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Alakh Pandey (R), CEO of Physics Wallah, alongside co-founder Prateek Maheshwari (L).
Physics Wallah
The Indian education technology startup Physics Wallah announced on Friday that it has successfully secured $210 million in funding as it seeks to broaden its operations, including potential acquisitions, amidst ongoing challenges within the ed-tech landscape.
This investment round, led by Hornbill Capital and supported by Lightspeed Venture Partners, GSV, and WestBridge, has elevated the company’s valuation to $2.8 billion, a notable rise from its previous valuation of $1.1 billion.
Founded in 2020, Physics Wallah is part of a growing ed-tech ecosystem in India, aiming to provide affordable education resources for a variety of competitive exams. The startup distinguishes itself by offering courses that typically cost under $50, aiming to enhance accessibility for students in economically disadvantaged regions.
Pandey emphasized the company’s mission, stating, “We are not built for 1% of the country or 1% of the world, we are built for the remaining 99%, those who cannot attend expensive coaching classes… now we enable different kinds of students,” during an interview with CNBC.
Operating on a freemium model, Physics Wallah provides free course content on YouTube and offers additional paid features such as homework assistance and assessments for those seeking more comprehensive support.
The company reported a remarkable 250% increase in year-on-year revenue for the fiscal year ending in March 2024, with Pandey anticipating the “highest absolute” EBITDA figures for the current fiscal year. This metric, which stands for earnings before interest, taxes, depreciation, and amortization, serves as a key indicator of profitability.
Furthermore, Pandey expressed a willingness to consider acquisitions that would help expand their content offerings and user base. “Consolidation, we are open to it if it addresses different geographic segments that we cannot serve, and if it focuses on content and community first,” he noted.
The company’s previous investments include a 50% stake in Xylem Learning, an ed-tech firm based in Kerala.
Challenges in India’s Ed-Tech Sector
Pandey and Maheshwari highlighted critical trends driving the industry, such as the shift towards a hybrid model that combines online learning with physical classrooms and the increasing internet accessibility in rural and semi-urban areas. These developments play a significant role in providing educational opportunities to underprivileged children.
The rise of ed-tech in India gained momentum during the Covid-19 pandemic, as various companies pursued rapid expansion. However, this growth has also led to the downfall of several high-profile firms in the sector, such as Byju, which was once valued at $22 billion and is now grappling with multiple insolvency proceedings. Issues like aggressive acquisition strategies, excessive marketing expenditure, and poor management have been cited as contributing factors to its decline.
Pandey addressed the challenges faced by the ed-tech industry, emphasizing the importance of focusing on content quality and student outcomes rather than solely on valuations. “If you see interviews or even read the headlines of previous actors that you’re talking about, all they talk about is the crazy valuation they have, the funds they have raised, how much money they have made,” he stated.
“Education is a different endeavor. It’s not like any other startup where you can boast about valuations… at the core, you must acknowledge that you are genuinely working to transform the lives of students.”
Maheshwari concurred, suggesting that despite certain setbacks in the market, the overall demand for educational services continues to grow. “I don’t believe the market has shrunk. A couple of players have struggled to perform post-Covid… but the number of learners is increasing year-on-year,” he noted.
Looking ahead, Pandey mentioned that Physics Wallah is considering an initial public offering (IPO), although he refrained from specifying a timeline. “An IPO is something that we will pursue. We aim to establish strong governance for the company; we are actively working on forming a board of independent directors… the timing of the IPO is not our priority; we are operating the company as if it were already public,” he explained.
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