Daybreak - Physics Wallah is risking the business it has built for the one that it wants to build

Episode Date: November 22, 2023

On Monday, Physics Wallah fired over 100 of its employees and also announced it was going to hire more than a thousand more in the coming months. India's only profitable edtech unicorn is on a relentless expansion spree. So much so that its investors want it to slow down.From establishing itself as the leader of NEET-JEE test preparation, Physics Wallah (PW) wants to dip its toes in a bunch of other areas—from banking and defence to civil services now. Not to forget short-term skilling courses and even tie-ups with schools.Despite this hyper growth phase coming after PW became the only profitable edtech unicorn in the last financial year, cracks are appearing on its armour now.Tune in.Recommended reads:Physicswallah vs the popstarDaybreak is produced from the newsroom of The Ken, India's first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, analytical business stories. 

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get alert, as soon as we release our first video. episode, please follow intermission on Spotify and Apple Podcast or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. He started with a phone camera, a whiteboard and a YouTube channel. He would solve je-e-level physics questions for online students. And now he has a cult status. He's a homegrown hero in the ed tech space. A breakout star, some people like to call him.

His ed tech startup raised an impressive $100 million in VC funding and became India's youngest unicorn ed tech last year. And currently, it also happens to be the only profitable one. Any guesses? It's certainly not by Jews. Well, I'm talking about Physicswala's co-founder Alak Pandey. Physics Walla, or PW as it is called now, has been quite the disruptive force in India's test prep market.

And it was basically two main things that fueled its rise. Number one, it gave good quality JEE and NET coaching at super affordable rates to all students. Most of the video content until 2020 was actually free to access. And number two, of course, it was run by a star tutor. Now though, it has been over two years since that Star Tutor step into a virtual classroom. Alak Pandey kind of had to shift his focus towards the management side of things after his startup became super successful and this was also after some convincing from his co-founder Pratik Maheshwari. He told the Ken that he does feel like teaching and that maybe he will once things stabilize.

But hold on. Things are unstable at Physicswala, the only profitable ed tech in India right now? I mean, sort of, you could say. You might remember that dramatic viral video from April this year, which featured three former Physicswala tutors who quit the platform over what they had called differences with Alakpande. They broke down on camera and they claimed that another physics while teacher was trying to sabotage their new platform. And that is a whole different story. but it was a sure sign of a storm that was brewing.

And then day before yesterday, the EdTech fired more than 100 of its employees after performance reviews. But the company has actually been on this relentless expansion spree this year. In May, it was reported that the Ed Tech was investing 100 crore rupees to scale up its UPSC vertical. In fact, with the firing announcement on Monday, PhysicsWala also declared that it is planning to hire more than one thousand people in the coming few months. Physics Walla wants to transition into an everything ed tech. But as it does that, its competitors are also closing in on its core specialty,

which is NEET and JEE coaching. So the question is, is this risk worth taking? Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nick Daesh Sharma, and I Don't Chase the New Cycle. Instead, thrice a week on Mondays, Wednesdays and Fridays, I will come to you with one business story that is worth understanding and worth your time. Today is Wednesday, the 22nd of November. You know, when I said Physics Walla is on a spree, I meant it is on a spree quite literally.

It is trying its hand at a whole lot of different stuff. From defense to banking to civil services, it is even going beyond this market with short-term skilling courses and tie-ups with schools under its Vidyapid School Centre program. Apart from all of this, it is also opening offline centres across the country and abroad. Behind this hypergrowth is a series of mergers and acquisitions. In the last year or so, it has acquired test prep platforms such as prep online and NCRT book publisher Altus Vortex or AV publication. It has also formed a joint venture with one of the leading ed techs in the civil services and government exam prep market called Utkarsh classes and Edutek Private Limited.

But all of this growth is rather haphazard. At a time when we are hearing about other ed techs laying people off, physics walla is hiring. Alak Pandey, who spoke to the Ken reporter Alifia Khan, told her himself that they have hired around one thousand people in the last three months alone. But this push to become more than its NETJ specialist identity might cost PhysicsWala. To a certain extent, it actually already has. Stay tuned to find out. In April this year, three of PhysicsWala's seven academic directors broke away from the company. They said that it was because of differences with Pandey and then they went on to create Sankal Bharat, which is a medical and engineering.

test prep platform. It was like a reality TV type of a spat. PhysicsWala employees accused Tarun Kumar, Manish Dubei and Sarwesh Dixit of plotting with rival platform Adda 247. Ada 247, by the way, is backed by Westbridge Capital, which is one of the VC companies that funded Physicswala as well. So in response to these accusations, the three teachers uploaded a bunch of videos on YouTube asking students for support in tears. Later, another academic director from Physics Wallah Aditya Anandh also joined Sankal Bhart. And now for the twist in the tale. Sankal Bharat has garnered 240,000 mobile app downloads and nearly 500,000 YouTube subscribers already.

And as it turns out, the acutious. of physics walla teachers who had said that the former tutors who had quit physics Walla had colluded with a rival platform? That was kind of true. Sankal Bharat is actually owned by Adda 24-7's owner. And here's what's even more messed up. The teachers who left Physicswala were not just among its oldest employees, two of them were also handling its new offline centers. They know the platform dangerously well. All it's strengths and weaknesses. So it is not just bad publicity for Physicswala. In the long run, these exits could severely affect Physicswala's main game, which is NET and JEE coaching.

If PhysicsWala's unique selling point or USP is affordable quality teaching, it's almost like the new rival Sankal Bhart is saying game on. It is dropping its prices even more. But Pandey tried to played down. He said that only four out of the 2,500 teachers had left. But this was a huge deal. And Physics Walla founders couldn't afford to pull an ostrich. You know when they bury their heads in the sand? They had to address a town hall after all these resignations. The founders laid bare the company's financials and they assured employees of growth saying that these exits would not matter. Coming up next, were they speaking the truth? about this growth? It is true. Irrespective of all the drama and the bad publicity, physics

wallah is growing and consistently at that. In the last financial year, it was India's only profitable ed tech unicorn and its net profit shot up by more than 14 times. So like I told you earlier, they are investing into a bunch of other verticals that are not any TNJ. Co-founder Maheshwari told us that it was pure ambivalier. driving at all. Although he did accept that the unicorn is on a hypergrowth path, he also admitted that investors have asked it to slow down a little. But competitors say that this is Physics Walla's way of increasing its value on the books. One of its competitors based out of Noida told us, and I'm quoting, their revenue may be shown as much higher, but it is not

so much from their own business. Physics Waller is taking at least 51% stake in. in other companies so that it can show their revenues as its own. End quote. Maheshwari Doh said that the figure that they have put out right now does not include the revenue acquired through mergers and acquisitions. But this hypergrowth that we are talking about is in the online space only. Physics while our speed of offline expansion is rather moderate and in fact quite calculated. After all, it is a whole different game.

They've even had issues from their offline centres with students complaining that lectures were not being scheduled on time, teaching was poor and that centres were empty. Meanwhile, physicswala has entered new test prep segments, the civil services, banking, government exams. This has obviously upset its competitors. Some of them are hitting back, like Adda 247, which was a government job prep platform. but it supported PhysicsWala's breakaway faction of star tutors. Not long after this, we saw viewership of Physicswala's main YouTube channels drop. Plus, there are also allegations about toxic work environment by former tutors.

So, could Alak Pandey going back to the classroom and doing his magic fix the situation? Maybe to a certain extent. Daybreak is produced from the Newsroom of the Ken, India's first subscriber-focused business news news platform. What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters, subscriber-only apps and podcast extras. Head to the ken.com and click on the red subscribe button on the top of the website. I am Snigda Sharma, your host, and today's episode was edited by my colleague Rajiv Sien.