Allen Career Institute, a prominent offline coaching network based in Kota, Rajasthan, is reportedly in advanced discussions to acquire Unacademy, a Bengaluru-based edtech startup.
According to an ET report, Allen could value Unacademy at around $800 million, a significant drop from its peak valuation of $3.4 billion.
The report said the negotiations, which have been ongoing for several months, await a final sign-off from Allen’s promoters.
Notably, the talks involve both companies’ investment banks deliberating over a share swap ratio and cash payouts for Unacademy’s founders and early investors.
“While the negotiations have been on, with investment banks involved on both sides, the key to the deal going through is to bring the Maheshwari brothers on board for merging Unacademy with Allen,” ET reported, citing the source.
Rationale behind the merger
The potential acquisition comes during a turbulent phase for India’s edtech industry, which has seen a downturn following a pandemic-era boom.
Both companies have faced challenges: Unacademy pivoted from an online-only model to embrace offline formats, while Allen has been dealing with reduced revenues in its Kota-based coaching ecosystem.
The deal could create a consolidated education powerhouse, combining Allen’s extensive physical network with Unacademy’s digital expertise.
Valuation dispute and founder exits
The report further said that the valuation disagreements, particularly around Unacademy’s cash reserves of $160 million, have emerged as a sticking point in negotiations.
If finalized, Unacademy’s co-founders, including CEO Gaurav Munjal, Roman Saini, and Sumit Jain, are expected to step down.
Hemesh Singh, another co-founder, left his CTO role in June but remains an advisor. The talks are being driven by Gaurav Munjal and Allen’s investor, Bodhi Tree, which invested $600 million in Allen in 2022.
Financial and operational struggles
Allen, a well-established name in test preparation for medical and engineering entrance exams, reported revenues of Rs 2,277 crore and profits of Rs 427 crore in FY23.
However, it has not yet filed audited financials for FY24. Meanwhile, Unacademy, which recorded revenues of Rs 988.4 crore but posted a loss of Rs 631 crore in FY24, has undertaken extensive cost-cutting measures. including layoffs affecting over 250 employees in July and the exit of several senior executives.
