Byju's acquires Aakash Educational Services for about $1 billion
Byju's has acquired test-prep leader Aakash Educational Services for nearly USD 1 billion (about ₹7,300 crore) as India's biggest online education startup looks to build its position in the brick and mortar segment.
The acquisition is Byju's biggest and one of the largest ed-tech deals in the world. Post the transaction, Blackstone Group and Aakash Educational Services Ltd (AESL) founders will hold a minority stake in Byju's, which is valued at about USD 13 billion.
Byju's, the most valued ed-tech startup in the country, is backed by marquee investors like Mary Meeker, Yuri Milner, Chan-Zuckerberg Initiative, Tencent, Sequoia Capital, Tiger Global and others. It is estimated to have raised over USD 2 billion in funding to date.
According to sources, Byju's is also in talks to raise an additional USD 600-700 million in funding that will help in further growth acceleration.
In the past, Byju's had acquired TutorVista and Edurite (from Pearson in 2017) and Osmo in 2019. Last year, the General Atlantic-backed company had bought coding training platform WhiteHat Jr for USD 300 million.
The edu-tech space has seen strong growth globally with the COVID-19 pandemic serving as an inflection point. Many edu-tech companies, including Vedantu and Byju's, have also raised funds in the past few months to accelerate their growth plans.
AESL Managing Director Aakash Chaudhry said the transaction with Byju's is part cash and part equity deal.
"It is close to 60-65 per cent cash and the remaining equity...The overall deal value is close to about USD 1 billion," he said during media interactions.
AESL and Byju's started exploring a deal about 6-7 months ago.
"This will be the largest integration in the education space in India, especially in the startup space...COVID has really opened the gates to online education significantly and going forward, we believe that all kinds of models in education will exist in K-12, test prep and even in higher education," Chaudhry told PTI.
Together with Byju's, AESL will be able to provide students with the education it was providing but at a much larger scale with multiple delivery channels that can be innovated out of both ecosystems (online and offline), he added.
After the integration, Byju's will make further investments to accelerate Aakash's growth, he noted.
Chaudhry said AESL will continue to operate as a separate entity and further expand its presence in the country.
"At Aakash, we are looking to transform student experiences by steering innovative and digitally-enabled learning solutions. Together with Byju's, we will work towards building an omnichannel learning offering that will accelerate test-prep experience to the next level," he said.
In its over 33 years of existence, AESL has helped millions of students prepare for medical and engineering entrance exams. It has a pan-India network of 215 centres (including franchisees), and a student count of more than 2.5 lakh.
In 2019, private equity firm Blackstone had picked up a 37.5 per cent stake in AESL. While the company had not disclosed the financial details, sources said the ₹1,350 crore transaction had valued AESL at USD 500 million (over ₹3,545 crore).
"Our complementary strengths will enable us to build capabilities, create engaging and personalised learning programmes. 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," Byju Raveendran, founder and CEO of Byju's, said.
The addition of Aakash is a significant step towards strengthening its product offering, he added.
Byju's cited industry reports and said the test preparation and after-school tutoring (high school) segment is estimated to be a USD 7-8 billion opportunity in India and is expected to witness 55-60 per cent growth over the next 4-5 years.
On whether the ed-tech platform will continue to scout for acquisitions, Byju's said the company will look at opportunities that bring in new products and formats, market expansion and/or distribution opportunities.
Launched in 2015, Byju's has over 80 million students cumulatively learning from the app, 5.5 million annual paid subscriptions, and an annual renewal rate of 86 per cent. During April-September 2020, Byju's added 45 million new students to its platform.
EY was the exclusive financial advisor for Byju's on this transaction. Phoenix Advisors was the exclusive advisor to AESL.