🕹Why did Byju's buy Aakash Institute?

Understanding the offline ambitions of Byju's

I can’t believe people are just talking about the size of the Byju’s-Aakash deal(which is huge, no doubt. 1 billion dollars is a big number). What’s bugging me is that no one is concerned about the reason why Byju’s bought Aakash Coaching. Recall that all the previous acquisitions by Byju’s are online education companies. But Aakash isn’t. It’s a traditional coaching institute. Then why does Byju’s need it?

In today’s article, this is the question I’ll answer.

Hi friends I’m Shreyans👋 and welcome back to another edition of my newsletter, Integral- a place where we understand the latest tech news in India.

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Let’s go🚀🚀

🕹First, let’s understand the motive of this deal:

Byju’s will pay $1 billion(Rs. 7300 crores) in cash and equity, to Aakash Coaching to acquire it. Aakash has more than 200 coaching centers across India and has close to 2.5 lakh students.

The spirit of this deal is perfectly summed up in the words of Aakash Chaudhry, the MD of Aakash-

[The two companies merging together will offer] very substantial and value-additive services to students.

Byju’s buying an offline company makes one thing clear- they want to expand into the offline education market as well.

According to the company executives, the deal is also aimed at expanding the reach of Byju’s and Aakash Educational in smaller towns and cities.

🕹Why the deal doesn’t make sense?

As I said above, all the previous acquisitions made by Byju’s are online education companies whereas Aakash is a traditional coaching institute.

First question: Why does Byju’s need an offline education company?

Also, remember that Byju’s online education model is disrupting the traditional offline model of education- the same model upon which Aakash is based. So, Byju’s bought something that it is disrupting.

Look at the size of the deal: 1 billion dollars. Now look at what Byju’s is getting in return: 200 coaching centers and 2.5 lakh students(and teachers also). The students and teachers alone aren’t worth this much. Obviously, a big part of that 1 billion dollars is for the 200 classrooms.

Second question: Why does Byju’s need the 200 classrooms? How will it utilize these classrooms?

If Byju’s really needed 200 classrooms, it could have got them for a lot cheaper than 1 billion dollars. Paying this hefty price tag seems foolish.

I had 2 strong reasons why the deal didn’t make sense. But I knew I was missing something. So, I went back and read the official announcement. Fortunately, I immediately got the answer to my first question:

🕹Why does Byju’s need an offline education company?

Let’s look at a statement by Mr. Byju Raveendran on this deal-

For several of Byju’s offerings such as test-preparation, an online-only model is still a few years away.

This answers the first question- why does Byju’s need an offline education company. Fully online education will take a few years to become established. Until then, Byju’s needed to offer offline education as well. This is where Aakash comes in. It’s an established offline education company with lots of classrooms and teachers spread throughout India. This will be helpful to Byju’s to gain a stronghold on offline education.

Onto the second question:

🕹Why does Byju’s need the 200 classrooms? How will it utilize these classrooms?

The answer to this question was given by Aakash Chowdry, MD of Aakash in a press conference:

The acquisition will enable the two entities to build the largest omni-channel for students in India

Focus on the word omni-channel. Here’s the meaning of this word according to HubSpot:

At its core, omni-channel is defined as a multi-channel sales approach that provides the customer with an integrated customer experience. The customer can be shopping online from a desktop or mobile device, or by telephone, or in a bricks and mortar store and the experience would be seamless.

What I understood from this definition is that the customer can use the same product via different channels, but he would get the same experience in every channel.

Applying this concept of omni-channel to the Byju’s-Aakash deal means that students can visit via any channel- online(Byju’s) or offline(Aakash), and they would get the same experience in both the channels.

This is exactly what Mr. Chowdry said-

Students who have wanted to access physical classrooms have gotten that from us. And those who wanted to access content and learning online has been served by Byju’s. Together, we will leverage the physical location and technology and online learning…

This answers my second question on why the deal doens’t make sense- To build an omni-channel education, Byju’s needed Aakash’s classrooms.

Both sides are clearly enthusiastic about omni-channel education.

Here’s what Byju’s CEO Byju Raveendran said about omni-channel in the press conference-

The future of education will blend offline and online experiences

And here’s a statement by Amit Dixit from Blackstone, one of the investors in Aakash-

omni-channel will be the winning model in test prep and tutoring

🕹Now the final question- what are the benefits of omni-channel education for Byju’s?

As I said, omni-channel offers an integrated customer experience. What are the benefits of the omni-channel approach(online + offline) compared to a purely online approach?

  1. For students unable to access the online education of Byju’s, they can just go to the nearby Aakash coaching center to get the same education. This why the teachers of Aakash are an added bonus for Byju’s- they will ensure that students get the same education as their online teachers.

  2. Many aspects of education like solving questions, asking doubts, giving tests etc are best fulfilled by offline mode. This will improve the overall student experience.

  3. For parents who are reluctant to enroll their children in online education programmes, they can enroll their students in the offline education centres. Then in the future, Byju’s can attract these students to its main product- fully online education.

🕹Wrapping up…

In today’s article, we tried to understand why Byju’s bought Aakash Institute. At first, the deal didn’t make sense because 1) no reason why an online education company needs an offline coaching institute and 2) paying 1 billion dollars for classrooms seems foolish. First, we understood why Byju’s needs Aakash- fully online education will take some years to get established. In the meanwhile, Byju’s needs to offer online+offline education. Then, we understood how Byju’s will use Aakash’s classrooms and teachers- to create an omni-channel so that students will get the same educational experience whether they’re learning in online or offline mode. Then we looked at the possible benefits of an omni-channel approach to education.

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