Alakh sir, can PhysicsWallah ace the profit test?

The Noida-headquartered company provides test preparation classes for various competitive exams in India and was last valued at over $1 billion. It promised to finish the course in September 2023. But that deadline stretched—first to March and then to December 2024. After repeated complaints, PhysicsWallah completed the course this month, through “marathon classes”—many classes in a day. However, the process left the student exasperated.

“Classes were being cancelled as teachers used to go absent. On social media, we would see them engaging in other activities like college visits and seminars to promote PhysicsWallah,” he said.

Not only are classes delayed, some students even complain of study material being delivered late. A student from Kolkata Mint spoke to said he was preparing for CA exams, conducted by the Institute of Chartered Accountants of India. On its website, PhysicsWallah claims it “offers the best CA online coaching in India for foundation and intermediate CA exams at affordable prices”. The student enrolled earlier this year but has been waiting for the study material to be delivered for close to a month now.

In Lucknow, where the company runs a brick and mortar coaching centre, a student said he regrets his decision of enrolling into a course to prepare for the Joint Entrance Exam (JEE), a national level test for admission to engineering colleges. He is unhappy with the quality of the faculty at this centre.

All the three students didn’t want to be identified.

PhysicsWallah, which started as a YouTube channel in 2016, had a phenomenal run thus far. It more than tripled its revenue in 2022-23 to ₹779 crore and has the rare distinction of being a profitable unicorn.

But as the above instances show, not all is well. In fact, the company may struggle to remain profitable, going ahead. While its revenue rocketed, its net profit in 2022-23 shrunk 91% to ₹9 crore, data sourced from Tofler shows.

Conversations with 10 current and former employees at the company as well as industry watchers reveal a tale of struggle, symptomatic of the larger decay we see in Indian edtech today. Byju’s, once India’s largest edtech firm, has imploded and is struggling with failed acquisitions, governance issues and legal cases. Unacademy, another edtech unicorn, is grappling with unsuccessful acquisitions and the challenges of establishing an offline presence.

PhysicsWallah doesn’t have any known governance slip-ups. But it is struggling to establish and run its brick and mortar coaching centres. The company has laid off employees and increased fees twice mid-season last year, a former executive said. This led to student churn. The 10 executives didn’t want to be identified.

On complaints of classes not being completed, PhysicsWallah clarified that classes are never cancelled from an academic standpoint unless mandated by an external macro factor (like administrative regulations, extreme weather conditions etc.) . “We take curriculum planning very seriously. We achieve this through a comprehensive plan that anticipates factors, such as teacher absences due to illness or personal commitments. We have a well-defined course planner that provisions for another teacher from the same batch who can readily step in and take over the class,” the company stated.

On delays in order delivery, the company stated that 87% of the orders are delivered within 0-5 days; 9.5% within 5-10 days and 2.8% take more than 10 days. “Although relatively small in number, there are still orders that experience longer delays,” the company clarified, stating various reasons for such delays, from address mismatch to adverse weather conditions.

Delayed deliveries and streamlining of classes, even if it exists, are easier problems to solve. The bigger issue: charting out a path that is sustainable for the company, and different from the fate of other bleeding edtech unicorns. Amid the challenge of staying profitable, can PhysicsWallah stand the ground of ‘affordable education for all’? That’s the company’s motto.

Dance like Pandey

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Let’s circle back to the company’s origins and what made it popular.

Like we mentioned earlier, PhysicsWallah started as a YouTube channel in 2016. It was only in 2020 that the company made a formal beginning, founded by Alakh Pandey and Prateek Maheshwari.

Like Byju’s Byju Raveendran, Alakh Pandey is also a teacher and much of PhysicsWallah’s popularity is because of his charisma.

In one YouTube video, Pandey is seen explaining the concept of electromagnetic waves to students through engaging hand movements and sounds. In another, he breaks into a joke while explaining a concept. His teaching style is theatrical—he uses dance and songs to engage with students.

Part of Pandey’s popularity is because of his rags-to-riches story. He grew up in Prayagraj, Uttar Pradesh. In an interview to YourStory, Pandey said that when he was in the third grade, part of his family house had to be sold to make ends meet. Whatever remained of the house was sold when he was in the sixth grade.

Pandey became a very popular name in the north Indian belt
—A former employee

He started teaching, earning ₹5,000 a month while in the eleventh grade. The earnings supported his family. Later, Pandey joined an engineering college but dropped out in the fourth year. Before launching his YouTube channel, he held a job at a coaching institute.

Today, many teachers at PhysicsWallah ape his style of tutoring. They tell Hindi shayaris (poetry) during classes, said a former employee. “Pandey became a very popular name in the north Indian belt,” the executive said.

While the pandemic was a catalyst for growth, it was short-lived. Like other edtech firms, PhysicsWallah, too, had to venture offline once lockdowns were a thing of the past. The initial response was overwhelming.

“The idea was to revolutionize offline coaching, just like we did online coaching at a low price,” a former employee of the company said.

The company started offline coaching operations in 2022 after it raised $100 million in Series A funding from Westbridge and GSV Ventures at a $1.1 billion valuation. It currently runs 69 centres and is planning to expand to over 300 in the next four years.

Pay more

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While PhysicsWallah managed to crack the online coaching market with its affordable motto, it is wavering when it comes to physical centres. Unit economics work differently.

“A large number of students can study online in a single batch but offline has strength limitations,” a former employee explained. PhysicsWallah followed a subscription model online offering most JEE and National Eligibility-cum-Entrance Test (NEET) courses for annual fees of just ₹2,000- ₹5,000. Most of the company’s Master of Business Administration (MBA) and UPSC courses were priced under ₹20,000 online.

“Typically, in traditional coaching centres like Akash and Allen, the capacity of offline classrooms is 40-60 students. But PhysicsWallah started having classrooms with 100-150 students,” the executive quoted above said.

However, enrolling a larger number of students for offline classes has become challenging. PhysicsWallah is struggling to fill some of its centres, also because it increased fees. By how much?

According to one employee, the fee for a two-year JEE course, last year, was priced at about ₹1.2 lakh without discounts and at ₹90,000 after discounts. This year, it has spiked the fee to about ₹1.6 lakh after discounts. The company’s website quotes JEE fees at ₹2 lakh.

Without disclosing the percentage increase in fees, the company clarified that the net realised fee has increased. “It is not due to an increase in listed price but due to a reduction in discounts being offered to the students, as our listed fee was already lower compared to peers,” it said.

“PhysicsWallah stands out in the market by offering the most affordable lectures priced at ₹4,000 in its online model. Moreover, in our offline classrooms, Vidyapeeth (tech-enabled pure offline) offerings are priced 40% less and our Pathshala (hybrid offline) offerings are priced 60% less vis-à-vis traditional offline players,” the company added.

According to Praneet Singhal, director, technology and internet, 1Lattice, an advisory and research firm, education and coaching are typically not very price sensitive markets as learners and parents focus more on the long-term benefits. About 8-10% annual increase is considered nominal, he said.

Empty chairs?

What does the enrollment data tell us?

“In January this year, we should have done 10,000 admissions—both Paathshala and Vidyapeeth together—but we managed 6,000 admissions,” said an employee.

A former employee said that one centre in Kolkata has performed miserably. “We started with a capacity of 4,000 and we have not been able to fill even 1,000,” said this person. The company faces a similar struggle across many cities. For instance, in Kota, the hub of test preparation coaching, PhysicsWallah had enrolled about 30,000 students in 2022 but couldn’t even manage 17,000 the next year across its four centres in the town, said two employees.

The numbers provided by the company differ.

In 2022-23, about 23,000 were enrolled in Kota, a spokesperson from PhysicsWallah told Mint. This shrunk to 20,000 in 2023-24.

“All this in the context of increasing capacity in other regional hubs. For example, Patna increased from 8,000 in 2022-23 to 23,000 in 2023-34,” the company clarified.

Overall numbers, the company underlined, remain robust. “In 2022-23, the first year of our offline operation foray, over 80,000 students studied in our offline classrooms. In 2023-24, our reach expanded even further, with an impressive enrolment of over 165,000 students. The growth trajectory continues, and next year, we are on track to educate a remarkable 280,000 students,” the spokesperson further added.

Student enrolment count in 2023-24 increased 1.5 times compared to the year before, the company said. The rise in overall enrolment numbers, said a former employee, is because of the rise in centres—not because of the company’s quality of education.

The teacher test

Quality of education is directly linked to the quality of teachers. Most teachers at the company lack experience, said multiple current and former employees.

“Parents were sending rigorous complaints that teachers are not teaching. Many parents even stopped paying fee. We were not able to collect fees from about 30,000 students across centres,” said a former employee, referring to the period between December 2022 and May 2023.

PhysicsWallah, however, disagrees with the assertions made by these employees.

Most companies don’t realize they are expanding too fast and too thin.
—Nikhil Parmar

The company has implemented a faculty training programme last year, where it inducts trainees from top-tier engineering, medical and science colleges, the company stated. They are trained over a four-month period under the guidance of “master and experienced” teachers.

Nonetheless, the rout in the edtech market is an indication that PhysicsWallah, too, may have to slow down.

“Most companies don’t realize they are expanding too fast and too thin, at the cost of their quality,” Nikhil Parmar, an angel to over 20 startups, including edtech companies, said.

He alluded to the company’s marketing expenses that have shot up dramatically—over six times to ₹67 crore in 2022-23.

“Traditionally, PhysicsWallah had spent little on acquiring learners, especially on advertisements. Opening a large number of offline centres and exam categories required aggressive marketing and spend on customer acquisition,” said Signal of 1Lattice. “Offline-led models are working capital intensive— building rent, day-to-day centre operations, along with centre level teacher salaries,” he added.

Some market watchers, therefore, advise a back-to-basics approach.

“PhysicsWallah should go back to building a community of students online, globally, and spend on making high-quality videos for its 10 million subscribers, riding on its unique selling proposition—core STEM subjects and individualized learning experience,” Parmar said.

STEM is an acronym for science, technology, engineering, and math.

If it fails to stem the burgeoning expenses, the company risks losing its exalted status—that of being a rare, profitable edtech company. As of now, the company doesn’t appear too worried.

“PhysicsWallah confidently anticipates remaining profitable in the foreseeable future,” a spokesperson told Mint.