Physics Wallah (PW), an edtech unicorn, increased operating revenue by 2.6 times in the fiscal year ending March 2024, while its losses increased by 4.4 times due to a steep increase in spending. Physics Wallah's income from operations increased to Rs 1,940.4 crore in FY24 from Rs 744.3 crore in FY23, according to the company's consolidated financial accounts filed with the Registrar of Companies.
The corporation derived more than 90% of its revenue from educational services, with the remainder coming from product sales. It also earned Rs 74.64 crore from interest and gains on financial assets, bringing the total revenue to Rs 2,015 crore in FY24.
Physics Wallah was founded in 2020 by Alakh Pandey and Prateek Maheshwari. It offers both online and offline classes and study materials for JEE, NEET, other engineering entrance examinations, and state board exams. The corporation also has departments dedicated to skill development, higher education, and study abroad programs.
Physics Wallah claims to provide free education to over 4.6 crore (46 million) students via its 112 YouTube channels in five vernacular languages, as well as 5.5 million paid students. Moving on, the corporation spent 35.3% of its entire expenditure on employee benefits, totaling Rs 1,159 crore. This expenditure increased 180.9% from the Rs 412.6 crore booked in FY23. Other costs that increased dramatically during the year included material costs and legal and professional fees. Importantly, the corporation reduced its advertising and promotional expenses by 70.8% to Rs 19.56 crore in FY24.
The company's total costs increased by 280.4% to Rs 3,279 crore in FY24, outpacing revenue growth by a significant margin. It's worth mentioning that the corporation recorded Rs 1,452.7 crore in miscellaneous expenses. A spokesman for the firm clarified that Rs 756 crore has been classified as fair value loss of CCPS (non-cash item).
Physics Wallah's losses increased by 13X to Rs 1,131 crore in FY24, up from Rs 84 crore in FY23, owing to escalating costs. The company's losses include Rs 756 crore allocated to the fair value loss of CCPS; eliminating this non-cash item, the company's losses are around Rs 375 crore.
According to the corporation, adjusted EBITDA is around (positive) Rs 67 crore. This EBITDA includes Rs 151 crore in ESOP costs and other non-cash items such as depreciation, amortization, and impairment. It's worth noting that the company generated Rs 779.28 crore in revenue from operations and Rs 8.87 crore in profits in FY23. However, the company's restated numbers for this year indicate an operational revenue of Rs 744.3 crore and a net loss of Rs 84 crore in FY23.
The company's operating cash flows remained positive during the quarter, totaling Rs 211.85 crore. In terms of ratios, EBITDA margin and ROCE fell to -44.70% and -85.84%, respectively. Physics Wallah invested Rs 1.69 to generate one rupee of operating revenue.
Physics Wallah raised $210 million in the largest equity round for an edtech business in recent years, increasing its total capital to $310 million and valuing the company at $2.8 billion. According to TheKredible, the co-founders own more than 85% of the company.
While there is little doubt about Physics Wallah's credibility among its most important stakeholders, its students, one has to ask if the loyalty and admiration it garners is not beginning to cloud decision-making among investors. The sheer size of the funds received and the valuations place the burden of creating something that matches the perception on the founders. They have been working hard to achieve this, and another two years of robust growth should comfort many investors. However, it appears that the final word on the disruption that edtech companies such as Physics Wallah hoped to provide has yet to be heard. Will it be Physics Wallah who shows the way? There is little doubt that it is in a better position than most to do so.
