Unacademy-Allen deal; Swiggy Q2 earnings

Happy Wednesday! Unacademy and Allen Career Institute have been in talks to strike a deal but the terms are yet unclear. We have details of the potential transaction in today’s ETtech Morning Dispatch.

Also in the letter:
■ Varun Alagh acquires Mamaearth shares
■ Jewellery startups reach CCPA
■ IndiaAI Mission GPU tender

Allen Institute held talks to acquire Unacademy valuing edtech firm at $800 million in a cut-price deal: sources

Edtech firm Unacademy has held extended talks with Allen Career Institute, an offline test preparation centre, for a merger which will see a steep reduction in its valuation to $800 million, down from $3.4 billion in 2021.

Driving the news: The negotiations, which have been ongoing for a few months now, hinge on a final nod from the Allen promoters, the Maheshwari family, agreeing to terms, while investment banks on both sides navigate the complexities of a share swap ratio.

“Both sides are yet to finalise the details of the share-swap ratio and what the cash payouts will be to the founders and early backers of Unacademy,” said a person familiar with the matter.

Jargon buster: A share swap ratio determines how many shares of the acquiring company will be exchanged for each share of the target company in a merger or acquisition.

Deal details: If the acquisition goes through, it will be among the most significant consolidation move in India’s edtech space. “The valuation being ascribed to Unacademy includes the cash balance of around $160 million that the edtech firm has,” a person briefed on the matter said.

Tell me more: The talks are being steered by Allen’s key investor Bodhi Tree led by Uday Shankar, vice-chairman of JioStar, and Unacademy cofounder Gaurav Munjal, who, along with other founders, is expected to exit post-transaction. Post the deal, Munjal and the other founders Roman Saini and Sumit Jain, are expected to leave the edtech firm. Earlier, one of the other Unacademy cofounders and its CTO Hemesh Singh had also left the edtech startup.

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Team churn: Over the last year, Unacademy has cut its team size consistently. Most recently, it fired 250 employees in July . Several senior executives have also left the firm due to the restructuring.

Also Read: How consolidation is taking hold in fund-starved edtech sector

Swiggy’s Q2 operating revenue rises 30% on Instamart boost

Sriharsha Majety, group CEO, Swiggy

Swiggy has posted a 30% year-on-year (YoY) growth in its operating revenue for the July-September quarter, primarily driven by the expansion of its quick commerce unit Instamart.

Key numbers:

Operating revenue up 30% YoY at Rs 3,061 crore
Net loss marginally down to Rs 625 crore from Rs 657 crore
Food delivery gross order value (GOV) grew 14% YoY
Quick commerce GOV grew 75% YoY
Cash balance as of September 30 at Rs 4,531 crore, raised Rs 4,359 crore via IPO later

Management guidance:

Expects to post positive adjusted Ebitda by Q3FY26 at group level
Expects adjusted Ebitda breakeven by Q2FY27
Plans to operate over 1,046 dark stores by March 2025
Bulk of future investments to go into Instamart

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Food delivery use cases: Swiggy said it will continue investments in this segment, which accounts for two-thirds of its GOV, to enhance use cases for food delivery. It said that its newly launched 10-minute service Bolt now contributes to 5% of overall food deliveries. The company has expanded Bolt to over 400 cities.

Instamart in focus: The quick commerce business reported a GOV of Rs 3,382 crore for Q2FY25 – a 24.1% rise quarter-on-quarter (QoQ), driven by a 21% growth in order volumes and a 10% boost in orders per dark store. The 24% growth in GOV is the fastest pace since Q1FY23, Majety said.

We are expecting a double-digit growth annually for the foreseeable future, Majety said in an investor note.

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Peer check: This puts Swiggy’s annualised gross sale run rate at around $1.6 billion. For market leader Blinkit, it’s on a nearly $3 billion gross sale annualised run rate. while Zepto–per brief to investors–is clocking $2 billion in total annual sales.

Also Read: We’re 100% compliant with FDI regulations; aim to be majority India-owned: Zepto’s Aadit Palicha

Mamaearth’s Varun Alagh buys 1.8 lakh shares of Honasa Consumer for Rs 4.6 crore

Mamaearth CEO Varun Alagh purchased 1.8 lakh shares of the company in November, according to information sourced from the National Stock Exchange (NSE).

Quick recap: The stock price of Mamaearth parent company Honasa Consumer took a beating post poor Q2 results. The company is facing challenges in its offline distribution channel as well.

Current status: As of September 30, Alagh owned 10.35 crore shares, which has now increased to 10.37 crore shares. This translates to around 32% stake in Mamaearth. This was worth Rs 2,715 crore, as of Tuesday’s closing price.

Financial report : The company posted a 7% year-on-year (YoY) decline in operating revenue at Rs 462 crore. It reported a net loss of Rs 19 crore in the quarter, compared to Rs 30 crore net profit in the same period last year.

Also Read: Impact of distribution changes higher than expected; taking steps to bring growth back to Mamaearth: CEO Varun Alagh

New-age startups say lab-grown diamonds are not ‘synthetic’

New-age jewellery companies like Aukera, Giva, Green Lab Diamonds, and Jewelbox have raised concerns with the Central Consumer Protection Authority (CCPA) regarding the use of the term ‘synthetic’ for lab-grown diamonds (LGDs).

What’s the matter: A group of venture capital-funded jewellery startups have emphasised that LGDs share the same physical, chemical, and optical properties as naturally mined diamonds, making them virtually indistinguishable to the naked eye.

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Tell me more: India’s LGD sector is growing rapidly, bolstered by rising consumer adoption and investor interest. For instance, Giva raised Rs 255 crore in a Series B funding round led by Premji Invest, with participation from Epiq Capital and Edelweiss Discover Fund.

The domestic LGD jewellery market is estimated to surge fourfold from $299.9 million in 2023 to $1.19 billion by 2033.

Zoom in: Despite this robust growth, concerns about unethical practices, such as mislabeling and mixing LGDs with natural diamonds in jewellery without disclosure, have emerged. The CCPA had asked diamond makers to clearly distinguish LGDs and disclose their production methods to protect consumers.