Byju’s Strategic Acquisition of Aakash Educational Services

Recent financial activity has drawn attention to Byju’s, with over $1 billion raised last year and potential for another $500 million. Today, further insight into this growth is being revealed.

Byju’s announced on Monday the acquisition of Aakash Educational Services, a well-established network of coaching centers operating for 33 years. This move aims to strengthen Byju’s position as a leader in India’s rapidly expanding online learning market and bolster its offline presence.

Deal Details and Valuation

The Indian startup, currently valued at $13 billion, reportedly paid approximately $1 billion for the acquisition. This was comprised of around $600 million in cash and the remainder in company stock. Sources familiar with the transaction indicate this is one of the largest deals within the edtech sector. EY provided advisory services for both companies involved.

Aakash Educational Services, backed by Blackstone, operates over 200 physical tutoring centers nationwide. These centers cater to students preparing for entrance exams to leading engineering and medical institutions, serving a student base exceeding 250,000.

The Genesis of the Deal

While Aakash had begun offering some online resources, a shift in student preferences accelerated by the pandemic prompted discussions between the two companies approximately six to seven months ago. Executives from both firms shared this information during a joint interview.

Aakash Chaudhry, Managing Director and Co-promoter of Aakash Educational, emphasized that the combined entity will deliver “very substantial and value-additive services to students.” The existing leadership team at Aakash Educational will remain in place following the acquisition.

Creating an Omni-Channel Learning Experience

The acquisition is expected to establish the largest omni-channel learning platform for students in India. This will provide access to both physical classrooms and online learning resources.

Byju Raveendran, Co-founder and CEO of Byju’s, highlighted the evolving future of education, emphasizing the integration of offline and online experiences. He previously conducted in-person classes for large groups of students before founding the online platform.

For certain offerings, like test preparation, a fully online model is still considered several years away. This deal also aims to extend the reach of both Byju’s and Aakash Educational into smaller cities and towns, according to the executives.

Blackstone’s Perspective

Amit Dixit, Co-Head of Asia Acquisitions and Head of India Private Equity at Blackstone, which held a 37.5% stake in Aakash since 2019, stated that an omni-channel approach is crucial for success in test preparation and tutoring. Blackstone anticipates a successful partnership between Aakash and Byju’s, two leading companies in Indian supplementary education.

Byju’s Growth and Expansion

Byju’s user base has experienced significant growth, now exceeding 80 million users, with 5.5 million being paying subscribers. The company is currently profitable and generated over $100 million in revenue within the U.S. last year.

Strategic Acquisitions and Future Plans

Byju’s has actively pursued inorganic growth through acquisitions. In 2019, they acquired U.S.-based Osmo for $120 million, and in 2020, they purchased WhiteHat Jr., a coding platform for children, for $300 million. Raveendran indicated that the company is actively seeking further acquisition opportunities.

Reports suggest Byju’s is currently in discussions to acquire California-based Epic for a sum exceeding $300 million.

Industry Analysis

Jayanth Kolla, Chief Analyst at Convergence Catalyst, believes the Aakash acquisition will enhance Byju’s brand recognition and expand its student reach. He notes that organic growth online can reach a plateau in a market like India.

The acquisition of Aakash is expected to provide Byju’s with a stronger foothold in the Indian education market, combining online learning with a robust network of physical coaching centers.