Google-backed edtech startup Adda247 acquired test prep firm Ekagrata Eduserv, Noida-based Schoolnet bought out Housing.com cofounder Advitiya Sharma’s startup Genius Teacher, Allen Career Institute picked up Peak XV-backed Doubtnut, while mid-tier IT services firm Happiest Minds took over Macmillan Learning India, adding to the list of recently-closed deals.
Industry executives said the consolidation is being driven by the fact that smaller companies often offer unique propositions and specialisation in niche categories. Such companies could also be acquired at attractive valuations due to the prolonged funding winter.
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“The edtech industry saw a boom during Covid with funding coming through in a big way… Suddenly, there were many edtech platforms in India, but some had flawed models and unit economics. Now, over the past year, several of them have shut down, while others which managed to survive are finding it difficult to continue operating independently,” Adda247 founder and chief executive Anil Nagar told ET. The acquisition of Ekagrata Eduserv adds to Adda247’s deal count, having already bought out StudyIQ, a UPSC preparation platform in 2021, and Veeksha, an augmented reality-virtual reality learning modules platform, in 2023.
“We have a strong user base of commerce students…and are thinking about what else we can offer them. To cater to their needs, we thought that CA could be one category to delve into,” Nagar said elaborating on the strategy to acquire the CA test preparation firm.
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ETtechFunding squeeze
Investments in India’s edtech sector soared nearly sevenfold to $4 billion in 2022 from $580 million in 2019 largely due to the pandemic-fuelled surge in digitalisation. Funding, however, plunged to $319 million in 2023. Over the last six months, funding has declined to $192.5 million, according to market intelligence platform Tracxn.
“Wider consolidation is becoming increasingly essential for the growth of the higher-education and skilling ecosystem. Acquisitions are driving growth, enabling companies to combine resources, streamlining operations, and enhancing career outcomes,” said Mayank Kumar, managing director at Mumbai-based skilling and workforce development startup Upgrad.
He said there has been a drastic shift in investors’ intent to back businesses compared to the pre-Covid era with discussions now largely focused on unit economics, profitability and sustainable cash flows compared to total addressable market (TAM) or market size previously.
Among the top edtech firms, SoftBank-backed Unacademy also held talks with K12 Techno Services, which runs the Orchids International chain of schools, for a merger, according to online news portal Entrackr. Both companies have a common investor in Peak XV Partners, formerly Sequoia Capital India.
Expanding into new verticals
Hero Vired, the education technology unit of Hero Group, is also open to expanding its business through strategic mergers and acquisitions. “With the backing of the Hero Group, we have some flexibility in the size of the companies we consider, but we’re especially keen on mid-size organisations that have the potential to disrupt the market,” said Akshay Munjal, founder and chief executive, Hero Vired.
In an earlier interview with ET, Deborah Quazzo, managing partner at GSV Ventures, said consolidation in the edtech sector was inevitable. However, it had not picked up as quickly as expected due to the sectoral downturn.
Edtech startups like problem-solving platform Doubtnut were being acquired as they were unable to secure follow-on funding. The deal valued the company at $10 million, significantly lower than the $53.7 million it had already raised from investors like WaterBridge Ventures and Peak XV Partners, as per Tracxn data.
Adding to the funding crunch, large startups are currently under scrutiny, especially following allegations of corporate governance lapses at Bengaluru-based Byju’s by its investors and lenders. In February, edtech founders met to discuss the impact of the developments at Byju’s on the entire industry.