Physics Wallah to cross Rs 2,400 cr in revenue in FY24, says co-founder

Where Byju's acquisitions were indiscriminate, PW's are measured, says co-founder

In the middle of a challenging funding environment for Indian educational technology (edtech) startups, Physics Wallah (PW) stands out as the sole profitable unicorn in this sector, valued at over $1 billion. The company aims to sustain its profitability for the fourth consecutive year and is on track to grow its revenues by 67 per cent this financial year (2023–24, or FY24) as it outlines an aggressive expansion syllabus.

Prateek Maheshwari, the co-founder, stated, “We achieved Rs 780 crore in revenue for 2022-23. In FY24, we are targeting a total revenue of Rs 2,400 crore at the group level, with the core PW business contributing around Rs 1,900 crore. The remaining Rs 500 crore will come from our inorganic expansion through partnerships and acquisitions.”

Maheshwari also mentioned that nearly 75 per cent of this revenue target has already been attained, with growth evident across various business verticals.

The online segment has experienced 100 per cent growth this year, while the offline vidyapeeths have expanded by 150 per cent, significantly contributing to revenue targets. The company is set to achieve a 250 per cent overall growth at the group level this year.

At present, PW, led by Alakh Pandey, boasts of a student base of 135,000, which is projected to reach 250,000 by the end of FY24. This impressive growth comes during a funding winter chill, with edtech firms finding warmth in ways to enhance margins. This has forced many to lay off staff and cut back on discretionary spending.

PW’s expansion strategy encompasses the launch of more offline centres and strategic acquisitions. The company secured its unicorn status in June last year, raising $100 million in Series A funding from WestBridge Capital and GSV Ventures, leading to a valuation of $1.1 billion.

Around 40 per cent of this funding, approximately $40 million, was specifically set aside for acquisitions. Subsequently, PW has completed nine acquisitions, including the recent purchase of Kerala-based Xylem and United Arab Emirates-based Knowledge Planet.

While 30 per cent of the allocated acquisition funds have been utilised, Maheshwari stated that more capital will be directed towards this bucket. He noted that this year’s focus involves integrating these acquisitions into the business, with no further acquisitions planned for the current year.

The primary avenue of expansion for PW remains the scaling of its offline centres, which have proven to be the fastest-growing vertical in terms of both student enrolment and revenue generation.

Currently operating in 38 cities through the vidyapeeth business and 16 cities via the paathshala business hybrid model, the company plans to expand to 24 more cities with vidyapeeths and 39 more cities with paathshalas, establishing a presence in a total of 108 cities, said Ankit Gupta, chief executive officer, PW Offline.

Despite the fact that 95 per cent of the user base engages through online channels, the offline centres contribute approximately 40 per cent of the overall revenue.

“Brick-and-mortar businesses, especially in the coaching industry, cannot generate more than 25 per cent of earnings before interest, tax, depreciation, and amortisation. But revenue-generation capacity is very high,” said Maheshwari.

Maheshwari explained that while online platforms tend to have higher margins due to reduced capital expenditure and operating costs, student sentiment often leans towards studying in offline centres.

Nevertheless, the online channel remains the primary profit generator for PW. A particular geography of interest for PW is southern India, where it possesses a substantial student base but lacks a robust offline presence. The acquisition of Xylem has furthered this geographical expansion.

“We are opening four more offline centres in Bengaluru. Our expansion in Kerala and Tamil Nadu is being driven by our partner, Xylem. We will enter Andhra Pradesh and Telangana markets next year,” Maheshwari said.

This route of aggressive expansion, however, does not come without its risks.

Edtech giant Byju’s, which has recently found itself in hot water after a spate of corporate governance lapses and financial irregularities, also opted for this strategy of growth in its early days. This led to a drastic increase in its cash burn.

Where Byju’s acquisitions were indiscriminate, PW’s are measured, said Maheswari.

“We acquire companies only to strengthen our existing capabilities or categories,” said Maheshwari, adding, “We have never rushed overseas to acquire companies. We always assess the synergies with our core business before we go forward with partnerships.”

“Acquisitions are easy; integrations are difficult. All our acquisitions are fully integrated with our business and are generating profits. Xylem is growing at 100 per cent, as fast as PW, and so is Knowledge Planet,” he added.

Another differentiator that sets PW apart from competition is that it is profitable, the only one to achieve this milestone among its fellow unicorns.

“Our priority is Student Net Promoter Score (a measure of customer satisfaction). If you keep student experience at the top of everything, you need not overspend on marketing and branding. Our second priority is growth; a company should grow at a healthy pace. And third is profitability, which is a byproduct of the first two,” Maheshwari said.

PW, he said, has a very detailed operating plan for all its initiatives and verticals.

“Our financial planning and road map for profitability are very exhaustive. It’s part of our culture and the corporate governance structure that we have put in place.”

The company also gained an advantage by not overhiring, like many of its competitors did when they were flush with cash.

“We have kept the company very flat in terms of hierarchy. We haven’t gone out and overhired, even when we raised our funds. Hiring at PW has always been done on a need-based basis, unlike other edtech companies,” Maheshwari added.

The company has no funding requirements at the moment and is eyeing a public listing in the next three years.