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Lightspeed Venture Partners is set to lead a $150-million funding round for Alakh Pandey’s PhysicsWallah—a rare deal in India’s edtech sector amid declining investor interest due to decreased demand for online learning.

Lightspeed, which has invested in edtech companies such as Bhanzu, Teachmint, and once India’s biggest unicorn Byju’s, has issued a term sheet giving PhysicsWallah a pre-money valuation of $2.6 billion, according to four people familiar with the matter. 

The investors are now carrying out financial due diligence for the deal—which is largely expected to be a primary fund infusion—the people said, on condition of anonymity due to the private nature of the discussions. The founders may also look at doing secondaries, they added.

“PhysicsWallah had kickstarted exploring a fundraise last year and was looking at a slightly larger round of $250 million or so at a valuation of over $3 billion,” said one of the four people.

“The main aim was to put a new valuation tag given their massive growth. But the actual deal negotiations only began a few months back. Lightspeed has given a term sheet, but the deal is yet to be closed,” the person added.

If the deal goes through, PhysicsWallah will more than double its valuation from approximately $1.1 billion in 2022 to over $2.7 billion to $2.8 billion (post-money). This would mark a rare instance of an upround in the global edtech sector, which was once highly sought after during the pandemic. The sector has since then faced challenges as students returned to physical tuition centres following the lifting of pandemic-related restrictions.

PhysicsWallah declined to comment. The company refuted claims of the founders looking to do secondaries.

Lightspeed did not respond to queries sent by YourStory.

Entrackr had first reported on PhysicsWallah’s funding round last month. Moneycontrol had first reported about PhysicsWallah’s fundraise in March last year.

PhysicsWallah, one of India’s hottest edtech platforms, raised its first round of external funding of $100 million in mid-2022 from private equity firm WestBridge Capital and US-based edtech investor GSV Ventures. The company, which is among the very few profitable edtech startups globally, became one of India’s youngest unicorns (startup valued at over a billion dollars). It achieved the unicorn tag in just two years since inception.

Since then, PhysicsWallah, which began as a test-prep learning platform, has expanded its offerings to upskilling, K-12 (kindergarten to class 12), and offline tuition centres.

The company’s revenue, too, increased substantially from a mere Rs 25 crore in FY21 to Rs 780 crore in FY23.

According to another person familiar with the upcoming funding, the company’s revenue more than doubled to around Rs 1,800 crore in FY24. For FY25, the company is targeting a revenue of over Rs 2,900 crore, the source said.

However, ever since PhysicsWallah began its aggressive expansion spree after raising external funding, the company’s bottom line has taken a hit. The company’s profit dropped to Rs 6 crore in FY23, from Rs 100 crore in FY22. In FY24, the company has slipped into losses, The CapTable had previously reported.

PhysicsWallah also down scaled its operations in Kota and moved some of its teachers to other regions to tackle the slowdown and increase profitability.

The company, founded in 2020 by YouTube teacher Alakh Pandey and second-time entrepreneur Prateek Maheshwari, competes with edtech platforms such as SoftBank-backed Unacademy, Tiger Global-backed Vedantu and Byju’s, once India’s most-valued unicorn, valued at over $22 billion.