While Hornbill Orchid is likely to invest $70-80 million, a large chunk of the remaining amount is expected to come from venture capital firm Lightspeed, which earlier backed its edtech rival Byju’s, they said.
“The round is almost complete and Hornbill Orchid is leading it, putting the largest amount of capital into the round,” one of the people said.
This will be the second round of funding for PhysicsWallah, started by Alakh Pandey, a popular teacher, in 2016 as a YouTube channel offering coaching for engineering and medical entrance exams. In 2022, the profitable edtech startup will raise $1.5 billion in funding. raised $102 million at a $1.1 billion valuation from WestBridge Capital and GSV Ventures in its first round of funding.
This is expected to be one of the first major primary capital raisings in the edtech sector after a long hiatus.
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“Given the state of edtech, this will remain one of the largest deals in this space for some time, even as late-stage activity has already begun,” the person cited above said.
Hornbill Orchid is an India-focused hedge fund anchored by Chinese private equity firm Orchid Asia and advised by Hornbill Capital, founded by former investor Avendus Private Equity. Investment Manoj Thakur, CEO, Advisors.
The hedge fund has also invested in publicly traded companies such as Angel One and NIIT Ltd.
PhysicsWallah did not comment on the development.
Email queries sent to Thakur and Lightspeed went unanswered by press time Friday.
According to data intelligence platform Tracxn, India’s edtech sector has received $215 million in funding so far in 2024, a modest uptick from the $321 million raised in all of 2023.
However, Tracxn said there is still a long way to go to reach the sector’s peak in 2021, when edtech companies raised $4.1 billion. The 2023 figure was an 87% decline from the $2.4 billion raised in 2022, reflecting the sector’s continued decline in fundraising markets.
In February, Deborah Quazzo, managing partner at GSV Ventures, told ET that the troubles at Byju’s had led investors to be more concerned about corporate governance at Indian edtech startups.
PhysicsWallah’s latest fundraise, which saw Prateek Maheshwari become its co-founder in 2020, comes at a time when consolidation has begun again in the sector, with a handful of smaller companies being acquired by well-funded players, ET reported on July 19.
This includes a Google-backed edtech startup Adda247 acquires exam preparation company Ekagrata EduservNoida-based Schoolnet buys Housing.com co-founder Advitiya Sharma’s startup Genius Teacher, and Allen Career Institute acquires Peak XV Partners-backed Doubtnut. Mid-tier IT services firm Happiest Minds also took over Macmillan Learning India.
In fiscal year 23, PhysicsWallah’s operating revenue tripled to Rs 772 crore on a standalone basisdriven primarily by its expansion into the offline space.
The offline business accounted for about a third of its revenue.
An executive with knowledge of PhysicsWallah’s operations said that over the past year, the company has made the decision to pursue rapid growth even if “it means sacrificing some level of profitability.”
The company’s net profit in FY23 fell to Rs 16 crore from Rs 98 crore in FY22 due to a significant increase in employee costs and provision for certain non-cash expenses, leading to a seven-fold increase in total expenses, PhysicsWallah said in December.
The company’s inorganic expansion (it acquired smaller companies like Xylem Learning, PrepOnline and Altis Vortex) added Rs 500 crore to its consolidated revenue.
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