Physics Wallah Raises $210 Mn With An Eye On Acquisitions, Valuation Doubles To $2.8 Bn

Edtech unicorn Physics Wallah (PW) has raised $210 Mn (about INR 1,756.7 Cr) in its Series B funding round, led by Hornbill Capital, at a post-money valuation of $2.8 Bn.

The round also saw participation from Lightspeed Venture Partners and its existing investors, GSV and WestBridge.

PW cofounder Prateek Maheshwari told Inc42 that the startup will largely use the funds for its strategic plans, which include geographical expansion and acquisitions.

“Currently, we are sitting on INR 1,200 Cr plus treasury…. For our internal growth initiatives – be it Vidyapeeth expansion, new category launches, new vertical business, and innovation which we are doing – we are sufficiently capitalised. But now we are a total group size of 15,000 employees (and) we thought of raising one round so that the treasury gives us more comfort. It’s a comfort capital which we have raised,” said Maheshwari.

Overall, the edtech player, which seems to be following the path of its rivals BYJU’S and Unacademy in terms of aggressive fundraise, product category expansion, and acquisition, aims to use the fresh funds to pursue inorganic expansion, enter the K-12 formal education segment, enhance its content and publication offerings, and explore mergers with community-driven education platforms across categories going forward. 

Maheshwari said that the startup hasn’t shortlisted any asset for acquisition yet but has a thesis in place, which includes companies in content-heavy categories, such as the publication industry.

Besides, it is also evaluating companies that can help PW with geographical expansion, particularly in the southern part of India.

“In general, we do not have a huge strength in the southern part. Xylem has done a phenomenal job in Kerala and they are planning to expand it to Tamil Nadu also. But Andhra Pradesh, Telangana, Bengaluru are the markets where we are not as strong (in terms of) online as well as offline presence…” Maheshwari said.

It is worth noting that in June last year, PW acquired a 50% stake in Kerala-based Xylem in an INR 500 Cr (around $61.04 Mn) deal.

Founded in 2020 by Alakh Pandey and Maheshwari, PW entered the unicorn club in 2022 by raising $100 Mn in its maiden funding round from Westbridge and GSV Ventures at a valuation of $1.1 Bn. Since then, it has expanded its offerings by entering the offline space and acquiring multiple companies.

In 2023 alone, PW made three other acquisitions – iNeuron, which offers skill development courses in AI and ML; test prep platform Utkarsh Classes: and UAE-based K-12 online learning platform Knowledge Planet.

PW currently operates tech-enabled offline and hybrid centres across 105 cities in the country. Its offerings span various educational segments, including two Gurukulam Schools, test preparation in 43 categories, a skilling vertical, and higher education and study abroad verticals. It also claims to offer free education to over 4.6 Cr students through its 112 YouTube channels in five vernacular languages. 

Speaking on the investment, Manoj Thakur, founder of Hornbill Capital, said, “Physics Wallah is a rare combination of vision, execution, and impact with a thriving 3C model – content, community, and commerce. We are excited to see PW’s use of AI not only to help improve students’ outcomes but also their emotional well-being.”

It is pertinent to mention that PW’s indigenously built Alakh AI was launched in December last year. Its AI educational suite’s offerings include AI Guru, Sahayak, and NCERT Pitara among others. Already 40 Lakh students are using its AI Guru product, as per the company.

PW is also entering into a strategic partnership with Microsoft, Maheshwari said but didn’t provide any further details.

PW will continue to invest more money and time on AI, he said.

A Quick View Of PW Financials

It is pertinent to note that PW was net profitable in FY23 even as its top edtech competitors, like Unacademy and Vedantu have been struggling on that front. However, its net profit narrowed over 90% year-on-year (YoY) in FY23 to INR 8.9 Cr. Meanwhile, PW’s operating revenue increased 234% YoY to INR 779.3 Cr that year.

Maheshwari told Inc42 that the startup clocked a revenue of INR 1,975 Cr in FY24, adding it expects the revenue to jump over 50% in the current fiscal year (FY25).

However, PW slipped into loss at a group level in FY24 and aims to turn PAT positive in FY25. Maheshwari said that the company was profitable in Q1 of the current fiscal and will post the highest EBITDA numbers in the history of the company in FY25.

“As a strategy, we are focusing on growth and student experience, we are not much worried about profitability. We believe in sustainable growth, (and) when the competition is weak, we should go out and capture the maximum market to maintain the student experience… Breakeven is a good thing for us, (though) we will generate good EBITDA this year,” Maheshwari said.

Meanwhile, differentiating PW from BYJU’S, Maheshwari said that PW’s cash allocations have been around 30-40X lower than the embattled company and all the acquisitions have helped the company grow.

“There has to be some fundamental synergies with the businesses when you choose inorganic growth, and a good amount of effort goes into integration. If you look at all the large businesses within the group, they have been built in-house. Be it Vidyapeeth, which has turned profitable this year, be it Pathshala… we are number one in all these categories not only in terms of students but also revenue,” Maheshwari concluded.