Indian edtech start-ups are showing the money

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Indian edtech start-ups are showing the money
Learn from home. the Indian edtech industry will achieve a size of $30 billion over the next decade, a 40-fold jump from its current size of $700-800 million.Courtesy: Getty Images

India has the world’s largest population of school-going children – 265 million. That number will rise substantially if higher education is thrown into the mix. With schools and colleges shut because of the coronavirus outbreak, online education companies are stepping in to fill the breach. It’s an opportunity worth billions.

Albert Einstein, arguably the greatest scientist to have ever lived, once said: “In the midst of every crisis, lies great opportunity.” Since then, this has become an oft-repeated idiom across management classes, textbooks, corner offices and boardrooms around the world.

When the Covid-19 pandemic led to the world’s most stringent nationwide lockdown in India last year, followed by lesser state-specific and local lockdowns in 2021, created an economic crisis across various industry segments, the online education (edtech) sector sensed an opportunity.

A report RBSA Advisors says the Indian edtech industry will achieve a size of $30 billion over the next decade, a 40-fold jump from its current size of $700-800 million. Result: Firms like Byju’s, Unacademy and UpGrad have emerged as global leaders in this space.

Start-ups get millions of subscribers, billions in funding

With schools and colleges shut and exam schedules gone awry, edtech start-ups found their moment under the sun. Offering services like kindergarten to Class 12 (K-12) coaching modules and online coding classes as well as more niche learning programmes, these start-ups attracted millions of new subscribers and billions of dollars in fresh funding.

And with their valuations soaring by the day, these start-ups could offer investors who enter them now huge upside potential in the years to come.

A recent report released by RBSA Advisors, a leading transaction advisory firm, says the Indian edtech industry will achieve a size of $30 billion over the next decade, a 40-fold jump from its current size of $700-800 million.

Result: Leading Indian edtech players such as Byju’s, Unacademy and UpGrad have emerged as global leaders in this space.

According to Google Trends, there was a 60% rise in searches for edtech options. Byju’s, Toppr and others gained even more traction. A BARC India-Nielsen report says there was a 30% rise in the time spent on education apps in the first three months of the lockdown.

Investors poured in $1.4 billion in 2020 alone

The sector has attracted investments from private equity investors worth as much as $4 billion in the last five years. Of this, $1.4 billion, or more than a third of that amount, came in 2020 alone, leading to the emergence of global edtech leaders like Byju’s, which now commands a valuation of $15 billion.

Meanwhile, many of them are also beefing themselves up in terms of size. Besides raising funds from existing and new investors, they have been hyperactive in the mergers and acquisitions (M&A) space as well. Byju’s, India’s most valuable start-up, has acquired WhiteHat Jr and LabInApp while Unacademy has bought rival start-ups such as CodeChef, PrepLadder, Mastree, Kreatryx, Coursavy, and NeoStencil.

Online learning giants Byjus, India’s edtech behemoths, crossed the $1-billion mark in revenues for the next financial year. They are looking at closing the next year at $1.2-1.3 billion in revenues.
Online learning giants Byjus, India’s edtech behemoths, crossed the $1-billion mark in revenues for the next financial year. They are looking at closing the next year at $1.2-1.3 billion in revenues.Courtesy: Getty Images

Byju’s shows the way

Byju’s recently acquired traditional tutorial chain Aakash Educational Services Ltd (AESL) for $950 million, its largest buyout, in a cash-and-stock deal. This is by far the largest acquisition by an Indian start-up dwarfing Snapdeal’s $400-million takeover of Freecharge in 2015 and Flipkart’s 2014 purchase of Myntra for $330 million.

“We will integrate Aakash’s expertise in test prep with our content and tech capabilities and will invest further capital in Aakash once the integration is done,” Byju’s founder Byju Raveendran told the media after the deal was announced. “This acquisition will help Byju’s cross the $1-billion mark in revenues for the next financial year. We are looking at closing the next year at $1.2-1.3 billion in revenues,” he added.

We are seriously thinking of an 18-24 month timeline to look at a public offering. But it can take a bit longer since we are in no hurry and will look at the right market timing.
- Byju Raveendran

The company is now planning to go public. Though no date has fixed yet, Raveendran indicated that Byju’s could launch an IPO sometime around April 2023. “We are seriously thinking of an 18-24 month timeline to look at a public offering. But it can take a bit longer since we are in no hurry and will look at the right market timing,” he said shortly after announcing the AESL takeover.

The company has raised more than $2 billion from marquee investors such as like Sequoia Capital, Tencent, Tiger Global, Mary Meeker, Yuri Milner, Chan-Zuckerberg Initiative, and others. Some of them may want to exit if the valuations are right.

Meanwhile UpGrad, another leading Indian edtech start-up, has recently raised $120 million from Temasek, the Singapore sovereign wealth fund even as a smaller rival Lead School received $30 million from GSV Ventures, a Silicon Valley-based investor.

Biggest edtech market in the world

This heightened level of investor interest in Indian edtech start-ups is not difficult to fathom. India has 265 million school going children, the highest in the world. This makes India, potentially, the largest edtech market internationally.

According to Google Trends, there was a 60 per cent increase in searches for edtech options. Leading edtech service providers like Byju’s, Toppr and others gained even more traction. A joint report by BARC India and Nielsen revealed that there was a 30 per cent increase in the time spent on education apps in the first three months of lockdown.

The report by RBSA Advisors says: "Online education offerings for classes 1 to 12 are projected to increase 6.3X by 2022 from the base of 2019." The post K-12 market is expected to grow 3.7x to touch $1.8 billion, it added.

Little wonder then that investors are flocking to plunge their cash into Indian edtech start-ups.

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