PhysicsWallah IPO: Story Of Explosive Growth, Pivots & Operational Risks

PhysicsWallah's is a story of explosive growth, strategic pivots, and significant operational risks.

The RHP filed with SEBI details a company built around its charismatic founder, Alakh Pandey, who is now steering a massive and costly shift from an online-first brand into a hybrid offline empire. But this high-speed growth has come at a cost.

The company's own filings reveal significant internal control failures flagged by its auditors, a "revolving door" of employee and faculty talent, a graveyard of failed acquisitions, and a long list of operational compliance gaps that pose a tangible risk to its expanding network of physical centers.

To start with, the entire Physicswallah brand and its "student community-led approach" are inextricably linked to its founder. The company's main YouTube channel is named "Physics Wallah-Alakh Pandey", and its success is listed in Risk Factor #4 as depending "substantially on the continued leadership of our founders".

This powerful brand is now being directed toward a high-stakes pivot to offline centers. The financials provide a stark justification for this shift. As of fiscal 2025, an online student generates an average collection of just Rs 3,682.79. In contrast, an offline student generates an average revenue of Rs 40,404.56 — more than ten times the value. This strategy has already transformed the business. In Fiscal 2023, offline revenue was just 37.77% of the total. By Fiscal 2025, it had jumped to 46.83%, achieving a near 50/50 split with the online segment.

This pivot, however, is incredibly expensive. The "Objects of the Offer" section, which details how the Rs 3,100 crore in fresh IPO proceeds will be used, tells a surprising story.

Only Rs 460.5 crore (14.8%) is earmarked for "Capital expenditure for fit-outs of new offline centers". The single largest use of the IPO money is Rs 710 crore (22.9%) for "Expenditure towards marketing initiatives". Furthermore, the company is allocating a combined Rs 597.5 crore (19.3%) just to pay the leases on its existing offline centers and those of its subsidiaries, Utkarsh and Xylem.

This means a total of Rs 1,307.5 crore (42.2%) of the IPO is designated for marketing and paying existing rent. This suggests the brand's organic online pull is not, by itself, enough to fill these high-cost physical seats, requiring a massive paid marketing budget.

Also, this breakneck expansion has created significant "growing pains" that are visible throughout the DRHP. The company's own auditors have flagged "Significant Gaps in Internal Financial Controls".

For Fiscal 2023, the auditors issued a "Disclaimer of Opinion" on internal financial controls — a severe red flag. They stated they were "unable to obtain appropriate audit evidence" because the company "did not establish internal financial control" based on the required framework.

These issues persisted. In Fiscal 2024, the auditors noted the company's accounting software "does not have the feature of recording audit trail (edit log) facility". As of Fiscal 2025, the report still flagged that for three sub-systems, the audit trail feature was "neither enabled nor operated" or the logs weren't properly preserved. On top of these, in both Fiscal 2024 and 2025, the company was also flagged for failing to maintain daily data backups on servers physically located in India, as required by law.

This internal strain is also reflected in its workforce. The company has experienced a high-speed "revolving door" of talent. Total employee attrition hit 45.27% in Fiscal 2024. Attrition for its on-payroll faculty spiked to 40.40% that same year. While these numbers improved in Fiscal 2025, the risk factor disclosures reveal specific "poaching" incidents. It notes that in March 2023, "five of our faculty members" in the core JEE/NEET categories left to join a competitor, followed by "11 faculty members in the GATE Education Category" in January 2024.

Also, perhaps most tangibly, the company's "launch first, get permits later" strategy for its offline centers is documented in detail. The "Government and Other Approvals" section lists dozens of operational centers with essential permits still "pending" or, in many cases, "yet to be applied for". This includes over 70 "fresh applications" for Fire NOCs that are still "pending" and over 62 "fresh applications" for Coaching/Tutoring Licenses also "pending". And overall, the list of licenses "yet to be applied for" is extensive, covering 38 centers for Trade Licenses and 71 centers for Shops' & Establishments' Registrations. This represents a significant regulatory risk that could lead to fines or forced center closures.

Apart from these, the company's M&A strategy, used to fuel its rapid entry into new markets, has also had high-profile failures. The DRHP admits it "did not realize the business synergies envisaged" from some acquisitions.

iNeuron, acquired in FY23, was a complete write-down. The auditor's report notes it "does not have any active business operations or employees" and faces "material uncertainty... to continue as a going concern". PrepOnline was also "impaired" (its value written down) after it "was not able to achieve expected sales of its books".

The "successful" acquisitions, meanwhile, come with significant future liabilities. The IPO will fund a payment "Tranche" for Utkarsh Classes, with more payments tied to future profits. The buyout of the Xylem founders is structured in payments that extend all the way to 2030, with the price tied to future revenue and performance.

On top of it all are the related-party transactions. The IPO papers show that the parent company, Physicswallah Ltd, acts as a "central bank" for its group, supporting its subsidiaries with significant capital. In Fiscal 2025 alone, the parent company provided significant sums in loans to Penpencil, Xylem, and the failed iNeuron. It also acted as a major customer to its own subsidiaries, recording Rs 58.3 crore in "Purchase of goods/services" from Penpencil in FY25. And, the parent company also centrally manages the ESOP plan, allocating the non-cash "share based payment" expense to its subsidiaries.

This financial structure highlights a highly integrated, but also highly dependent, group where the parent company's resources are actively used to fund the growth and operations of the entire ecosystem.

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