Unacademy in talks to invest in school chain Orchid

Edtech major Unacademy is in talks to buy a significant stake in Sequoia Capital-backed K12 Techno Services, which runs the Orchids International chain of schools, two people aware of the development said.
If the deal materialises, it’ll be the first such bet made by an edtech startup in India on a physical school chain.

K12 is also backed by Sofina, making the Belgian investment fund and Sequoia Capital, common investors in both the companies.

Sequoia is likely to exit Orchid through this transaction, the people cited earlier said.

“The talks are on for an investment of around $25-30 million by Unacademy... it may become a larger transaction. The discussions are currently in final stages...,” said one of the persons cited earlier.

Unacademy’s move to back a school chain is a part of its plan to start offering K-12 education on its platform. That segment is dominated by Byju’s.

SoftBank-backed Unacademy announced on Monday that it is acquiring Rheo TV, a live streaming platform for gamers, the latest in the mergers and acquisitions the edtech industry is currently seeing.

“Unacademy wants to tie up its physical presence and a lot of back-end operations with the acquisition of a chain of schools,” said a person with knowledge of the development. “Besides Orchids, it is also actively looking to acquire a chain in north and west of India.”

Sofina will invest along with Unacademy in K12, and the current management will continue to own a minority stake and run the business, said three people aware of the development. “If the offer is compelling, a full sale cannot be ruled out,” the person added.

Sofina had invested around Rs 200 crore in K12 a year ago.

Unacademy and Orchids International declined to comment.

K12 Techno Services, founded in 2010, is a school management company which provides academic support, services and technology solutions to 37 schools in India across six cities. In 2016, the promoters exited the company and it was acquired by Sequoia Capital India, which now holds 64% stake, while Navneet Learning LLP owns the remaining 36%, according to a Care Ratings press release from March 2021.

Orchid is looking to add six schools in FY22 and 12 in FY23, the Care rating report said. The total operating income of the company improved by 19% y-o-y to Rs 106.24 crore in FY20 as compared with Rs 89.15 crore in FY19, the release said.

Unacademy was founded in 2015 by Gaurav Munjal, Hemesh Singh, and Roman Saini. Unacademy Group comprises Unacademy, PrepLadder, CodeChef, Graphy and Relevel. The company is backed by several investors, including Tiger Global, Dragoneer Investment Group, SoftBank VF2, Facebook, General Atlantic and Sequoia India.

The edtech company has added muscle to its growth engine through the inorganic route, acquiring companies in the last three years to grow both vertically and horizontally. Starting with the acquisition of Wifistudy for $10 million in 2018, it went on to acquire Kreatryx, CodeChef, Prepladder, Mastree, Coursavy, Neostencil and Tapchief, among others.