SoftBank-backed edtech startup Unacademy, which has been under pressure to turn profitable, is in talks to merge with K12 Techno, the operator of Orchids International Schools, according to a report by Entrackr on Tuesday. The discussions have been ongoing for the past four weeks, and if successful, both companies will own a 50% stake in the joint entity.
Unacademy invested in K12 Techno, the parent company of Orchids International Schools, three years ago. Peak XV is a common investor in both companies. Sources revealed that Unacademy previously attempted to acquire K12 Techno in 2021, but those negotiations did not succeed.
Unacademy, once the second most valued edtech startup after Byju’s, has struggled to raise funds. The startup last raised $440 million in August 2021, led by Singapore’s state-owned Temasek Holdings, at a valuation of $3.44 billion. Founded in 2015 by Gaurav Munjal, Hemesh Singh, and Roman Saini, Unacademy reportedly claimed it was close to achieving profitability in April.
Incorporated in 2010, K12 Techno provides full-stack education services to over 800 private educational institutions, enrolling more than 300,000 students across India under multiple brands. The company boasts a compound annual growth rate (CAGR) of around 40% over the past five years.
Last month, Venturi Partners, a growth equity firm specialising in consumer investments across India and Southeast Asia, purchased a $27 million stake in Bengaluru-based K12 Techno Services Private Limited from Navneet Learning LLP, a subsidiary of Navneet Education. In September, K12 Techno secured undisclosed funding from private equity firm Kedaara Capital, providing a partial exit for Peak XV Partners (formerly Sequoia Capital India).
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The Indian edtech sector, which saw massive growth during the COVID-19 pandemic, is now facing a funding winter and rising costs amid declining demand for online education. Byju’s, led by Byju Raveendran, once valued at $22 billion, has been particularly affected, facing scrutiny over various issues. This has led to calls from shareholders for significant changes, including Raveendran’s ouster. Furthermore, the company has seen the resignation of its auditor, Deloitte, and several board members.
As the edtech industry navigates these challenges, the potential merger between Unacademy and K12 Techno could mark a significant consolidation, aiming to bolster their market positions and drive towards profitability in a turbulent market environment.
