How offline became the new online for India’s ed tech unicorns

On a recent showery, downcast afternoon, we made an incognito trip to an offline centre unveiled by Byju’s, India’s most valued education technology unicorn that offers everything from K-12 to test prep, coding and upskilling.

White walls with the distinctive purple company logo greet visitors at the entrance. Moving past, there were five glass chambers.

“These are counselling rooms where we hold monthly meetings with students and their parents to track their progress of integrating into the process so they stay updated as well,” an admission counsellor explained.

Then followed a lobby with a series of classrooms, each with a big monitor and long desks in front to seat students.

“Our classes can accommodate 30-40 easily but that’s the beauty of our brand. Our strength generally lies between six to a maximum of 15 in a batch,” the counsellor said.

Byju’s plans to open 500 such physical tuition centres across 200 cities in 2022, targeting classes four to 10. These centres will combine offline and online learning experiences. The company said it aims to enrol 1 million students via this initiative in the next two years and set new benchmarks for the format of blended learning in a post-pandemic world.

Hybrid flexibility

The counsellor explained how the company simplifies subjects like mathematics with the help of Vedic maths so that students can speed up their problem-solving skills. He showed us a recorded biology lesson, which he said was followed up with a live lesson by a teacher present in the class.

Using tech at offline centres is one aspect of hybrid. The other incorporates the pandemic-era approach where students, obligated to stay at home, studied on their gadgets through online live classes and recorded lectures.

The counsellor said while Byju’s always wanted to disrupt traditional coaching centres, it is now focusing more on offline. But it will still facilitate students who want to leverage the flexibility of the hybrid mode.

“The fees, however, could go higher than the current amount for a year since we will be providing both online lectures and live sessions with take-home study materials for the students,” he added.

Offline is the new online

“You either die trying or live long enough to become the very thing you went out to disrupt. True on both edtechs going physical, and physical going digital,” a tweet that went viral on the day Moneycontrol reported that Kota-based Allen Career Institute is getting into online coaching to take on heavily funded rivals such as Unacademy, Byju’s and Vedantu.

The tweet is emblematic of what’s happening with education technology companies, many of which became unicorns, valued at billions of dollars. After the pandemic, while Vedantu, Byju’s and Unacademy have launched physical coaching centres, incumbents such as Allen and Aakash are going online.

“The Covid-19 pandemic was a massive turning point for India’s education system. People had reservations about online learning but were forced to shift online,” said a top official of an edtech company, requesting anonymity. “The shift made them realise the benefits of online, but there are certain disadvantages too.”

Most people have realised now that online isn’t a bad option although offline remains dominant in a country like India, he said.

“So that’s the big question for all education companies: How do you offer the best of both worlds? By going hybrid—and that’s exactly what these people are doing here,” the official added.

As the pandemic appears to wear off, parents and students nurse diverse opinions on online and offline. Some are comfortable with online, while others want to move back to offline.

Consequently, demand for the services of online edtech companies has moderated after two consecutive years of hyper growth as some students go back offline. On the other hand, demand at offline education companies is bouncing back as the pandemic recedes, although it is still much lower than pre-Covid levels.

Education companies have thus been investing heavily to pivot to hybrid coaching by integrating and bundling their online and offline offerings to provide the ‘best of both worlds.’

Economics of hybrid

Edtech companies including Unacademy, Byju’s and Vedantu that have launched newer courses combining online and offline offerings have thus increased fees.

The monthly fees for offline courses at Byju’s for the K-12 classes are in the range of Rs 3,000-Rs 3,500. These courses typically include offerings such as digital and physical study material, online recorded classes and access to Byju’s tuition centres. Courses that are taught completely online usually have fees of about Rs 15,000 annually.

“Offline centres will obviously charge you more. There are building and land infrastructure costs, there’s other infrastructure like blackboards and benches, there are helpers and cleaners. So these costs add up and you have to charge the students more,” said an edtech investor requesting anonymity.

The very reason these companies went online was because they wanted to go asset-light and remove all these fixed costs, which are not core to their operations, he said.

“But if they are coming back to offline, then the student fees will have to go up. It’s going to be interesting to see how these edtech companies manage it, given that the growth trajectory is flatter in offline,” the investor added.

The investor’s comments reflect the revenue multiples that offline education companies like Aakash Educational Services and Allen Career Institute got when they raised funds over the past two years.

According to a Moneycontrol analysis, Aakash, which was sold to Byju’s for $950 million, had a revenue multiple of about 5.7x, and Allen, which raised $600 million for a 30-35 percent stake, had a revenue multiple of about 5.4x. To put the number in perspective, online edtech companies such as Byju’s, Unacademy and Vedantu have a revenue multiple of 25-35x, which is about five times higher.

“Current (revenue) multiples are reflections of essentially two numbers—projected future revenue growth and projected future profit margins,” said Mujtaba Wani, partner at GSV Ventures, a global edtech investor. “The reason Aakash or Bodhi Tree traded at lower revenue multiples is because they are generally growing slower than their online equivalents.”

Full circle

Vedantu cofounder Anand Prakash said the company ventured into online coaching back in 2011 primarily because the three cofounders had identified certain limitations of offline. Vedantu’s founders had earlier started Lakshya, an offline coaching centre, which they later sold to Mumbai-based K-12 and test preparation firm MT Educare.

“We had run offline for a long period of almost eight years and then ventured online because there were certain issues in offline, one of them is that we cannot accelerate beyond a pace,” said Prakash. “We cannot open up centres in second-tier and third-tier as we cannot send the best teachers since a lot of the best ones did not want to settle in second-tier and third-tier cities.”

But life seems to have come a full circle: Vedantu opened an offline centre in Muzaffarpur in the last week of June.

Prakash said hybrid coaching centres are a demand of parents and might solve their concerns.

Juggling between offline and online

Sangeeta Singh (name changed), mother of a 15-year-old, said online classes were helpful for children to stay on top of studies as schools and coaching classes were shut. However, she said it also affected their concentration and interest towards learning.

“There is no one to monitor him while he attends online lectures. I would rather have him go to offline coaching classes because at least the teacher can understand if he is slacking,” she added.

Anjika Kumar, a student of Modern Delhi Public School in Faridabad, echoed the same opinion. Kumar was in the eighth grade when Covid-19 hit and she remembers being determined to attend online classes at the beginning.

“That eventually faded out and all I did was get into my blanket and listen to my classes. I was half asleep when some very important topics were taught,” she said.

Kumar, now 16, has just moved to 10th grade and is attending school and coaching offline. She feels offline classes help her stay accountable and give her a feeling of accomplishment after meeting friends and talking to teachers.

“When you come back home after an entire day of offline classes… You have experiences to relate to what you studied throughout the day,” said Kumar.

However, Kumar added that some aspects of online coaching like recorded lectures and electronic copies of study material helped her prepare for exams.

“When learners are young, they prefer a hybrid approach rather than pure offline. When learners are relatively older then they prefer pure online,” Gaurav Munjal, cofounder of Unacademy, tweeted in June.

Munjal said the reason for these choices is the higher intent to self-learn in students preparing for advanced exams like NEET PG, unlike younger learners.

Ankita Verma, an MBBS student interning at the Indira Gandhi Institute of Medical Sciences in Patna and a NEET PG aspirant in 2020, took a gap year to prepare for the competitive medical exam.

But soon the pandemic hit and the famous tutoring centres where she wanted to enrol closed. While some classes pivoted to online video lectures, others uploaded recorded videos on YouTube.

Verma decided to attempt the paper that year also because everything was online and easily available. She started attending lectures before and after her shifts. She would watch recorded lectures on her way to the hospital or just before bed.

“I wasn’t relying on online classes at all. But to my surprise, online wasn’t bad at all. In fact, I saved time as I didn’t have to travel to classes for hours, could attend my shifts also, and most importantly, saved lakhs of rupees of fees,” she added. Verma ended up cracking the exam in the first attempt.

Is hybrid the way forward?

With students and parents juggling between online and offline, education companies have found a bankable solution for the near future by bundling these services. Not only does the hybrid pivot allow them to take on giants in their non-core segments, it also adds to their revenue, especially when many are struggling to keep up with their growth trajectories.

To be sure, most of these companies, especially online edtech unicorns, had raised millions of dollars over the past two years from investors with the promise of penetrating deeper into India’s lower-tier towns, with pure online offerings.

“Certain segments of Indian edtech are now saturated. The market for $1,000 online K-12 tutoring courses or test prep is very crowded with Byju’s, Unacademy and Vedantu dominating,” said Wani of GSV Ventures

To find new revenue streams and to fuel growth, they need to add offerings, he said. Byju’s has done so through mergers and acquisitions of Great Learning, Aakash, and Epic. Unacademy has made some acquisitions but much less successfully. Another natural new offering is to add offline, Wani said.

“But many of them have the resources to invest. Byju’s has raised billions in the last few years and is (standalone business) profitable—they have the luxury to deploy capital offline. Of course, small players and new challengers will find it very hard to compete in a hybrid way,” Wani added.

Edtech companies have invested heavily in technology, offline and online infrastructure, and hiring star educators, among other initiatives. Byju’s has said it would invest about $200 million in setting up offline tuition centres. Moneycontrol reported that Unacademy spent Rs 100 crore to hire 30 educators in Kota alone.

As education companies scramble for solutions after the pandemic, parents, students, investors and founders seem to have found a common ground that suits all and offers the best of both worlds—hybrid coaching. But the longevity of hybrid will depend on the execution of this pivot.