Edtech unicorn Lead is set to acquire the K-12 India business of British educational services company Pearson, which has been divesting its K-12 businesses in other geographies as well.
Lead’s cofounder and chief executive Sumeet Mehta said the acquisition will help the company expand its network to 9,000 schools from around 3,500 currently.
He said the all-cash deal will be funded through a fresh capital raise and internal accruals. The deal value was not disclosed.
The acquisition, Mehta added, will see around 150 people join Lead from Pearson.
According to sources who spoke on condition of anonymity, Lead is likely to close a Rs 150 crore funding round, with venture debt from investors including Stride Ventures and Alteria Capital, and loans from banks including ICICI Bank, HDFC Bank and Standard Chartered Bank.
The Mumbai-based company, which provides tech-enabled solutions to schools with a focus on digital learning through an online or hybrid classroom model (both physical and digital), raised $100 million in January last year in its Series E round, which propelled it into the elite club of startup unicorns, or privately held companies with a valuation of $1 billion or more.
“It’s a good acquisition for us because Pearson currently services some of the schools that we don’t service in the CBSE and ICSE segments, and with this acquisition, we become school ed-tech market leader by a large margin because of the access to a large network of schools and also the product portfolio because we will have not just the tech-based integrated system of Lead but also the blended learning solution from Pearson,” Mehta said.
Lead’s business is currently split 40:60 between CBSE and state board schools.
Schools in India are broadly categorised into four segments in terms of fees – government schools, which is the biggest segment in terms of numbers with around one million schools, low-fee and affordable segments with around 200,000 schools each, and the high-fee segment of about 50,000 schools.
“Pearson’s business is entirely CBSE and ICSE, which is why the acquisition was very attractive,” Mehta said. “The schools that get added to our network from Pearson have a higher propensity to spend, higher inclination towards innovation and less fee constraints. In that sense, it is very accretive in terms of future take-rate growth.”
Lead’s debt funding round comes at a time when venture capitalist funds have slowed down on funding activity, especially in the edtech segment. Data sourced from Venture Intelligence showed that VC funding into ed-tech startups hit $1.94 billion in 2022 from $4.08 billion in 2021.
Startups in other segments, especially those in the growth and late stage, have also been turning to alternative instruments such as convertible notes. This allows these companies to raise funds by avoiding potential down rounds in a slow market.
On about Lead’s plans, Mehta said the company will look at inorganic growth opportunities, while also building solutions to target the low-fee school segment.
“With Pearson K-12, we get a presence in the high-fee segment schools. In future, we will build solutions to enter the low-fee segment as well, and as the government opens up public-private partnership opportunities, we will play there as well. That’s the long-term plan, and this is an important step towards that plan,” he said.
Source: Economic Times