What prompted India’s Byju’s to acquire test-prep firm Aakash in $1b deal?

Byju Raveendran, the founder of Byju's. Photo: Hemant Mishra/Mint

What started as a collaboration talk with Byju’s ended up as a takeover deal worth $1 billion for Aakash Educational Services, in one of the most expensive deals in India’s burgeoning education space. In an interview, Aakash Chaudhry, managing director and co-promoter of the test preparation firm, spoke about what prompted him to sell the three-decade-old brand to a six-year-old startup and his plans to open centres outside India. He also explained how Aakash’s tier-III town expansion in India will provide Byju’s a launchpad to increase its market share beyond cities and metros. Edited excerpts:

A 30-year-old established brand gets sold to a six-year-old startup. What does it mean for the market?

It signifies that the market is changing, customers are changing. The alignment of business is changing and moving significantly towards technology. These are the times, even if you are a 30-year-old brand when you have to be honest and realize the direction the market is going. From a tuition centre to a national brand, we have moved a long way. But we felt Byju’s is more prepared and in a better place to take a brand like Aakash forward. While technology will disrupt the market, we had to assess which side of the disruption you wish to be—you want to be on the side where you get disrupted and are not left with a choice or be part of the disruption. We choose to be part of the entity and redefine the industry.

How did the talks with Byju’s start, and how long did it take to seal the deal?

We started talking in June last year. The Byju’s team reached out to understand our work, etc. The meeting with Byju Raveendran was meaningful and cohesive, and there was no discomfort. Both of us were thinking the same thing—about empowering students and teachers. He is a teacher himself—we are doing this for the past 30 years—our ethos was similar.

So, Byju’s reached out to you first? Did the team talk about the takeover in part or full in the first meeting?

Yes. But during that time, there was no discussion of acquiring. That was a very open discussion, trying to understand what we are doing, what they are doing. Is there a possibility of working jointly, offer a joint course, use each others’ content, etc.

So, when did the acquisition talk start?

I think, it was in the month of October. And we were able to come to an agreement in December. It’s almost six months of talks overall to reach a level of understanding.

You have said the nearly $1 billion deal is part-cash and part-equity. Was it more cash or more equity? And what percentage of equity did you get from Byju’s?

It’s 60-70% cash, and the rest is equity. Percentage of equity (laughs)—it’s in single digit. We are one of the large partners, but not as large as some of the big VC investors.

What will happen to brand Aakash after the takeover?

Brand Aakash will stay as it is. It will be the test prep face of Byju’s and anything to do with the medical, IIT, and other test preps will be done under the Aakash name. Even the test prep of Byju’s in medical and IIT space will move to Aakash. Byju’s students who were getting Byju’s teaching will get our teaching, lectures and everything under the Aakash’s name. They have around 100,000 students in the test prep space.

How will brand Aakash continue to expand its footprint?

We have around 215 centres. We are expecting to add 100 to 150 centres in two years. They will be a combination of extension centres and full-fledged centres, technology-led centres to fulfil the need of students, mostly in tier-II and tier-III cities. And the investment will come from a single entity (Byju’s).

How will Aakash’s expansion to smaller cities benefit brand Byju’s, which largely has an urban, middle and upper-middle-class client base?

We have to see this in two objectives—brand Aakash will continue to expand for its own business interest and growth road map to reach out to more students with our quality of education in more cities. By adding value to Aakash, it will add value to the overall system. Second, the expansion will directly advantage Byju’s market. This will make Aakash centres kind of the physical point of contact for all kinds of services under the name of Byju’s as well. This depends on what kind of programme a student is taking—is he/she taking a test prep or K-12 programme. Byju’s focus is on K-12 students, and our focus is only on test prep. Our focus is to expand physical and their focus to expanding digitally.

Byju’s has gone international. Will Aakash go abroad with its physical centres so that the larger entity can have a share of both physical and digital markets in other countries?

Yes, we have plans to go outside India, especially the Middle East, where there are a lot of Indians and children of the Indian community who have the aspiration to write entrances for medical and IITs. That will be a logical extension of Aakash to the Gulf market. Byju’s presence there will help us significantly as they have a base and market understanding.

Your father built it from scratch, and then you joined as a second-generation entrepreneur. Was it easy for your father to let go of ownership?

It was an emotional moment. He used to treat it as a baby, but there comes the point when you have to detach the child for the benefit of the child. As a good entrepreneur, if you realize that your business is in safer hands, then you are at peace. For its (company’s) growth, it has to be put in an orbit where it will evolve and grow.

This article was first published on livemint.com.

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Following vacancies can be applied for (only in Singapore).   

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Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.