Edtech unicorn Vedantu said on Thursday that it had acquired Deeksha, a test preparation platform for board and competitive exams, in a $40 million cash and stock deal.

Vedantu is looking to boost its hybrid teaching play with the acquisition of Ace Creative Learning, Deeksha’s parent entity.

It had launched its first offline centre in Muzaffarpur in June.

The acquisition will give Vedantu access to almost 40 offline centres across Telangana, Andhra Pradesh and Karnataka, and to Deeksha’s 13,000 students.

Deeksha will leverage Vedantu’s live courses platform, including its content and technology assets, to provide hybrid (online and offline) learning to its students.

The acquisition will also help Vedantu further foray into tier 3 and tier 4 towns as it looks to unlock new segments in online learning, it said.

Founded in 1998, Deeksha provides offline coaching to students in grades 11 and 12, helping them prepare for competitive exams such as the Joint Entrance Examination (JEE), National Eligibility cum Entrance Test (NEET), and the Karnataka Common Entrance Test (KCET), among others.

Vedantu’s hybrid expansion is largely focused on test preparation as it looks to bolster its play in the segment.

“We have been in the test preparation segment since 2018. In fact, it has been one of our major segments,” Vamsi Krishna,cofounder and chief executive of Vedantu, told ET.

Krishna said its consumer research had shown that parents wanted their children to be in a disciplined environmentwhile preparing for these examinations and that the need for them to send their children to off line centres was higher.

“Hence, we are following the hybrid strategy for our test prep expansion. A strong acquisition also adds to our IPO story,”Krishna said.

Deeksha will continue to operate as a separate entity even after the acquisition as it leads Vedantu’s off line expansionstrategy.

As part of the deal, Vedantu will bring 900-1000 employees of Deeksha under its umbrella. Deeksha will continue to leadVedantu’s off line foray and will open new off line centres in the coming months.

Deeksha has been clocking 20-21% earnings before interest, taxes, depreciation, and amortization (Ebitda), and a toplineof Rs 90-100 crore, people aware of the deal told ET.

“…we have to take prudent calls around rationalising and doubling down on growth areas when required. We will bedoubling down on tier 3 and 4 geographies as we look to make education more aff ordable,” Krishna said, on being askedwhy large edtech fi rms have been making acquisitions and laying off employees simultaneously.

Krishna said he expects its hybrid learning model to contribute 15-20% to its overall revenue by the end of FY24.

In April, Vedantu announced the launch of Ai Live classes to cut the price of its courses by 70% and make aff ordability akey diff erentiation from rivals.

Vedantu isn’t the fi rst Indian edtech company to eye hybrid learning.

In April 2021, Byju’s acquired brick-and-mortar exam coaching chain Aakash Institute for $950 million. It remains one ofthe largest acquisitions in Indian edtech.

By February 2022, Byju’s said it would invest $200 million to open new tuition centres for students in grades 4 to 10. InMay, Unacademy followed suit, launching off line centres in India’s JEE coaching capital, Kota (Rajasthan).

At present, kindergarten to grade 8 (K-8) contributes roughly 40% to Vedantu’s revenue, while grades 8-10 and testpreparation for grades 11 and 12 contribute 30% each.

Vedantu
became a unicorn
in September 2021, when it raised $100 million in a funding round led by Temasek-backedimpact investing fund ABC World Asia. Its other backers include Coatue Management, Tiger Global, GGV Capital and WestBridge Capital

Unicorns are privately held companies with a valuation of $1 billion or more.
.