Business
Allen Institute In Talks To Acquire Unacademy But Valuation Slashed To $800 Million
Allen Career Institute, a prominent player in offline test preparation, is in advanced discussions to acquire Bengaluru-based edtech giant Unacademy at a valuation of $800 million—a significant drop from its peak valuation of $3.4 billion.
However, according to sources familiar with the matter, the acquisition negotiations hinge on final approval from Allen’s promoters, the Maheshwari family.
Key Negotiation Points
Talks have been ongoing for several months with investment banks representing both sides. While most stakeholders are reportedly aligned on the deal, the Maheshwari family remains the decisive factor. “Convincing the Maheshwari brothers to merge Unacademy with Allen is critical for this deal to close,” said a person close to the negotiations.
- One of the primary sticking points involves determining a share swap ratio based on the valuation of both companies. Additionally, discussions are underway to finalize potential cash payouts to Unacademy’s founders and early investors.
- Another contentious issue is Unacademy’s cash reserves, valued at approximately $160 million. This has become a critical factor in determining the company’s enterprise valuation, which currently excludes the cash holding.
Unacademy’s Struggles and Strategic Shift
Unacademy’s financial performance for FY 2023-24 reflects the challenges the edtech sector faces. The company reported a loss of ₹631 crore on revenues of ₹988.4 crore. The steep drop in valuation is indicative of a broader reset within the edtech industry, which saw a Covid-induced boom now followed by significant pullbacks from cautious investors.
According to insiders, co-founder Gaurav Munjal was reluctant to fully embrace the offline model, leading to instability in senior management. High-profile exits, including CFO Subramanian Ramachandran, COO Vivek Sinha, CMO Karan Shroff, and SVP Ashish Arora, have compounded the firm’s woes.
Sector-wide Challenges
The broader edtech sector has seen a recalibration, with investors growing increasingly cautious about high-risk ventures following the pandemic. Competitors such as Physics Wallah and other offline coaching giants have also emerged as strong contenders, further intensifying market competition.
Despite these challenges, Unacademy continues to explore avenues for growth through strategic partnerships. Earlier, the firm was engaged in merger talks with K12 Techno, operators of Orchids International Schools, signaling its intent to diversify its offerings.
Founders’ Exit Looms as Allen Inches Closer to Acquiring Unacademy?
The potential acquisition of Unacademy by Allen Career Institute is set to reshape the edtech sector, with Unacademy’s founders—Gaurav Munjal, Roman Saini, and Sumit Jain—expected to exit the company if the transaction is finalized.
According to sources familiar with the matter, Hemesh Singh, another co-founder who resigned as Chief Technology Officer in June 2023, remains in an advisory role but will not participate in future operations post-merger.
Munjal and Bodhi Tree Steering the Deal
The merger talks are being spearheaded by Gaurav Munjal and Allen’s investor, Bodhi Tree Systems, a venture jointly led by James Murdoch and Uday Shankar. In 2022, Bodhi Tree invested $600 million into Allen, valuing the Kota-based coaching giant at $1.3 billion. The Maheshwari family, majority stakeholders in Allen, have yet to fully endorse the deal, making their approval crucial for the transaction’s success.
Allen, renowned for its dominance in engineering (JEE) and medical (NEET) test preparation, operates over 285 classroom campuses and 400 test centers across 64 Indian cities. Its 2023 revenue stood at ₹2,277 crore, with a profit of ₹427 crore. The acquisition of Unacademy would enable Allen to significantly strengthen its digital presence, leveraging Unacademy’s online expertise to consolidate market leadership and potentially pursue a public listing.
Despite their complementary strengths, this deal comes with a history of tension. The two giants have previously been embroiled in controversies involving aggressive teacher-poaching tactics. Allen co-founder Brajesh Maheshwari has publicly condemned teachers leaving for higher salaries, even threatening to blacklist them permanently from returning.
Investor Stake and Financial Impact
Unacademy’s investor pool includes prominent names such as Temasek, General Atlantic, Peak XV Partners (formerly Sequoia Capital India), Tiger Global, and Meta. Since its inception, Unacademy has raised $880 million, though its recent financials reveal a sharp downturn, with a loss of ₹631 crore on ₹988.4 crore revenue in FY24.
The founders’ departure could signal a shift in Unacademy’s operational strategy, offering Allen an opportunity to integrate both online and offline models seamlessly. While Unacademy has navigated turbulent waters post-pandemic, its existing cash reserves of $160 million remain a contentious issue in finalizing the valuation.
Potential Market Impact
If the merger is successful, it could reshape India’s competitive coaching sector, with Allen and Unacademy becoming a formidable hybrid player. This consolidation would not only strengthen Allen’s digital footprint but also challenge major competitors like Aakash Educational Services, Rao IIT Academy, and Khan Global Studies.
However, the path ahead is also laden with uncertainties, with the Maheshwari family’s final decision likely to determine whether this ambitious merger materializes.
In a sector marked by intense competition and shifting investor sentiment, this potential acquisition represents both a consolidation of power and a strategic pivot for the future of Indian education.
Future Outlook
Should the deal with Allen materialize, it could reshape the dynamics of India’s test preparation market by combining the digital expertise of Unacademy with the offline dominance of Allen. However, the path to closing the deal remains uncertain, given the unresolved valuation and structural concerns.
Still, the outcome of these negotiations could set a precedent for the edtech sector, as companies across the board struggle with post-pandemic realities and investor skepticism. For now, Unacademy’s future hangs in the balance, awaiting a decision from the Maheshwari family that could redefine its trajectory