Unacademy to be acquired by upGrad in share-swap deal as India’s edtech sector consolidates

Unacademy, previously recognized as one of India's leading edtech startups, is poised for a significant merger with competitor upGrad through an all-stock agreement. This strategic move aims to unify two prominent online education platforms in the nation. On Sunday, Gaurav Munjal, Unacademy’s co-founder and CEO, announced via a post on X that both companies have entered into a term sheet for upGrad to fully acquire Unacademy. While the valuation details remain under wraps until the deal concludes, this announcement follows a challenging period for Unacademy, whose valuation plummeted below $500 million—an 85% decline from its peak valuation of $3.5 billion during the pandemic in 2021. The edtech sector in India, once thriving during the pandemic, has faced hurdles as students gradually returned to physical classrooms, leading to a decreased demand for online educational services. Many companies, including Unacademy, which had rapidly expanded during the pandemic, are now focusing on cost-cutting measures and redirecting their efforts towards essential digital offerings. In a separate statement, upGrad co-founder Ronnie Screwvala confirmed that Munjal will remain at the helm of Unacademy following the merger. He emphasized that this union would bolster upGrad's comprehensive educational approach, which includes K-12 education, upskilling, and lifelong learning. They have also agreed upon a break fee, the specifics of which have not been disclosed, should the deal fall through. “Unacademy played a pivotal role in creating the modern edtech framework,” Munjal remarked, acknowledging the challenges faced in maintaining focus and market share amid a lack of substantial innovation in the sector. Founded in 2015, Unacademy rose to prominence as a key player in India’s edtech landscape, particularly during the lockdowns that pushed millions of students towards online learning. However, as demand tapered off with the reopening of schools, the company has had to implement cost reductions, workforce layoffs, and business restructuring. Munjal noted that Unacademy currently holds over $100 million in cash reserves after a year of consolidating its physical centers with franchise partners and honing its focus on online education. The company also executed an employee stock buyback worth ₹500 million (approximately $5.40 million), with around 40% of former employees taking part. Over the course of 13 funding rounds, Unacademy has attracted significant investment, raising about $854.3 million from prominent investors like SoftBank, Tiger Global, General Atlantic, and Peak XV Partners. The shifting dynamics have profoundly impacted India's edtech landscape, with Byju’s—once the country's most valuable startup—seeing its valuation drop to near zero and entering insolvency proceedings. Conversely, competitor Physics Wallah has successfully turned profitable, continuing its expansion and making a strong entrance into public markets last year. Recently, Munjal has also been focusing on Airlearn, an AI-driven language-learning app that employs a gamified technique reminiscent of Duolingo’s model. This pivot has caused some tension with Unacademy’s investors, who are concerned that the core edtech initiatives may be neglected during these turbulent times. Nevertheless, Munjal believes that Airlearn is gaining momentum in markets including the USA, UK, Germany, and Canada, positing that AI could herald a new era of innovation in educational technology.