Edtech

Lightspeed to Lead $150 Million Funding Round in PhysicsWallah at a Valuation of $2.6 Billion

• ByStartupStory     |    August 16, 2024

Lightspeed Venture Partners is set to lead a $150-million funding round for PhysicsWallah, the edtech platform founded by Alakh Pandey. This deal comes at a time when investor interest in India’s edtech sector is dwindling due to a significant drop in demand for online learning. Lightspeed, known for its investments in edtech companies like Bhanzu, Teachmint, and previously India’s largest unicorn Byju’s, has issued a term sheet giving PhysicsWallah a pre-money valuation of $2.6 billion, according to four individuals familiar with the matter.

The investors are currently conducting financial due diligence for the deal, which is expected to be primarily a fund infusion. However, there may also be some secondary transactions, according to the sources who spoke on condition of anonymity due to the private nature of the discussions.

“PhysicsWallah had kickstarted exploring a fundraise last year and was looking at a slightly larger round of $250 million or so at a valuation of over $3 billion,” said one of the sources. “The main aim was to put a new valuation tag given their massive growth. But the actual deal negotiations only began a few months back. Lightspeed has given a term sheet, but the deal is yet to be closed,” the person added.

If the deal is finalized, PhysicsWallah’s valuation would more than double from approximately $1.1 billion in 2022 to between $2.7 billion and $2.8 billion (post-money). This would mark a rare instance of an upround in the global edtech sector, which experienced a significant boom during the pandemic but has faced challenges since as students have returned to physical classrooms following the easing of pandemic-related restrictions.

PhysicsWallah declined to comment on the ongoing discussions. The company also refuted claims that the founders are considering secondary transactions. Lightspeed did not respond to queries from YourStory.

Entrackr was the first to report on PhysicsWallah’s funding round last month, while Moneycontrol had earlier reported about the company’s fundraising efforts in March last year.

PhysicsWallah, one of India’s most prominent edtech platforms, raised its first round of external funding—$100 million—in mid-2022 from private equity firm WestBridge Capital and US-based edtech investor GSV Ventures. The company quickly became one of India’s youngest unicorns, achieving a valuation of over a billion dollars just two years after its inception. Initially focused on test-prep learning, PhysicsWallah has since expanded its offerings to include upskilling, K-12 education, and offline tuition centers.

The company’s revenue has seen substantial growth, rising from Rs 25 crore in FY21 to Rs 780 crore in FY23. According to another source familiar with the funding, PhysicsWallah’s revenue more than doubled to around Rs 1,800 crore in FY24. The company is targeting revenue of over Rs 2,900 crore for FY25.

However, the aggressive expansion that followed the external funding has impacted PhysicsWallah’s profitability. The company’s profit dropped to Rs 6 crore in FY23, down from Rs 100 crore in FY22. In FY24, the company reportedly slipped into losses, as previously reported by The CapTable. PhysicsWallah has also downsized its operations in Kota and relocated some of its teachers to other regions in an effort to tackle the slowdown and enhance profitability.

Founded in 2020 by YouTube teacher Alakh Pandey and serial entrepreneur Prateek Maheshwari, PhysicsWallah competes with other edtech platforms like SoftBank-backed Unacademy, Tiger Global-backed Vedantu, and Byju’s, which was once India’s most valuable unicorn, with a valuation of over $22 billion.

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