So Unacademy is getting acquired by Allen at a valuation of $800 Mil, when it has raised over $850 Mil over the course of a decade? Nice.
And that's when it has $160 Mil in cash balance? And was once valued at $3.4 Bil? Awesome.
Plus, the founders of Unacademy are going to exit, having sold way over $30 Mil in secondaries at the peak valuation period in addition to the usual payday? Beautiful.
Really happy for Team Unacademy, but I think Allen could negotiate better. After all, Unacademy is a cash guzzler on steroids. And while a loss making company could be valuable due to its growth aspects, Unacademy isn't growing either.
In FY24, Unacademy recorded a revenue of ₹988 Cr at a loss of ₹631 Cr.
In FY23, its revenue was ₹1044 Cr at a loss of ₹1678 Cr.
In FY22, it was ₹719 Cr at a loss of ₹2848 Cr.
And in FY21, it was ₹398 at a loss of ₹1537 Cr.
Something very interesting to note is that a significant part of the later years' earnings is the interest on cash deposits. Like in FY23, it earned ₹137 Cr from it. Aren't FDs beautiful? I guess they are..
But I digress.
The point is while the losses have shrunk, the revenue has plateaued. On what basis is Unacademy's business getting valued at $640 Mil? It's a business with sales of $110 Mil, making a loss of $76 Mil. There are no earnings to value it using the traditional P/E ratios, but a revenue multiple of SIX? Where is that coming from?
Take NIIT for example. It's an upskilling company, not exactly in Unacademy's space. But arguably a greener pasture. Its revenue in FY24 was $182 Mil with a PAT of $26 Mil, and then it's being valued at $832 Mil by the market. The company is profitable, growing steadily, and has healthy options for the future, and then it's getting a revenue multiple of 4.5. But Unacademy, which has never smelled money (probably even in dreams), is getting a revenue multiple of SIX?
What chooran are the investment bankers supplying to Allen? And most importantly, where do we get it from? These are very important questions.
While the absolute morons at VC companies who once valued Unacademy at $3.4 Billion won't still be in green even if this deal went through, I think the fact that this deal is even getting considered at this price is just beautiful. For Unacademy, of course. Not for Allen, or Bodhi Tree.
(Unless, of course, most of it happens in share swap. Where Unacademy gets a fraction of Allen which itself beefs up its valuation to go through with the deal).
A good question is, what would be the fair valuation of Unacademy?
Considering it has a cash balance of about ₹1300 Cr in the bank, the company has maximum of two to three years to live. Any fundraise it tries with declining revenues and severe losses is going to be very difficult, and will only happen a lower valuation (than the current $800 Mil).
So if Allen just delays the acquisition talk, even by a few months, it might just be able to bring down the fair valuation of Unacademy - to a song.
Well, that would be interesting, don't you think?
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