Byju’s, the country’s most profitable online education firm, is acquiring Blackstone Group-backed Aakash Educational Services (AESL) for an estimated $1 billion in cash and stock in the biggest deal in the Edtech sector to date. Byju’s footprint will be expanded into the offline market as a result of the acquisition.
Following the transaction, JC Chaudhry and Aakash Chaudhry, founders of Blackstone Group and AESL, will become minority shareholders in Byju’s. AESL, on the other hand, will continue to operate independently. Byju’s stated in a statement that following the integration, it will make additional investments to “accelerate Aakash’s growth.”
Byju’s is the most valuable Indian start-up after Paytm, with a valuation of around $13 billion. So far, Byju’s educational offering is limited in the sense that, as an online medium, it lacks the scope of face-to-face physical interaction with students. With AESL on board, Byju’s can now overcome this limitation and use the former’s physical infrastructure to provide offline coaching to non-test prep students, according to analysts.
Furthermore, existing Byju’s subscribers, particularly those in grades 9-12, can automatically enroll in AESL’s core entrance exam courses, increasing stickiness for the Byju’s platform. Aakash Educational Services will be able to add online learning to its services as a result of the agreement with Byju’s. “The physical centres frequently have capacity constraints, and classes can sometimes last for hours, causing students inconvenience.” The problems can now be mitigated because their courses are becoming hybrid,” analysts said.
After raising more than $1 billion in funding from investors last year, Byju’s raised nearly $460 million in new funding last week. The Bengaluru-based company is in talks to buy rival Toppr in a deal worth more than $100 million. Last year, the company paid $300 million for WhiteHat Jr. Byju’s, which claims to have 80 million registered users and 5.5 million subscribers, claimed to have added 45 million new students to its platform in just six months during the lockdown.
According to Aakash Chaudhry, MD of AESL, the deal with Byju’s will allow it to reach a larger audience. Students interested in medicine and IIT typically begin honing their skills in classes 8-10. Aakash has been a fantastic company, with consistently improving Ebitda margins and revenue growth. According to Atit Danak, principal and head of CoNXTat Zinnov, this is expected to provide Byju’s with short-term cash flow relief. According to a recent EY-IVCA report, the Indian ed-tech sector is expected to grow 3.7 times over the next five years, reaching $10.4 billion by 2025 from $2.8 billion in 2020.