Indian edtech Vedantu has acquired a majority stake in education chain Deeksha for $40 million, the latest in local online learning platforms’ growing attempts at tapping opportunities in the offline market.
The Bengaluru-headquartered Vedantu, which became a unicorn last year, said it will integrate its technology into offline centers of Deeksha as part of the strategic partnership to create a “scalable hybrid model.” Deeksha is a 22-year-old institution that operates 39 physical centers in three Indian states and coaches students in 11th and 12th grade to prepare for competitive exams.
Vedantu began experimenting with offline experience earlier this year and said in Deeksha it found the right partner to maker deeper inroads in smaller Indian cities and towns. In an interview with TechCrunch, Vedantu co-founder and chief executive Vamsi Krishna said he has been tracking Deeksha for 10 years and when they began exploring synergies together, it became clear that the two will immensely benefit from the partnership.
Deeksha’s current topline revenue is between $10 million to $12 million and it’s operating at a 21% EBIDTA margin, according to a person familiar with the matter. Krishna declined to comment on Deeksha’s finances.
Krishna, who is a teacher himself, has taken a slightly different approach to acquisition opportunities. The edtech market in India has witnessed more than a dozen consolidations in the past two years, but Vedantu has largely avoided any participation in that game. “We are still open to acquiring more startups, but I don’t have a certain metric to hit. Acquiring firms is not a strategy for Vedantu,” he said.
“When we say we are employing a hybrid strategy, we don’t mean pure offline centers. In fact, we don’t have any intention to ever open a pure offline center. We have always believed in creating access to quality teachers especially in tier 3 and tier 4 cities. Our vision is that students come to the center, but teachers are still teaching through streaming and other technologies.
Indian edtech giants accelerated their growth during the pandemic — and raised record amounts of capital. But as schools reopen, the firms are increasingly finding it difficult to maintain the same growth.
India is one of the world’s largest education markets with over 300 million school-going students and those preparing for competitive college exams. Only a sliver of this base is currently using any online education service.
Offline coaching centers, in contrast, are growing and continue to remain far more popular among students. In the past two years, top edtech giants including Byju’s, Vedantu and Unacademy, some of which sought to displace the offline players by offering affordable and higher quality education, have renewed their efforts to more directly tap the offline market.
Byju’s acquired Aakash, another physical online institute, for nearly $1 billion last year. Unacademy launched offline experience stores earlier this year. “Offline learning is not going away anytime soon. In fact, online complements offline really well, and together as a package, the omnichannel model is going to steer and be here for a long period of time,” GV Ravishankar, a partner at Sequoia India, said at an event earlier this year.
“Through this partnership, we will leverage Vedantu’s LIVE Class platform for our students and provide a hybrid solution that maximizes learning outcomes through personalized learning algorithms. Vedantu’s hybrid learning model will also enable us to provide the same ‘Deeksha Experience’ to millions of students in smaller towns and cities at an affordable cost,” said Dr. Sridhar, co-founder of Deeksha, in a statement.