Biggest deal in Edtech sector! Byju’s to acquire Aakash Educational Services for $1 billion

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April 06, 2021 4:30 AM

In the biggest deal in the edtech sector so far, the country’s most valued online education firm, Byju’s is acquiring Blackstone Group-backed Aakash Educational Services (AESL) for an estimated $1 billion cash and stock deal.

Byju’s that claims to have as many as 80 million registered users and 5.5 million subscribers said it managed to add 45 million new students on its platform in mere six months during the lockdown.

In the biggest deal in the edtech sector so far, the country’s most valued online education firm, Byju’s is acquiring Blackstone Group-backed Aakash Educational Services (AESL) for an estimated $1 billion cash and stock deal. The acquisition will extend Byju’s footprint into the offline segment. Post the deal, Blackstone Group and AESL founders JC Chaudhry and Aakash Chaudhry will become minority shareholders in Byju’s. AESL will, however, continue to function independently.

In a statement, Byju’s said that after the integration, it will make further investments to “accelerate Aakash’s growth”.

Valued at about $13 billion, Byju’s is the most-valued Indian start-up after Paytm. So far, the educational offering of Byju’s is limited, in the sense that being an online medium it does not have the scope of the face-to-face physcial interaction with the students. With AESL on board, Byju’s can now overcome this limitation and use the former’s physical infrastructure to offer offline coaching to students belonging to the non-test prep category, analysts said.

Also, the existing subscribers of Byju’s, especially those studying in grades 9-12 can automatically opt for AESL’s core entrance exam courses, thereby creating stickiness for the Byju’s platform. As far as Aakash Educational Services is concerned, the deal with Byju’s will enable them to add online learning to its services. “The physical centres often have capacity constraints and classes sometimes go on for hours, creating inconvenience for students. Now, with their courses becoming hybrid, the problems can be mitigated,” analysts said.

“The future of learning is hybrid and this union will bring together the best of offline and online learning, as we combine our expertise to create impactful experiences for students. The pandemic has brought the importance of the blended format of learning to the forefront,” Byju Raveendran, founder & CEO, Byju’s said in a statement. After garnering more than $1 billion from investors last year, Byju’s raised another close to $460 million in fresh funding last week. The Bengaluru-based company is in discussions to acquire rival Toppr in a transaction estimated to be over $100 million. Last year, the company had acquired WhiteHat Jr in a $300-million deal.

Byju’s that claims to have as many as 80 million registered users and 5.5 million subscribers said it managed to add 45 million new students on its platform in mere six months during the lockdown. Aakash Chaudhry, MD, AESL, told FE that the deal with Byju’s will enable it to get a wider reach in terms of audience. Students who are interested in medicals and IIT typically start building on their abilities from classes 8-10. “That is where the presence of Byju’s is massive and we will get more visibility. Aakash’s presence is currently limited to the over 215 test prep centres,” Chaudhry said.

Aakash has been an extremely good business with steadily improving Ebitda margins and revenue growth. This is expected to create cash flow relief to Byju’s in the short term, said Atit Danak, principal and head of CoNXTat Zinnov.

The market size of Indian ed-tech sector is estimated to grow by 3.7 times in the next five years, to touch $10.4 billion by 2025 from $2.8 billion in 2020, according to a recent report by EY-IVCA. The segment will see more than 37 million paid users by 2025.

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