JC Chaudhry (left), chairman and MD, and Aakash Chaudhry, director and CEO, Aakash Educational Services LimitedImage: Madhu Kapparath
J C Chaudhry loves numbers. In fact, he is obsessed with them.
Whether it is hiring teachers for his test preparatory coaching centre, Aakash Educational Services Limited, or striking a deal with one of the world’s largest private equity (PE) companies, the septuagenarian has always turned to numerology before placing any bets.
“I have been practicing numerology for 35 years,” says Chaudhry, 70, sitting in his office that overlooks one of Delhi’s overhead metro routes in Karol Bagh. “When I look at buying a plot for the institute, the number has to match and be harmonious with my date of birth. It is the same for the faculty that I appoint or the fee structure. Everything is based on the number that is lucky for me.”
A few months ago, when it came to bringing on board New York-headquartered PE firm Blackstone, Chaudhry checked whether the names of both the companies matched numerically. After they did, he sold a 37.5 percent stake in Aakash for about ₹1,350 crore. The decision wasn’t entirely based on numerology though. Aakash for long had been looking to diversify beyond a classroom test prep provider into a big education technology company. The deal valued Aakash, founded in 1988, at a staggering ₹3,600 crore.
“Besides hard work, numerology has helped me take the safer option a number of times,” says Chaudhry. With Blackstone on board, Chaudhry and team bought Meritnation—a company owned by Info Edge, that develops content and assessment modules in mathematics, science and English for students in classes 1 to 12 across nine countries—for ₹100 crore. It also offers online and offline test preparation modules for various undergraduate entrance examinations.
The acquisition and the stake sale—in under two months—come at a time when the Indian education sector is in the midst of a churn, led by increased investor interest in the online education category. Byju’s—the poster boy of Indian online education—is already valued at a whopping $8 billion. A 2017 study by Google and KPMG in India states that the online education market in India is expected to be worth $1.96 billion by 2021 with over 9.5 million users, up from around 1.6 million users in 2016.
The institute had a total strength of over 2.72 lakh students in 2019
In its 250 centres across the country, Aakash coaches over 250,000 students a year for medical and engineering entrance examinations. Thousands of others make use of its online modules. And now, Meritnation is giving the New Delhi-headquartered company the necessary technology to go beyond test preparation.
“We started the transition five years ago,” says Chaudhry. “In our business, there is a severe shortage of good teachers. In a classroom, we can only teach 200 students. But with an online platform, we can teach thousands of students… that is why we felt the need to focus more on digital to bring results. Our strength has been our academic experience.” Sevli to Delhi
Numerology apart, Chaudhry’s success story is one of pure grit.
He had an impoverished childhood and lost his mother at a young age. His father ran a small clothes shop in Sevli, a nondescript village in Haryana where they lived, and by his own account, Chaudhry did not own a pair of chappals till he was 12 or a pair of trousers till he went to study botany at DAV College, Jalandhar. “Poor is an understatement,” says Chaudhry. “I was extremely poor.”
After his postgraduation in botany from the prestigious Birla Institute of Technology, Pilani, Chaudhry moved to Delhi to become a teacher in a private school before landing a government job. Over the next few years, he became principal of the Model Co-Ed Senior Secondary School, Vikaspuri, New Delhi, before resigning and giving private tuitions for students for medical entrance examinations in 1988. “Whatever money I was making as salary, I could make that from teaching two students… I thought why not take the risk,” says Chaudhry. “That’s what led me to start Aakash.”
Aakash began with 12 students in Ganesh Nagar, New Delhi, with each having to pay ₹2,000 as fee. In the first year, seven cracked the medical entrance exam and since then, it has built a stellar reputation in the entrance examination business. Chaudhry claims Aakash has produced over 3.2 lakh doctors in the country. “Practically, every third doctor in India is from Aakash,” he says.
By 2007, the company diversified into the lucrative IIT-JEE entrance examination following a slump for medical courses. About 1.2 million students appear for IIT-JEE every year. This year, over 2,000 students from Aakash scored 95 percentile and above in the exams and secured admission in some of India’s prestigious IITs. It was around this time that Chaudhry’s younger son, Aakash—after whom the institute is named—joined the business as CEO.
By 2012, the company launched a tablet-based model of learning. “It had built a strong foundation as far as the whole academic pedagogy and understanding of the test prep market are concerned,” says Aakash. “We were able to scale from one location to multiple locations, but we came to a point where we thought that despite expanding significantly, there were more than 90 percent students who did not have access to what we had done.”
However, the tablet-based model, too, had its limitations. That’s because the company was only providing the content; the learning management system (LMS) was being outsourced. LMS helps companies with tracking, reporting and delivery of educational courses and training programmes. “We realised that these guys were going to limit our speed [of growth] because they had their own journeys. That’s the time when we started looking out,” says Aakash.
By 2017, the company felt the need for its own LMS platform. “We were coming from a strong content thought process… others were coming up with technology experience, but not much of academic experience,” says Aakash. “This is not about delivering information. It’s about coaching, and the main difference between teaching and coaching is that the coach intervenes frequently to solve problems.”
India’s online education market was becoming a booming business then. In 2018, the size of the test preparatory market stood at roughly $7 billion, with the undergraduate test preparatory market, including foundation coaching, constituting over 55 percent. Job-oriented test preparatory courses commanded 31 percent market share. The same year, India’s edtech companies received in excess of $700 million in funding. Aakash had firmed up plans for an IPO and even filed its draft red herring prospectus with the Securities and Exchange Board of India in July 2018.
That’s when Aakash decided to tie-up with Blackstone. The PE firm—which established its office in India in 2005—has so far deployed nearly $10.4 billion in the country across various sectors. Of this, $6.6 billion was invested in the last four years, making India the largest market for the company in Asia.
“It was either the IPO or private equity. Sometimes you want to go digital, but you have a slight doubt… when you have a strong backing, it becomes easier,” says Aakash. “It was clear that though we were going to grow our physical classrooms, there was a limitation to that growth. If you want to reach out to a million kids, technology has to be the way.”
Aakash knew that Blackstone’s global expertise would come in handy. “They had experience and investments in some of the education companies and partners within the firm who had invested in tech companies. So they could bring in all that knowledge, experience or talent pool required to create an ecosystem,” he says.
Blackstone also helped bring Deborah Quazzo, a leading education technology investor and founder and managing partner of GSV AcceleraTE—a venture capital fund investing in the learning and talent technology sector with investments in Coursera, Turnitin, Andela and CourseHero—as director at Aakash Educational Services. “She’s connecting us with one or the other US-based edtech companies, and helping us pick up something from them,” says Aakash. “Suddenly, access to the education technology fraternity and ecosystem have multiplied for us. It was limited, not just to India, but the Delhi-NCR area.”
The newer avenues are giving the company sharper insights. “Top universities like Harvard, Yale or Stanford are moving to open platforms. The technology and thought process here are to build up from the ground and go for a proprietary software. It’s a different thought process on what we should bet on today that can help us in 5 or 10 years, so that we don’t have to do a major rejig of our technology.”
In addition, Aakash has also lined up plans to foray into international markets. “We want to expand into the Middle East, and other places abroad. The partnership will help us spread internationally,” says Chaudhry. Sky is the Limit
The acquisition of Meritnation is the cherry on the cake. “Meritnation gives us a wider canvas to play on,” says Aakash. Apart from Meritnation’s technology, Aakash’s digital play includes live online classes known as VSAT, solving doubts online and recorded video lectures in addition to online testing. The company is also firming up plans to offer coaching for postgraduate medical courses and chartered accountancy. “We are looking to broaden, but it would essentially be around performance,” says Aakash. “The core DNA of the company is around delivering performance in education and building using technology.”
Experts believe Aakash will become a formidable player in the edtech space in the next few years. “We are likely to see some serious consolidation in the industry in the coming months,” says Aurobindo Saxena, an independent education consultant and former head of education practice at Technopak Advisors, a management consulting firm. “Aakash’s core strength has been classroom learning. Byju’s tried a similar model and failed. But both the companies have been able to attract some top talent in the business. The focus will be on providing better education at cheaper prices.”
Last year, Aakash also roped in Viplav Baxi, considered a doyen in the edtech industry and former director of product and digital transformation at Oxford University Press, as the group’s chief product and engineering officer.
“With Blackstone, Aakash will have deep pockets to do as many acquisitions and acquire specific capabilities which will help them consolidate,” says Narayanan Ramaswamy, partner and head—education at KPMG in India. “In the test prep industry, you hardly find universally accepted brands and many have been doing well locally. Aakash will be looking to put together a string of brands to help them expand. Meritnation has a loyal customer base and provides them with the technology to expand in the digital space.”
Yet, amidst all the focus on technology, digital and open learning, the Chaudhrys aren’t in the mood to shut the door on physical classrooms. “We will look to add between 10 and 20 new physical classrooms every year,” says Aakash. “Digital and digitally-enabled programmes should contribute 30 percent-plus to our revenue in five years. We’re looking at having a paid student base of a million in the next few years.” But that doesn’t mean the company is looking to enter into every category of online education.
“Our approach is going to be to identify a niche for us within this market instead of going after everything under the sun,” adds Aakash.
With the father-son duo firmly in the driving seat, backed by both Blackstone and numerology, Aakash is now aiming for the skies. Did Chaudhry ever think he would get to where he is today, when he was in Sevli? “Never,” says Chaudhry. “I only knew how to work and didn’t even know what an entrepreneur was until a few years ago. At 70, I continue to work from 9 am to 9 pm every day.”
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(This story appears in the 28 February, 2020 issue of Forbes India. To visit our Archives, click here.)