Regulatory Framework for Mergers and Acquisitions

The Companies Act, 2013

The Companies Act is the primary law applicable to all companies registered in India. All business transactions, including mergers and acquisitions, must comply with the Companies Act of 2013.

Securities Laws

The securities in the Indian market are subject to the rules and guidelines issued by the Securities and Exchange Board of India (SEBI). M&A transactions are also dealt with within SEBI’s Substantial Acquisition of Shares and Takeovers amendment of 2018.

Foreign Exchange Management Act (FEMA), 1999

Foreign Exchange Management Act (FEMA) guidelines state that any exchange that intends to settle mergers in India must abide by FEMA guidelines. FEMA guidelines also require the supervision of full-time responsible persons such as administrative staff and secretaries who are members of the companies, as the companies involved in such cross-mergers have a testamentary liability.

Major technology acquisitions in recent years: Flipkart, eBay and Myntra

In 2017, Flipkart raised $ 1.4 billion from global technology leaders eBay, Tencent and Microsoft, announcing a merger with the Indian branch of eBay. eBay invested $500 million in cash and sold their business to Flipkart in exchange for an equity stake in the e-commerce giant. In addition, Flipkart acquired Myntra in 2014 for $300 million. The move consolidated Flipkart’s position in the e-commerce market and placed it on the global map of tech start-ups that “made it big.”

Glance through a bit of history of Byju’s and Aakash

Let us take a quick look at the journey of Byju’s and Aakash so far for us to get a better perspective of the deal and the road ahead.

A brief history of Byju’s Learning App (Think and Learn)

Byju Raveendran, the founder CEO of Byju’s was born into teacher parents and raised in Azhikode, a small, humble town in the Kannur district of Kerala. When Byju Raveendran was working as an engineer with a shipping company based in the UK, he started to help his friends prepare for the CAT exam, an entrance exam for getting into the best b-schools of India. To test himself out of curiosity, Byju also gave the exam and secured 100 percent in his first attempt. Surprised and thinking it was a fluke, he attempted once again. Again, 100 percent score! Maybe that was the first big turning point in his life.

Though he secured a score others would die for, Byju decided not to enter into India’s finest graduate programs known for their cut-throat competition and minuscule admission rates. Soon the two friends who wanted him to tutor them for CAT turned into 4, and then 8, all of a sudden 16. Between 2006 and 2011, Byju’s tutoring sessions went from 40 students to over 1,000 at crowded venues across various metro cities. By 2010, over 1,200 aspiring MBA applicants fought their way into this popular course through his classes.

An aha moment occurred for Byju when he realised that many of his college graduate students were struggling in math and science from a foundational perspective. He felt that the students didn’t have a core understanding of logic; their entire schooling was focused on exam grades, not learning the concepts and fundamentals. Pain point identified, the next big turning point for Byju.

“I was a teacher by choice and an entrepreneur by chance.” – says Byju Raveendran. In 2011, Think and Learn (Byju’s learning app’s parent company) was launched by him, and his wife and co-founder, Divya Gokulnath. Byju realised if he could raise the funds, he could create, package, and deliver the best educational content for students across India to solve the identified pain points because he had an uncanny passion and knack for teaching ideas and concepts the way which would later revolutionise such coaching.

He correctly identified the need for a product and platform that would appeal to the parents of the students, who prioritise quality education for their children over anything else. That meant that Byju’s would have to beat out the incumbent players in the conventional tutoring and coaching space that many traditional households were already paying for.

In 2015, he launched Byju’s – The Learning App which currently has over 80 million students cumulatively learning from the app, 5.5 million annual paid subscriptions, and an annual renewal rate of 86 percent. This was achieved by strategically pivoting from exclusively serving aspiring graduate school applicants to the larger untapped market: 250 million+ K-12 grade students in India.
In place of the traditional model of integrating physical classroom environments into digital tools or platforms, Byju’s decided to disrupt the outside-the-classroom digital experience. By investing upfront in content development and curation focused on the core subjects of Math, Science, English language, and Arts, Byju’s did develop a massively entertaining and engaging library of lessons in fundamental subjects for every student in the K-12 segment and undergraduate students aiming for admission to India’s premium graduate schools.

Rather than just offering a digital version of outdated learning methods/styles as has been the trend till recently, Byju’s strategy is to embrace everything that makes learning fun, entertaining and relatable. For example, students would learn about gravity via a neatly assembled graphic video of the earth, moon’s orbit, and an instructor walking quickly but articulately through an example of the moon’s relationship with the earth. Byju’s methods ensure that complex concepts and theories get delivered in easily comprehensible and digestible forms.

Byju’s co-founder Divya Gokulnath declared a $370M in revenue for the year ended 31st March 2020. The elite venture capital investors across the globe have started noticing Byju’s potential and strengths, and funds have started flowing in easily. Funding rounds have so far come from some big investor names like Tencent Holdings, Sequoia Capital, Qatar Investment Authority, Chan-Zuckenberg Initiative, Owl Ventures and Mary Meeker which in turn has boosted Byju’s valuation and enhanced its brand.

All these firms are chasing the first true EdTech company that has successfully reached such great product-market traction quickly. With the support and strategic reach of these powerful firms, Byju’s stands formidable in its quest to gain international access.
With lots of cash on hand, BYJU’s has been aggressive in constantly keeping the brand top of mind of households by roping in the likes of Shah Rukh Khan, Virat Kohli, Lionel Messi. Some of the big sports celebrities sport the Byju’s jersey in various Indian national matches of different sports which reach large numbers of viewers across India and the globe.

A quick history of Aakash Educational Services Ltd

From a tiny brick and mortar coaching centre started in Delhi in 1988 to a Rs 1,200-crore-plus annual turnover, Aakash Educational Services (AESL) has dreamed big ever since its launch.

Starting a coaching business was a novel concept when it started but founder J C Chaudhry ensured that the company stayed relevant to changes and trends in the educational needs of students. In 2006, Aakash Chaudhary, his son, also joined ASEL after graduating from Harvard Business School.

Aakash Educational Services has more than 215 test prep centres, which coach 250,000 high-schoolers and prepare them for the hard-to-crack competitive exams to enter India’s top engineering and medical schools.

When Aakash wanted to expand and was in need of funds, there were plans to go IPO. When the IPO plans took a backseat, Blackstone picked up a 37.5% stake in AESL for $184 million in October 2019, valuing Aakash at $480 million.

A Strong Core Offering

There is a certain liking for. the classes on the Byju’s app. They are enjoyable, easily understood and interesting. This is the major selling point as the videos are highly engaging with an amalgamation of animation, gamification, and live-action formats. It is interesting to watch pizza being used to teach complex math problems.

Therefore, the quality of the teaching material, the way of presenting it and the connection built with the students makes Byju’s a preferred choice for its target audience.

What also gives Biju’s an edge over its peers is the personalisation of the teaching material for every student it provides. A rich learning profile is built for  each student and the app memorises the student’s learning fingerprint, enabling it to customise and personalise the student’s learning experience. Byju’s personalisation engine mimics the actions of a personal tutor, helping in tackling students’ weaknesses and enabling the students to learn at their own pace.

Everything has been built on this core offering of the company. “If you have a great product, it will sell automatically”.

Having said that, a good product also needs a “business brain” along with a mix of right marketing, right amount of funding and investors, sense of pivoting at the right time and grabbing the right opportunity, to survive and thrive. Byju’s managed to be the shining example of that, of course with certain glitches…

A Favourite of the VC World

Things started coming together for Byju’s as soon as it had launched the app. The company was bootstrapped by Raveendran who had put in over $2,500 from his earnings. Byju’s received its first funding of $9 million in 2013 from Aarin Capital, which is run by Ranjan Pai and Mohandas Pai.

This was followed by the entry of Sequoia Capital in 2015. They liked what they saw – the core content and the pedagogy of the company was strong besides the entrepreneurial spirit and vision of Raveendran, who had already started catalysing product development in the K-12 segment and building a strategy around device learning.

Apart from the right timing, Raveendran’s reputation as an educator worked in his favour in terms of investors’ faith. Later in the same year, it launched the Byju’s app targeting school students, which amassed two million users within a quarter. 

2016 was a significant year for Byju’s with a line of investors, including Sequoia, Innoven Capital, Sofina Group, Times Internet and the International Finance Corporation, signing big checks. Byju’s raised four rounds of funding, quickly rising in the valuation charts. The internet boom was at its peak along with smartphone penetration which gave the investors the right proposition. In the same year, Mark Zuckerberg and Priscilla Chan’s funding arm — Chan Zuckerberg initiative led a $50 million round and boosted the startup’s value to $462 million. This was a stardom moment for Byju’s in the start-up industry.

Vivian Wu, managing partner of Chan Zuckerberg Initiative appreciated the level of engagement from students (average 71 minutes are spent by students on the app) and the company’s research on how parents felt about the app which was reflected by the annual subscription renewal rate of 85%.

By 2017, the company’s growth with 3,00,000 annual paid subscribers helped turn it into a case study in Harvard. Its reported valuation was at $800 million.

In August 2017, it entered the elite group of “unicorns” with over $1 billion valuation. This made global VC firms sit up and take notice of the rapidly growing Edtech market in the world’s second-most populous country.

There was a high adoption and 85% annual renewal came from small towns and cities shows, which had set the vision for Byju’s scope for deeper penetration. There was a huge market.

Later in 2018, Byju’s raised a whopping $540 million round from Naspers Ventures and Canada Pension Plan Investment Board at a $3.6-billion-valuation, it became the world’s most valuable Edtech company besides turning profitable.

The company has hit $12 billion valuation in its recent round of funding of $200 million led by BlackRock and T Rowe Price. What also makes Byju’s investors’ favourite is the company’s usage of capital. In the first five years, the company utilised less than $350 million of the primary capital. Most of the recent fundraising has been utilised to finance inorganic growth. The company never raised money because it needed it, but to add the right propositions.

The Beginnings: Where It All Started

The online learning platform was the brainchild of Byju Raveendran, a former engineer turned CAT (Common Admission Test) tutor. He started this venture after he found his passion for teaching during his time as a tutor where he helped some friends clear their CAT exams. This cultivated his interest in teaching and slowly the frequency and the size of those classes grew. This prompted him to take a better look at the structure of the syllabus and the education sector in its entirety. Upon seeing the severe gap in what was being taught and what was being retained by students, he took it upon himself to do something about this ever-growing distance between education and learning.

BYJU’S was founded in 2011 under its parent company ‘Think and Learn Pvt Ltd’ with a special focus on the K-12 segment (Kindergarten to 12th Standard). Initially, when the platform was launched it was primarily focused on test preparations, which is a far cry from where it stands today with its vast network of teaching staff, multiple scholarship and training programmes and immersive quality-oriented content. Soon after its launch, BYJU’S launched the ‘BYJU’S Learning App’ in 2015 alongside a re-structured syllabus from 6th to 12th grade and better accessibility to experienced teachers to carry the content forward.

Looking at it today, you might have to think twice about putting it into the start-up category as it currently stands at the top of its league in the Edtech sector. The reason for such a large-scale success is the brand’s approach to education dissemination, which puts all the focus on the content rather than the business aspect of the company.