Classplus is overvalued, Unacademy's Gaurav Munjal says citing Graphy's growth

Gaurav Munjal, the co-founder of Unacademy, India’s second-most valued edtech unicorn, has taken a dig at the valuation of Tiger Global-backed B2B (business-to-business) edtech startup Classplus that competes directly with Unacademy's Graphy, pegging a bet on the company it acquired last year at a time when some its other verticals have come under fire.

“Graphy is now doing almost Rs 25 crore in monthly GMV (Gross Merchandise Value). That’s 50 percent of Classplus which is the market leader with a valuation of $500 million. Classplus is definitely overvalued,” Munjal told employees on the company's internal slack channel.

Moneycontrol has seen the message.

Munjal, citing Graphy’s growth, said, “Good to know that we are #2 in that market. And we will soon be #1. Our product is 10x better and our team size is 1/10th of Classplus.”

Founded in 2018 by Mukul Rustagi and Bhaswat Agarwal, Classplus is a mobile-first SaaS (Software-as-a-service) platform that allows educators and content creators to build their online presence, digitise their offline tuition centres and sell courses online.

"We believe one can only understand their business and numbers well enough. Others can only speculate. And hence, we don’t like to look down upon anyone," Rustagi told Moneycontrol, reacting to Munjal's comments.

"We are growing very well, and are way above the metrics quoted here. What matters to us is that our teammates, customers and shareholders are all putting great effort every day in making this a great mission. We respect everyone and wish Gaurav all the best," Rustagi said.

According to data filed with the MCA (Ministry of Corporate Affairs), while Classplus's revenue grew to Rs 45.4 crore in FY22 (2021-22) from Rs 16.3 crore in FY21, its losses also widened to Rs 162.9 crore in FY22 from Rs 57.8 crore in FY21.

Classplus has, to date, raised around $162 million in funding from several investors. In its latest funding round, where the Noida-based startup bagged $70 million in a Series D funding round co-led by Alpha Wave Global and Tiger Global, Classplus was valued at close to $600 million.

A player in this niche segment under edtech, Graphy is also a SaaS (software-as-a-service)-based platform under Unacademy's group companies for creators to grow their audience, monetize their skills, and host live sessions and cohort-based courses.

Munjal's bullishness on Graphy comes at a time when two of Unacademy's growth verticals--job guarantee vertical Relevel and NEET PG learning platform PrepLadder--on which the company has been betting big, have come under fire for unfulfilled promises and alleged fraudulent activities.

PrepLadder, which contributes nearly a fifth to Unacademy's total revenue, saw a mass exodus of doctor-turned-educators, which could potentially drag the vertical's revenue down to a third, Moneycontrol reported earlier this month. PrepLadder already saw a 40 percent drop in its revenue in the first 10 days of November, since Unacademy publicly announced the resignation of the educators.

Currently, Unacademy is in the midst of a legal battle with the educators.

Meanwhile, in September, Relevel, which Munjal claimed to have reached an ARR (annualised revenue runrate) of $12 million (about Rs 90 crore, or about a tenth of Unacademy's projected revenue), had come under fire with subscribers alleging foul play at the job guarantee vertical, Moneycontrol reported. Learners also claimed that very few candidates got placed by Relevel even upon completing the course and clearing the test.

With schools, colleges and physical tuition centers reopening, Unacademy's core test preparation business has slowed down this year, forcing the company to aggressively take cost-cutting measures. The company has already fired over 1,000 employees since the start of this year and has halved its team by exercising internal migration.

Unacademy also cut its monthly burn to Rs 50-60 crore from over Rs 200 crore this year, Moneycontrol reported earlier.

Amid slowing growth in the core business, an investor had told Moneycontrol that a lot hinges on how the company's acquisitions perform in the coming few years as it looks to grow beyond the pandemic-led boost.