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Exclusive: PhysicsWallah in talks to raise around $250 million; eyes $3.3-bn valuation

India’s only profitable edtech start-up is trying to raise funds not because it needs the money, but to increase its valuation and for potential M&A deals.

March 23, 2023 / 07:58 AM IST
PhysicsWallah co-founder and Chief Executive Officer Alakh Pandey

PhysicsWallah co-founder and Chief Executive Officer Alakh Pandey

PhysicsWallah is in initial talks to raise at least $250 million, at three times its existing valuation, a huge round and a massive valuation mark-up for an edtech start-up, at a time when the overall sector is struggling due to slower growth amid reopening of schools, colleges and physical tuition centres.

The edtech unicorn led by Alakh Pandey, a star YouTube teacher, is seeking to value its company at $3.3 billion, up from its existing valuation of $1.1 billion, at least three people aware of the matter told Moneycontrol. PhysicsWallah is in the market and is talking to multiple private equity (PE) investors, the people said, requesting anonymity. The company’s existing shareholders GSV Ventures and WestBridge Capital will add to their bets, the people added.

“Since the start of this year, PhysicsWallah has been seeking a new round of funding. The round size and valuation could wary as the talks are at a fairly early stage,” said one of the people quoted above.

“The company will at least look to raise $250 million not because it needs it, but for increasing its valuation and for potential mergers and acquisitions (M&As). PhysicsWallah is very well capitalised otherwise, and is also profitable. So, it doesn’t actually need funds. But if it raises funds in an environment like this, it will set itself a valuation benchmark,” the person added.

PhysicsWallah and GSV Ventures declined to comment on the story. Queries sent to Partners at WestBridge Capital remained unanswered.

PhysicsWallah reported a 10x growth in its operating revenue in FY22 (2021-22) to Rs 232.5 crore and clocked a profit of nearly Rs 100 crore, becoming the largest and only profitable edtech start-up in India.

Now, in FY23, the company expects its revenue to top Rs 1,200 crore, with an earning before interest, taxes, depreciation and amortisation (EBITDA) margin of 40-45 percent, Pandey had told Moneycontrol in an interview last year. If the company manages to pull off such an aggressive growth in FY23, it will become the only edtech unicorn in the country to register an over 100 percent growth in revenue as its closest competitors Unacademy and Vedantu are expecting flat to marginal growth this year.

“PhysicsWallah has a revenue of about $150 million and is projecting strong growth even next year. With money in the bank through profit and through what it has raised, it will aggressively look out for acquisitions and other ways to grow, unlike other companies that had to cut down spending,” said a second person quoted above.

“The company’s valuation has already been marked up internally by investors, and so, it is seeking to raise a new round at that valuation. If you look at PW’s revenue, it will be more than Unacademy’s for this year, and Unacademy is sitting on a valuation of $3.4 billion since 2021. So, a valuation mark-up for PW is imperative,” the person added.

PhysicsWallah’s fund-raise deliberations and aggressive growth plans come at a time when edtech start-ups in India have witnessed a massive slowdown in growth, with the pandemic-led boom vanishing due to reopening of schools, colleges and physical tuition centres.

Moreover, almost all edtech unicorns including the most funded ones such as Unacademy, Byju’s and Vedantu, among others, have fired over 1,000 employees in a bid to cut costs and extend the runway as funding to India’s start-up ecosystem has slowed down significantly.

The last biggest round raised by an edtech company in India was Byju’s $250-million fund-raise in October. But the world’s most-valued edtech start-up managed to raise it only at a flat valuation of $22 billion.

PhysicsWallah, founded in 2020, by Pandey and Prateek Maheshwari, had raised $100 million from WestBridge Capital and GSV Ventures at a valuation of $1.1 billion in June last year. The company had then said that it will use the funds for business expansion, branding, opening more offline learning centres, and introducing more course offerings.

Nikhil Patwardhan
Nikhil Patwardhan