Why India is the New China
Over the most part of the last decade, China was the hottest EdTech market until Chinese regulation changed this, propelling India into the limelight.
By Hilary Foord, Investment Banking Analyst at IBIS Capital
For the most part of the last decade, China has been the hottest EdTech market leading the industry’s technological advancements and innovation. Chinese tutoring firms alone attracted $6.5bn of funding in 2020 across 32 deals, at the time cementing its status as EdTech’s leading geographical market. However, regulation introduced by the Chinese government in 2021 changed this. A law was introduced banning EdTech companies that teach school curriculum from making profits, raising capital, or going public. These measures not only crippled China’s tutoring market but also removed investor confidence (both public and private) from China’s EdTech scene. Larry Chen, the founder of GSX Techedu, personally lost over $14bn of his own fortune.
However, India is perfectly placed to take advantage of this situation. Investors will look to re-deploy their capital into another market. Since the Chinese regulation came into place, 4 Indian EdTech firms have achieved Unicorn status in the form of UpGrad (the online pathway programme provider), Eruditus (executive level course platform), Vedantu (online tutoring firm), and just recently in May 2022 PhysicsWallah (online tutoring platform). These 4 firms join Byju’s (now a decacorn) and Unacademy in becoming Indian unicorns. The sudden glut of Indian unicorns emerging, whilst slightly coincidental, highlighted the EdTech power shift that had occurred. In fact, 2021 was the first year that India attracted more EdTech investment than China. $3.8bn was invested into India up from $2.3bn in 2020 compared to $2.7bn into China down from $10.2bn in 2020.
There are a number of macro-economic trends that favour continued growth within India which will help it to maintain its status as Asia’s brightest EdTech market. India’s youthful population is an attractive option for education companies to benefit from. 26% of its population are younger than 15 and the country’s median age is 28. The adoption of the internet is also growing rapidly in India. According to the IAMAI-Kantar ICUBE 2020 report, India had 622 million active internet users in 2020. This number is expected to increase by 45% to reach 900 million by 2025, with rural India particularly driving this growth. Coupled with this, smartphone ownership is accelerating as ownership among government school student families increased from 30% in 2018 to 56% in 2020 and from 50% to 74% among private school student families. Rising affluence in India is helping to underpin these trends — forecast real GDP per capita growth is expected to be 9% per annum through 2022. These macro-economic trends have seen bullish predictions for the industry in India. The Indian EdTech sector is projected to be a $10.4bn industry by 2025 and to reach $30bn by 2030 growing at a CAGR of 15% over this period.
According to analytics company Tracxn, there are several other Indian EdTech companies rising the ranks. Tracxn has predicted that India has 15 active ‘soonicorns’, including student financing firm Leap Finance, online coding school BrightChamps, and Teachmint, the teaching and classroom management platform, highlighting that the future is bright for India. It seems that India will not be giving up its mantle of Asia’s leading EdTech market anytime soon!
