CL Educate plans global expansion after NSEIT's DEX business buy

Post this acquisition, it will enter the digital assessment market, which is projected to touch over Rs 13,000 crore in India by 2028

CL Educate, the parent company of coaching centre Career Launcher, is planning expansion into key international markets such as Singapore, Indonesia, West Asia and North America.

This expansion would be supported by the recent approval for acquisition of the Digital Exam Assessment (DEX) business of NSEIT by CL Educate.

The acquisition would be for an initial consideration of Rs 230 crore, with an additional consideration not exceeding Rs 75 crore, subject to achievement of business goals.

“Given that CL has operating leadership on the ground in these geographies, we see exploring these markets in the near future in a phased manner,” said Satya Narayanan, founder and chairman of CL Educate.

 

“Over and above these, there would be perhaps more obvious opportunities in neighbouring markets like Sri Lanka, Nepal and Bangladesh. Entering these regions would not only drive significant top line growth but also substantially enhance margins, making it a highly attractive strategic move,” added Narayanan. 

The proposed acquisition excludes, and will be undertaken post completion of sale of, the technology business of NSEIT Limited, which is a step-down subsidiary of the National Stock Exchange (NSE).

There is a dedicated team that is studying and leading the global footprint opportunity at CL Educate, which is listed on the BSE and NSE. DEX’s international growth strategy will generate the plan that will be relevant for various global markets, including Saarc.

“Singapore, Indonesia, North America and West Asia will also be in the consideration set when internationalisation, as a theme, becomes a business priority for DEX,” said Narayanan.

Post the acquisition of NSEIT DEX, CL Educate will not only enter the digital assessment markets but also start at a healthy 20 per cent relative market share. Naryanan said this will enable CL to have a platform from which it will look to expand its market share in India and abroad.

He said while DEX has a country-wide reach with over 230 physical centres and 3,000 elastic locations, its expansion to international markets will result in a margin expansion along with the geographical penetration.

Now, DEX is present in recruitment and promotion, entrance examination and professional certification examination segments. Its current clientele are mostly quasi-government organisations. 

“Post the acquisition, due to our scalable nature and wider reach, we plan to enter other assessment areas and compete across multiple domains,” said Narayanan.

Rs 13,000 crore market

Post Covid-19 pandemic, the demand for digital assessments has grown at an accelerated pace. It is a Rs 7,000 crore market growing at 12 per cent a year within which digital assessments is growing more rapidly at 16 per cent and comprises two-thirds of the overall market, according to industry experts. The assessment sector is projected to reach over Rs 13,000 crore by 2028 in the country.

Assessment is a core activity in multiple areas for governments, organisations and educational institutions as well as ordinary citizens and learners.

It includes areas such as recruitment and promotion, professional certifications, school and university assessments, entrance examinations, vocational certifications and individual certifications.

As a result, it is a large total addressable market (TAM) opportunity that adds up to about 90 million assessments in India alone. NSEIT DEX brings this opportunity into the fold of CL Educate.

“Large and healthy growing TAM, strong business moat and profitable business unit with strong leadership team are the three strategic wins in the NSEIT DEX acquisition by CL Educate,” said Narayanan.

He said NSEIT DEX is also a deeply technology-led area and only two players have built scale in the space of digital assessments.

He said that NSE IT DEX is also an extremely robust, well managed and profitable business that adds Rs 200 crore to CL’s top line and over 17 per cent margin to the earnings before interest, taxes, depreciation, and amortisation (Ebitda), with most of the long term potential still hugely in the future. 

Narayanan said there are tailwinds from both the government and private enterprises.

Digital assessments enhance the examination process by minimising the time and resources needed for conducting, grading, and analysing results. This leads to a more streamlined approach and offers greater control over security.

Digital platforms are also equipped to handle large scale assessments.

 These assessments also provide access to remote and underserved areas and significantly lower operational costs.

While both the test preparation and digital assessments businesses fall within the broader edtech spectrum, they would operate as distinct businesses at CL Educate.

Each will maintain separate teams for strategy, sales, operations, marketing, technology and support.   

“With both businesses operating as independent companies, with predominantly distinct boards of directors, we believe we can make the most of business opportunities that come the way of each without any conflict of interest,” said Narayanan.

He added, “We will be financing the acquisition through a mix of debt and internal accruals. And, given that DEX is a cash generating business with healthy growth rates, we also plan to retire the debt over three years.”