Is the high valuation of PhysicsWallah shares justified?

PhysicsWallah shares got listed today, 18^th November, 2025, at a premium of 33% to the issue price of the IPO. The issue price of the IPO was Rs 109 per share. The stock continued with its gains all through the first day of listing. It ended the day up 42.42% at Rs 155.24. The IPO had seen muted demand from retail investors. But the gains seen today may indicate to some buying demand from retail investors too, today.

PhysicsWallah has still not achieved net profitability. So its Earnings per share (EPS) is still negative. Therefore, its price-to-earnings ratio is also currently negative. For a company that has a negative EPS, listing price and the day end price of Rs 155 is very high valuation.  To understand better, imagine if the company’s EPS was not negative but Rs 1 per share. Then also it would have been trading at a P/E ratio of more than 150 at the end of day, today. To bring things even more into perspective, Nvidia’s shares are currently trading at a P/E ratio of around 53. Nvidia is listed at Nasdaq. It is among the leaders of Artificial Intelligence boom.

Operationally profitable in the last 3 years

In the year ending 31^st March, 2025, PhysicsWallah posted net loss of Rs 225.7 crore (before exceptional, one-time items). In the previous year, ending on 31^st December, 2024, it had posted net loss of Rs 1,263.9 crore. In the year ending on 31^st December, 2023 its net loss was Rs 89.4 crore. Net loss margin of the company in FY 23 was 11.57%; in FY24 it was 62.71%; in FY 25 it was 7.4%. So the company has been able to cut down its net losses as a percentage of its total revenues.

The company has been operationally profitable in each of the past three years. In FY23 its operational profit was Rs 576.9 crore; in FY24 it was Rs 87.8 crore; in FY25 it was Rs 635.63 crore.

PhysicsWallah is generating cash

The company also generated positive cash flow from operations in each of the past three years. It was also cash flow positive on net basis in each of the last three years. At the end of FY 23 its cash and cash equivalents stood at Rs 48.8 crore; at the end of FY 24 it was Rs 53.2 crore; at the end of FY25 it was Rs 53.7 crore. These are positive factors that may justify some of the high expectations regarding the company.

PhysicsWallah is an EduTech company. It mainly offers preparation courses for competitive exams like IIT-JEE. It has also started offering upskilling courses such as in data sciences. The company offers its courses through online channel and offline channel. The company has also started increasing its offline presence through physical, brick-and-mortar classes.

Unique challenges to the business model of EduTech companies

Shares of EduTech companies, globally, tend to trade at relatively lower Price-to-Earnings (P/E) ratios. This, because of the inability of many of these companies to generate profit on a sustainable basis. Examples include Coursera and Chegg in USA.

Some challenges are unique to their business model. One is that they have lesser number of customers who make repeat purchases. Once a customer takes a competitive exam preparation course of PhysicsWallah and passes through the exam, he will not need to buy that course again. Competition is also very intense. There is competition both from the organized players and the unorganized ones. PhysicsWallah also has competition from thousands of teachers across India that offer competitive exam preparation coaching. The sector is heavily dependent on both the quality of course and the quality of teaching. So quality of teachers employed by PhysicsWallah will play a critical role in its future success. Employee expenses therefore make up the biggest expense of the company. A large part of the success of PhysicsWallah is due to the individual teaching appeal of its founder, Alakh Pandey. Students are the main target segment of EduTech companies. Many of them are also highly price sensitive with relatively less purchasing power.

Opportunities ahead
India currently has the youngest population in the world. Its media age currently is around 29 years. This means that half the population of India is currently of less than 29 years of age. Due to this young population, demand for competition preparation courses and upskilling courses is likely to remain strong in the short, medium and long term.  But the current valuation at which PhysicsWallah’s shares are trading may still be very high in spite of all the growth prospects and opportunities ahead.

Disclaimer : This content is only for informational purpose. It does not make any recommendation to act or invest.