In June 2022, PhysicsWallah (PW) emerged as the 101st unicorn startup from India, marking its entry into the unicorn club with its inaugural external funding round. Since then, PW’s growing influence in India’s edtech landscape has coincided with the decline of established players in the industry.
Much of PW’s success has stemmed from its reliance on profitability up to this point. However, as its profits dwindle due to investments aimed at expanding into new products and markets, the edtech startup finds itself facing similar challenges as its competitors, including Unacademy, BYJU’S, and Vedantu.
PhysicsWallah now confronts the same conundrum that has perplexed edtech startups thus far: how to achieve sustainable growth while diversifying into new products and verticals. Can it navigate this challenge without resorting to the drastic measures undertaken by its rivals?
We’ll delve into this question after covering these news stories from our newsroom:
1. Swiggy’s Revenue Milestone: Food delivery giant Swiggy is poised to report nearly INR 10,000 crore in revenue for FY24 as it progresses towards a potential $1 billion IPO.
2. Risky Swipes: India’s dating apps market experiences significant growth, but this success is marred by a rise in incidents of crime and fraud, raising concerns about platform accountability.
3. What’s Stalling Ather? Despite being an early entrant, Ather Energy’s market share has eroded to new players and automotive giants, prompting questions about its strategic decisions and competitive capabilities.
From PhysicsWallah to Edtech Everything:
When we interviewed PhysicsWallah founder Alakh Pandey in 2022, edtech platforms were transitioning from online-only to hybrid models, and he believed that stability would be achieved within a couple of years.
In the two years since then, Unacademy and BYJU’S have undergone significant operational adjustments, while Vedantu has taken a more cautious approach. Meanwhile, PW, fueled by profits, has expanded into nearly every edtech category to some extent.
In addition to its core test prep segment, PW has ambitions to broaden its study abroad business to compete with Leverage Edu and others. PW Skills, another venture gaining momentum, aims to rival upGrad, Scaler Academy, Unacademy-owned Relevel, NxtWave, and similar platforms.
However, some of PW’s new offerings, such as the Parent app (launched in Feb 2024), PW Drona (course management for educators), PW Olympiad (a gamified early learning platform), and PW LearnOS (a productivity tracker), lack revenue streams.
Recently, the startup entered offline education for primary classes with PW Gurukulam School. It announced plans to invest INR 100 crore to strengthen its UPSC vertical and INR 120 crore to bolster PW Skills.
The Quest for New Revenue Streams:
PW Unigo holds significant long-term potential for PW, but rapid revenue scaling in this space presents challenges. For example, Leverage Edu, a seven-year-old startup, reported INR 68.9 crore in revenue for FY23, with a loss of INR 103 crore, despite raising over $70 million in the past five years.
Building relationships with lenders and educational institutions takes time, and there’s intense competition in the overseas education counseling market, as noted by a former Leverage Edu executive.
A senior PW employee revealed that groundwork has commenced with a team of 20 for PW Unigo, though it’s not currently a major focus area for the company.
PW Skills, launched in October 2022, is another revenue prospect, albeit in its infancy with only a few courses compared to competitors.
For PW, integrating revenue-generating edtech components is imperative. PW Unigo and PW Skills offer potential sustainable revenue streams alongside the offline vertical’s growth trajectory.
Shrinking Profits:
One distinguishing factor for PhysicsWallah was its profitability. However, the company witnessed a 91% decline in net profit to INR 9 crore in FY23 from INR 98.2 crore in FY22 due to increased expenses related to talent acquisition and capital expenditure for offline expansion.
As reported recently, PW is poised to surpass INR 2,000 crore in revenue for FY24. Co-founder Prateek Maheshwari indicated a slight decrease in adjusted EBITDA for FY24, without addressing the bottom line.
This decline comes after PW’s profits contracted in the first full fiscal year post-2022 fundraising.
Notably, offline learning, comprising PW Vidyapeeth and Pathshala centers, experienced the fastest growth for PhysicsWallah in FY24, underscoring the substantial investment made in this domain over the past year and a half.
Until 2022, PhysicsWallah operated solely online before raising funds to expand its coaching center network. Revenue is expected to reach around INR 680 crore, up 115% year-on-year (YoY).
However, as one Bengaluru-based edtech founder highlighted, each coaching center takes at least a year to break even, if at all. Initial year collections typically cover only a portion of costs such as teacher salaries, rent, and infrastructure expenses.
For context, PW currently operates 77 Vidyapeeth centers, up from just seven in 2022. A PW insider revealed, “We had to invest in 2023 to reap rewards in 2024. Currently, all edtech startups are competing for collections, given the peak enrollment season. Therefore, PW had to prioritize building these coaching centers before collections commenced.”
Interestingly, the startup plans to launch 55 new Vidyapeeth centers by the end of 2024, with existing centers operating in around 105 cities. Maheshwari previously mentioned the success of Pathshala centers in Tier II, Tier III, and Tier IV cities and towns, with plans to open 50 more centers in the next two years.
Edtech Battle in 2024:
Investments made in 2023 and 2024 are expected to yield returns in 2025. Consequently, PhysicsWallah must demonstrate revenue growth in the online learning space while continuing its expansion efforts. However, this strategy aligns it more closely with its competitors.
PW’s expanding product portfolio mirrors the strategies employed by edtech unicorns prior to 2022. BYJU’S, Unacademy, and Vedantu pursued aggressive user base expansion and acquired startups to enter new verticals, leading to significant losses and subsequent closure of many verticals.
Similarly, PW has pursued acquisitions in 2023 and hired thousands of employees for new ventures. However, the untested nature of its new revenue-generating products necessitates further investment in product-market fit.
While PhysicsWallah embarks on experimentation and expansion, its competitors focus on sustainable growth, largely refraining from launching new products.
Unacademy narrowed its net loss by nearly 40% in FY23 to INR 1,678.1 crore, with revenue reaching INR 907 crore. CEO Gaurav Munjal claimed a 60% reduction in cash burn in 2023.
Vedantu plans to add 30+ offline centers in the coming year, but it has yet to disclose its FY23 financials. The company may experience a revenue decline as it scales back its offline operations.
Aakash, owned by BYJU’S, saw an 82% increase in profit to INR 79.5 crore in FY22 on INR 1,421.2 crore
