Indian ed-tech startup Physics Wallah bags $2.8 billion valuation amid sector troubles

Indian education technology startup Physics Wallah announced on Friday that it had raised $210 million as it looks to expand its business, in part via acquisitions, amid troubles in the sector.

The funding, led by Hornbill Capital, and involving Lightspeed Venture Partners, GSV and WestBridge, values the company at $2.8 billion, a significant increase from its last valuation of $1.1 billion.

Physics Wallah, founded in 2020, is one of India’s many education technology, or ed-tech firms, that offers free and paid-for courses for various competitive examinations in India. The company aims to differentiate itself by offering courses that on average cost less than $50, in order to be accessible to more kids in poorer parts of the country.

“We are not built for 1% of the country or 1% of the world, we are built for the remaining 99%, those who cannot go to these fancy coaching classes … now we enable different kinds of students,” Alakh Pandey, CEO of Physics Wallah, told CNBC in an interview.

The company runs on a freemium business model, hosting courses for free on YouTube. For those students who want more features such as homework and tests, there is a paid offering.

The company said its revenue grew 250% year-on-year in the fiscal year ended March 2024 and Pandey said he expects the “highest absolute” EBITDA in the current fiscal year. Earnings before interest, taxes, depreciation, and amortization, or EBITDA, is one measure of profitability used by companies.

Pandey said the company is open to acquisitions provided it gives them access to new content and users.

“Consolidation, we are open to it if it’s based on different geography that we cannot serve to, and if it caters to content and community first,” Pandey said.

The CEO pointed to the equity investments it has already made. Last year, Physics Wallah brought a 50% stake in Xylem Learning, an ed-tech company headquartered in Kerala in south India.

Pandey and his co-founder Prateek Maheshwari said that the company is focused on some key trends including the push for hybrid — both online and in physical classrooms — and broader internet penetration across villages, towns and smaller cities in India. All of this helps children from less-privileged backgrounds get access to education.

The ed-tech boom in India began during the Covid pandemic when several companies looked to expand aggressively.

But that expansion also led to some high-profile collapses in the sector, including ed-tech firm Byju — once valued at $22 billion — which has all but collapsed and is facing multiple insolvency proceedings in India. Its fall has been attributed to factors including aggressive acquisitions, high spend on marketing and mismanagement.

Discussing some of the failures in the ed-tech sector in India, Pandey said his company is focused on the content it offers and the outcomes for students.

“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,” Pandey told CNBC.

“Education is different thing. It’s not like any other startup that you can grow and talk about crazy valuation … at heart you have to accept that you are actually working to change the life of students.”

Maheshwari, who also spoke to CNBC, said that despite the failures, the market is still growing.

“I don’t believe the market has shrunk. A couple of players have struggled to perform post-Covid … but the learners are increasing year-on-year,” Maheshwari said.

Speaking about Physics Wallah’s future, Pandey said an initial public offering will happen, but wouldn’t be drawn on a timeline.

“An IPO is something that we will do. We want to have a strong governance in the company, we are working on that, forming a board of independent directors … it’s not that important for us when the IPO will happen, we are running the company like a public company,” Pandey said.