UpGrad in Advanced Talks to Acquire Unacademy for $300-400 Million Amid Significant Valuation Drop

Edtech company UpGrad is reportedly in the final stages of talks to acquire its rival Unacademy for a valuation of $300-400 million (approximately Rs 2,500-3,300 crore).

This potential acquisition price marks a significant markdown from Unacademy's last known valuation of $3.44 billion, achieved in 2021. The deal structure suggests that Unacademy's language-learning application, AirLearn, will be separated into an independent company. UpGrad is set to acquire Unacademy's primary test-preparation division, which includes its expanding network of offline learning centers. Notably, UpGrad will not hold any equity in the spun-off AirLearn entity.

Over the past three years, Unacademy has implemented aggressive cost-cutting measures, reducing its annual cash burn from over Rs 1,000 crore to around Rs 100 crore. The company currently possesses cash reserves of approximately Rs 1,200 crore, making it an attractive acquisition target. For the fiscal year 2024, Unacademy reported a revenue of Rs 839 crore, a 7% decrease year-on-year, while its net losses narrowed by 62% to Rs 631 crore.

UpGrad, founded by Ronnie Screwvala, focuses on online degree and professional certification programs in collaboration with international universities.

Impact This potential merger signals a major consolidation wave within India's Edtech sector. It could strengthen UpGrad's market position by integrating Unacademy's test-prep capabilities, particularly its offline presence. For investors, it represents a significant exit opportunity for Unacademy's stakeholders, albeit at a much lower valuation, reflecting the post-pandemic market recalibration for edtech firms. The deal might also pave the way for further M&A activities in the competitive Edtech landscape. Rating: 7/10

Difficult Terms: Edtech: Education Technology - The use of technology to deliver educational services and learning materials. Acquisition: The act of one company purchasing a majority stake or all of another company. Valuation: The process of determining the current worth of an asset or a company. Term Sheet: A document outlining the preliminary terms and conditions of a business deal, often a precursor to a formal contract. Spin-off: A corporate restructuring where a new company is created from an existing business unit of a parent company. Cash Burn: The rate at which a company spends its cash reserves to cover operating expenses when its revenues are insufficient. Revenue: The total amount of income generated by the sale of goods or services related to the company's primary operations. Net Losses: The total expenses incurred by a company that exceed its total revenue over a specific period. Marquee Investors: Highly influential and well-known investors who have invested significantly in a company, lending credibility. Verticals: Distinct business segments or areas of operation within a company or industry. Regulatory Filings: Official reports and documents submitted by companies to government regulatory bodies. Professional Certification Programmes: Educational courses or programs designed to equip individuals with specific skills and credentials for professional advancement.