From $3.4 billion to $290 million: UpGrad walks away from Unacademy deal over valuation differences

Edtech firm upGrad has walked away from the talks to acquire rival startup Unacademy after the two sides failed to agree on valuation, PTI reported on Thursday, citing people familiar with the matter.

The proposed deal had reportedly pegged Unacademy’s valuation at about $290 million, down more than 90% from its peak valuation of $3.4 billion in 2021.

According to the report, upGrad walked away after identifying multiple business challenges at the Temasek- and SoftBank-backed firm, including a shrinking core business and intensifying competition in offline coaching centres that would require heavy investments.

"The company was valued at around USD 290 million, as per the founders, when the discussion started about the acquisition. UpGrad identified a lot of challenges related to the business of Unacademy, even though the business was acquired at USD 280 million. Therefore, the deal was called off," PTI quoted people mentioned above as saying.

UpGrad co-founder Ronnie Screwvala confirmed the decision, citing valuation differences.

“While we cannot comment on specific numbers, it is fair to say that we were unable to arrive at a mutually agreeable valuation,” Screwvala said in a statement.

In a candid post on X in December marking Unacademy’s 10th anniversary, co-founder Gaurav Munjal said the company was now worth “less than $500 million”, a fraction of its peak valuation, and admitted that the pursuit of scale during the pandemic had led to strategic missteps.

Munjal said Unacademy, which began as a YouTube channel in 2010 and formally launched as a platform in 2015, scaled rapidly during COVID-19 as paid subscriptions surged and valuations ballooned. However, the company was later hit by a shift back to offline learning, cheaper competing products and investors pushing towards profitability.

“We invented the playbook, but we stopped innovating on price,” Munjal wrote. “A competitor came in, used our own playbook against us with a cheaper model, and beat us at our own game while we were distracted.”

Unacademy’s parent, Sorting Hat Technologies, narrowed its standalone loss to ₹284.3 crore in the year ended March 2024, from a loss of ₹1,591.2 a year earlier.

The total income of Sorting Hat Technologies slipped marginally to ₹864.3 crore in FY24 from ₹868.8 crore in FY23.

The company’s net worth has declined for two consecutive years, falling to ₹1,078.7 crore in fiscal 2024 from Rs 1,189.17 in fiscal 2023.

"There were also high-profile exits from the company (Unacademy), which again triggered fresh alarms for the deal. There were no discussions or negotiations around the valuation, but there were mainly business-related challenges because of which the deal could not go through," according to sources.