Edtech founders upbeat on PhysicsWallah IPO effect, others more skeptical

While PhysicsWallah is heading towards listing at Rs 3,820 crore, it has become a bellwether for the industry's credibility. Founder-investors and investors are keeping a close eye, as a success could pave the way for further listings following BYJU'S jitters and a sector-wide slump.

POs have been a topic of startup discourse this year. However, unlike the AI buzz, an IPO is all about proving a business is ready for public scrutiny. Few sectors need that credibility more than edtech, which has swung from pandemic-fuelled boom to painful corrections. PhysicsWallah (PW), which has now submitted documents with the Securities and Exchange Board of India (SEBI) for an initial public offering of Rs 3,820 crore, is seen as the change bearer that might bring the industry back into the limelight. What started with Alakh Pandey educating in physics on a whiteboard in YouTube has turned into a billion-dollar enterprise now set to experiment with the public markets.

PW's imminent listing is a point of reckoning for the Indian edtech industry. With bruising years under its belt, which were dominated by BYJU'S woes, the company's draft prospectus has emerged as a proxy for the industry's credibility. If PW manages to demonstrate steady earnings, controlled customer acquisition, and governance that can withstand quarterly pressures, its IPO will pave the way for more credible domestic listings. If it slips, scepticism will run deeper, valuations will contract, and the anticipation of the next good signal will only lengthen. As Ashwin Damera, Co-founder and CEO at Eruditus, says, "PW's listing indicates Indian edtech has reached a new stage from high-growth startups to businesses with scale and profitability… Public markets are the natural progression for companies with good unit economics.". Not everyone is ready, but for the top few, IPOs are no longer out of reach.

Test of maturity PhysicsWallah's move to list will be a milestone and an experiment. PW's transition towards the public market compels one, pragmatic question: Is it possible for an edtech company to turn its speedy growth into consistent profits and strong governance at scale? Investors are going to view edtech with a more acerbic eye for profitability, cash flows, and governance, as opposed to merely growth," states Damera, observing the industry will have to justify metrics, including student acquisition cost, lifetime value, and learning outcome, as they are not necessarily conventional in financial markets. Anil Joshi, Managing Partner and Co-Founder of Unicorn India Ventures, is guarded in his response that PW's performance does not necessarily imply the entire sector is mature.  "Genuine industry maturity is evident when there are several companies that show strong, sustainable business models, stable revenues, and investor confidence in the sector… PW's performance will set the trend for several to follow and create sectoral maturity.". But at this point in time it will be too early to presume so," he added. What Indian stock markets value are repeatability over story. Institutional investors and bankers will demand unadulterated unit economics and transparency of line on seasonality, as education revenues are not levelled throughout the year. As Vikram Gupta, Managing Partner and Founder of IvyCap Ventures, points out, "From the IPO side, the demand-supply is marginally imbalanced because there is a huge pipeline of IPOs currently, and there is only so much money out there which is seeking to invest.". The IPO price itself could be not the real picture of the real worth of the companies." An anonymous top edtech executive explains a negotiable practical point about the pricing. "I believe that is the only blemish in PW's IPO route. They must be a bit flexible on valuation.". At least what I have been hearing is that they are slightly rigid on the valuation demand. Meanwhile, co-founder and CEO Vamsi Krishna of Vedantu emphasizes a different benefit of going public. "It is very much needed and essential, particularly after all the fiascos and the relentless bombardment of bad news.". One who is going through an IPO and performing well is actually something the industry requires.  Krishna states, "The consumption propensity of Indian parents is one of the highest in the world as a share of take-home pay.". When that is the scenario, educational expenditure will keep expanding, so there is a business to be had." Looking deeper into partnerships and credibility, Krishna further says, "The only change which may occur is with some of these B2B or government tie-ups. Being listed will bring a lot more credibility to do those things," contending that listed status minimizes perceived counterparty risk on the part of institutional partners.