Kota loses its crown—will Allen’s big bet on schools and digital pay off?

Founded by Rajesh Maheshwari in 1988, in a rented room in Vallabh Bari space of this Rajasthan metropolis, the schooling empire boomed, and Kota itself turned synonymous with India’s take a look at preparation (test-prep) dream.

The pandemic in 2020 broke that rhythm. Enrollments crashed to almost 1 / 4, revenues tumbled, and rivals poached school. Yet by 2021–22, pent-up demand pulled college students again, and Allen’s footfalls as soon as once more crossed 100,000. To many, the Kota fortress seemed regular once more.

Bodhi Tree, a fund with a fame for selecting winners, poured a staggering $600 million into Allen in 2022.

But beneath the floor, the test-prep order had shifted. In June 2024, Nitin Kukreja, Allen’s CEO, advised the school that enrollments in Kota had as soon as once more plunged, from 131,000 the yr earlier than to simply 81,000 in 2024, a virtually 40% drop, Mint had reported again then.

Online upstarts, hybrid fashions, stressed lecturers, and a metropolis scarred by rising scholar suicides have been eroding the very basis of Kota’s dominance—and with it, the crown jewel of Allen Career Institute.

Today, the corporate is at a crossroads, compelled to chart a brand new path past its hallowed test-prep halls.

Under the management of Kukreja, the previous Star Sports CEO, the corporate has been trying a metamorphosis during the last three years—from brick and mortar teaching centres to an schooling conglomerate with a robust digital spine.

But that dream has been riddled with challenges. Slow progress, a flurry of top-level exits, and a lacklustre digital adoption fee have raised a basic query: Can Allen reinvent itself, or will or not it’s a casualty of the very digital wave it’s making an attempt to trip?

Out-of-Kota technique

For over 35 years, Allen Career Institute has been synonymous with rigorous take a look at preparation, coaching college students to crack the Joint Entrance Examination (JEE) and the National Eligibility cum Entrance Test (NEET). A great rating in these examinations is a ticket to India’s prime engineering and medical schools, respectively.

But the golden period of Kota, the bedrock of Allen’s huge legacy, is arguably over—with frequent authorities crackdowns—due to suicides and constructing regulation violations. Subpar placements within the tech business, and rising layoffs, have solely added to the uncertainty within the test-prep market.

In reality, friends diversifying past their conventional markets are additionally excluding Kota from their plans.

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Ujjwal Singh, founder and CEO of Sri Chaitanya’s digital take a look at prep enterprise, Infinity Learn, advised Mint that whereas the corporate has been increasing from its southern stronghold into northern states, its Rajasthan presence is concentrated in Jaipur and Sikar. “We have been contemplating an entry into Kota over the previous yr, however our analysis exhibits town is shrinking as a marketplace for each new and present gamers. Our north India foray will focus on supply markets, cities the place college students come from, relatively than vacation spot hubs like Kota,” Singh mentioned.

Allen, due to this fact, has been pressured to diversify.

According to 2 business executives, Allen is pursuing an aggressive entry into Okay-12 education and greater schooling, a radical strategic shift.

“The firm is on the lookout for a land parcel of two-three acres in prime metros, and the plan is to enter the education ecosystem with the premium International Baccalaureate (IB) curriculum,” one of many executives, who didn’t wish to be recognized, mentioned.

To lead this cost, the corporate has employed Vishnu Karthik, the previous CEO of ‘Xperiential Learning Systems’ at The Heritage Group of Schools within the National Capital Region. Allen didn’t verify Karthik’s appointment.

Allen’s ambition doesn’t cease at schools. The firm can also be exploring a foray into undergraduate diploma schools, though the main points aren’t recognized but.

“The high-stakes bet to turn into a full-fledged schooling ecosystem is fuelled by a easy enterprise rationale: 10% are rankers, 90% are bankers,” said a venture investor, who has evaluated and made investments in consumer-facing education businesses. “90% still believe in the Allen brand, and it is a good strategy to use that funnel to fuel their higher education segment.”

Allen confirmed the education and greater schooling foray however didn’t share particulars. Queries despatched to Bodhi Tree didn’t elicit a response.

The bet to turn into a full-fledged schooling ecosystem is fuelled by a easy rationale: 10% are rankers, 90% are bankers.
— A enterprise investor

The newest transfer is the third prong of a broader plan being pursued over the previous three years. The first was taking the model on to college students in new cities, as a substitute of forcing them to maneuver to the teaching hub of Kota. In the previous yr alone, Allen has entered over 20 cities. This growth has introduced in over 100,000 new college students, partly cushioning the hit from Kota’s shrinking enrollments, Kukreja advised Mint in an interview.

The second, and most crucial technique, is a push into the digital house. The firm’s on-line arm is known as Allen Digital.

The digital dilemma

The bodily growth, and a push into schools, are rooted in Allen’s present playbook. But the digital foray requires a whole leap of religion: a full-scale transformation of a standard family-led enterprise. Apart from Rajesh Maheshwari, brothers Brajesh Maheshwari, Govind Maheshwari and Naveen Maheshwari have been additionally a part of the enterprise.

For an organization that has taken on a $600 million funding, a tech-led technique can also be anticipated to command a a lot greater valuation when the corporate finally lists on the bourses, an inevitability given the accountability of offering traders with an exit.

“In schooling, valuations differ sharply: offline fashions get one type of quantity, however digital platforms command a premium,” said an investment banker, who has been valuing tech-based companies. The person didn’t want to be identified. “Test prep has seen both waves. First everything went online, then back offline. But the eventual winners will be those with strong digital offerings. Investors want Allen positioned at the front of that curve,” the banker added.

The journey, up to now, has been rocky.

Allen Digital has enrolled 500,000 paying college students over the previous 15 months, together with each on-line and offline. 45,000 of them are purely on-line, the corporate said.

Online progress has been gradual, particularly when benchmarked towards rivals who’ve scaled into the hundreds of thousands.

Case in level, Noida-based Physics Wallah. Its on-line paid orders rose to 2.4 million in 2023 from 0.85 million within the earlier yr, in response to a YourStory report. The edtech agency started as a YouTube channel arrange by star instructor Alakh Pandey.

The causes for gradual adoption largely boil all the way down to poor timing and pricing.

Allen Digital was launched approach again in June 2022, when the pandemic-fuelled ed-tech increase was coming to a screeching halt. “Customer expectations round edtech have been in any respect time low. To are available and construct belief within the class as soon as once more, to say that that is one place the place you possibly can actually get your studying completed, was a more durable climb than we thought,” mentioned Kukreja.

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While its closest rival within the on-line house, Physics Wallah, swears by promoting programs for as little as ₹4,500, a comparable Allen IIT JEE course can value upwards of ₹90,000.

“For some opponents, buyer acquisition prices are near zero on account of their tech DNA, like within the case of Physics Wallah, which has a big YouTube presence. Unless Allen can construct a equally low-cost channel, it must preserve pricing between ₹30,000 and ₹50,000 to maintain margins,” mentioned an business advisor, who spoke to Mint on the situation of anonymity.

Kukreja declined to remark on the competitors’s technique. However, he mentioned that Allen has been in a position to place over 100 college students into IITs, with its pure on-line supply modules, hinting at its worth proposition.

While that’s a basic debate of high quality over amount, within the close to time period, it has resulted in Allen’s gradual progress.

“Kota has at all times been central to Allen’s profitability. Earlier, even when the non-Kota enterprise was a bit wobbly, town was sturdy sufficient to generate regular money flows and carry the corporate ahead. But with falling enrollments and the shadow of scholar suicides, that core engine has been hit,” mentioned the business advisor quoted above, highlighting the headwinds the sector is now dealing with.

Since Allen operated as a partnership agency till 2021-22, year-on-year figures aren’t instantly comparable. For 2022-23, income from operations stood at ₹2,277 crore. In 2023-24, income rose 42% to ₹3,244.7 crore, whereas revenue fell 44% to ₹135.9 crore.

While Kukreja claims that Allen has generated two-fold income progress in 4 years, this falls in need of personal fairness expectations. “From a non-public fairness lens, the thumb rule is a 25% greenback IRR (inner fee of return)—which implies the enterprise has to develop 3x in 5 years,” mentioned the advisor.

Kukreja mentioned the gradual progress is a aware selection.

“If I look again on the final three years, the basics are in place and the enterprise is in a a lot more healthy state. Could we’ve grown quicker? Maybe,” he said. “Maybe, we could have launched many more centres outside, maybe moved faster on digital. But we were always watchful—to do it with the right things in place. Especially when you see what has happened to the landscape outside.”

Byju’s, as soon as India’s most valued edtech startup, quickly declined right into a sea of lawsuits, a results of reckless acquisitions, quick growth, and a scarcity of monetary self-discipline.

Star exits

Allen Digital’s issues have been exacerbated by two high-profile management exits. The most telling signal of hassle got here with the departure of its first-ever CEO, Abha Maheshwari. A former Meta government, Maheshwari was employed two years in the past to infuse a tech-first DNA into the standard enterprise.

“She was not making a lot headway… There have been organizational complexities and cultural disconnects between the legacy Allen and digital groups,” mentioned the business advisor quoted above.

Her exit was intently adopted by that of Apoorv Sharma, the chief advertising officer who joined from Apple however give up in May this yr, simply 1.5 years into his tenure.

Kukreja confirmed the 2 exits however declined to quote causes.

“Abha has completed a implausible job when it comes to build up the platform for us, and so has Apoorv,” said Kukreja. “The great thing is that we have been able to attract talent. We have got teams from Google, Meta, Apple, Flipkart, Kotak…you name it. In a large organization like ours, you will have some management churn,” he added.

The fix-it plan

Faced with a management exodus, a floundering digital technique, and a weak core enterprise, the Star Sports veteran is just not deterred. Kukreja mentioned that the corporate’s revenue fall in 2023-24 was for mandatory investments in a long-term play.

While Allen is doubling down on its bodily growth in new cities, it is usually rising versatile on pricing. “At the bottom tier, a ₹5,000 take a look at sequence is accessible. Full on-line packages, with options like doubt decision, begin at round ₹30,000, whereas hybrid fashions in smaller cities are priced nearer to ₹50,000,” Kukreja mentioned.

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Meanwhile, the corporate is making an attempt to repair the tech hole by way of inorganic strikes. In December 2023, it acquired Doubtnut, an AI-powered doubt-solving platform.

The acquisition gave Allen rapid entry to a strong tech stack that it had struggled to construct in-house. Kukreja mentioned he’s open to extra such buys.

Last December, The Economic Times reported that Allen held talks to accumulate edtech agency Unacademy, which signalled a bigger ambition to consolidate the market and achieve a much bigger digital foothold. Unacademy, in 2022, was valued at $3.4 billion. The acquisition has, nonetheless, fallen by way of.

Internally, the corporate is trying to shed its family-run picture (the Maheshwaris are nonetheless on the board) and embrace a company construction. Like many new age startups, they’re incorporating new practices with formal discover intervals, severance, and efficiency evaluations, Kukreja mentioned. Most curiously, it has launched worker inventory possession plans (Esops), beginning with the non-teaching employees, and slowly extending the profit to long-term instructing workers.

But making a full-stack schooling firm nonetheless stays a difficult enterprise. Allen must compete with not simply edtech startups but in addition sturdy regional gamers.

The Chaitanya Group, Hyderabad-based, has efficiently expanded into schools however has completed so with a cautious, regional focus. Then there’s Amity, which constructed a model by ranging from greater schooling and then expanded into different segments like Okay-12 schools. However, its mannequin is extra akin to a non-public college.

The closest parallel to Allen’s ambition is Physics Wallah, which additionally began as a test-prep model and is now trying to create a full schooling ecosystem. While Physics Wallah has the funding and a passionate neighborhood, it has not too long ago slipped into losses.

The closest parallel to Allen’s ambition is Physics Wallah, which additionally began as a test-prep model and is now trying to create a full schooling ecosystem.

Anupam Shukla, associate at Pioneer Legal, who specialises in personal fairness offers inside schooling, famous that a lot of the growth part within the teaching business is over. What was as soon as a interval of flux—when unorganized tuition shifted to skilled teaching techniques—has now stabilised, leaving fewer alternatives for speedy scale-up, he mentioned. In schools, any new participant, even with a big legacy, would face hurdles competing with entrenched gamers who already dominate catchment areas and scholar pipelines, he added.

Allen, nonetheless, has the benefit of an enormous battle chest, due to Bodhi Tree.

Kukreja believes that the corporate’s document in delivering outcomes will in the end differentiate it in a market now skeptical of flashy progress and big guarantees.

“4,500 Allen college students cracked IIT admissions this yr,” he claimed. “Just 1,100 were from Kota; the rest from other cities.”