By Sam Nussey and Fanny Potkin

TOKYO/SINGAPORE, Oct 5 (Reuters)Line Corp’s 3938.T food delivery business in Thailand is gearing up for a prolonged battle with players ranging from SoftBank-backed Grab to banks after a merger with a listings heavyweight and an outside capital injection.

Expansion in food delivery by chat app operator Line in its second-largest market comes as the sector grows globally through the novel coronavirus pandemic but as questions linger over how companies will turn a profit.

Fast-growing delivery business Line Man hopes its edge will come from last month’s merger with Thailand’s leading restaurant listings site Wongnai, in addition to leveraging Line’s 47 million Thai users.

“We can reduce costs a lot and that is the path to profitability,” Line Man Wongnai Chief Executive Yod Chinsupakul said in his first interview with international media since taking up the post.

The company is targeting 20 cities by year-end, from 15 now, and is moving more delivery in-house, Chinsupakul said, having relied on Hong Kong-based logistics firm Lalamove to scale quickly.

Line Man Wongnai has raised $110 million to fund its expansion from investor BRV Capital Management – the first of Line’s overseas businesses to raise such capital.

“The average price per item tends to be very low, therefore focusing on conquering volumes is the strategy to win,” said Alfonso de los Reyes, an analyst at Singapore-based venture outfit Momentum Works.

The merger has left loss-making Line with a 46% stake in the delivery business. It also delivers food in Japan and Taiwan.

Line is being taken private by SoftBank’s domestic internet business Z Holdings 4689.T in a deal raising expectations that the chat app’s operations will serve as a gateway to overseas expansion.

SoftBank-backed Grab also delivers food in Thailand, along with leftfield challengers like Siam Commercial Bank SCB.BK.

(Reporting by Sam Nussey Editing by Robert Birsel)

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