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upGrad eyes larger play in lifelong learning space via M&A route

New acquisitions won’t be merged into upGrad but will operate independently, under the parent

November 30, 2020 / 01:42 PM IST

Online education firm upGrad is eyeing a larger play in the lifelong learning space through the merger and acquisition route, as it looks to leverage on the renewed demand for virtual learning amidst the Covid-19 pandemic. The first such acquisition was of The GATE Academy (TGA) on November 24 through which upGrad entered the test-preparation space.

The company defines lifelong learning as learning across college and professional life, typically from 18-60 years.

In an interaction with Moneycontrol, Ronnie Screwvala, co-founder of upGrad, said that the idea is to look at companies in the education space that are well-established and can add value to the portfolio.

Together but independent

“Our core business is working professionals and entrepreneurs who have built successful businesses in this space. We have planned a series of acquisitions in FY21 on this front. But like TGA, which will be a separate subsidiary, the idea is not to acquire companies and merge them with upGrad. It will be a synergistic partnership of a diverse set of complementary businesses,” he added.

However, he was quick to add that upGrad would not become a portfolio investor and the aim is to completely acquire companies and allow them to be part of the upGrad framework while they operate independently.

TGA offers coaching for the Graduate Aptitude Test in Engineering (GATE) exam, which is not just an entrance exam for postgraduate courses but also an entry requirement for roles in public sector firms such as ONGC, BHEL and NTPC, among others.

While the financial details of the TGA acquisition were not disclosed, Screwvala said that the idea is to acquire companies ‘at the right price’.

upGrad co-founder Mayank Kumar added that test-prep (especially GATE) was a critical piece missing in upGrad’s portfolio and that this acquisition would help fill the gap.

How do the numbers stack up?

upGrad’s Q2 business performance results show that it recorded an 80 percent increase in enrolment from Tier 2 cities. The company said that it is on track for its forecasted Rs 1,200 crore annual run rate. Job guarantee programmes see 80 percent enrolment from Tier 2 cities.

The company added 20 new programmes  in Q2 in the areas of marketing, finance, operations, HR, law, strategy & leadership, analytics, Big Data, IoT, cyber security, AI & data science. The platform has a total of 0.9 million learners on a cumulative basis.

Mayank Kumar, co-founder of upGrad, said that the company enabled 1,000-plus job transitions in 2020 (to date, as of Q2). Overall, upGrad saw a 25 percent rise in career transition in jobs for learners. As of Q2, the average-revenue-per-user (ARPU) is over Rs 2.5 lakh.

In fact, upGrad also had to make changes to meet the rising demand. The start date of programmes, which used to be once a quarter till the last fiscal, had to be tripled in Q2, to meet the growing demand.

Amidst COVID-19 and the subsequent lockdown, economic uncertainty led to job losses and pay cuts across companies. However, upGrad was among the first to revoke the salary cuts initiated earlier.

upGrad had said that 100 percent of the amount cut would be given back to all employees in the July salary, given the growth in business in the April-June quarter. Employee strength also grew to 2,000 from 600 at the beginning of the financial year, despite it being merely a five-year-old company.

Phalgun Kompalli, an upGrad co-founder, said that the idea is to double down on the existing programmes while adding newer ones.

Merely a month after Finance Minister Nirmala Sitharaman announced that the top 100 universities in India would be allowed to offer online programmes, online education firm upGrad announced a slew of e-degree programmes over a blended module in June 2020. This was the first such fully online degree programmes in the country and included MBA, BBA as well as LLM degrees.

“The law programme that we added recently has become very popular. To cater to the rising need, we are looking to get courses in areas such as arbitration, IT laws and also get international partners on board,” he added.

Ambitious plans

Kompalli said that in two years, upGrad wants to have 40 university partners from the current 15 and about 350 programmes from 110 now.

Unlike other players, who have 30-35 percent completion rates for online programmes, co-founder Screwvala said that there is an 80 percent completion rate at upGrad.

But the company is clear about staying away from segments such as K-12. Co-founders Screwvala, Kumar and Kompalli agreed that K-12 is not a space that the company is interested in currently.

“Our core competency is distribution and online learning with structured digital tools. This is the key differentiator in the market since we also have the ability to get players such as TGA to go bigger online,” added Kompalli.

Funding is also on the mind, though the company did not reveal the exact quantum that is being looked at.

“We have been a self-funded company for the last five years. It is now time for us to get external partners in the business, including finance. I have seen companies raise funding and then figure out how to deploy it. But for upGrad, self-funding has taught us the restraint and what it means to have value for money,” he added.

Amidst the edtech boom and the rising demand for upskilling with job loss fears, the market is just getting richer for players like upGrad.

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M Saraswathy
M Saraswathy
first published: Nov 30, 2020 01:42 pm