Can BYJU’S Acquisition Of Aakash Change The Test Prep Market?

Indian unicorn BYJU’S has made its seventh acquisition, and this time, it could be one of the biggest edtech deals across the world. India’s largest online education startup is likely to spend $1 Bn to acquire the renowned offline test prep major Aakash Education Services (AESL) which is also backed by Blackstone Group. In August 2020, BYJU’s acquired WhiteHat Jr, for a whopping $300 Mn as well.

The Bengaluru-based startup offers K-12 online lessons and test prep modules and has seen a significant rise in user traction as offline schools and coaching centres had to shut down due to the lockdown in the pandemic. But of late, competitors like Unacademy have stolen a march on BYJU’S with their live tutoring for competitive exams. And interestingly, the entry of Unacademy and its live training modules have compelled BYJU’S to shift from its pre-recorded tutorials to a similar live-lesson format last year.

But right now due to heavy competition and schools/coaching centres started resuming operations company is under pressure to maintain its leadership position and expand its market presence. BYJU’s has also realised and understood the need to have a larger presence in the competitive test preparation market and ultimately expand its reach and revenue. And Aakash might be the right choice.

Hyderabad--Kukatpally Center Gallery | AESL

As per the Bloomberg report, the AESL CEO Aakash Chaudhry (son of founder J.C. Chaudhry) and the Chaudhry family would completely take the exit from the business while Blackstone would swap a portion of its 37.5% equity in Aakash for a stake in BYJU’S.  Backed by the PE firm Blackstone Group that invested $500 Mn in the Aakash Institute in 2019, AESL runs the company that has 200+ physical coaching centres across 130 cities. The company is providing engineering and medical test prep services for classes 10-12 students. These offerings by the company are placed under three brands – Aakash Medical, Aakash IIT-JEE and Aakash Foundations (for classes 8-11). And the company claims to have more than 250K learners in its fold. 

Why Test Prep Is An Important Market? 

Test preparation is an evergreen market in India, helps aspirants get admission to engineering and medical courses and gilt-edged government jobs. Startups in online test prep niche bagged $1,776 Mn between 2014 and H1 2020, more than 25% of the total funding raised by Indian edtech startups, according to data from VOE analytics.

The country is expected to have 37 Mn paid edtech users by 2025 compared to the 10 Mn-odd in 2020, as per VOE analytics, and the test prep segment will comprise around 5 Mn users. Also from around $666 spent per user per year, the test prep ticket size is expected to grow 75% to $2,669 by 2025. So, this deal with AESL is bound to give the edtech giant a firm footing in two of the most lucrative segments.

BYJU’s has relied on acquisitions to enter new market segments so far. It has acquired companies like Vidyartha, TutorVista, Edurite, Math Adventures, Osmo, WhiteHat Jr. in the last few years. 

As per the reports, annually, 2.5 Mn+ Indian aspirants appear for NEET, 10 Lakh+ write the UPSC exam and 2.6 Mn+ try to qualify for banking entrance tests. Also several state-level versions of these exams, and one can easily understand the scope of this market that caters to people vying for a fast-shrinking pool of ‘secure’ jobs. 


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