia’s national and regional champion and is a key catalyst toward digitalization of travel and accommodation in Indonesia and the region. 

“We trust that this joint investment can enable Traveloka to deepen its leadership and create value for the entire travel ecosystem,” he added. 

The OTA start-up claimed on a statement that this financing round attracted many investors, so many it resulted in an oversubscribed transaction. 

Ridha, for his part, said that OTAs have transformed the tourism industry landscape during the pandemic, thanks to their “unparalleled convenience and access”.

“The pandemic has accelerated digital transformation. Customer behavior changes coupled with innovative technological services mean digitization will help drive economic recovery,” Ridha said.

He explained that Indonesia’s gross tourism booking has seen an increase from 24 percent before the pandemic to 33 percent in 2021 and is projected to reach 36 percent in 2024.

"We are pleased about Traveloka’s financing round in collaboration with BlackRock, Allianz Global Investors, Orion and other leading global financial institutions, as it aligns with INA’s mission to create prosperity for Indonesia in the long term, by laying down the foundation for a sustainable digital ecosystem, including digital infrastructure, digital services and digital platforms -- which will go a long way to drive economic recovery and growth,” said Ridha.

Read also: Traveloka reels in major Thai investor amid ongoing IPO rumors

Head of Mandiri Institute Teguh Yudo Wicaksono said that, along with economic and mobility recovery, start-ups that operate within the tourism sector may gain significant momentum in recovery.

“From the business strategy perspective, there may be an impetus to [invest] in this kind of startup,” Teguh told the Post on Thursday.

However, he warned that this investment is not without risk seeing as how the current global economic situation, i.e. inflation in developed countries and the United Kingdom’s financial crisis, made investors wary.

On top of the economic circumstances, “generally, there has been startup valuation correction. Startups with healthy cashflow are more attractive [vis-à-vis growth] and investors are more selective. From the data, the number of venture-capital firms getting into Indonesia is now decreasing, even when their funding grew slightly,” said Teguh.

Teguh explained that Traveloka’s business model has been proven successful in the market, but he did not know its development in terms of cashflow, hence his mild criticism of INA’s decision to inject the unicorn.

“Traveloka might be planning to undergo initial public offering [IPO] and maybe this is investors’ expectation. Unfortunately, tech firms that have gone public did not seem to have good performance in IPO. So, this is a risk for investing in startups like Traveloka; the return of investment may not be as big as expected,” Teguh added.

Traveloka recently moved forward with another maneuver to stabilize its financial performances, amid increasingly widespread rumors about their plan to conduct IPO in the near future. 

In this manner, the US$5 billion-valued unicorn locked a deal of major funding in early August from PTT Oil and Retail Business Public Company Ltd. (OR), a Thailand-based state-owned oil-and-gas company. The number of the investment, however, was undisclosed.

The deal was sealed following recent circulating reports that Traveloka has been looking to rake in $200 million of funding in preparation of its IPO.

Since last year, Traveloka has reportedly been considering various options to conduct an initial IPO. The company initially planned to conduct an IPO on Wall Street, the United States. The action was planned to be implemented via SPAC, namely Bridgetown Holdings Ltd., which is affiliated with billionaires Richard Li (Pacific Century Group) and Peter Thiel (Paypal).

This action was expected to raise funds of up to $5 billion.