upGrad eyes scale, stronger learner pipeline with Unacademy merger

After months of back and forth, two of India’s most prominent edtech players, upGrad and Unacademy, have moved a step closer to joining forces after signing a term sheet for a potential merger.

In an all-stock deal, upGrad plans to acquire Unacademy in a 100% share swap, meaning the companies will exchange equity rather than use cash.

If completed, the union will mark a pivotal moment for the sector, creating an edtech company that aims to work with learners from their early school years through to their professional careers.

If that sounds familiar, you are not alone. Companies such as Byju’s and PhysicsWallah have walked this path.

Failed talks and eventual agreement

upGrad, led by Ronnie Screwvala, has built its reputation in higher education and professional upskilling, focusing on adults seeking career advancement.

Unacademy, co-founded by Gaurav Munjal, rose to prominence in test preparation, helping students prepare for competitive exams such as the IIT-JEE and NEET.

By joining forces, the two companies hope to create a comprehensive educational funnel. A student might start with Unacademy for school-level coaching and eventually move to upGrad for a degree or professional qualification, allowing the combined group to remain part of the learner’s journey for decades.

This announcement was not the first time the two companies had considered a merger. In late 2025, exploratory negotiations began, with initial talks centred on a valuation for Unacademy of between $300 million and $400 million. That was roughly a 90% fall from its peak valuation of $3.4 billion during the pandemic years.

Those early discussions collapsed in January 2026 after the parties could not agree on price and flagged operational risks. Screwvala said at the time that the companies were unable to reach a “mutually agreeable valuation”.

Beyond price, worries surfaced that Unacademy had become a collection of disparate business units, some of which were loss making. Its company-run offline centres were also losing money.

After the talks broke down, Unacademy undertook restructuring. Munjal moved to exit the company-operated centre business by converting locations to franchise partnerships, where local operators run the sites while the parent provides the brand and teaching materials. The change was designed to make the business more capital efficient. By March 2026, with a leaner structure, the deal was back on track.

Screwvala said the agreement also includes a break fee, a clause requiring one party to pay a penalty if it withdraws from the deal before completion. Munjal noted that the valuation will remain undisclosed until closing, when regulatory filings make the transaction public.

Shared logic

The core idea behind the merger, according to the two leaders, is that the combined company will be stronger than the two operating separately.

Munjal said on social media that “The Whole is bigger than the Sum of Parts” and that the goal is to “build Great Online Products for Learners in India and Globally”.

Screwvala echoed this, noting that the integration would put upGrad on a “strong trajectory” by expanding its focus “from K12 to forever learning”.

Commercially, the acquisition gives upGrad a massive pipeline of younger learners. Traditionally, upGrad has relied on high-ticket, low-frequency sales. By absorbing Unacademy’s test-prep audience, upGrad can cut customer acquisition costs because it can market advanced courses to students already inside its ecosystem.

Recently, upGrad acquired Internshala. The move complements the company’s broader strategy of building an end-to-end learning ecosystem. By integrating Internshala’s internship platform with upGrad’s courses and degree programmes, the companies can cross-sell skilling certifications and academic pathways while also creating a more direct pipeline between learners and employers.

Comparative context

To gauge the significance of this move, let’s compare it with the strategy of PhysicsWallah, a major rival in test preparation. While upGrad is moving top-down, beginning with professional degrees and expanding into younger cohorts, PhysicsWallah has taken a bi-directional approach.

PhysicsWallah began with affordable test-prep and later expanded both upwards into professional skilling and downwards into schools. Initiatives such as PW Gurukulam aim to “catch ’em young”, a strategy similar to how some software companies built lifelong loyalty in the 1980s.

While PhysicsWallah focuses on affordability and its own hybrid centres, the upGrad-Unacademy entity appears to be leaning towards a more premium, franchise-led and AI-driven model.

Past hiccups

The road to this merger featured internal issues, notably around employee stock option plans. In late 2025, Unacademy faced criticism for shortening the exercise window for former employees to just 30 days, a move that would have forced many to pay high taxes on shares that were hard to sell.

After backlash from former staff, Unacademy put the changes on hold. To restore confidence and provide some reward despite a lower valuation, the company launched a Rs 50 crore ESOP buyback programme in February, giving many employees a chance to convert shares to cash, with several individuals likely receiving more than Rs 1 crore.

Meanwhile, a key plank of the deal is that Munjal will remain as co-founder and chief executive of the Unacademy vertical. That was a concern in earlier talks, as Screwvala wanted strong leadership to continue overseeing the test-prep business. Screwvala has praised Munjal and his team for creating “online education products that learners love”.

One promising asset is Airlearn, an AI-powered language-learning app developed at Unacademy. Munjal said it grew from a $200,000 annual revenue run rate to nearly $3 million by the end of 2025. There were discussions about spinning Airlearn off, but it is now likely to be integrated into the merged group and serve as an innovation hub.

IPO ambitions

The merger is also intended to prepare upGrad for an initial public offering. The company has prioritised stability and profitability over aggressive short-term expansion and reported that it turned EBITDA positive in the 2025 financial year. EBITDA, earnings before interest, taxes, depreciation and amortisation, is a common metric for operating profitability.

By acquiring Unacademy, upGrad adds roughly $100 million to revenue and gains access to Unacademy’s cash reserves of more than $100 million. That strengthens the balance sheet as the company prepares to tell its story to public market investors.

The upGrad-Unacademy deal signals a maturing industry where the emphasis has shifted to sustainable unit economics. Experts suggest the sector could eventually be dominated by three or four massive integrated skilling players offering everything from pre-school literacy to executive coaching.

“The next chapter for education is only beginning,” Munjal said when announcing the deal with upGrad.

With this potential merger, upGrad and Unacademy are betting that combined scale, broader product lines and a focus on AI will put them at the front of that next chapter.