CREDIT ratings agency Moody's Investors Service has upgraded the corporate family rating on Grab Holdings from "B3" to "B2" following its recent debut on the Nasdaq.

The rating upgrade reflects the improvement in Grab's liquidity and financial flexibility following its public listing, said Moody's analyst Stephanie Cheong in a report on Friday (Dec 3).

"More importantly, the listing fully eliminates the redemption risk associated with its convertible redeemable preference shares, which had weighed on the company's credit profile," she added.

The agency has also upgraded Grab's senior secured term loan from "B3" to "B2" and changed the outlook to "stable".

Grab's public listing will add US$4.4 billion to its cash liquidity of around US$5.2 billion as at Sept 30.

Its substantial cash balance and access to public equity markets provide greater financial flexibility to pursue organic and inorganic growth, thereby better positioning it for growth, said Cheong.

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But Grab is expected to maintain a prudent approach towards any acquisitions or investments, such as maintaining a large cash buffer relative to its operating cash needs over at least the next 3 years.

Moody's views the risk from rivals Didi and Uber's expansion into Grab's markets to be low over the next 6-12 months.

Still, the inherently low switching costs for independent drivers and consumers still make Grab's core businesses "susceptible to aggressive competitors with adequate funding", said Cheong.

Despite sizable losses historically, Grab has been able to generate earnings in ride hailing and food delivery markets where it has a leading position.

Moody's expects operating losses in the food delivery business to continue to taper, while operating profits in ride hailing should increase as economies reopen.

But Ebitda is not expected to break even on a consolidated basis before 2023 as growth plans for its financial services business will continue to temper overall profitability over the next 2-3 years, said Cheong.

The group's current "B2" rating remains constrained by investment and execution risks associated with the its nascent digital financial services business, exposure to social risks and evolving regulatory regimes, and its complex corporate structure.

There is also high governance risk given Grab's aggressive financial policy, as reflected by the use of debt to fund its evolving business.

Moody's said it would consider further upgrading the ratings if Grab turns profitable across all business segments and starts generating net cashflow over a "multi-year period", while maintaining robust liquidity with sufficient cash or alternative liquidity on hand to cover its short- and medium-term debt and commitments.

Shares of Grab lost over a third of their value on the first day of trading on the Nasdaq, plunging under the crucial US$10 mark. This came after the stock briefly surged 18 per cent at market open on Thursday.

It ended the day at US$8.75, down 33 per cent from its US$13.06 opening price.