Edtech’s Failed Marriage, WinZO’s Legal Plea, and Eternal’s GST Woes

The collapse of the upGrad–Unacademy merger wasn’t a negotiation failure, it was the moment Indian edtech finally admitted that the optimism of 2021 cannot coexist with the realities of 2026. On paper, the deal made sense: combine India’s leading higher-ed and skilling platform with one of its most recognisable test-prep brands, add scale before a 2027 IPO, and build an integrated learning stack from K-12 to workforce. But beneath that clean storyline sat a $3B valuation gulf, mismatched business models, founder psychology, and a market that no longer rewards complexity.

To understand why the deal unravelled, you have to revisit the arc of Indian edtech. Between 2018 and 2021, the sector was in land-grab mode: ₹30,000 crore of VC inflows, rapid acquisitions, inflated valuations, and GMV theatre. Then the correction arrived: funding shrank over 70%, profitability replaced growth as the new religion, and Byju’s meltdown created a permanent “governance discount.” In this world, a mega-merger needed to look clean, profitable, and IPO-ready. Instead, this one looked messy.

Strategically, the logic was strong. upGrad has built a disciplined, degree-linked higher-ed and skilling machine: ₹1,547 crore FY24 revenue, 30% YoY growth, shrinking losses, and alignment with NEP 2020. Unacademy brought scale - 1M+ paying learners at its peak - and a powerful funnel via test-prep dominance and offline centre expansion. For upGrad, acquiring ₹800-900 crore of additional revenue plus ~₹1,100-1,573 crore of cash would have strengthened its IPO narrative.

But the numbers couldn’t meet in the middle. Unacademy’s 2021 valuation was $3.44B. By late 2025, internal negotiations placed its fair value around ~$300-400M, an 85-90% markdown. Even at this reduced level, merging into a $2-2.25B upGrad meant Unacademy would receive 10-15% of the combined entity - too high for a business with flat growth, heavy offline capex, and governance overhangs. And because the entire structure was stock-based, every percentage ceded diluted IPO upside. For an IPO-bound company, that complexity was a deal-breaker.

Then came the business-model mismatch. upGrad’s DNA lies in high-ticket, long-cycle programs with strong LTV and enterprise demand - structurally more predictable, higher-margin, and aligned with regulatory reform. Unacademy’s test-prep engine is cyclical, churn-heavy, educator-driven, and increasingly offline. Adding a volatile, capex-first business risked muddying upGrad’s carefully built profile just as global markets are rewarding clarity and discipline.

Founder dynamics made the equation even more fragile. Ronnie Screwvala operates with IPO precision - clean structures, governance defensibility, and surgical acquisitions. Gaurav Munjal, meanwhile, is rebuilding Unacademy around a leaner test-prep engine and future bets like the AI-powered AirLearn app. With AirLearn carved out of the merger structure, upGrad would inherit the legacy without owning the upside. No buyer wants that asymmetry.

Governance concerns widened the chasm. Unacademy’s abrupt ESOP exercise-window flip exposed cultural fragility and the harsh truth of preference stacks in a down round. A distressed stock-only merger would have triggered massive ESOP wipeouts and complicated preference liquidations - exactly the kind of cap-table chaos no IPO-bound board would import.

The macro environment reinforced caution. PhysicsWallah’s DRHP created a new standard: high offline efficiency, stable margins, and a clean narrative. Global parallels — 2U’s bankruptcy, Chegg’s AI shock, Coursera’s slowdown — showed that public markets punish complexity. upGrad absorbing Unacademy risked looking less like strategic consolidation and more like a rescue.

With the merger dead, the paths diverge clearly. Unacademy must choose between becoming a lean offline-first test-prep player, accepting a down-round that resets its cap table, or building its future around AI-led bets like AirLearn and Graphy. upGrad now gets the cleaner runway - able to pursue targeted acquisitions (bootcamps, global workforce-development firms, distressed Byju’s/Aakash assets) without importing governance baggage.

The failure of the merger is not a setback for edtech - it’s a sign of discipline. The era of “blitzscale first, economics later” is gone. Valuations must reset. Business models must simplify. And the sector is consolidating around operators with clarity: PhysicsWallah in test-prep, upGrad in higher-ed skilling, Allen in offline excellence. Everyone else must specialise or get squeezed out.

Let’s go through what else is happening in Indian startup world - Grab your simmering cup of StartupChai.in and unwind with our hand-brewed memes.

“Pucha Maine Terese?”: WinZO Cofounder Urges K’taka HC To Move ED Probe To Delhi

WinZO’s cofounder has urged the Karnataka High Court to shift the ongoing Enforcement Directorate probe to Delhi, arguing that the gaming platform’s operations, bank accounts, and employees are all based in the national capital.

After hearing initial submissions from both sides, a bench led by Justice M Nagaprasanna has scheduled the matter for its next hearing on January 14.

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“Paisa Laya?”: Eternal Get Two Fresh GST Demand Notices Worth INR 28 Cr

Eternal, the parent of Zomato and Blinkit, has received two fresh GST demand notices from West Bengal tax authorities totalling about ₹27.6 Cr. The orders, issued under Section 73 of the CGST Act, relate to alleged short payment of output tax for the period between April 2020 and March 2022.

Notably, this marks the third tax demand from West Bengal in the same week for Eternal, following an earlier ₹1.92 Cr notice tied to FY20.

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“Tum Mein Wo Baat Nahi Rahi”: SoftBank Sells Another 2.15% Stake In Ola Electric

SoftBank has pared its holding in Ola Electric further, selling another 2.15% stake and bringing its shareholding down to 13.53% from 15.68% over the last four months. The latest move follows the offloading of 9.4 Cr equity shares between July and September 2025 via SVF II Ostrich (DE) LLC.

The sell-off comes at a tense moment for Ola Electric, which is navigating regulatory scrutiny, mounting competition in the E2W space, shrinking revenues, and rising consumer complaints.

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“Ho Raha Bharat Nirman”: Tamil Nadu Unveils INR 100 Cr Deeptech Startup Policy

Tamil Nadu has rolled out a ₹100 Cr deeptech startup policy, promising early-stage grants, incubation support, innovation infrastructure, and flexible funding options for founders.

The state is betting big on sectors like AI, blockchain, semiconductors, electronics manufacturing, spacetech, and AVGC to position itself as a global deeptech hub. The move comes with deeptech funding hitting a record high in 2025 as Indian startups raised $530 Mn across 87 deals.

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