Unacademy Reverses ESOP Exercise Window Policy Amid Employee Concerns

According to reports, Uncademy has retracted its controversial proposal to shorten the ESOP exercise window from ten years to just thirty days. The edtech business told former workers that it was delaying the changes to the ESOP policy, according to an internal email that Economic Times was able to see. According to the email, the company will review the policy when necessary and will keep working to find the best solution for its workers while making sure that it balances the interests of all of its stakeholders.

Ex-Employee Slams Change in ESOP

Not long ago, an ex-employee of Unacademy criticised the shift in the ESOP exercise timeframe on social media platform X. According to the former worker, the unicorn's decision to shorten the window from ten years to thirty days would require workers "to cough up a huge amount to pay taxes or forfeit... vested ESOPs." Group CEO and cofounder Gaurav Munjal released an explanation last month amid the growing uproar.

He asserted that while the edtech major looked into M&A negotiations, the decision was made to guarantee that employees would receive shares in Unacademy or the combined company. Munjal contended that in a low-value M&A transaction, investors with a predisposition for liquidation could lawfully destroy all ESOP value. He went on to say that before these rights take effect, vested options were to be converted into ordinary shares during an early timeframe.

The CEO's public confirmation last year that Unacademy, which was originally valued at $3.5 billion in 2021, was for sale sparked criticism. According to reports, the business has looked at takeover negotiations with competitors Allen, K-12 Techno Services, and upGrad throughout the past 12 months. According to recent speculations, the ailing company could be sold to the unicorn led by Ronnie Screwvala for as cheap as INR 2,650 Cr ($300 Mn).

Financial Dynamics of Unacademy

In 2010, Munjal, Hemesh Singh, Roman Saini, and Sachin Gupta founded Unacademy, which began as a YouTube channel. In late 2015, it debuted as an edtech platform. It has since developed quickly, concentrating on test preparation and branching out into other verticals. Supported by companies including Temasek, SoftBank, Nexus Venture Partners, Peak XV Partners, and General Atlantic, the firm has raised about $848 million to date.

During the capital-fuelled pandemic period when schools were closed, the startup raised millions of dollars. But as learning institutions reopened, fissures began to show. The unicorn's activities were nonetheless hampered by competition from offline rivals, and many of its acquisitions never came to fruition.

Additionally, the business lost money developing an offline segment that did not succeed. Revenues remained unchanged, while the corporation continued to report significant losses. For comparison, Unacademy's operating income decreased by 2.3% YoY to INR 716 Cr in FY24, while its losses decreased by 82.09% YoY to INR 285 Cr. Cofounders Roman Saini and Munjal both left the firm last year amid the controversy.