PhysicsWallah: Enhancing Business Operations with AI
PhysicsWallah is a leading Edtech company that is embracing artificial intelligence (AI) to optimise its operational procedures and decrease the need for staff, even as it pursues growth through acquisitions. This Noida-based organisation continues to navigate profitability hurdles in its offline segments despite the proliferation of its Vidyapeeth centres.
Workforce Adjustments at PhysicsWallah
During its Q2 FY27 earnings discussion, management revealed a reduction in the total number of employees, which decreased to approximately 19,100, along with a faculty size of around 7,100, both showing a sequential decline. The company credited this downtrend to increased efficiencies achieved through AI across various functions such as content generation, quality assurance, test paper creation, and assessment.
AI’s Impact on Coding and Expenses
Management disclosed that AI is responsible for approximately 90% of the coding produced by PhysicsWallah. This shift towards greater automation has played a significant role in curbing employee costs, which observed a 2.3% decrease year-on-year during Q2 FY27, excluding employee stock option plan expenses. For the first half of FY27, employee expenditures also dropped by 2.4% compared to the same timeframe last year.
Investment in Technology Growth
Despite the advances in AI-driven efficiencies, PhysicsWallah is committed to investing in technology, with expenditures reaching Rs 104 crore in H1 FY27, in comparison to Rs 70 crore in the equivalent period last year.
Challenges in Offline Business
While AI efficiencies have aided in enhancing operational effectiveness, the offline aspect of PhysicsWallah’s business remains critical. The segment recorded a pre-Ind AS EBITDA loss of Rs 108 crore in H1 FY27, down from a loss of Rs 120 crore in the previous year, as indicated during the earnings call.
Revenue Growth in Offline Operations
The offline sector experienced a 9% year-on-year revenue increase, amounting to Rs 541 crore in Q2 FY27, while total revenue for H1 rose by 12% to Rs 1,031 crore. Management linked the slower growth in part to decreased NEET enrolments and delays in governmental exam notifications that impacted demand at several centres.
Expansion of Offline Centres
PhysicsWallah currently operates 370 offline centres, which includes 167 Vidyapeeth centres, a rise from 117 in the prior year. The Vidyapeeth centres contributed around 66% of the offline business income in H1 FY27. Management indicated that the standalone Vidyapeeth operations are already profitable and expect the overall offline sector to draw closer to breaking even. The plan includes adding 25 to 30 offline centres annually over the next two to three years while keeping an eye on initial costs.
Acquisition Strategy for Online Expansion
In addition to operational enhancements, PhysicsWallah is considering acquisitions to broaden its online education offerings. The company is in advanced talks with several fully online education enterprises and is exploring various other opportunities.
Financial Strategy for Acquisitions
PhysicsWallah has allocated less than $20 million for these acquisitions, consistent with the Rs 300 crore set aside from its IPO for undisclosed acquisitions. Management anticipates that these deals will positively impact margins while reinforcing its presence in new sectors and providing synergies with its technological framework and YouTube distribution channels.
Revenue Forecast for FY27
PhysicsWallah targets a revenue growth of around 30% for FY27, which encompasses the anticipated contributions from acquisitions. Nevertheless, management foresees that mergers and acquisitions will contribute less than 5% to the overall revenue growth for the year. The company reported consolidated revenue of Rs 1,242 crore in Q2 FY27, reflecting an 18% year-on-year increase, with net profit climbing to Rs 142 crore from Rs 70 crore in the previous year.