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India’s most valued edtech firm, Byju’s has embarked on an acquisition spree to grow its topline, acquire market share and diversify its offerings beyond the core K-12, or kindergarten to Std XII, segment.
At present, it has three key acquisition targets — Bengaluru-based Great Learning; Noida-based Gradeup, and Mumbai-based Toppr — at an estimated cost of $550-600 million.
Diverse offerings
Great Learning will give Byju’s an entry into the big-ticket upskilling market, while Gradeup is into online test-prep, and Toppr offers a combination of K-12 learning, test-prep and coding classes. By gaining a toehold in these emerging high-growth segments, Byju’s aims to widen its student base.
“You will see us making many more acquisitions over the next few months. Most of our acquisitions, so far, have been full-cash acquisitions,” co-founder Byju Raveendran had told BusinessLine earlier, implying future acquisitions will also be largely cash-led.
Much of the company’s inorganic growth via acquisitions has been through Raveendran’s nearly $2.3-billion fund raises since inception, from over 30 investors including Naspers, Lightspeed Venture Partners, Tiger Global, Aarin Capital, General Atlantic, Tencent, Sequoia and Qatar Investment Authority.
Most valued start-up
Founded in 2011 by Raveendran and his wife, Divya Gokulnath, Byju’s was valued at $13 billion in March 2021 when it raised $460 million in a Series F funding round led by MC Global Edtech Investment Holdings. Having perfected the art of fund raising without diluting promoter stake (27 per cent, as of March 2021), Raveendran is currently in talks to raise $150 million from UBS Group AG at a valuation exceeding $16 billion, which will make Byju’s India’s most valued start-up, overtaking Paytm at $16 billion. To compare, founders of other companies such as Zomato hold a mere 5.5 per cent stake, with investors holding the rest.
Given the acquisition of eight companies (including Vidyartha, Tutorvista and Edurite) in 2017, Math Adventures in 2018, Osmo in 2019, WhiteHat Jr and LabInApp in 2020, and, more recently, Aakash Educational Services for $940 million, one wonders why Raveendran is looking to acquire more.
“Byju’s strategy, of late, has been mergers and acquisitions. This could be because he is unable to grow and scale up his core K-12 business and is, therefore, buying up edtech firms to garner market share in various emerging segments,” said an investor in edtech, on condition of anonymity.
Most of Byju’s acquisitions till the end of 2020 were towards gaining teams and platforms, but two significant ones enabled it to scale up outside India: Osmo, at $120 million; and WhiteHat Jr, at $300 million. Recently, in partnership with WhiteHat Jr, it also expanded in the Latin American and South East Asian markets with the launch of Future School, a one-on-one live tutoring platform for kindergarten to grade 8 students, covering maths, science, coding, music and fine arts.
All-India reach
The Bengaluru-based company has over 80 million students on its app, of whom 5.5 million are paid users and 65 per cent is from non-metros. It has added 45 million new students since the pandemic broke out last year, and the average time spent on the app per day went up from 71 to 100 minutes during the lockdown.
Despite adding millions of new students, Byju’s failed to achieve its target of $150 million in net profit in FY 2021. Its last reported profit was $2.8 million on a revenue of $189 million in FY 2019. Some of the reasons for this could be the focus on chasing growth vs profitability, huge investments in office space, ambitious marketing spend and the high price points of its annual subscriptions.
Future of learning
“While Byju’s recent acquisition of Aakash will help it gravitate towards a blended learning model, which is the future of learning, by acquiring more companies in adjacent segments, Raveendran is trying to build an edtech giant with diverse offerings for students of all age groups both in the domestic and international markets,” said another edtech investor. That’s the big lesson from Byju’s, for now.
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