Physics Wallah (PW), the edtech unicorn, has posted an impressive revenue surge of 2.6 times in FY24, reaching Rs 2,015 crore. However, the company also witnessed a significant expansion in losses, driven by rising costs.
Revenue Growth Fuels Optimism, But Costs Escalate
Physics Wallah has reported a robust revenue growth of 2.6X in FY24, with revenue from operations touching Rs 1,940.4 crore, compared to Rs 744.3 crore in FY23. The company’s total revenue for FY24, including financial gains, stood at Rs 2,015 crore. This marked a solid performance, with over 90% of the revenue coming from educational services.
The company has become a major player in the Indian edtech sector, offering online and offline courses tailored to JEE, NEET, and other entrance exams. It also provides study materials for state board exams and skill development programs. The company serves a wide audience, offering free education to over 46 million students via its 112 YouTube channels. In addition, it serves around 5.5 million paid users, showcasing the scale and reach of its offerings.
Despite this impressive growth in revenue, the company also saw a sharp rise in expenses, leading to an unexpected widening of losses. The total expenditure in FY24 jumped a staggering 280.4%, reaching Rs 3,279 crore, far outpacing the revenue growth.
The key driver behind this increase in expenditure was a 180.9% rise in employee-related costs, amounting to Rs 1,159 crore. These costs alone accounted for more than a third of the company’s total expenses. The increase in employee benefits reflects Physics Wallah’s aggressive expansion and hiring efforts to scale its operations to meet growing demand.
Rising Costs and Shrinking Profits: What’s Behind the Losses?
One of the most notable aspects of the company’s financials is the sharp jump in its losses, which grew 13 times to Rs 1,131 crore in FY24. This figure includes Rs 756 crore in non-cash fair value losses from CCPS (Compulsory Convertible Preference Shares). If we exclude this non-cash expense, the company’s actual losses are closer to Rs 375 crore.
The company’s spending on materials and professional services also saw significant growth during the year. However, there was some positive news on the marketing front, as the company reduced its advertisement and promotional expenses by nearly 71%, down to just Rs 19.56 crore in FY24.
Despite the rise in operating losses, Physics Wallah has remained optimistic about its financial health. The company reported positive operating cash flows of Rs 211.85 crore, indicating that its core operations are generating cash despite the widening losses. Moreover, the company’s adjusted EBITDA was reported to be Rs 67 crore, which excludes non-cash expenses such as depreciation, amortization, and stock-based compensation.
Performance and Financials: A Closer Look
In terms of profitability, Physics Wallah reported a significant shift in its financial results for FY24 compared to the previous year. For FY23, the company disclosed a net loss of Rs 84 crore, though its operating revenue was adjusted to Rs 744.3 crore, down from Rs 779.28 crore previously reported.
A closer look at its financial ratios paints a picture of the ongoing challenges Physics Wallah is facing. The company’s EBITDA margin plummeted to -44.7%, and its Return on Capital Employed (ROCE) worsened to -85.84%. This suggests that, while the company is growing rapidly, it is struggling to maintain profitability amidst its high costs.
On a unit level, Physics Wallah is spending Rs 1.69 for every rupee it earns in operating revenue. This significant cost-to-revenue ratio highlights the financial strain the company is under despite its revenue growth.
Financial Breakdown:
- Revenue from Operations: Rs 1,940.4 crore (FY24)
- Total Revenue (Including Financial Gains): Rs 2,015 crore (FY24)
- Employee Benefits: Rs 1,159 crore (35.3% of total expenses)
- Total Expenditure: Rs 3,279 crore (280.4% increase YoY)
- Losses: Rs 1,131 crore (including non-cash fair value losses)
- Adjusted EBITDA: Rs 67 crore
- Operating Cash Flow: Rs 211.85 crore
Future Prospects: Is Physics Wallah On Track for Recovery?
Looking ahead, Physics Wallah’s prospects remain uncertain. The company has raised $210 million in its most significant funding round, bringing its total funding to $310 million, and is valued at $2.8 billion. While this large infusion of capital offers hope for continued growth, there are growing concerns about the company’s ability to balance its revenue expansion with the rising costs.
With its co-founders, Alakh Pandey and Prateek Maheshwari, controlling more than 85% of the company’s stake, Physics Wallah remains largely in their hands. Investors will likely be watching closely to see if the company can turn its fortunes around in the next couple of years.
The company’s scale and potential make it a significant player in the Indian edtech space, but whether it can build a sustainable model that matches its valuation remains to be seen.
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