 "edtech")
China’s new restrictions on its online education industry have come as music to the ears of Indian edtech companies such as Byju’s, Unacademy and upGrad who are expecting their valuations to soar as they go in for aggressive acquisitions prior to hitting the IPO route.
In a crackdown on its $100 billion edtech sector, China decreed a few days ago that companies offering private tutoring and online education cannot go public, raise foreign capital or make profits if they offer online school curricula.
Chinese edtech companies plunged into uncertainty and those listed on the US stock exchanges saw their stocks collapse by 50-60 per cent as a result, according to research by Bernstein. Analysts say the constraints will pose serious challenges to many global PE backers such as Temasek and Tiger Global who have bet big on the Chinese industry.
But the same PE funds have also invested in Indian edtech companies and they and other players may now make bigger bets in India given the serious challenges they will face in follow up investments in China. Temasek, for instance, recently invested $120 million in upGrad while Tiger Global has been a consistent investor in Byju’s, putting in money yet again last year.
Tiger Global has also spread its risks by investing in Byju’s competitors too – in Unacademy and Vedantu. Last year, it was one of the key investors in a $86 million fundraise by Unacademy in which Tiger Global has a 2.7 per cent shareholding.
In July 2019, it invested yet again in Vedantu when the latter raised $100 million from various investors, making it Tiger Global’s fifth round of investment in a company in which it has a 13 per cent stake. Concerns exist about the valuations of some big Chinese players. Chinese online education app Zuoyebang raised over $1.6 billion from Alibaba and it is reported to have a valuation of $10 billion.
But these valuations could fall dramatically under the new rules which have slammed shut the door both to an IPO and to fresh infusions of funds from global private equity players. Zuoyebang’s key rival, Yuanfuado (backed by Tencent) hit a valuation of $15.5 billion last October.
On the American stock exchanges, the TAL Education group saw its share value halved. Even worse off was Larry Chen, founder of Goatu Techedu, who saw his company’s shares crash by over 70 per cent on the New York exchange.
In contrast, the valuations of Indian edtech companies are hitting new records. The giant Byju’s is valued at $16.5 billion, making it among the top 15 most valuable start-ups in the world. It is expanding aggressively in the US.
Last month, Byju’s bought the online reading platform for children, Epic, for $500 million. It has been looking at an IPO which could also include a simultaneous listing in India and the US. This option now looks as though it could become easier in light of the Chinese IPO ban.
Last month, Byju’s bought the online reading platform for children, Epic, for $500 million. It has been looking at an IPO which could also include a simultaneous listing in India and the US. This option now looks as though it could become easier in light of the Chinese IPO ban.
According to reports, Unacademy is negotiating a fresh fundraise which could take its valuation up from $2 billion to $3 billion. And upGrad has recently raised money from Temasek which has brought the company closer to becoming a unicorn.
Indian edtech companies have had a dream run, helped by the pandemic and education moving online. According to Bernstein, the sector raised $1.8 billion from PE players last year, that’s triple the $652 million it managed in 2019.
They have also intensified their acquisitions to scale up the business. The edtech sector has more than doubled its acquisitions from 10 in 2019 to 23 in 2020. This year alone, Byju’s has closed five acquisitions.
