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Indian edtech firms push for M&As to supercharge growth | India Digest Volume 62

Written by KrASIA India Digest Published on     6 mins read

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In this round of India Digest from August 6 to August 11, 2021, read our big story of the week, the weekly buzz, and more.

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Since late last year, Byju’s has been on an acquisition hunt, which has further accelerated this year. Every time the edtech behemoth buys a company, the Indian startup community on Twitter comes alive with jokes. The most famous and resonating one is the proposal to rechristen Byju’s to Buy-jus.

However, Byju’s is not the only edtech company that is buying rivals left, right, and center. Its competitor Unacademy has also sped up its acquisition game beginning this year. For this week’s big read we looked at each of these acquisitions made by Byju’s and Unacademy, including a few other players, to bring out a comprehensive outlook on how these smaller players will help the two leaders in the sector.

The Big Read

Indian edtech firms push for M&As to supercharge growth

What Happened

It was only last year that the Indian edtech sector, which had been growing slowly but steadily over the past several years, became investors’ darling. As the pandemic made edtech solutions critical for parents and students in the world’s second-most populous country, investors pumped in USD 2.2 billion last year in the sector. To put this in perspective, Indian edtech companies raised USD 4.1 billion between 2010 and 2020, according to a recent report by RBSA Advisors. In 2019, the sector attracted a mere USD 400 million.

Fuelled by VC money, initial signs of consolidation in the segment started emerging by the second half of 2020. In their bid to increase user base and pad up product offerings, deep-pocketed edtech startups (read: Byju’s and Unacademy) started buying smaller peers. The RBSA Advisors report said the sector saw 17 merger and acquisition (M&A) deals last year.

However, this year, M&A-led growth seems to have become the prime focus for major edtech players.

How Did It Happen

Between 2016 and 2019, Byju’s bought a total of six companies, of which none stood out much. The deals with TutorVista, Erudite, and Osmo were mainly driven by its ambition to venture into the US market, while others contributed to its content and technology. Only one of them, Infiken Internet Labs, which provided computer and data-related services, was shut down.

All these acquisitions were small-scale and didn’t help the company as much as it expected.

With a war chest of USD 1.8 billion fueled by investors since 2020, Byju’s has shelled out USD 300 million for coding tutoring startup WhiteHat Jr., close to USD 1 billion for offline coaching chain Aakash Institutes, USD 600 million for higher education startup Great Learning, USD 150 million to acquire direct competitor Toppr, and USD 500 million for US-based digital-book reading platform Epic.

Looking at these acquisitions, it is clear that most of the money has gone into four things. Bolstering its presence in the test prep space by taking over Aakash; clearing out its rivals like Toppr; adding new offerings—coding, higher education courses, doubt clearing, on-demand tutoring, and virtual lab assistance; and grabbing hold of the US market through Epic.

In the last 16 months, Unacademy, the second most valued edtech startup in India after Byju’s, has bought nine education technology firms.

Before the pandemic hit India in early 2020, Unacademy raised USD 110 million from General Atlantic and other existing investors. In March 2020, five days into the nationwide lockdown, the startup acquired Kreatryx to strengthen its exam preparation portfolio. Of these, five acquisitions—Kreatryx, PrepLadder, Coursavy, NeoStencil, and HandaKaFunda—strengthened Unacademy’s position in the online test preparation segment.

Other companies it bought include TapChief, a networking platform for professionals to land short-term projects, competitive programming startup CodeChef, and Mastree, a subscription-based platform catered to fifth- to eighth-grade students for science, technology, engineering, arts, and math courses. These three acquisitions paved the way for Unacdemy to enter new segments—coding, job-hunting, and K-12.

Unacademy founder Munjal now plans to directly lock horns with Byju’s as he charts out a plan to enter into the higher education segment, where Byju’s recently made its presence after acquiring Great Learning. So far, Byju’s and Unacademy have remained focused on their respective core areas. However, with the two giants out on a shopping spree, they are slowly getting into each other’s turf.

The Weekly Buzz

1. Indian automobile marketplace CarTrade’s IPO oversubscribed 20 times. CarTrade raised INR 9 billion (USD 120.9 million) from anchor investors a day before the issue opened, after which it reduced the offer size to 12.9 million shares from earlier 18.5 million shares. The company set a price band for the offer at INR 1,585–1,618 a share.

2. Zomato’s losses expand 168% in April–June quarter. Barely three weeks after making a stellar debut on bourses, Indian food delivery company Zomato on Tuesday posted a loss of INR 3.6 billion (USD 48.4 million) on the revenue of INR 9.16 billion (USD 123 million) in the first quarter of the financial year (FY) 2022. Although Zomato’s share fell 4% ahead of the results, they climbed up over 6% on Wednesday as market analysts deemed the company’s revenue growth strong, on the back of reviving demand.

3. Amazon’s top Indian seller Cloudtail to discontinue operations next May. The development comes right after India’s apex court refused to halt an ongoing antitrust probe against Amazon and Flipkart by market regulator Competition Commission of India (CCI). Set up in 2014, Cloudtail is a joint venture between Catamaran Ventures, an investment firm set up by Infosys billionaire N.R. Narayana Murthy and Amazon. It has so far enabled over 300,000 sellers and entrepreneurs to go online.

4. CoinDCX becomes the first Indian crypto startup to enter the unicorn club. Despite regulatory uncertainty around cryptocurrency trading in India, B Capital Group has led a USD 90 million Series C round in Mumbai-based cryptocurrency startup CoinDCX. The three-year-old company, claims to have over 3.5 million users. It will utilize this funding to increase awareness of cryptocurrencies to onboard 50 million users in the next few years.

5. SoftBank turns Indian SaaS startup Mindtickle into a unicorn with a USD 100 million check. The new funding comes just nine months after the Tokyo-headquartered investor wrote its first USD 100 million check for the company. Over the last decade, the company has grown to serve over 2,000 global enterprises, including Johnson & Johnson, Merck, AppDynamics, Wipro, and MongoDB.

6. Chiratae Ventures closes its fourth fund at USD 337 million. In the 15 years of its existence, Chiratae has participated in 100 deals to date and has exited 38 investments in companies such as CloudCherry, Manthan, Myntra, Newgen, and Xpressbees. It recently raked in a 43x return from its investment in gaming company PlaySimple.

Q&A Of The Week

4 thoughts from Vineet Rao, co-founder of group-buying startup DealShare

At a time when most online grocery businesses in India are partnering with neighborhood stores, or kiranas, Bengaluru-based group-buying grocery startup DealShare is luring users away from them.

Started in 2018 by Vineet Rao, Sourjyendu Medda, Sankar Bora, and Rajat Shikhar, DealShare targets low and middle-income families with daily and hourly flash deals. It claims these deals are 20–30% cheaper than what’s available in kirana stores. Plus, it promises steeper discounts if buyers share product listings on WhatsApp to whip up group purchases.

DealShare claims to have 1.5 million monthly active users who place 100,000 orders a day. It recently raised USD 144 million in a Series D round led by Tiger Global, with participation from WestBridge Capital, Alpha Wave Incubation, and Z3Partners. Partners of DST Global, Alteria Capital, and Matrix Partners India also pitched in. We spoke with Vineet Rao about DealShare’s group-buying and discounts strategy.

Deals This Week

In partnership with Tracxn

What We Are Reading

The Cloud 100

The annual ranking of the top 100 cloud companies globally by Forbes is worth a glance. The featured companies in this sixth series of the ranking hail from as far afield as Dublin and Bengaluru. The top 10 companies on the Cloud 100 list are worth USD 190 billion. The list features two companies founded by Indians: Postman and Razorpay at the 54th and 57th position, respectively. In total there are 12 companies based out of the US.

The Spoiler

Tune in next week to find out how this cryptocurrency startup survived the RBI ban on crypto startups in 2018.

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