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The proposed merger between Indian edtech giants upGrad and Unacademy has officially collapsed after months of negotiations, with valuation disagreements cited as the primary reason for the deal’s failure. Sources familiar with the matter confirmed on January 8, 2026, that upGrad has abandoned its plans to acquire the struggling test-preparation platform, marking another setback for India’s beleaguered edtech sector.
“The deal fell through as the two parties could not agree on a final valuation,” a source aware of the developments revealed. The failed acquisition leaves Unacademy with dwindling options as it searches for an exit strategy amid mounting operational challenges and a dramatic decline in company valuation.
The Valuation Gap That Killed The Deal
According to reports, Unacademy was seeking a valuation between $300 million and $400 million for the acquisition. However, sources indicate upGrad, led by co-founder Ronnie Screwvala, was unwilling to meet this price tag for what many industry observers now consider a distressed asset.
The exact valuation upGrad was willing to offer remains undisclosed, but the significant gap between buyer and seller expectations proved insurmountable despite months of negotiations. With the exam-preparation market saturated and user retention under pressure across the edtech sector, upGrad appears to have maintained valuation discipline rather than overpaying for a struggling competitor.
Neither Unacademy nor upGrad responded to queries about the collapsed merger by the time of publication.
Unacademy’s Dramatic Fall From Unicorn Status
The proposed valuation of $300-400 million represents a staggering 89-91% decline from Unacademy’s peak valuation of $3.5 billion achieved in 2021 during the pandemic-driven edtech boom.
Valuation Trajectory
| Period | Valuation | Decline from Peak |
| 2021 | $3.5 billion | Baseline |
| December 2024 | Below $500 million | 86% decline |
| January 2026 | $300-400 million | 89-91% decline |
This dramatic collapse reflects what industry analysts call the “brutal truth” of the edtech sector—companies that rode the pandemic boom have struggled to sustain growth as students return to offline learning and investor funding dries up.
Munjal’s Changing Stance on Acquisition
The failed merger comes just over a month after Unacademy co-founder and CEO Gaurav Munjal confirmed for the first time that the startup was open to being sold.
December 2024: Denial Turns to Acknowledgment
In December 2024, when Allen Career Institute was reported to be in talks to acquire Unacademy for $800 million, Munjal dismissed the reports as “mere rumours” and denied any possibility of sale or merger.
However, his stance shifted dramatically within weeks. Speaking about potential mergers last month, Munjal acknowledged that Unacademy would proceed with an acquisition if it could create a “stronger entity.” He also publicly admitted that the company’s valuation had plummeted to below $500 million—just 14% of its 2021 peak.
This rapid change in position signals the mounting pressure facing Unacademy’s leadership and investors to find an exit strategy as independent operations become increasingly challenging.
A Pattern of Failed Acquisition Attempts
Over the past 18 months, Unacademy has engaged in acquisition discussions with multiple potential buyers, but none have materialized into completed transactions.
Companies that held acquisition talks with Unacademy:
- K-12 Techno Services
- Allen Career Institute
- upGrad
The consistent failure to close a deal suggests either unrealistic valuation expectations from Unacademy’s side or fundamental concerns about the company’s business model and future prospects from potential acquirers.
The Proposed Deal Structure
Under the framework discussed during negotiations, Unacademy shareholders would have received shares in upGrad, which currently values itself at approximately $2 billion. The deal was expected to focus on Unacademy’s core test-preparation business while potentially excluding other business verticals.
For upGrad, the acquisition was positioned as part of its preparation for a potential public listing. However, the company’s leadership ultimately decided that absorbing Unacademy at the asking price would not create sufficient value for its shareholders.
Signs of Internal Stress
Reports from 2024 indicated that Unacademy co-founders, including Gaurav Munjal and Roman Saini, had exited the startup. While the exact nature and extent of these exits remain unclear, they signal deep internal stress as the company grapples with operational challenges.
The departure of founding team members often indicates disagreements over strategic direction or mounting pressure from investors to find exit options.
Unacademy’s Investor Base
Unacademy’s collapse is particularly painful for its marquee investor roster, which participated in funding rounds at significantly higher valuations:
Major investors include:
- Tiger Global
- Peak XV Partners (formerly Sequoia Capital India)
- SoftBank
- WaterBridge Ventures
- Meta (Facebook)
- General Atlantic
- Temasek
These investors now face substantial markdowns on their investments, with stakes purchased at peak valuations worth a fraction of their original investment amounts.
Why The Edtech Sector Is Struggling
Unacademy’s troubles reflect broader challenges facing India’s edtech industry in 2026 as the sector adjusts to post-pandemic realities.
The Pandemic Boom and Bust Cycle
2020-2021: Explosive Growth
- Lockdowns forced learning online
- Record funding rounds at premium valuations
- Aggressive user acquisition and expansion
- Multiple unicorns created in months
2023-2026: Reality Check
- Students return to offline learning
- User retention rates plummet
- Funding winter and investor caution
- Valuation corrections across the sector
- Widespread layoffs and cost-cutting
Unacademy’s Specific Challenges
High burn rates: Aggressive marketing and expansion during the boom created unsustainable cost structures that the company has struggled to reduce.
Exam-prep market saturation: Intense competition from established players like BYJU’S, PhysicsWallah, and traditional coaching institutes like Allen has squeezed market share and pricing power.
Weak user retention: Converting free users to paying subscribers and retaining them long-term has proven difficult as alternatives proliferate.
Failed acquisitions: Previous attempts to grow through acquisitions have not delivered expected synergies or revenue growth.
What’s Next for Unacademy?
With upGrad now out of the picture, Unacademy faces increasingly limited options for achieving a liquidity event for its investors.
Potential Paths Forward
Accept lower valuation: The company may need to significantly reduce asking price to attract buyers, potentially accepting offers well below $300 million.
Engineer turnaround: Focus intensely on core test-prep business, achieve profitability, and build toward independent sustainability or eventual IPO.
Seek strategic partnerships: Instead of full acquisition, explore partnerships that provide capital and strategic benefits while maintaining independence.
Raise down round: Accept fresh funding at significantly reduced valuation to extend runway while restructuring operations.
Wind down operations: In the worst-case scenario, orderly shutdown and asset sales to recover maximum value for investors.
Implications for upGrad
For upGrad, walking away from the Unacademy deal demonstrates valuation discipline as it prepares for its own public listing. The company can now focus on:
Organic growth: Strengthening existing business lines without integration challenges
Selective M&A: Pursuing other acquisition targets at more attractive valuations
IPO preparation: Maintaining clean financials and growth trajectory for eventual public markets debut
Market share gains: Capitalizing on competitor struggles to win customers and talent
Broader Lessons for Indian Startups
The collapsed merger offers important insights for India’s startup ecosystem:
Valuation expectations must adjust to market reality: Companies that raised at inflated pandemic-era valuations must accept significant corrections to achieve liquidity.
Growth-at-all-costs era has ended: Sustainable unit economics and paths to profitability matter more than revenue growth and user acquisition.
Consolidation is necessary but difficult: Despite obvious benefits, ego, investor complexity, and valuation gaps make mergers challenging to execute.
Timing matters in fundraising: Companies that raised at peaks face much harder paths than those who maintained valuation discipline.
Conclusion
The collapse of upGrad-Unacademy merger talks underscores the harsh realities facing India’s edtech sector as it transitions from pandemic boom to sustainable business models. Unacademy’s journey from $3.5 billion unicorn to distressed asset seeking buyers at 90% discounts tells a cautionary tale about unsustainable growth and the importance of building fundamentally sound businesses.
For Unacademy, the failed acquisition means continuing to operate independently in an increasingly challenging market with dwindling options for investor exits. For upGrad, maintaining valuation discipline may prove wise as other opportunities emerge in a sector facing continued consolidation pressure.
As both companies move forward separately, their paths will provide important indicators of whether India’s edtech giants can successfully navigate the transition from venture-funded growth experiments to profitable, sustainable businesses. The answer will shape not just the edtech sector, but set precedents for how India’s startup ecosystem handles the inevitable cycle from boom to correction to maturity.
