| Quick Takeaways Physics Wallah has recorded a consolidated loss of Rs 1,131 Cr for FY24. The main reason for the loss was the fair value change of CCPS and increased ESOP and personnel expenses. After a Net profit of INR 8.9 crore for FY23, Physics Wallah revised their FY23 bottom line with the change in regulations related to accounting. The Operating income of the startup increased 2.6 times to INR 1,940.4 Cr for FY24, as compared to the previous year’s INR 744.3 Cr. Physics Wallah Revenue now stands at Rs 1,940 crore. |
One of the leading online educational platforms, Physics Wallah, which was established in 2016 as an Indian EdTech unicorn, suffered a consolidated loss of Rs 1,131 crore in FY24. The question arises – how come a prominent company suffered this significant loss? Well, there were many factors contributing to the loss, which will be discussed below.
Talking about the company – it was founded by Alakh Pandey and Prateek Maheshwari, and today it has transformed itself into an educational firm. A wake-up call for the company when despite having a substantial user base and growth, it suffered from competition, high investments, and heavy operational costs. However, Physics Wallah Net Profit stood at INR 8.9 crore for FY23.
So, let us delve deeper because there are more things to be unfolded about. Therefore, come with us as we unfold some relevant information regarding the issue.
Physics Wallah Witness Heavy Loss in FY24
Physics Wallah reported a consolidated loss of INR 1,131 crore in FY 2023-24, which is 13.5X more than a loss of INR 84.06 crore in FY 23. It has been started as a YouTube channel back in 2016 by Alakh Pandey and Prateek Maheshwari joined it in 2020. Today, Physics Wallah has transformed from a mere YouTube channel to a complete education technology company. It provides coaching for different competitive exams like NEET and JEE, materials for self-study, and online and offline study coaching.
So, why so big a loss? The important reasons include: Shrinkage in fair value of CCPS, an increase in ESOP, and personnel expenses. Further, the start-up informed that the change in fair value of CCPS in FY24 cost them INR 756 Cr as opposed to INR 67.1 Cr in FY23. Besides, ESOP expenses nearly shot up to INR 151 crore in the reviewed year, up from INR 38.3 crore in FY23. Let us know these in detail.
Key Factors Behind the Loss
One of the major factors behind the loss was the change in the fair value of CCPS. PW revealed that the change in the fair value of CCBC in FY24 cost the company INR 756 Cr, compared to INR 67.1 Cr in FY23. The sharp increase in the fair value reflected fluctuations in investor sentiment, business valuation, or other financial factors, that were negatively impacting the company’s balance sheet.
Another factor was an increase in the ESOP expenses. These expenses nearly quadrupled in FY24 to INR 151 crore, compared to INR 38.3 crore in FY23. This sharp rise is quite possibly due to the increased size of the company in terms of its employees, and also to the added value of stock options issued for incentive purposes. Being a high-growth startup itself, Physics Wallah will probably have scaled up hires during this period, at least to help sustain and drive the high growth happening within the business.
Where Did PW Spend?
PW’s total expenses increased over 280% to INR 3,279.1 Cr in FY24 from INR 862.01 Cr in FY23. Where did PW spend? Let’s have a look at the breakdown of PW’s spending.
- Employee Benefit Expenses – PW spending on employee costs surged 180% to INR 1,158.96 Cr in FY24, compared to INR 412.5 Cr in FY23.
- Advertising & Promotional Costs – Unlike the increase in other things, the expense for advertising and promotional stuff declined 70% to INR 19.56 Cr in FY24, compared to INR 67.09 Cr in FY23.
- Depreciation, Depletion & Amortisation Expense – Expenditure under this stuff rose 297% to INR 298.2 Cr in FY24, compared to INR 75.12 Cr in FY23.
- Rent-Related Costs – As the edtech major ventured into offline operations in FY24, it incurred rent expenses totaling INR 32.72 Cr during the reviewed financial year, compared to none in the prior year.
| Notably, “miscellaneous expenses” were the largest expense lines of PW as the incubated business incurred INR 1,452.7 Cr under this head for FY24 in comparison to INR 169.73 Cr under it for FY23 without classifying the expenses. |
Revenue Growth Amid Loss
Despite the significant loss, Physics Wallah has seen remarkable revenue growth in FY24. The company’s operating revenue increased 2.6 times to INR 1,940.4 crore in FY24, up from INR 744.3 crore in FY23. This reflects that the company’s core business operation, particularly its online education platform, is thriving and how.
Alongside, PW has gained widespread attention and recognition, especially among students preparing for competitive exams in India, for its high quality yet affordable coaching of various subjects, including Physics, Chemistry, and Mathematics.
Factors Helping in Revenue Growth
- The major reason is the company’s expansion into new subjects, regions, and formats.
- Besides, an increasing demand for online education services, especially post-pandemic.
- The increasingly digitizing education sector.
- Capitalizing on the booming EdTech market.
Outlook for Physics Wallah
While the substantial loss in FY24 raises concerns about the sustainability of the company’s finances in the short term, the company’s good revenue growth and market presence indicate Physics Wallah is working towards long-term growth and scalability. The company is likely to focus on operational efficiency and cost control as it grows its user base, particularly in areas such as CCPS valuation and ESOP compensation.
In the competitive landscape of EdTech, where quite a few companies are competing, the future of Physics Wallah will depend on its ability to balance growth with profitability. Revenue growth is promising; however, managing the rising costs associated with rapid growth will be key to the venture’s sustained financial health.
Bottom Line
Surely, the financial loss is huge and significant, for which several factors are to be blamed. The company’s performance in terms of revenue growth reflects its effectiveness and positioning in the future. With some strategic approach, the company could return to profit in the coming years, and compete in the highly competitive online education market.
With this, we end this guide here, hoping viewers get some informative insight into the issue. Stay Tuned for more!
Also Read: Malavika Hegde: Inspiring Story of a CEO, who saved Cafe Coffee Day from 7000 Cr Debt | Offerup: An Online Buy and Sell Locally C2C marketplace
