Vedantu acquires test prep platform Deeksha for $40 million

Vedantu is looking to boost its hybrid teaching play with the acquisition of Ace Creative Learning, Deeksha’s parent entity.

It had launched
its first offline centre in Muzaffarpur in June.

The acquisition will give Vedantu access to almost 40 offline centres across Telangana, Andhra Pradesh and Karnataka, and to Deeksha’s 13,000 students.

Deeksha will leverage Vedantu’s live courses platform, including its content and technology assets, to provide hybrid (online and offline) learning to its students.

The acquisition will also help Vedantu further foray into tier 3 and tier 4 towns as it looks to unlock new segments in online learning, it said.

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Founded in 1998, Deeksha provides offline coaching to students in grades 11 and 12, helping them prepare for competitive exams such as the Joint Entrance Examination (JEE), National Eligibility cum Entrance Test (NEET), and the Karnataka Common Entrance Test (KCET), among others.

Vedantu’s hybrid expansion is largely focused on test preparation as it looks to bolster its play in the segment.

“We have been in the test preparation segment since 2018. In fact, it has been one of our major segments,” Vamsi Krishna, cofounder and chief executive of Vedantu, told ET.

Krishna said its consumer research had shown that parents wanted their children to be in a disciplined environment while preparing for these examinations and that the need for them to send their children to offline centres was higher.

“Hence, we are following the hybrid strategy for our test prep expansion. A strong acquisition also adds to our IPO story,” Krishna said.

Deeksha will continue to operate as a separate entity even after the acquisition as it leads Vedantu’s offline expansion strategy.

As part of the deal, Vedantu will bring 900-1000 employees of Deeksha under its umbrella. Deeksha will continue to lead Vedantu’s offline foray and will open new offline centres in the coming months.

Deeksha has been clocking 20-21% earnings before interest, taxes, depreciation, and amortization (Ebitda), and a topline of Rs 90-100 crore, people aware of the deal told ET.

“…we have to take prudent calls around rationalising and doubling down on growth areas when required. We will be doubling down on tier 3 and 4 geographies as we look to make education more affordable,” Krishna said, on being asked why large edtech firms have been making acquisitions and laying off employees simultaneously.

Krishna said he expects its hybrid learning model to contribute 15-20% to its overall revenue by the end of FY24.

In April, Vedantu
announced the launch of Ai Live classes to cut the price of its courses by 70% and make affordability a key differentiation from rivals.

Vedantu isn’t the first Indian edtech company to eye hybrid learning.

In April 2021, Byju’s acquired brick-and-mortar exam coaching chain Aakash Institute for $950 million. It remains one of the largest acquisitions in Indian edtech.

By February 2022, Byju’s said it would invest $200 million to open new tuition centres for students in grades 4 to 10. In May, Unacademy followed suit, launching offline centres in India’s JEE coaching capital, Kota (Rajasthan).

At present, kindergarten to grade 8 (K-8) contributes roughly 40% to Vedantu’s revenue, while grades 8-10 and test preparation for grades 11 and 12 contribute 30% each.

Vedantu
became a unicorn in September 2021, when it raised $100 million in a funding round led by Temasek-backed impact investing fund ABC World Asia. Its other backers include Coatue Management, Tiger Global, GGV Capital and WestBridge Capital.

Unicorns are privately held companies with a valuation of $1 billion or more.