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

We profile the latest trends in India's Edtech industry, whose rapid growth has been further propelled by Covid-19 disruptions. As of June 2022, India has a total of seven Edtech unicorns. 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.

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. Recently in June 2022, Noida-based Edtech platform PhysicsWallah, also known as PW, became the seventh Edtech to enter the unicorn club, as it raised US$100 million in a Series A funding round from Westbridge and GSV Ventures. Other unicorns in the Edtech sector are Byju’s, Eruditus, Unacademy, Lead, Upgrad, and Vedantu.

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.

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.

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. Reports suggest that the Covid-linked Edutech boomed in 2021, driving the growth of three Indian EdTech players (Eruditus, upGrad, and Vedantu). In 2022, Lead and PW became the latest entrants to the billion dollar club. 

With the emergence of new Covid-19 strains, e-learning initiatives have gained popularity due to their effectiveness in disease control and convenience besides cost efficiencies. However, as the country heads towards normalcy, most Edtech startups are now exploring the hybrid option.

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.

This article was first published on January 7, 2022 and last updated on June 9, 2022.