After failed acquisition talks with Upgrad, Unacademy pivots back to online test prep, ETEducation
Bengaluru-based test preparation startup Unacademy is refocusing on its core business after its acquisition talks with Upgrad fell through.
As part of the shift, Unacademy will exit its company-operated offline centres and convert them into franchise partnerships. The move will result in “one of the healthiest cost structures in the sector” by April, cofounder and chief executive Gaurav Munjal claimed in an internal email to employees.
“The franchise model has already shown that it works: great local operators run operations, and we provide the academics, technology and reach. It is asset-light, capital-efficient, and aligned with who we are,” the CEO wrote.
Munjal also highlighted that the company reduced cash burn in its test-prep business in calendar year 2024, paring it to around Rs 200 crore from about Rs 450 crore earlier. “That didn’t happen by accident. It happened because we made hard calls, shut down what didn’t work, and doubled down on what did,” he wrote.
The SoftBank-backed startup has around Rs 1,200 crore of cash in the bank.
ET had earlier reported that Ronnie Screwvala’s higher-skilling company UpGrad has withdrawn from talks to acquire Unacademy over differences in valuation expectations. Initially, the talks had happened for an all-stock transaction that valued Unacademy at around $300 million — an over 90% cut from its peak valuation of $3.4 billion.
According to Munjal, several core verticals, including UPSC, NEET PG and CAT, have turned contribution-margin positive, while PrepLadder and Graphy were cash-flow positive through the year. Unacademy competes with the likes of PhysicsWallah, Allen and Aakash in the test-prep segment.
Airlearn, the company’s global language learning platform, scaled from about $200,000 in annual recurring revenue at the start of 2025 to nearly $3 million by year end, he added. “CY 2026 is not about survival. It is about growth,” Munjal wrote, adding that online test-prep businesses continue to compound while Airlearn is becoming a “serious” global language platform.
“We are going back to our strengths. Unacademy will be an online first company moving forth. Like it was when we started in 2015,” said a spokesperson.
The latest developments come at a time when the test-preparation market is becoming more concentrated, with large players expanding across formats and exam categories and others exploring mergers, acquisitions, or asset sales. Companies are also under increasing pressure to scale while reining in costs.
Earlier this month, Unacademy rolled back changes to its employee stock option (Esop) policy, which had significantly reduced the exercise window for former staffers. These changes, which faced a pushback from former employees, were brought in place in the context of a potential deal with UpGrad.
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