Ronnie Screwvala's upGrad Education is in the final phases of acquiring the US-based online education company Udacity. Simultaneously, the company is in discussions with investors to secure funding of up to $100 million. Approximately 80% of the funds raised will be allocated to support the acquisition deal

According to Inc42, Ronnie Screwvala, who holds a 22.4% stake in upGrad, is contemplating the use of his personal funds in the forthcoming investment round. The article further indicates that upGrad has sought external investors to contribute around $50-60 million, with the remaining portion anticipated to be supplied by existing investors, including Temasek.

Although the specifics of the upcoming funding round are still being worked out, it is improbable that upGrad's valuation will experience an increase from its previous assessment of $2.5 billion. 

The edtech sector in India faced challenges in 2023, with issues at Byju's negatively impacting investor interest. There are indications that upGrad is now looking to acquire Udacity for approximately $80 million, a slightly reduced amount compared to the previously discussed value of $100 million. 

Reportedly, upGrad is targeting the completion of the acquisition within the current financial year. "The due diligence process at Udacity is currently in an advanced stage, with appointed law firms actively involved in the ongoing procedures," said a source. "The upcoming financing arrangements are intricately tied to the Udacity deal."

The source added that there is no immediate need for external capital to operate the existing business. upGrad has been actively seeking international assets to augment its revenue and enhance its offerings in the reskilling domain. 

Another source emphasised the significance of the valuation at which upGrad secures new capital, considering the recent reevaluation of edtech valuations globally. "At this juncture, a flat valuation deal seems quite favourable. Companies demonstrating robust revenue growth with clear paths to profitability have been receiving a slight premium compared to their previous valuations," revealed a source, as per media reports. 

Since its establishment in 2015, upGrad has raised a total of $365 million, with the latest $36.4 million secured through a rights issue in March of the previous year. Notable investors include Bodhi Tree, a joint venture of James Murdoch and former Star India chairman Uday Shankar. 

In the financial year ending March 2023, upGrad reported a substantial 96% increase in revenue, reaching Rs 1,194 crore, while losses rose by 67% to Rs 1,142 crore during the same period. 

Udacity, headquartered in California, provides courses spanning data engineering, business analytics, artificial intelligence, data science, product management, and more. Its primary focus revolves around three key sectors: individual learners, government partnerships, and enterprise clients. 

While the enterprise segment serves as the largest source of revenue for the US-based company, maintaining customer retention has posed a significant challenge. Founded by Sebastian Thrun, Udacity achieved a valuation of $1 billion in 2015 after securing $105 million in funding from investors such as Germany’s Bertelsmann and Scotland’s Baillie Gifford. Silicon Valley's Andreessen Horowitz, known as a16z, is also among its notable investors. 

Sebastian Thrun, the founder of Udacity, is also recognised as the founder of Google X, where he contributed to groundbreaking projects such as self-driving cars and Google Glass. Mayank Kumar, the co-founder and managing director of UpGrad, stated in a recent announcement regarding the FY23 financials that the company remains committed to exploring both organic and inorganic expansion opportunities.