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!
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Startup India
The entrepreneurial scenario in India has changed over the last decade. The Indian government is supporting innovation through its Startup India initiative, creating employment opportunities and accelerating economic growth. In this blog, let's discuss Startup India, including its objectives, benefits, and eligibility criteria; also, know how to get a startup registered under this initiative.
What is Startups ?
A startup is the early stage of a company that is formed to develop a unique product or service, introduce it into the market, and scale it to make substantial revenues. Startups are an important part of innovation, job creation, and diversification in the economy. In India, startups play a critical role in driving technology adoption and solving complex challenges in areas such as healthcare, education, and financial inclusion.
Characteristics of a Startup
Innovation: Key concentration in developing new products, services, or processes.
Scalability: Ability to grow rapidly with low incremental costs.
Disruption: Challenge traditional business models or industries.
Importance of Startups in India
Job Creation: Startups are significant employment generators.
Economic Growth: Contribute to GDP by introducing new industries.
Technological Advancement: Drive innovation and technology adoption.
What is the Startup India Initiative?
Startup India is one of the flagship initiatives of the Government of India, launched on January 16, 2016. It aims to build a robust ecosystem that nurtures innovation and startups across the country. The idea is to give an impetus to economic growth and employment generation in a substantial way. Startup India seeks to encourage entrepreneurship by giving a boost to innovation and design, thus leading to the growth and success of the startup ecosystem.
Standup India Scheme Standup India scheme was announced on April 5, 2016, to finance new enterprises, to boost the entrepreneurship culture in India. The program ensures the availability of loans through the Scheduled Commercial Banks (SCBs), between ₹10 lakh and ₹1 crore to at least one member of the Scheduled Caste (SC) and Scheduled Tribe (ST), and at least one woman, per bank branch. The support in this new scheme is granted to businesses in the trading, services, or manufacturing sectors. This will supposedly help about 250,000 borrowers.
Key Objectives of Startup India
Making Business Easier: Simple rules, compliance, and legal steps.
Financial Help: Provide access to government funds and venture capital.
Building Skills: Offer training and mentorship programs.
Encouraging Innovation: Support research and development with grants.
Features of Startup India
Startup India Hub: This is a place where startups can connect with investors and mentors.
Fund of Funds for Startups (FFS): This is a ₹10,000 crore fund managed by the Small Industries Development Bank of India (SIDBI).
Tax Benefits: Eligible startups can get exemptions from income tax and capital gains tax.
Startup Recognition: Startups can receive official recognition from the Department for Promotion of Industry and Internal Trade (DPIIT).
The Startup India scheme eligibility criteria
If you want to get funding through the Start-up India scheme, you need to meet certain eligibility requirements. Knowing these requirements well will help you successfully go through the application process.
Business Experience: Start-ups applying for this scheme must have been operating for more than five years.
Age Requirement: Applicants must be at least 18 years old.
Company Structure: To get funds under this scheme, the company must be either a partnership or a private limited company.
Turnover Limit: The company should have an annual turnover of no more than Rs. 25 crore.
No Reconstruction: Start-ups that have emerged from the splitting or restructuring of an existing business are not eligible for this scheme. Companies that have divided an organization into two or more parts will be disqualified.
If a company is developing a new product or service, it can benefit from the Start-up India policy.
Here are the requirements:
The start-up must create, utilize, or sell a product or service that is based on new technology or intellectual property.
The focus should be on enhancing an existing product or developing a new one that adds value for customers or improves workflow.
The start-up must not engage in projects that are not unique or do not provide value to customers or enhance workflow.
To get a Startup India loan, start-ups must secure various approvals and submit specific documents:
Obtain approval from the Inter-Ministerial Board under the Department of Industrial Policy and Promotion (DIPP).
Acquire a recommendation from an incubator affiliated with a recognized post-graduate college.
Secure a recommendation from a government-recognized incubator.
File a patent for your product or service and have it published in the Indian Patent Office Journals.
If your services involve funding and equity, register with the Securities and Exchange Board of India (SEBI).
Provide a funding letter from any state or central government scheme that supports innovation.
How to Register Under Startup Under Startup India Scheme?
Step 1: Start Your Business
The first step in starting your business is to choose a legal structure, such as a Private Limited Company, Partnership, or Limited Liability Partnership (LLP). You will need to complete the standard registration process, which involves submitting an application and obtaining a Certificate of Incorporation or Partnership registration.
Step 2: Register with Startup India
Once you have created your business, the next step is to register it as a startup. This process is straightforward and can be completed online. First, visit the Startup India website and click the 'Register' button. Enter your name, email address, and mobile number, then create a password and click 'Register.' You will receive a One-Time Password (OTP) in your email. Enter this OTP and provide additional information, such as your user type, business name, and the stage of your startup. Finally, click 'Submit' to create your Startup India profile. Completing this registration will help your business be recognized as a startup under the Startup India scheme, granting you access to various benefits and support.
Step 3: Obtain DPIIT Recognition
After creating your profile on the Startup India website, the next step is obtaining recognition from the Department for Promotion of Industry and Internal Trade (DPIIT). This recognition provides benefits such as quality intellectual property services, relaxed public procurement rules, self-certification for labour and environmental laws, simplified winding-up procedures, access to the Fund of Funds, and tax exemptions for three years.
Step 4: Submit the Documents for Registration
To complete the registration process and obtain DPIIT recognition for your startup, please submit the following documents:
1. The incorporation or registration certificate of your startup.
2. Proof of funding, if applicable.
3. An authorization letter from the company's authorized representative
4. Evidence of your concept, such as a website link, pitch deck, or video (this applies to startups at the validation, early traction, or scaling stage).
5. Information regarding any patents and trademarks you hold.
6. A list of any awards or certificates of recognition you have received.
7. Your Permanent Account Number (PAN).
Step 5: Self-Certification of Eligibility Conditions
You need to confirm that your business meets the following conditions:
1. Your business must be a Private Limited Company, Limited Liability Partnership (LLP), or partnership firm.
2. Your business has been registered in India for no more than five years.
3. Your company's turnover does not exceed ₹100 crore.
4. Your company is consistently innovating or improving existing systems.
5. Your business is based on an original idea, rather than a split or reorganization of an existing business.
Step 6: Obtain Your Recognition Number
When applying for registration, you will receive your recognition number immediately. The authority will send you the certificate of registration or incorporation after reviewing your uploaded documents. Ensure that you upload accurate information to avoid errors, as mistakes can lead to fines of up to 50% of your paid-up capital or a minimum of Rs. 25,000. By fulfilling the eligibility and registration requirements, your company can participate in the Startup India scheme and enjoy various benefits provided by the government.
Wrapping Up
The Startup India initiative has revolutionized the entrepreneurial landscape in India by offering financial, regulatory, and infrastructural support. If you’re an entrepreneur with an innovative idea, registering under this program can unlock numerous opportunities for growth and success. Begin your startup journey today and contribute to India’s transformation into a global hub for innovation.
FAQ’s
Q1. What is the aim of the Startup India initiative?
Ans: Startup India aims to promote entrepreneurship, support innovation, and create a robust startup ecosystem in India.
Q2. How long does it take to register under Startup India?
Ans: The registration process typically takes 2–3 weeks, depending on document verification.
Q3. Are there any fees for registering under Startup India?
Ans: No, the registration process under the Startup India initiative is free of cost.
Q4. Can a sole proprietorship register under Startup India?
Ans: No, only Private Limited Companies, LLPs, and Partnership Firms are eligible to register.
Q5. What are the tax benefits available to startups?
Ans: Startups can avail of income tax exemptions for three consecutive years and exemptions on long-term capital gains.
Q6. Is the Startup India initiative open to foreign startups?
Ans: No, the initiative is exclusively for startups registered and operating in India.
