₹4,600 Crore IPO For PhysicsWallah Files?

The EdTech sector of India is all set to witness a major strategic change when PhysicsWallah filed its confidential draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) for an initial public offering (IPO) with a target valuation of ₹4,600 crore (approximately $500 million). The company can opt to protect the publication of sensitive financial and operational details in front of competitors by selecting the SEBI confidential pre-filing route it introduced in November 2022. In addition, this approach allows adjustments to be made to disclosures to be made in response to changing market conditions.

What is the use of this confidential filing?

The move of the company to use SEBI’s confidential pre-filing mechanism, which allows companies to remove the red tape that usually follows such initiatives and makes this confidential for a limited period of time, makes it the seventh major Indian company to opt for this method after Tata Play, OYO, Swingy, Vishal Mega Mart, Cedilla Financial Services, and Indira IVF.

The advantage of this method is that it protects sensitive business information and also allows PhysicsWallah to modify its disclosures as the market develops. The IPO is structured in such a manner that involves a fresh issue (new equity shares) as well as an offer-for-sale (OFS) component to enable early investors to sell a part of their holdings.

Recent Updates on the matter?

PhysicsWallah has roped in Kotak Mahindra Capital, Axis Bank, JP Morgan, and Goldman Sachs onboard to manage the offering. Their high profile mandate has a good track record for funding. The company raised $210 million in September 2024 and that took its post money valuation to $2.8 billion, a 2.5X increase from a $1.1 billion valuation. The funding round has also been attended by Hornbill Capital, Lightspeed Venture Partners, Westridge Capital and GSV Ventures, which reflects broad based investor confidence in the sector even as the broader EdTech ecosystem faced challenges.

Growth and its route

PhysicsWallah rapid growth is fueled by an unique combination of online innovation and offline expansion. The firm has over 55 lakh paid students, over 4.6 crore YouTube subscribers, and has over 14,000 video lectures and over 80,000 practice papers to its name. Apart from that, the platform caters to over 35 competitive exam categories such as NEET, IIT JEE, UPSC, CA, GATE and law and has a physical presence across 105 cities with more than 2 lakh students flocking offline centers.

Fresh funds from the IPO would also be tactfully plowed to fund long term innovation and operational stability opposed to any rash acquisitions. FY25 is the highest absolute EBITDA year for the founders and revenue grew 2.5× to an estimate ₹2,400 crore in FY24.

Industry context and future prospects

PhysicsWallah public listing at this juncture is significant while valuations in the EdTech space remain fluctuated, with investor sentiment optimistic yet cautious about the sector. As demand for accessible, quality education has increased especially after the pandemic, edtech companies stand out for opportunities to grow at a faster pace. However, with some peers finding it difficult, PhysicsWallah’s strong online presence coupled with its online offline approach is expected to roll further consolidate its leadership in the market

PhysicsWallah’s successful IPO would have a huge precedent for other edtech firms, analysts note. In order to continue to innovate as the company expands its content offerings and geographical reach, the company will need to find the right balance of regulatory and competitive pressures. A strategic advantage provided by the confidential filing allows the firm to control market expectations, and make it easier to improve disclosures and earn the confidence of investors, and possibly lay the groundwork for future public listings in the sector.