Bengaluru, Oct 13 Edtech unicorn Vedantu has bought a majority stake in Deeksha for $40 million in a cash and stock deal.

Deeksha is a test preparation platform for students of grade 11th and 12th, with a team strength of 950 members, and 13,000 students. According to a source close to the development, Deeksha has a Rs 9,200-crore turnover and 28 per cent EBITDA (earnings before interest, taxes, depreciation, and amortisation) margin. 

Started in 1998, Deeksha has 39 centres across Karnataka, Andhra Pradesh and Telangana. Vedantu will integrate its technology with Deeksha’s offline centres to create a scalable hybrid model that provides access to affordable quality teaching even in remote Tier-3 and Tier-4 towns.

Dr. Sridhar, Co-Founder, Deeksha said, “Deeksha has always believed in nurturing the success of every child through a Triple Integration Model that amalgamates wellness, academics and technology. Through this partnership, we will leverage Vedantu’s LIVE Class platform and provide a hybrid solution that maximises learning outcomes through personalised learning algorithms. Vedantu’s hybrid learning model will also enable us to provide the same ‘Deeksha Experience’ to millions of students in smaller towns and cities at an affordable cost.”

Vamsi Krishna, CEO, and Co-Founder, Vedantu said, “With this acquisition, our mission is to empower and scale Deeksha’s current learning model by deploying our in-house hybrid technology to reach the masses in remote areas and create impact at scale. This culmination of online and offline capabilities will help us expand our hybrid learning initiatives. We endeavor to change India’s learning curve through definitive outcomes on the back of our strong passion for delivering quality learning. This impact will be possible because of the shared vision, mission, values, and culture of our two organisations.”

Hybrid learning

Krishna added that he expects hybrid learning initiatives to contribute about 15-20 per cent to Vedantu’s business in the next financial year. In June, Vedantu opened its first hybrid center in Muzaffarpur (Bihar) and plans to continue this focus on Tier 3,4 regions going forward.

  He said an offline presence has driven efficiency insales and marketing. Besides, Vedantu has compensated for the added infrastructure cost of offline centres with its course prices. For instance, a course that costs around Rs 35,000 as an online offering, is priced at around Rs 65,000 at the offline centres.

Vedantu has laid off 624 employees this year.  In an email to employees, Krishna said ithe layoffs were done to build a longer capital runway, given the uncertainties of the outside world and an expected tightening of capital availability for the next few quarters. 

Talking about the company’s financial runway now, Krishna told businessline, “The steps we have taken since the start of the year have made all our core businesses’ contribution margin positive and the burn has reduced by almost one-fourth of what it was earlier. We were luckily better capitalised compared to other players because we raised funds last year and, hence, we are able to use that capital for growth.” 

Growing number of M&As

Amid a funding crunch, start-up merger and acquisition (M&A) deal volumes in the January to September period of 2022 have increased 55 per cent over the same period last year, according to Grant Thornton Bharat’s data. Speaking to  businessline earlier this week, Amit Nawka, Partner, Deals and Start-ups Leader at PwC India, said a significant portion of the M&A deals happening now are opportunistic share-swap deals, unlike the majority of all-cash deals that happened in 2021. 

Nawka added that apart from one significant funding deal in edtech this quarter, there has not been much fund-raising activity in the sector. The slowness in edtech funding will lead to increased M&A activity in the sector in the coming months. 

Besides Vedantu, edtech majors like upGrad and PhysicsWallah have also announced multiple acquisition deals in the past few months, the most recent being PhysicsWallah acquiring PrepOnline, an online learning platform for NEET, and Altis Vortex, an exam preparation book publisher.

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