India’s biggest online-education startup Byju’s has signed a deal to acquire brick & mortar entrance test preparation institute Aakash Educational Services Ltd for $1 billion.
This deal is said to be one of the largest edu-tech acquisitions in the world. The deal will be sealed in two or three months, according to a report by Bloomberg.
Aakash Institute has more than 200 physical centres in India and runs courses that prepares students to gain entry into India’s elite engineering and medical schools. It has over 2,50,000 students in total.
The Chaudhry family, founders of Aakash, will completely exit while Blackstone will swap a portion of its 37.5% equity in Aakash for Byju’s stake.
First acquisition for Byju’s in 2021
The Bangalore-based Byju’s is valued at $12 billion and has been able to raise plenty of funds as the pandemic and lockdown has increased the demand for its online lessons. Byju’s, said to be India’s second-most valuable startup, is backed by the likes of Facebook founder Mark Zuckerberg’s Chan Zuckerberg Initiative, Tiger Global Management and Bond Capital, co-founded by Silicon Valley investor Mary Meeker.
The Byju’s app caters to students from kindergarten to the 12th grade.
India has about 250 million students in the K-12 grades. The app provides lessons in math and science through video animations and games.
More than 70 million users logged in from over 1,700 cities around the country, Byju’s said last September. Of these, over 4.5 million are paid users.
This is the first acquisition by Byju’s in 2021. In August 2020, Byju’s acquired WhiteHat Jr for $300 million.
Is Byju’s killing off competition?
But why is Byju’s, an online educational portal, acquiring a brick and mortal tutorial centre?
According to analysts, acquiring Aakash will lend Byju’s a broader set of offerings and make its offerings more rounded. The takeover will help Bjyu’s inherit the well-established infrastructure of the brick and mortar test prep leader.
Another analyst that this reporter spoke to was more scathing: “This is just killing off competition. Byju’s is driving towards making online educational models the norm.”
The analyst’s words have a ring of truth. The thing is while online ed-tech startups have thrived since the pandemic, brick & mortar tutoring institutes have, on the contrary, floundered.
To invest in them now is indeed a paradox.
Interestingly, it should be pointed out here that Abhishek Maheshwari was late last year appointed as the CEO of Aakash Educational services. As it happened, he was the President of International Business for Byju’s before joining Aakash.
Should we connect some dots?