Profiling India’s EdTech Industry: A US$10 Billion Opportunity

Posted by Written by Naina Bhardwaj Reading Time: 6 minutes

We profile the latest trends in India’s Edtech industry, whose rapid growth has been further propelled by Covid-19 disruptions. India has a total of five Edtech unicorns, three of which emerged in 2021. The Indian Edtech industry’s future valuation is pegged at US$30 billion, backed by fast digitizing markets as well as uncertainty related to the pandemic. India permits 100 percent FDI in the education sector under the automatic route of approval.

Indian Edtech industry

As e-learning continues to grow more popular, its scope is widening worldwide due to pandemic led restrictions. As a result, India’s own education technology (Edtech) sector is expected by industry analysts to become a US$30 billion industry over the next decade.

According to a report by RBSA Advisor, ‘Unleashing EdTech Potential in India’, growth in the Indian Edtech sector will be backed by growing demand as well as strengthening business models, aided by facilitative governmental policy. The New Education Policy, 2020, has also provided policy impetus to the Edtech sector by recognizing the role of technology in education.

The income inelasticity of education in India is estimated at 0.93 vis-à-vis other expenditure, implying that at any income level, Indians are more inclined to spend on education. Additionally, a National Sample Survey (NSS) on Household Social Consumption stated that there has been a 26 percent surge in out-of-pocket expenditure on education between 2014 to 2018.

Industry reports suggest that the aggregate revenue of Indian Edtech startups has doubled since FY 2018 and this rate is expected to only multiply. Coupled with an exponential rise in the number of paid Edtech users (projected by KPMG to reach 37 million by 2025), the Indian Edtech industry presents huge opportunities for foreign investors.

India’s Edtech sector: A primer

According to Statista estimates, the present market valuation of the Indian Edtech industry is US$2.8 billion and is expected to reach US$10.4 billion by 2025. At present, there are 9,043 EdTech startups in India. This trend is further augmented by factors like India’s burgeoning internet economy – which recorded a total number of 743.19 million internet subscribers (as of March 2020). In 2020, there were approximately 700 million smartphone users in India.

Educational Technology Market Size in India  (in US$ Billion)

Segment

2020

2025 (Projection)

K-12

US$1.16 billion

US$4.3 billion

Test preparation

US$0.8 billion

US$3.99 billion

Online certification

US$0.58 billion

US$1.38 billion

Skill development

US$0.26 billion

US$0.73 billion

Total

US$2.8 billion

US$10.4 billion

Categories of the digital learning market in India and major players 

The digital learning market in India is categorized into following segments: K-12, test preparation, online certification, skill development, and enterprise solution. The major growth drivers of these segments include a large addressable market, convenience, price advantage, as well as pandemic-led disruptions, aided with ever evolving technology capabilities.

K-12: With the current enrolment of more than 250 million, the K-12 segment is the largest and most attractive segment for digital learning providers in India. In this segment of e-learning, further sub-segments include smart class solutions, online tutoring, online preparation for exams, simulation and virtual reality, STEM learning, AR and robotics, and assessment. Prominent Indian players in this segment are Cuemath, STEPapp, Whitehat Jr, and CampK12.

Test preparation: It is another emerging Edtech segment that has continued to evolve in the past few years, with a larger number of users relying on these platforms to prepare for competitive exams like JEE, NEET, CAT, IAS, GRE, and GMAT. This is mainly due to the convenience and cost effectiveness of these platforms. Training institutions, such as Career Launcher and T.I.M.E, and top B-schools like IIM-Ahmedabad and IIM-Kozhikode have started offering hybrid courses (combination of online as well as offline) in the test preparation segment. The key players in this segment are Byju’s, Unacademy, Vedantu, Toppr, Embibe, and Gradeup.

Online certification: Employability is the key factor driving the popularity of online professional education. Big data, project management, mobile app development, cloud computing, and digital marketing are some courses that are undertaken by professionals for upskilling. The prominent Indian players in this segment are Coursera, upGrad, Eruditus, Simplilearn, Jigsaw Academy, etc.

Skill development: Edtech startups are enabling faster skill development, further upskilling, and reskilling of gig economy workers and those in entry-level technology roles. Additionally, they are bringing engineers and software developers up to speed with the latest and most adopted technologies. Key players in this segment include Disprz, InterviewBit, Quizizz, Edureka, and Crio.Do.

Enterprise solution: This segment has witnessed maximum growth as companies are integrating such solutions to stay sustainable in a pandemic world. The major market players in this segment are Liqvid, Classplus, Foradian, Schoolguru, Byndr, etc.

Key Drivers of Edtech Sub-Segments in India

Sub-segments of Edtech in India

Growth drivers

Test preparation

Large addressable market

Price advantage over offline counterparts

Availability of known players

Online certification

Partnerships with known universities/colleges

Convenience and popularity among working professionals

K-12

Parents’ propensity to pay

Price advantage over offline counterparts

Increasing competitiveness among children

Skill development

Convenience

Growing interest in upskilling

Price advantage

Enterprise solution

Need for online product offerings

Requirement of remote workplace management tools

Trends in the Indian Edtech industry

The Edtech sector was already fast expanding worldwide before Covid-related disruptions accelerated its growth through almost overnight adoption of technology tools in the education sector. In fact, the Covid-linked Edutech boom has driven growth of three Indian EdTech players (Eruditus, upGrad, and Vedantu), taking the total unicorn tally to five (following BYJU’s and Unacademy).

With new Covid-19 strains emerging at greater frequency and no clarity on when normalcy shall return, e-learning initiatives are going to be the default option for sake of disease control and convenience besides cost efficiencies.

Substantial increase in the user base

EdTech firms like Vedantu and Byju’s (tutoring), Toppr (learning), and Unacademy (video lessons) have seen a substantial rise in traffic share during the pandemic-caused lockdowns. As per a joint report by BARC India and Nielsen, there was a 30 percent increase in the screen time on education applications on smartphones since the lockdown.

Further, it was reported that BYJU’s added over 33 million users to its platform to reach 75 million users, while Unacademy’s user base tripled to 40 million users by January 2021. Toppr has also recorded 100 percent growth in the paid user base. The trends further suggest that the increase in this screen time for online learning has not only increased for K-12 and post K-12 segments but also for professionals. As per a recent LinkedIn survey, almost 63 percent of professionals have increased their time spent on online learning to enhance their skills or reskill themselves to stay relevant.

In 2020, Facebook collaborated with the Central Board of Secondary Education (CBSE) to launch a certified curriculum on digital safety and online well-being, as well as augmented reality (AR). Facebook has partnered with the Bengaluru-based Startup Village Collective Digital Learning Platform to introduce the AR curriculum.

Value-added services with regular courses

More platforms are innovating to provide tailored products for their target audience, by offering value-added courses like group discussions, live projects, career counselling sessions, and internships etc. besides regular courses. Additionally, more advanced features like personalized dashboards, accurate performance tracking, and skill mapping are also offered to users by premium institutions in order to gain traction.

Gamification of e-learning experience

Technology is being leveraged to provide an immersive learning experience to users through improved interfaces to ensure better knowledge acquisition. Trends like simulation of concepts, level advancement badges, and incentive-based learning are driving user engagement on Edtech platforms like BYJU’s and Cuemath.

For example, while using BYJU’s, during a practice test round, the app prompts questions like, “Hey, did you answer that question a little too quickly?” to test student’s approach to learning. The situations involve “adventurous path to uncover the right answers to questions”, or giving students “lifelines” during tests.

Investment trends in the Indian Edtech sector

India is among the leading markets for global venture capital funding in education, following China and the United States. Reports suggest that the Indian education sector has received approximately INR 300 billion (US$4.04 billion) of funding since the onset of the Covid-19 pandemic. According to data from analytics firm Tracxn, between January and August 2021, Edtech players attracted a whopping US$3.81 billion in funding.

In 2021, India’s largest Edtech company, BYJU’s, attracted the lion’s share of approximately US$1.7 billion in investments, followed by Eruditus with a funding of US$650 million and upGrad, which got a funding of US$185 million. In the same year, Unacademy raised a total of US$440 million, propelling its valuation to US$3.44 billion.

In 2021, BYJU’s made several acquisitions, including that of Blackstone-backed Aakash Educational Services for nearly US$1 billion. Other acquisitions made by BYJU’s include: Epic – an online library for kids aged 12 and under – for US$500 million; Singapore-based Great Learning – an online professional and higher education company – for US$600 million; and Mumbai-based Toppr – an after-school learning platform – for US$150 million.

According to a report by Inc42 Plus, India recorded 346 Edtech funding deals between 2014 and the first half of 2020, amounting to US$2.2 billion. Out of this total funding, nearly 79 percent went to online test preparation startups, followed by online certification (8.4 percent) and K-12 (6 percent).

Players in the Indian Edtech industry who bagged major funding deals in 2020 were: Byju’s, Unacademy, Vedantu, Doubtnut, Embibe, and Testbook.com in the test preparation category; Lido in k-12 category; Coding Ninjas in the online certification category; and Classplus in the enterprise solution category.

Top Edtech Funding Rounds Recorded in H1 2020 in India

Startup

Funding amount (US$ million)

Investor

EdTech sub-segment

Byju’s

US$200 million

Tiger Global, General Atlantic, Bond Capital

Test preparation

Unacademy

US$110 million

Facebook, Sequoia India, Blume Ventures

Test preparation

Vedantu

US$43.3 million

GGV Capital, Legend Capital, Omidyar Network

Test preparation

Doubtnut

US$15 million

Tencent, Omidyar Network, Sequoia India

Test preparation

Embibe

US$12.6 million

Reliance Industries Limited

Test preparation

Testbook.com

US$8.3 million

Iron Pillar

Test preparation

Interview Bit

US$20 million

Sequoia India, Tiger Global, Global Founders Capital

Skill development

Classplus

US$10.7 million

Blume Ventures, Kunal Shah, Alvin Tse

Enterprise solution

Lido

US$10.5 million

BAce Capital, Picus Capital, Madhur Deora

K-12

Coding Ninjas

US$5.2 million

Info Edge

Online certification

 


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