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Unacademy Losses: A Business Case Study

Updated: Aug 3, 2022

Has Unacademy been wasting money they got from funding? With a loss of 1537.4 crore rupees in FY21, it has been a 494 per cent loss increase over FY20 when they had incurred a loss of 258.6 crores.

Look at how much money they spent… a massive 2029.9 crores. This means that for every rupee they earned they spent 5.1 rupees. And now they have realised that they have to cut costs. So, they laid off around 1000 employees, which includes teachers.

We are now awaiting to see their financials in FY22.


What are the problems that they have been facing?

· Unacademy exited from the K-12 segment.

· They had to lay off almost 1000 employees.

· There were allegations of toxic work culture in the company.

· They are now fighting in the competitive offline coaching market.

· They had to shut down their US operations in a few months after starting.

· Major pay cuts and stopping employee benefits have taken place.

Where did they spend so much money that they landed in muddied water, and now trying to get out of it?

They have been acquiring multiple companies and YouTube channels, trying to be a super app for EdTech with different types of services and products in their portfolio.

Meanwhile, with the pandemic-related lockdowns and restrictions easing, online learning is no more the only mode of learning. Schools and colleges are back in action, and offline institutes have opened up again.

Was it a myopic vision that they did not see this coming? Could they have been proactive instead of reactive? Only Munjal can answer these questions.

Founder Salaries

Talking of Munjal, let us look at their salaries.

Gaurav Munjal drew a salary of Rs. 1.58 crore in FY21.

Hemesh Singh got Rs. 1.19 crore.

Roman Saini received 88 Lakhs.

By the way, there have been allegations that the founders of Unacademy have been leading lavish lifestyles and spent a lot of money on lots of stuff including private jets.

Employee Benefit Costs

Why would people join a startup instead of well-known and established companies? Two of the reasons are higher salary and a number of perks.

Now, look at these numbers:

Employee benefit expenditure rose from 119.7 crore rupees in FY20 to 748.5 crores in FY21. That is a whopping 6 times increase. And the shocking number is that only 196.3 crores out of this 748.5 made up the salaries and wages.

Shutting operations and Cutting costs

They want to go for an IPO in the next 2 years.

Meanwhile, they are shutting their US medical licensing test preparation platform just 5 months after it was launched.

“The goal has changed. We have to do an IPO in the next two years. And we have (to) turn cash flow positive. For that, we must embrace frugality as a core value,” Munjal said.

He also realised something else when he said, “We spent crores on travel for employees and educators. We must cut all these expenses. We must turn profitable as soon as possible.”

He has learnt a fundamental management lesson, after spending more than 2000 crore rupees in a financial year. Better late than never.

So, what does this mean?

· No more free meals and snacks for employees.

· No more business travel for anyone, including the CXOs and Founders.

· No more dedicated drivers for CXOs.

· Reduction in reliance on paid software like Notion and Zoom.

· No more sponsorships (after they splurged in IPL 2022).

· Pay cuts for Founders and CXOs (but no one knows yet how much of a cut it will be).

Current Reserve amount in the bank

Unacademy claims to have cash reserves of Rupees 2800 crores in the bank.

Munjal said, “We are well capitalised but still want our businesses to be profitable, and it would take the Unacademy Group to a different league."

For your information, at a valuation of 3.44 billion dollars, Unacademy raised over 450 million dollars since March 2021. Even Zomato’s Deepinder Goyal invested in this EdTech company.

Acquisitions galore

In the last 2 years or so Unacademy acquired more than 10 startups.

Have a look at their acquisition timeline:

· October 2018: Wifi Study

· March 2020: Kreatryx

· June 2020: Codechef

· July 2020: Prepladder and Mastree

· September: 2020 Coursavy

· December 2020: Neostencil

· February 2021: Tapchief

· March 2021: Handa ka Funda

· July 2021: Rheo

· October 2021: Spayee

· November 2021: Swiflearn

Offline business (competition + capital intensive)

Recently Unacademy was in the news because of Allen Career Institute. Unacademy decided to foray into the offline test preparation and coaching centre business and to start with a bang they started poaching teachers from Allen which is a well-established brand in the market.

Unacademy is trying to move into the hybrid learning model. But in this offline mode, the competition is immense, and only well-regarded and respected teachers can give them a strong foothold. This is extremely capital intensive, and reportedly, Unacademy has been poaching teachers from other institutes by giving them huge hikes and in the income range of 1 to 10 crore rupees. They got 40 star teachers from Allen itself, so imagine the cost of onboarding these teachers!

In fact, in 2021, they reportedly poached a teacher from a rival platform by spending 20 crore rupees. 20 crore rupees to get one teacher? And they say teachers don’t get paid well?

Funding has dried up

Is funding like free petrol for your car? Or maybe even for upgrades that you need for your car.

But what if this petrol supply stops?

That is exactly what has happened in the Edtech space. Investors are sceptical because online plus offline means you have one foot on one boat, and the other foot on the other boat, and results could go either way. If both boats move in sync, it would be fine, else you have to jump on one boat or the other.

The point is that there are multiple challenges in the offline coaching business, and the expenses are very high. Results, on the other hand, are not guaranteed.

With the Funding Winter in place, Unacademy now does not have the access to more funds, without which expansion into the offline coaching business is going to be difficult, to say the least.

Edtech funding was 4.73 billion dollars in the last 6 months of 2021, versus only 2.1 billion dollars in the first 6 months of 2022. Funding for test prep startups has drastically fallen by 99% from 830 million dollars in Q1 of 2022 to only 6.1 million dollars in Q2 of 2022.

What next for Unacademy?

Unacademy has created this situation for itself. And it has to come out of it by itself.

Trying to be a super app through acquisitions did not work. So, they have to focus on test prep and move into a hybrid mode of operations. Or, they may even have to move out of the EdTech space and focus on Relevel and Cohesive, if they become the main source of profits.

It is not going to be easy for Unacademy, but the power of decision and action now lies in the hands of Munjal.

Watch the YouTube video here:


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