The only profitable edtech start-up in India is attempting to seek capital not for financial reasons, but to improve its valuation and for possible M&A agreements.
Physics Wallah is in preliminary talks to raise at least $250 million, or three times its current valuation, a massive round and valuation mark-up for an edtech start-up at a time when the broader business is struggling owing to weaker development while college institutions, physical tuition centres, and schools reopen.
According to at least three people familiar with the situation, the edtech unicorn run by Alakh Pandey, a popular YouTube teacher, is attempting to raise its valuation from $1.1 billion to $3.3 billion. According to the persons who requested anonymity, Physics Wallah is in the market and is in talks with a number of private equity (PE) investors. GSV Ventures and WestBridge Capital, the company’s existing shareholders, will increase their stakes.
Physics Wallah claimed a 10x increase in operating revenue to Rs 232.5 crore in FY22 (2021-22) and a profit of approximately Rs 100 crore, making it India’s largest and only profitable edtech start-up.
Pandey said in an interview last year that the business anticipates sales to exceed Rs 1,200 crore in FY23, with an earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin of 40-45 percent. If the firm achieves such fast growth in FY23, it would become the first edtech unicorn in the country to record over 100 percent revenue growth, while its nearest competitors Unacademy and Vedantu are predicting flat to marginal growth.
Physics Wallah’s fund-raising efforts and aggressive expansion ambitions come at a time when India’s edtech start-ups have seen a major slowdown in development, with the pandemic-driven surge fading owing to the reopening of college institutions, physical tuition centres, and schools.
Furthermore, practically all edtech unicorns, even the well-funded ones like Unacademy, Byju’s, and Vedantu, have let off over 1,000 people in an effort to cut expenses and lengthen the runway as investment to India’s start-up ecosystem has slowed dramatically.
Byju’s $250 million fund-raise in October was the largest round raised by an edtech business in India. Nevertheless, the world’s most valuable edtechstartup was only able to fund it at a flat valuation of $22 billion.
Physics Wallah, founded in 2020 by Pandey and Prateek Maheshwari, raised $100 million in June last year from WestBridge Capital and GSV Ventures at a valuation of $1.1 billion. The cash will subsequently be used for business development, branding, the opening of more offline learning centres, and the introduction of new course options, according to the firm.
