Blackstone-backed Aakash to take control of ed-tech firm Meritnation

By Debjyoti Roy

  • 03 Jan 2020

Test preparation company Aakash Educational Services Ltd is buying a majority stake in ed-tech firm Meritnation, sealing its first acquisition since getting the backing of private equity investor Blackstone Group Inc. late last year.

Aakash Educational is purchasing Info Edge (India) Ltd’s entire stake in Meritnation for around Rs 50 crore (nearly $7 million), the seller said in a stock-exchange filing. Info Edge owns almost 66% of Meritnation, which is operated by Delhi-based Applect Learning Systems Pvt. Ltd.

It couldn’t be immediately ascertained if Aakash, one of India’s largest providers of medical and engineering test preparation services, has also agreed to buy the remaining shareholding in Meritnation.

The deal comes barely months after Aakash secured funding from Blackstone in late October last year. At the time, Blackstone had said that the investment was part of its aim to build India’s largest digitally enabled, omni-channel education company through Aakash Educational.

Aakash Educational CEO Aakash Chaudhry said the acquisition will help accelerate growth of the company’s digital business and also strengthen the offline offerings across the classroom centres.

“We are continuing to evaluate several acquisition opportunities in the ed-tech space as part of our digital growth strategy, so that we can make our well-crafted student performance journey more productive,” he said.

Info Edge, which owns job portal and has invested in many internet ventures, has pumped in a total of almost Rs 150 crore in several tranches in Meritnation since 2008, according to VCCEdge, the data research arm of Mosaic Digital. It had last invested nearly Rs 38 crore in Meritnation in late 2017.

Meritnation was founded in 2008 by IIM-Bangalore alumni Pavan Chauhan and Ritesh Hemrajani. The company develops and delivers study content and assessment modules for students of classes I through to high school in mathematics, science and English. It also offers online and offline test preparation modules for various undergraduate entrance examinations, including engineering and medical.

The company posted net sales of Rs 34.7 crore for the fiscal year 2018-19 as against Rs 30 crore the year before, as per VCCEdge.

The transaction is likely to be completed by the end of March. 

Aakash Educational

The test prep company has a network of more than 200 centres across 130 cities that cater to more than 250,000 students. It uses classroom-based coaching as well as digital and distance learning methods.

The company provides test preparatory services to Class 10+2 students looking to study medicine and engineering. It also offers foundation courses (covering school boards and junior competitive exams) for Class 8-10 students. These offerings are categorised under three brands – Aakash Medical, Aakash IIT-JEE and Aakash Foundations.

The company had filed a draft proposal to float an initial public offering in July 2018. The IPO size was estimated to be around Rs 1,000 crore. It got approval from the Securities and Exchange Board of India in September 2018. That approval lapsed last year, and it is now unlikely to go ahead with the IPO immediately in light of the deal with Blackstone.

The company reported a net profit of Rs 160.18 crore for the financial year 2017-18 on revenue of Rs 973.33 crore. Its net profit has risen at a compound annual rate of 33.4% between 2013-14 and 2017-18 while its revenue has grown at an annualised pace of 24.3% in the five-year period.

Meritnation is among a large number of education-technology startups that have attracted considerable investor interest in recent years. Ed-tech firm Byju’s is the most valued in the segment after its valuation crossed $5 billion following a funding round in March last year. In December 2018, Byju’s had secured $540 million in a round led by South African tech conglomerate Naspers. Its other investors include General Atlantic and Tencent Holdings Ltd.

On Thursday, VCCircle reported that venture capital firms Matrix Partners and Accel backed an education that runs a network of community learning centres. In August last year, ed-tech startup AdmitKard raised $1 million from investors led by the Australia-based ed-tech fund Growth DNA and Dheeraj Bhatia, the founder of Kips Learning, a professional computer education firm.

Other players in different verticals in the ed-tech segment include Gradeup, Toppr, Springboard and Adda247.

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