Amid swirling reports of a potential merger or sale involving edtech giant Unacademy, Co-founder and CEO Gaurav Munjal has made a clear statement about the company’s future. In a post on X (formerly Twitter) dated July 3, Munjal emphasized that Unacademy is committed to long-term growth and profitability. “There is a lot being said about Unacademy currently. To set the record straight, Unacademy will have its best year in terms of growth and profitability. We also have many years of runway. We are building Unacademy for the long run. Ignore the rumours,” Munjal wrote.
Merger Talks and Industry Consolidation
Munjal’s post follows a report from The Morning Context, which revealed that Unacademy has approached several education companies about a potential merger or acquisition. Last month, Entrackr reported that Unacademy was in discussions with K12 Techno, a Bengaluru-based company that operates Orchids International Schools. Munjal acknowledged these exploratory talks, noting that the intense competition in the edtech sector is driving industry consolidation, with significant mergers expected within the next year.
Financial Health and Cash Burn
Reports about Unacademy come at a time when BYJU’S, another major player in the edtech space, is facing financial difficulties and seeking new funding at a significantly reduced valuation. Unacademy, however, appears to be in a stronger financial position. According to a report from The Morning Context, the company has Rs 1,600 crore in the bank, with a runway of around five years and no debt. Munjal mentioned that the company’s cash burn is expected to be around Rs 350 crore this year, down from Rs 570 crore the previous year and Rs 1,400 crore the year before. Back in December 2023, Munjal claimed that Unacademy had reduced its cash burn by 60%, securing a runway of over four years with its cash reserves.
Funding Challenges and Workforce Adjustments
Despite these positive financial indicators, Unacademy has struggled to secure fresh funding. According to Tracxn, the company has raised $880 million to date, with the last major round of $440 million occurring in August 2021. In response to the funding slowdown, Unacademy has implemented several cost-cutting measures, including layoffs. Recently, the Softbank-backed company laid off at least 250 employees across multiple verticals. This follows previous rounds of layoffs, with the company reducing its workforce by 12% in March last year and by 10% in November 2022. The current employee count is around 2,000.
Leadership Changes and Future Plans
The company has also seen several top-level changes. Co-founder Hemesh Singh recently stepped down as Chief Technology Officer to transition to an advisory role. Sumit Jain, a partner at the firm, is expected to join the board of directors, filling the seat vacated by Singh. Additionally, Unacademy’s leadership, including its founders, are expected to take salary cuts in FY24 to help the company work towards profitability.
Financial Performance
While Unacademy has yet to report its FY24 financials, the company reported a loss of Rs 1,678.1 crore in FY23, down from Rs 2,847.9 crore in FY22. However, its operating revenue surged to Rs 907 crore in FY23, compared to Rs 719.2 crore in the previous fiscal year.
Despite the challenges, Munjal remains optimistic about Unacademy’s future. He believes that the company has come a long way and still has a long way to go, emphasizing that Unacademy is built for the long run.
Financial Summary
| Metric | FY22 | FY23 | Projected FY24 |
|---|---|---|---|
| Loss | Rs 2,847.9 crore | Rs 1,678.1 crore | – |
| Operating Revenue | Rs 719.2 crore | Rs 907 crore | – |
| Cash Burn | Rs 1,400 crore | Rs 570 crore | Rs 350 crore |
| Cash Reserves | – | Rs 1,600 crore | – |
| Employee Count | – | ~2,000 | – |
| Funding Raised | – | $880 million | – |
| Last Funding Round (August 2021) | – | $440 million | – |
| Valuation | – | $3.4 billion | – |
Key Recent Events
- Layoffs of 250 employees
- Exploratory merger talks with K12 Techno and other market players
- Softbank-backed, with significant layoffs to reduce cash burn
Reasons for the Sale Situation
Where Unacademy Has Failed in Its Business Model
- High Cash Burn Rate
- Excessive spending without sufficient revenue generation.
- Despite reduction efforts, cash burn remains significant.
- Funding Slowdown
- Difficulty securing fresh funds.
- Last major funding round in August 2021.
- Market Saturation and Competition
- Intense competition in the edtech sector.
- Difficulty maintaining EBITDA due to market conditions.
- Employee Morale and Retention
- Multiple rounds of layoffs leading to reduced workforce.
- Impact on employee morale and stability.
- Management and Structural Changes
- Frequent top-level changes causing instability.
- Resignation of key figures, such as Co-founder Hemesh Singh.
- Economic and Industry Factors
- Overall slowdown in the edtech funding environment.
- Major competitors like BYJU’S facing severe financial issues.
Recent Statements and Future Outlook
Statements from Leadership
- Gaurav Munjal, Co-founder and CEO:
- Asserts the company is here for the “long run.”
- Claims that Unacademy will have its best year in terms of growth and profitability.
- Emphasizes that the company has a runway of around five years with no debt.
- Notes a reduction in cash burn to Rs 350 crore this year.
Operational Adjustments
- Layoffs and Cost Reduction:
- Multiple rounds of layoffs to minimize cash burn.
- Salary cuts for leadership to work towards profitability.
- Financial Metrics Improvement:
- Reduction in losses from FY22 to FY23.
- Increase in operating revenue in FY23.
Conclusion
Unacademy is navigating a challenging landscape with significant operational and financial adjustments. The company faces difficulties from high cash burn rates, funding slowdowns, market saturation, and internal management changes. Despite these challenges, leadership emphasizes a commitment to long-term growth and profitability, seeking strategic partnerships and exploring merger opportunities to stabilize and advance their position in the competitive edtech sector.