Byju’s, the edtech firm valued at $14 billion, said on April 5 that it has acquired offline test preparation firm Aakash Educational Services Limited (AESL) at a valuation of nearly a billion dollars. It is a landmark deal for many reasons. An Indian startup acquiring another company, let alone a 30-year-old one for a billion dollars is unheard of. That too one whose success lies in the offline space. Aakash’s promoters, led by Aakash Chaudhry, and its investor, private equity giant Blackstone, got 60 percent cash and 40 percent shares in Byju’s in the deal, sources say.
In an interview with Moneycontrol, Aakash Chaudhry, managing director of AESL, spoke about why he sold the company now, the future of education, and why despite the edtech wave, offline education and classes are irreplaceable.
Edited excerpts. It is an interesting time to do this. You were well capitalised, profitable and well perched. Why get acquired now?
It's a good question. The world was moving to digital and fairly fast. We had our own Aakash Digital, which closed the year at close to Rs 150 crore (revenue), but we did feel that the gap between us and the next 2-3 players is pretty large. With money in the bank from Blackstone, we had a choice -- should we throw all our effort from offline to digital, or should we look out for a partnership which is complementary in nature. So we spare them the hard work of building offline, and spare us the hard work of burning cash to build out online.
In Byju’s we saw a great opportunity and fitment. On paper and when we met him, the values were very similar. JC Chaudhary, himself being a teacher, has built very strong principles in the company, and when we both met Byju we were both very pleasantly surprised - he has very strong student commitment and passion for education. I think Byju’s as an ecosystem will be a good home for a brand like Aakash.
Aakash will continue to remain an independent brand?
Yes, it will. The test prep initiative within Byju’s will now come within the Aakash brand.
What if you had built it out further and sold it a few years later?
It's a bit of a bird in the hand is worth two in the bush. Why should we test the uncertainty when we can choose certainty? As an entrepreneur, you are a risktaker by nature, but here the intention is first to take the risk out of it. Can we build a platform that stretches enough and is aggressive enough, but takes the risk out of it? That is the attempt behind this.Edtech companies are improving access, but many say the quality of education is still an issue. Would you agree?
People say that putting a high-end teacher solves the problem, but it doesn’t. It is like, if you have a great surgeon operating on you, but you don't have the right nurses and don’t have the right post-op care, the surgery will go wrong. The same goes for education. A master educator or trainer can be an attraction for students to come, but to make them deliver, consistently over 2-3 years- that is where the systems, processes, commitment, passion and undying spirit come into play. If you pick four teachers from here, five from there and say the product is ready, that will rarely work. A bit like you can’t expect a multi-starrer film to be a hit if you don’t have a story.
What do you think the future of education is? Especially given a growing focus on skills rather than degrees?
The people who are offering degrees as a piece of paper and not quality of education, will suffer significantly. A lot of the Tier B-C colleges will go through a very tumultuous time. When students can sit at home and get the IIT-IIM tags at a low cost with online certification programmes, that is what students will go after.
Google has announced that with their certification programme you don’t even need a degree. You can straightaway join a job. That is significantly changing education.
Would Aakash be interested in some of these newer trends and spaces?
Under the Aakash brand, probably not because the brand is strongly associated with test prep. We don't want to confuse the audience and we don't want to dent the trust they have in us.
We want to continue to do better, because despite doing this for 30-40 years and being the leader, we are serving 2 lakh out of 30-40 lakh students. We have hardly cracked the market in terms of opportunity. There is a lot more to capture.
Will you take a step back from the business? Or continue in a leading capacity?
This is one of the initial conversations we had with Byju. Their whole ecosystem has been built with a founder mentality. That’s his core team, be it the founder of Osmo, or WhiteHat Jr. For me the role will continue to be steering the test prep business. I want to be actively involved and use my 15 years of experience in the business. We do have a new CEO (Abhishek Maheshwari, who joined from Byju's a few months ago) but we want to handhold the team through the different cycles of business, sometimes you spot an opportunity from experience.
What have your learnings from the last one year been?
It is interesting, because we did multiple surveys and got a lot of insights during the year, and every time, students came back saying that this is a high-stakes exam, they needed to meet their teacher, they wanted to come to the centre and solve doubts. There is a very strong pull for offline education. So although now it's a little uncertain with cases going up, in a few months centres will all be opening and students coming in.
So you will still reopen each and every centre that you used to have pre-pandemic as well?
Yes, absolutely. Parents keep asking us when we will reopen physical branches. Offline as a model will flourish because there is a very strong demand and inherent value they can derive. Had the kids been a little older, you could have said they are self sufficient. But kids from ages 12-17 need that rigout, discipline and continuous monitoring to deliver.
What will Aakash’s expansion strategy be? Where will the next level of growth come from?
It will come from adding more centres in Tier 3-4 towns, doing deeper penetration in metros and state capitals, so the access to student neighbourhoods will be great. In 33 years we have reached 2 lakh kids. The objective in the next 4-5 years is to reach 5 lakh kids, by adding more centres to increase penetration.
Will you go more digital? Given that you are owned by an internet company now?
Digital will become an important part of our offering, in terms of systems, delivery and content. Even before the acquisition our classrooms were more digitally enabled. But with the Byju’s muscle behind us now, we can definitely increase that.What is your biggest challenge today?
To keep the student excited and motivated, innovating the offline practice and offering technology and better services for our students. Apart from that it is a great brand, very trusted and with medicine and engineering being mainstream careers, there is an inherent demand from all sections of society.