PhysicsWallah raises $210 million in funding at $2.8 billion valuation

Prateek Maheshwari & Alakh Pandey

Edtech unicorn Physics Wallah (PW) has closed its Series B funding round, raising $210 million through a combination of primary and secondary transactions.

The round, led by Hornbill Capital, saw participation from Lightspeed Venture Partners, as well as existing investors GSV Ventures and WestBridge Capital. With this investment, the company’s post-money valuation has soared to $2.8 billion, a 2.5X increase from its previous valuation of $1.1 billion.

Founded by teacher-turned-entrepreneur Alakh Pandey in 2016, the profitable edtech firm had previously raised $102 million from WestBridge and GSV Ventures in its maiden funding round.

The latest round marks one of the largest primary capital raises in the edtech segment in recent times, signaling a renewed investor confidence after a long interval, especially as companies transition back to traditional learning methods while incorporating digital innovations.

Following a drastic decline in investment during 2023, which fell to $321 million from a peak of $4.1 billion in 2021, the current funding is a strong indicator of recovery.

According to a report by Tracxn, year-to-date funding in the Indian edtech sector stood at $215 million, showing a modest rebound from the $321 million secured by edtech startups in 2023.

Funding in India’s edtech ecosystem plummeted post pandemic as educational institutions reopening impacted demand for online learning coupled with the corporate governance issue and financial crisis faced by beleaguered edtech company Byju’s that hit investors’ confidence in the sector.

However, despite a modest recovery, the sector still has a long gap to cover up as funding in 2023 dropped by 87 percent from $2.4 billion raised in 2022. Edtech funding had peaked at $4.1 billion in 2021.

Focus on scale 

In FY23, PhysicsWallah reported a threefold increase in operating revenue, reaching Rs 772 crore on a standalone basis. This surge was primarily fueled by the company’s expansion into offline education, which now contributes approximately 45 percent of its overall revenue.

In an interview with Moneycontrol, Co-founder Prateek Maheshwari shared that the edtech firm has over Rs 1,200 crore in the bank to fuel its expansion, and will utilise the fresh capital wisely to scale up.

Despite the dip in profits in FY23 due to increased spending on growth, Maheshwari and Pandey remain optimistic about the future. “FY25 will be our highest absolute EBITDA year,” Pandey confidently states. He explained that their revenue has already grown 2.5x in FY24, and their strategic decision to invest in offline centres, which many doubted, is now paying off.

PW's net profit saw a decline to Rs 16 crore, down from Rs 98 crore in FY22, attributed to rising employee costs and provisioning for non-cash expenses that led to a significant increase in total expenses.

"The mandate for FY24 was to capture market share, which led to a dip in profits. However, we’re confident about the long-term roadmap. For FY25, we’re targeting more than 50% growth," the co-founder added.

Strategic expansion

With the fresh capital, PhysicsWallah plans to bolster its operations significantly. The company is aiming to establish localised education centers--Micro hubs-- to enhance accessibility for students across India, and continuing its strategy of exploring mergers with community-driven education platforms to strengthen its market position.

"Our strategy is to avoid mega centers like Kota due to the high concentration of students and associated challenges. Instead, we are focusing on smaller, efficient centers closer to students' homes. This year, we are heavily expanding in South India but will continue to grow Vidhyapeth at a strong pace with mirco hubs," Maheshwari said.

The edtech had previously acquired smaller firms such as Xylem Learning, PrepOnline, Altis Vortex.

"We are exploring opportunities in different geographies, particularly the South. We are also seeking smaller, growing platforms, particularly led by teachers, that share our philosophy of community building and have a brand affinity similar to Physics Wallah. We are not interested in large-scale acquisitions but rather in smaller entities," Pandey said.