At a far lower valuation of $800 million, the Indian edtech behemoth Unacademy, which was formerly valued at $3.4 billion, is in advanced negotiations to merge with Allen Career Institute. If completed, this possible agreement might change the test-taking environment in India and indicate that the difficulties in the post-COVID edtech industry are still present.
A Fall from Grace: Unacademy’s Valuation Dip
The steep drop in Unacademy’s value highlights the instability the edtech industry is experiencing. The Bengaluru-based platform’s valuation has fallen by more than 75% since it was once a favorite among investors due to its promising growth in online education. This devaluation is a reflection of the industry’s overall decline, which has been made worse by financial irregularities and the demise of important firms like Byju’s.
Investor concern has increased as a result of Unacademy’s flat revenue growth and shift to offline methods after years of operating exclusively online. Although the business has been able to reduce its losses, its valuation has suffered greatly as a result of its incapacity to resume robust development.
Allen Career Institute: The Offline Stalwart in Trouble
Allen Career Institute, synonymous with the Kota coaching ecosystem, has also seen its share of challenges. Known for its dominance in preparing students for competitive exams like JEE and NEET, Allen’s business has taken a hit as the offline test prep industry struggles to recover fully post-pandemic.
Despite being profitable, Allen is grappling with reduced enrollments and a changing education landscape. A merger with Unacademy could bring the benefits of digital expansion, but it also risks diluting the brand’s traditional strengths.
Merger Negotiations: Contingent on Promoter Approval
The consent of Allen’s promoters, the Maheshwari family, has been the main obstacle in the months-long negotiations between Unacademy and Allen. The Maheshwari brothers have the last say, even though interested parties on both sides are prepared to move further.
The share exchange ratio, which is determined by the valuations of both companies, is actively determined by investment banks. Another controversial issue is Unacademy’s $160 million cash reserve, which Allen’s team allegedly left out of the business assessment.
Why the Edtech Sector Is Consolidating
The post-COVID world has been a reality check for the edtech sector, which saw explosive growth during the pandemic but is now dealing with declining online engagement. The collapse of Byju’s, the sector’s most prominent player, and allegations of financial mismanagement have spooked investors across the board.
For Unacademy, moving into the offline segment was a necessary pivot to sustain relevance. However, the capital-intensive nature of offline operations and fierce competition from entrenched players like Allen have hindered its progress.
Allen, on the other hand, is dealing with the changing dynamics of the Kota ecosystem and declining student interest in traditional coaching models. Merging the strengths of both companies—Unacademy’s digital reach and Allen’s offline expertise—could provide a lifeline for both.
What’s at Stake for Founders and Investors?
The potential merger isn’t just about corporate strategy; it’s also about payouts. Discussions are ongoing about cash payouts to Unacademy’s founders and early investors. The eventual share swap ratio will likely determine how much equity each side holds in the merged entity, adding another layer of complexity to the deal.
For Unacademy, this merger could mean a fresh start after years of financial strain. For Allen, it’s an opportunity to modernize its offerings and compete more effectively in an increasingly digital world.
Credits: Money Control
The Road Ahead for Indian Edtech
The Unacademy-Allen talks highlight a broader trend in Indian edtech: consolidation. As smaller players fold and larger ones seek partnerships to survive, the sector is entering a phase of recalibration. The focus is shifting from growth at all costs to sustainable, value-driven operations.
If this merger goes through, it could set a precedent for other struggling edtech firms to explore synergies with traditional players. However, the success of such integrations will depend on how well the companies can align their cultures, strategies, and long-term visions.
