Capital for negotiation power, not growth: Prateek Maheshwari, PhysicsWallah

Despite setbacks faced by a few prominent players, edtech giant PhysicsWallah (PW), which recently secured $200 million in its latest funding round, is setting its sights on strategic acquisitions but remains committed to its self-sustaining growth model. Co-founder Prateek Maheshwari shares the company’s outlook, making it clear that while fresh capital bolsters its financial flexibility, PW’s growth trajectory will primarily be fuelled by its in-house yearly cash generation.

PW recorded a consolidated revenue of over ₹2,000 crore in FY24, with standalone figures surpassing ₹1,600 crore with the revenue mix reflecting a 55:45 ratio between its online and offline offerings.

While some companies have struggled, the overall market remains strong, he says, emphasising that the number of online learners is growing exponentially, particularly on platforms like YouTube.

“When domestic consumption increases, education is the first and foremost choice of a household to spend money on,” he explains, adding that the sector remains fundamentally bright. Despite challenges faced by a few startups, he argues that education is a non-discretionary expense. “People might cut out other expenses, but 70% of household expenditures in some form, focus on education. India, in fact, is even more sensitive towards education than China,” he says.

However, there are some existing gaps in the Indian education landscape which PW aims to address. Maheshwari says the company’s focus is on solving forward and backward integration issues in education, particularly in the K-10 segment through its brand Curious Junior. “No Indian entrepreneur has done justice to the K-10 market. That needs to be solved in India.”

In fact, even with a huge demographic dividend in India, he believes college education isn’t doing justice to the youth. “We need to solve this forward integration, either through partnerships with the government or with our own initiatives,” says Maheshwari.

Fund allocation

PW co-founder emphasises that the company is not actively pursuing any specific targets for the new funds. “There’s no active use of proceeds. Whatever we are doing is through the in-house cash we generate yearly, be it Vidyapeeth growth, opening new centres, ground-up work, or innovations,” he says. After this round, PW’s treasury will exceed ₹2,500 crore.

However, he didn’t rule out potential acquisitions entirely. PW, which has successfully integrated several companies, such as iNeuron, PW Skills, PW Institute of Innovation, and Xylem Learning, is open to acquiring a large asset if the opportunity presents itself. “If any good asset comes knocking on our door that matches our culture and is the right fit, we may think of doing it,” says Maheshwari, indicating that strategic deals could be on the table.

In the next one year, PW will explore a couple of deals, potentially “one large deal and some small deals.”

While the $200 million round has sparked speculation about PhysicsWallah’s plans to deploy aggressive capital, Maheshwari is quick to point out that the company’s growth isn’t tied to external funding. “Our growth plans are not related to funding. We are a build-first company. Historically, we have built a large business from the ground up with the cash we generate every year,” he says.

This approach echoes the strategies of rivals BYJU'S and Unacademy with its aggressive fundraising, product diversification, and acquisitions, plans to use the fresh capital to drive inorganic growth. The company seems to venture into the K-12 formal education space, expand its content and publishing offerings, and explore mergers with community-focused education platforms across various categories in the near future.

Maheshwari highlights that PW's ability to generate cash independently allows it to pursue growth without dilution or over-leveraging. “We don’t need capital to expand our core businesses. This funding is more about providing comfort when we negotiate for large acquisitions,” he adds.

PW's track record with acquisitions also became a key factor attracting investor interest. “Since we acquired Xylem Learning, the revenue has grown fourfold. It’s an amazing success story,” shares Maheshwari. He also says that the transformation of Utkarsh Classes and Knowledge Planet underscores PW’s ability to scale and optimise acquired companies.

However, he stresses that the difficult part is not the acquisition but the integration. “We’ve demonstrated our ability to do this, and that’s been a positive outcome for investors,” he says.

Additionally, one of the key growth drivers for PW this year has been Vidyapeeth, its offline education arm, which has seen significant traction. “This year is the year of profitability for the Vidyapeeth business,” says the co-founder. The platform saw over 200,000 student admissions over the last two years, and its financials have turned a corner after a capital expenditure of ₹400 crore. Maheshwari credits its transformation to strategic investments and operational improvements.