Byju’s, India's top ed-tech company, raised another round of capital. And this new round has made Byju’s the most valuable venture-funded tech company in India at $16.5 billion, edging it past Paytm that has a valuation of $16 billion.
In its latest round, Byju's has raised about $350 million from UBS Group, Blackstone, Abu Dhabi's ADQ, Zoom founder Eric Yuan's family office and Phoenix Rising - Beacon Holdings. The fund raising is part of $1.5 billion the company started raising in April.
Bulk of the capital raised will be used to fund a spate of acquisitions Byju’s has in mind.
In terms of acquisition, since 2017 has acquired nine companies — the largest in the list the 33-year-old test-prep company Aakash, for $1 billion. Byju’s is also acquiring rival Toppr in a transaction estimated to be over $100 million. And reports have it that at least three more deals are in various stages of completion.
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But why is Byju's not able to meet its profit target?
The ed-tech space in India led by Byju’s has cornered the bulk of the start-up funding in 2020 as the pandemic led to a boom in subscriptions for online educational services. A bunch of investors including new backers like Silver Lake and Alkeon Capital collectively infused over $1 billion into the company last year.
Byju's, which is also planning an IPO, caters to students from kindergarten to the 12th grade. Byju's app provides lessons in math and science through video animations and games.
Byju’s claims to have as many as 80 million registered users and 5.5 million subscribers. But in terms of profits, it is not able to meet its target, and that is where the worries for the company start.
Analysts say Byju's focus on relentless growth and its huge marketing costs are not allowing it to meet its profit numbers. Byju's is of course good at controlling the media narrative, and so what we mostly see is its 25 million-plus new users on its platform in the Covid-ravaged 2020. The start-up says it has grown its registered student user base from 70 million -- 4.5 million annual paid subscriptions-- last October to 80 million registered students-- 5.5 million annual paid subscriptions-- till April last.
The ed-tech startup's efforts at increasing its penetration in smaller towns, heavy investments in office space, and high price points of its annual subscriptions are also precluding it from achieving its net profit target. Its entry price point of Rs 15,000 to Rs 20,000 per year in subscription is a bit steep for students living outside of the metro cities.
The market size of Indian ed-tech sector is estimated to grow by 3.7 times in the next five years, to touch $10.4 billion by 2025 from $2.8 billion in 2020. The segment will likely see more than 37 million paid users by 2025.
So, all may not be lost for Byju's still.
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