Edtech

PhysicsWallah Sees Losses Widen in FY 2023-24 Amid Rapid Expansion; Losses Revise FY 2022-23 Figures

• ByStartupStory     |    November 8, 2024

Noida-based edtech unicorn PhysicsWallah (PW) has reported a sharp increase in losses for FY 2023-24, fueled by a significant rise in employee benefit costs and other expenditures, even as the company achieved a remarkable 2.6-fold increase in operating revenue. The company also revised its FY 2022-23 figures, now reporting a loss of Rs 84.1 crore, a stark contrast to the Rs 8.9 crore profit previously stated in its earlier consolidated financial statements.

The increase in losses comes amid the company’s aggressive expansion into new educational verticals, which has stretched its cost base. Initially focused on test-prep offerings, PW has rapidly diversified its portfolio to encompass school education, skills training, and more, casting a wider net to cater to a broad base of learners. Despite the substantial increase in revenue, the company’s higher costs are a significant factor in its widening losses.

The news comes as PW faces competition from BYJU’S, the once-dominant player in India’s edtech sector, which has also been grappling with rising losses. For FY 2023-24, BYJU’S reported a consolidated loss of Rs 1,131.3 crore, up a staggering 13.5 times from the Rs 84.1 crore loss recorded in the previous fiscal period. The company’s losses were further impacted by non-cash adjustments related to Compulsorily Convertible Preference Shares (CCPS), amounting to Rs 756 crore. After excluding these non-cash adjustments, the company’s actual cash losses stood at approximately Rs 375 crore, up 4.4 times.

While PW’s revenue surged significantly, the company’s expenses saw an even sharper rise. Operating expenses increased by 280.4%, reaching Rs 3,279.1 crore for FY 2023-24, compared with Rs 862 crore the previous year. The primary driver of the increase was employee benefits, which escalated by 180.9% to Rs 1,159 crore. Additionally, other expenses surged by 442.4% YoY, amounting to Rs 1,660 crore. The rise in miscellaneous expenses was especially notable, climbing by 755.9% to Rs 1,452.7 crore.

Interestingly, PW reduced its advertising and promotional expenses by nearly 40%, although these still represented one of the company’s largest cost areas, totaling Rs 37.3 crore in FY 2023-24, compared to Rs 62.1 crore in FY 2022-23.

Despite the loss, PW has remained optimistic about its future growth trajectory. Co-founder Prateek Maheshwari told YourStory earlier this year, “FY24 was the year of ‘growth,’ while FY25 is the year of ‘sustainable growth,’ as PW aims to return to a profitable path.” Maheshwari added, “We have bounced back this year, with the first two quarters being EBITDA profitable for the first time in our company’s history.” EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a key metric used to assess a company’s core operational performance.

In light of its expansion and changing financial landscape, PW is hopeful that FY25 will bring the company closer to profitability, with Maheshwari predicting that it “is expected to be the highest in absolute EBITDA profitability since inception.” While the profitability metric for FY25 remains uncertain due to the transition from I-GAAP to Ind-AS, Maheshwari remains confident that the company will emerge stronger.

This optimism is reinforced by the company’s recent fundraising achievement. In September 2024, PW raised $210 million in a Series B funding round, led by Hornbill Capital, with substantial participation from Lightspeed Venture Partners. This funding round has catapulted PW’s post-money valuation to $2.8 billion, making it the third-most valued edtech firm in India, behind Unacademy ($3.4 billion) and Eruditus ($3.2 billion).

The impressive revenue growth, bolstered by substantial investments, highlights PW’s rapid ascent in India’s highly competitive edtech market. However, the company faces challenges in balancing its rapid expansion with the need for sustainable financial health moving forward.

As PW looks ahead to FY25, the focus will likely remain on achieving sustainable growth, while also maintaining its leadership position in the rapidly evolving edtech ecosystem.

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