Unacademy Tightens ESOP Rules, Ex-Employees Must Now Exercise Vested Options Within 30 Days

Test-prep start-up Unacademy has amended its employee stock option plan (ESOP), sharply reducing the time former employees have to exercise their vested options from up to 10 years to just 30 days. Under the change, the board has granted a one-time 30-day window from the effective date of the revised plan for exited employees to convert their vested options into shares. Any options that are not exercised within this period will lapse, according to an email the company sent to former staff and that has since circulated publicly.

The revised rules also require ex-employees to pay both the exercise price and any applicable taxes within the shortened window. Unacademy cautioned that exercising stock options triggers immediate tax liabilities under Indian law and noted that shares in a private company are illiquid, with no guaranteed exit or payout.

Context

The ESOP change comes as Unacademy is reportedly in talks for a possible acquisition at a sharply lower valuation.

Founder-CEO Gaurav Munjal told staff the company is engaged in M&A discussions for an all-stock deal valued at roughly ₹2,650 crore (about $295 million), a dramatic fall from the start-up’s peak private valuation of around $3.4–3.5 billion. In such a structure, Munjal warned, investor liquidation preferences could leave common shareholders, including ESOP holders, with little or no value unless they hold shares in the merged entity.

In an internal clarification circulated to employees, Munjal said the tight exercise window was intended to give former employees a realistic chance to retain some stake in any future stock-based transaction. “When liquidation preference is properly enforced, ESOPs effectively become zero. But we didn’t want that to happen,” he wrote, adding that the board tried to find a way to allow ex-staff to participate if a stock deal proceeds. Munjal also apologised for the outcome and said he accepted responsibility for the situation.

Terms & Warnings

The notice to former employees reportedly set the ESOP exercise terms at a very low per-share price (the company’s communications referenced an exercise price figure and the latest merchant-banker valuation), but it emphasised the financial risk: immediate tax, uncertain liquidity, and the priority of preference shareholders in any sale. One version of the company’s message specified that the window would remain open until January 19, 2026 for the one-time exercise.

Unacademy, once a pandemic-era high-flying edtech unicorn backed by investors including SoftBank, General Atlantic, Temasek, Nexus and Peak XV, has been through a prolonged reset.

Management has pared costs, scaled back non-core bets and restructured leadership; founders Gaurav Munjal and Roman Saini stepped back from day-to-day roles earlier this year as the firm pursued profitability and strategic options. The company reported narrower losses in recent filings but faces intense competition from offline coaching and a softer paid-online demand environment.