Physics Wallah attracted new investors in this round, including India-focused hedge fund Hornbill Capital and venture capital firm Lightspeed Venture Partners, the company said on 20 September. Existing investors GSV Ventures and WestBridge also participated.
“We want to use the proceeds to expand Vidyapeeth (PW’s offline centres). We also want to use it in case of a large opportunity for M&A, we want to have some treasury with us for that,” Prateek Maheshwari, co-founder of Physics Wallah, told Mint.
War chest for expansion
Physics Wallah has been on an aggressive growth spree over the past two years, entering new verticals and investing in inorganic growth opportunities. The fresh investment is expected to further fuel the company’s growth momentum.
Physics Wallah has so far spent about ₹400 crore on Vidyapeeth and Pathshala, its hybrid vertical.
“It is likely that we will invest another ₹70 to 100 crore in capital expenditure in the upcoming year (for offline expansion),” Maheshwari said.
Physics Wallah plans to add 40 centres in the next one year and enter cities including Nashik, Pune, Dehradun, Coimbatore, Hyderabad and Chennai, apart from widening its presence in existing cities. The company is also scouting for acquisitions. According to Maheshwari, the company has spent about 60% of the previous funding round on mergers and acquisitions.
“Now 40% is unutilised with us from the last funding round and post this round, we will be sitting on a treasury of more than ₹2,500 crore,” he added.
Founded by Alakh Pandey and Maheshwari, Physics Wallah became a unicorn in 2022 after securing $100 million in its first funding round from Westbridge and GSV. So far, the company has acquired six startups including FreeCo, iNeuron, Only IAS and Utkarsh Classes.
Physics Wallah is now hunting for companies that could help increase its presence in the southern part of the country. It is also looking to acquire content-rich companies within growth verticals. For growth, Physics Wallah plans to focus on Curious Junior, a small cohort-based classroom programme for K-10 students and PW Skills, its skilling vertical, as growth drivers.
“The Indian startup ecosystem hasn’t adequately addressed the K-10 segment, hence Curious Junior is a major focus for the company. But we’re also committed to addressing the country’s skilling problem through PW Skills,” said Maheshwari.
Optimistic outlook
The focus on growth has come at a cost. The company, once feted as the only highly valued, profitable edtech startup in India, is said to have slipped into a loss in FY24, mainly because of its unprofitable offline business. To be sure, the company is yet to officially announce its FY24 financials.
An industry executive told Mint that there is a perception the company might be overextending itself with its rapid expansion plans.
“As a VC-backed company, one of the few in edtech doing well, it was expected that it would need to drive growth aggressively to secure its next funding round,” the executive said on condition of anonymity.
However, Maheshwari expects the company to turn profitable next year as the offline business starts generating gains. In FY25, he said, the company has already started generating cash in the first and second quarters, from a negative 18% cashflow.
“The current market, I am coming out as a dominant player. Now this is the time you should go and capture the maximum market. You should not stress too much on profitability. If you see the numbers from last year also, we haven’t stepped very deep in losses. It was a careful decision to focus more on experience and growth as a number,” he said.
Public listing
The new investment in Physics Wallah marks a positive development for the Indian edtech sector, which has faced declining demand, reduced funding, and waning investor interest.
“The challenges for edtech are within very specific business model-related issues. PW has proven that only with the right student-led strategy, high quality content, affordability for a wider student population and use of technology, it is possible. Therefore, to us, this is a big opportunity,” Manoj Thakur, founder and managing partner at Hornbill Capital, told Mint.
Thakur’s inclusion on Physics Wallah’s cap table indicates the company is gearing up for its next major milestone – a public listing. While no specific timeline has been set, both the company and its investors believe Physics Wallah is well-positioned for a public listing.
“We are strengthening our finance team and our governance processes… Manoj has taken a lot of companies public, which attracted us towards Hornbill, and Manoj as an individual, because they are the right advisors for us to make us IPO-ready and take us public,” said Maheshwari.
The executive cited earlier said that while current market conditions may not be ideal for an edtech listing, Physics Wallah’s IPO could shift that perception.
“The key to a successful IPO for Physics Wallah is ensuring it returns to profitability,” the executive added.
