Daybreak - Physics Wallah’s journey from master of one to jack of all trades could backfire

Episode Date: May 14, 2023

India's youngest detect 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:India’s youngest edtech unicorn Physics Wallah is making an audacious gamblePhysicswallah 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 an alert as soon as we release our first episode, please follow intermission on Spotify and Apple Podcasts 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 J-E-level physics questions for online students.

Now, he has a cult status. He is a homegrown hero in the ed tech space, a breakout start. His ed tech startup raised a whopping $100 million in VC funding and became India's youngest unicorn ed tech last year. I am talking about Alak Pandey, the founder of Physics Walla. Physics Walla, or PW as it is called now, has been quite the disruptive force in India's test prep market. It was basically two main things that kind of.

China 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 actually until 2020 was free to access on YouTube. And number two, of course, it was run by a star tutor. But you know what they say about power? With it comes responsibility. It's been two years now since Alak Pandey, the star tutor, step into a virtual classroom to teach.

He had to shift his focus towards the management side of things after some convincing from his co-founder Prateik Maheshwari. He told again that he does feel like teaching and that maybe he will once things stabilize. Wait a second. Things are unstable at Physics Waller? The answer is yes. And you might have gotten a hint last month

when a dramatic video went viral. It featured three former Physics Waller tutel who quit the platform over what they called differences with Pandey. They broke down on camera and claimed that another physics-walla teacher was trying to sabotage their new platform. That is a whole different story that I will get to later. But it was a sure sign of a storm brewing. And to be honest, the storm is partly also because of Pandey himself.

Considering how the company has been on this relentless expansion spree, it is not so surprising that cracks are appearing now. Just last week, it was reported that the ed tech is investing 100 crore to scale up its UPSE vertical. Physics Walla wants to transition into an everything ed tech. But as it does that, its competitors are closing in on its core specialty, NEET and GE coaching. So is it a risk worth taking?

Welcome to Daybreak, a business podcast, from the Ken. I'm your host, Nickda 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 Monday the 15th of May. 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, even going beyond this market with short-term skilling courses and tie-ups with schools under its Vidya Pete School Center program. Apart from all of this, it is also opening offline

centers 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 Wartex 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 1,000 people in the last three months alone. But this push to become more than its NEDJ specialist identity might cost Physics Walla.

To a certain extent, it actually already has. Stay tuned to find out. Last month, three of Physicswala's seven academic directors broke away from the company. They said that it was because of differences with Alibald. They went on and created Sankal Bharat, a medical and engineering test prep platform. What happened next was like a reality TV type of a public drama. Physicswala employees accused Tarun Kumar, Manish Dubei and Saresh Dixit of plotting with rival platform Adda 247.

Ada 247, by the way, is also backed by Westbridge Capital, which is one of the VC companies that funded Physicswala. 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 Physicswala, Aditya Anand, also joined Sankal Bharrath. 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 accusation of Physicswala teachers who had said that the former

tutors who had quit Physicswala had colluded with a rival platform, that was kind of true. Sankal Bharat is actually owned by Adda 247'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 centres. They know the platform dangerously well, all its 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 NEET and GE 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 play it down. He said that only four out of the 2,500 teachers had left. But this was a huge deal. And Physics Waller 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 voila 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 TNJE. Co-founder Maheshwari told us that it was pure ambition 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 Walla is taking at least 51% stake 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 Walla's 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 24-7, 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 Al-Aq 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 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.