Physicswallah Limited

Physicswallah coaches students for competitive exams. JEE and NEET at the core, plus UPSC, state government exams, CA, defence, and a growing K-12 business. It started as a free YouTube channel run by Alakh Pandey, began charging in 2020, and listed in November 2025 at Rs 109.

The same teaching is sold two ways. Online, on the app, where the average student paid under Rs 4,000 in FY25. Offline, in 366 physical centres and hostels, where the average student paid around Rs 40,000. The free YouTube library is still how most students find the company, which is why advertising was only 9.1% of revenue in FY26.

Costs are people. Employee benefits were Rs 1,906 cr in FY26, 49% of revenue. Offline adds leases, fit-outs and the depreciation that comes with them.

The IPO raised Rs 2,962 cr. Rs 2,017 cr is still unspent and sitting in fixed deposits.

Online is now big enough to carry the group. Q1 FY27 online revenue was Rs 549 cr, up 33%, with segment profit of Rs 76 cr against Rs 25 cr, so margin went from 6% to 14% in a year. Offline did Rs 490 cr, up 14.5%, and lost Rs 27 cr against Rs 52 cr, which is normal for Q1 since costs run all year and fees arrive later.

Take out interest on the IPO cash and the non-cash fair value line and the group operating loss was Rs 12.66 cr against Rs 70.11 cr last year. Rs 57 cr better on Rs 207 cr of extra revenue. Employee cost grew 15.8% against revenue growth of 24.4%. That gap is the argument.

All of it happened in a handicapped quarter. The NEET cycle ran a month late, pushing peak enrolment from June into July, and online NEET collections fell 28%.

Deferred NEET enrolments land in Q2, reported November. Online grew 33% with that hole in the quarter. Q2 carries its own enrolments plus the ones pushed out of Q1, so growth should accelerate. If it does not, the exam calendar was not the reason and demand is slowing.

Group profit in Q3 FY27, reported February. Management has said the group turns PAT positive in Q3, which is the quarter this company earns in. Trailing twelve month PAT is already Rs 15 cr positive. Hit it and forecasts get rebuilt off a profit base. Miss it and the guidance loses credibility one quarter after being given.

Centres filling while additions slow. Offline went from 182 centres in June 2024 to 303 in June 2025 to 366 now. Adding 63 in a year instead of 121 means less new-centre loss while the older ones fill. Offline made Rs 26 cr of segment profit in FY26; the same network a year more mature should make more without a single new centre.

FinZ exit. FinZ Finance is PWL's own NBFC. It got its RBI licence in September 2025 and began lending students their fees in March 2026. In late May the company said it would put Rs 120 cr of equity in; the stock fell; on 4 June it reversed and moved student lending to third-party NBFCs. The Rs 120 cr went in anyway. It is now being divested. Watch the price it fetches. Near book value, the capital comes back. A write-off means Rs 120 cr is gone.

Where the rest of the IPO money goes. Of Rs 2,962 cr raised, Rs 643 cr earmarked for marketing is unspent, Rs 427 cr for new centres is unspent, and Rs 675 cr of the Rs 941 cr earmarked for unnamed acquisitions has already gone out. Spend the marketing money and the 9% advertising ratio rises and recent margin gains partly reverse.

Reported profit is softer than it reads. The Rs 52 cr EBITDA includes Rs 109 cr of interest on IPO cash and excludes a Rs 44 cr remeasurement loss.

Offline costs run whether classrooms fill or not. Q1 depreciation Rs 111 cr, Rs 78 cr of it offline, plus Rs 26 cr of finance cost.

Founder concentration. The company is Alakh Pandey to most of its students.

Acquisition sprawl. Sarrthi IAS taken to 51% for Rs 72 cr in July, a new stake in Bharat Innovations Global, and Rs 29 cr of goodwill already written off in FY26.

Dilution. Paid-up capital went from Rs 285.97 cr to Rs 290.09 cr in three months.

FY27E revenue is management's own 30% guidance. The margin is the Q1 improvement carried through the year. Everything else is arithmetic on the FY26 and Q1 filings.

Strip out the Rs 2,017 cr of unspent IPO cash and the market pays Rs 33,664 cr for the operating business. At thirty times earnings that needs about Rs 1,120 cr of profit, which at a 12% net margin means roughly Rs 9,350 cr of revenue, or 2.3 times the last twelve months. At 30% growth, guided and delivered, that arrives in FY30.

So the price is asking for four years of execution at the rate the company is currently running. Not a heroic assumption, but not a free one either.

The thesis breaks if online margin stalls. It went from 6% to 14% in a year on mix and cost leverage, and the whole case rests on it continuing toward 20%. Two flat quarters there and the FY30 arithmetic stops working.

It also breaks if the remaining IPO money goes into more acquisitions instead of centres and product, or if FinZ sells at a write-off. Rs 675 cr of the acquisition head has already gone out and there is a Rs 29 cr goodwill impairment on the books to show for it.

Offline needs to keep improving on its own. If the FY25 and FY26 centre vintages do not lift the FY27 offline segment result well above the Rs 26 cr it made in FY26, the leverage story is only about online, and half the business is dead weight.

TenetFour Research. Educational analysis only. Not investment advice or a recommendation to buy, sell, or hold any security. Author may hold a position. Readers are responsible for their own decisions.