Physics Wallah Posts INR 1,131.2 Cr Loss in FY24 Despite 2.6X Surge in Revenue
Edtech unicorn Physics Wallah (PW) has reported a significant financial setback for the fiscal year 2023-24 (FY24), posting a consolidated net loss of INR 1,131.2 crore. This marks a dramatic increase in losses, more than 13 times higher than the previous year’s loss of INR 84.06 crore in FY23. However, it is important to note that the company’s FY23 numbers were adjusted due to changes in accounting standards, as Physics Wallah had initially reported a net profit of INR 8.9 crore for that period.
The sharp increase in losses for FY24 is primarily attributed to two factors: a significant change in the fair value of Compulsorily Convertible Preference Shares (CCPS) and a considerable rise in ESOP (Employee Stock Ownership Plan) and employee-related expenses.
Key Factors Behind the Loss
One of the main drivers of the substantial loss in FY24 was the change in the fair value of CCPS. Physics Wallah revealed that the fair value change of CCPS in FY24 cost the company INR 756 crore, compared to INR 67.1 crore in FY23. CCPS are financial instruments that companies issue to raise capital, and their valuation is impacted by various market conditions and financial performance metrics. The sharp increase in the fair value adjustment likely reflects fluctuations in investor sentiment, business valuation, or other financial factors that negatively impacted the company’s balance sheet during the year.
Another contributing factor to the mounting losses was the surge in ESOP expenses. These expenses, which account for the cost of employee stock options granted to the company’s staff, nearly quadrupled in FY24, reaching INR 151 crore, compared to INR 38.3 crore in FY23. This sharp rise is likely linked to the growth of the company’s employee base and the increasing value of stock options issued as incentives. As a high-growth startup, Physics Wallah has likely ramped up its hiring efforts, particularly to support its rapidly expanding business, which in turn led to higher compensation-related costs.
Revenue Growth Amid Losses
Despite the significant loss, Physics Wallah has seen impressive revenue growth in FY24. The company’s operating revenue surged 2.6 times to INR 1,940.4 crore, up from INR 744.3 crore in FY23. This growth indicates that the company’s core business operations, particularly its online education platform, are thriving. Physics Wallah has garnered widespread attention for its affordable, high-quality coaching in subjects like physics, chemistry, and mathematics, and this revenue increase underscores its growing market share and popularity among students preparing for competitive exams in India.
The company’s expansion into new subjects, regions, and formats may have played a role in the revenue spike. Additionally, the post-pandemic demand for online education services, particularly in India’s rapidly digitizing education sector, likely helped bolster its top line. The sharp increase in operating revenue demonstrates that Physics Wallah has successfully capitalized on the booming edtech market, even as it grapples with rising operational costs and losses.
Outlook for Physics Wallah
While the significant loss in FY24 raises questions about the company’s financial sustainability in the short term, its strong revenue growth and market presence suggest that Physics Wallah is focused on long-term expansion and scalability. As the company continues to grow its user base, it is likely to focus on improving operational efficiencies and managing expenses, particularly in areas like CCPS valuation and ESOP compensation.
In the competitive edtech landscape, where several companies are vying for dominance, the future of Physics Wallah will depend on its ability to balance growth with profitability. The surge in revenue is promising, but managing the rising costs associated with its rapid expansion will be key to ensuring sustained financial health.
Overall, while the financial loss in FY24 is significant, Physics Wallah’s performance in terms of revenue growth indicates a company that is scaling effectively and positioning itself for future success in India’s highly competitive online education market. With strategic adjustments, the company could potentially return to profitability in the coming years.
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