India’s leading test preparation leader, Aakash Educational, is combining its forces with the tech startup, involving nearly $600 million in cash and the remaining in stock.
The agreement, announced on 5 April 2021, is built around Aakash Educational Services. BYJU’S test preparation ambitions take in the chain’s classrooms, teachers and brand in one purchase of close to $1 billion, the biggest acquisition Indian ed-tech has seen.
Aakash Educational Services: BYJU’S test preparation bet
The two companies described the deal as a strategic merger in their joint announcement, reproduced by afaqs. EY acted as exclusive financial adviser to BYJU’S and Phoenix Advisers advised AESL, and the buyer committed to further investment in Aakash after the integration. “The future of learning is hybrid and this union will bring together the best of offline and online learning,” founder and chief executive Byju Raveendran said in the statement, adding that the pandemic had brought the blended format of learning to the forefront.
Marking its foot in the offline market, Byju’s is looking at maintaining its leadership position in the field with this amalgamation. The three-decades-old firm, Aakash has taken the opportunity of growing online education preference during the pandemic to explore the deal.
“This partnership aims at making quality online learning accessible for the students in India. The integration of physical location and technology, the integration of physical location contributed by Byju’s will offer a unique learning experience, “ said Aakash Choudhary, Managing Director of AESL. He further added that this “acquisition will add value to the student’s education.”
Byju’s and Aakash Educational executives said that this association will bring accessible online education to smaller cities and towns. The co-founder and Chief Executive of the Edtech giant Byju’s, Byju Raveendran has been a teacher himself, having taught hundreds of students in the past.
The Head of India Private Equity at Blackstone and Co-Head of Asia Acquisitions, Amit Dixit said “we are looking forward to being a part of the association between the two leading companies in the sector.”
How Aakash got here
Aakash was built by J C Chaudhry, its founder and chairman, over 33 years, starting from medical entrance coaching and growing into one of the country’s largest classroom test preparation chains, according to the joint announcement. The firm stayed family owned until November 2019, when Blackstone bought a minority stake in a deal that Legally India reported at $191 million, or about Rs 1,350 crore. By the time of the sale to BYJU’S, Blackstone held about 38 per cent of the company, TechCrunch has reported.
The 2019 partnership came with a thesis attached. Blackstone and the Chaudhrys set out to build what the announcement later called India’s largest digitally enabled, omni-channel test preparation company, pairing Aakash’s classrooms with new digital delivery. The chain says it has helped millions of aspirants into medical and engineering seats over its 33 years. The pandemic then pushed the whole sector online faster than any plan had assumed.
In the announcement, Dixit set out why the fund backed the combination: “We have always believed omni-channel will be the winning model in test prep and tutoring,” he said. Aakash Chaudhry, the managing director, said Aakash would “continue to operate as a separate entity with the same passion and commitment,” with the founding family staying on to lead its growth.
The market the deal reshapes
With 45 million new subscribers added to its platform during the lockdown and has a renewal rate of 86%, Byju’s claimed that online-only classes are the future. With more than 215 test preparation centres across India, Aakash entered the exponentially growing Ed-tech sector with this deal. The sector is estimated to reach $10.4 billion by the year 2025.
The deal at a glance:
| Term | Detail |
|---|---|
| Value | Close to $1 billion, nearly $600 million of it in cash |
| Structure | Cash and stock; Aakash to run as a separate entity |
| Seller side | The Chaudhry family and Blackstone, holder of about 38 per cent |
| Advisers | EY for BYJU’S, Phoenix Advisers for AESL |
| Network acquired | More than 215 test preparation centres |
The deal hands the buyer a branch network it would have needed years to build. For the coaching industry the signal runs the other way: the largest pure online player in the country has paid its largest cheque for classrooms, teachers and a 33-year-old brand in Aakash Educational Services. BYJU’S test preparation business, until now an app category, becomes a physical operation with centres in more than a hundred cities through this single transaction.
What has happened since
Completion took longer than either side suggested in April 2021. In September 2022, TechCrunch reported that BYJU’S had cleared payments of about $230 million owed to Blackstone for the acquisition, after earlier instalments were pushed back; the publication put the final figure at about $234 million, citing a person familiar with the matter, and Raveendran said the two sides had “mutually decided to process the payments later.” The report confirmed the structure flagged at announcement, part cash and part stock, that made Blackstone and the Chaudhry family shareholders in the buyer.
The buying did not stop at Aakash either. In July 2021 the company picked up Toppr, the school learning platform it had been courting since February, together with the professional education firm Great Learning and the United States reading platform Epic, Business Today reported. Aakash remained the largest of the lot by price, and the only one bought for its buildings as much as for its code.
Eighteen months on from the announcement, the final accounting for Aakash Educational Services, BYJU’S test preparation purchase, was therefore still being settled, even as the company kept buying elsewhere. The 215 centre network it acquired has remained the core of its offline business since.
