Unique Risks in Physics Wallah's IPO Revealed by Zerodha
Zerodha, India's largest brokerage by user count, has recently pointed out a unique risk factor in the draft IPO papers of Physics Wallah. This online tutoring platform has acknowledged potential threats to student safety in its draft red-herring prospectus, claiming that any failure to protect students could adversely affect its reputation and business.
Among the cited risks, two incidents from 2023 stand out. One involved a staff member who was filmed pushing a student in one of their offline centers, which sparked outrage on social media. Following an internal review, the company terminated the staff member involved. In another incident, a student was seen threatening a faculty member during a video call, which adds a peculiar twist to the risk assessment.
Zerodha made this observation public through a post on X, noting this “unique risk” without delving into much detail, other than referencing the source as 'Company DRHP'. The light-hearted nature of these risks highlights the complexities of operating in the online education sector, where both student safety and educational quality are paramount.
Physics Wallah is aiming to raise ₹3,820 crore through its IPO to further its growth as a new-age, tech-driven startup. The company, backed by prominent investors like WestBridge Capital and Hornbill Capital, plans to issue new shares for ₹3,100 crore and raise ₹720 crore through an offer for sale by its co-founders, Alakh Pandey and Prateek Boob.
With a valuation of $2.8 billion in September 2024, Physics Wallah is looking to utilize the IPO proceeds for multiple purposes, including establishing physical coaching centers, enhancing technology and marketing efforts, and funding potential acquisitions. Notably, the company has reported a 49% year-on-year revenue growth, reaching ₹2,887 crore in the fiscal year 2024-25, while managing to narrow its losses significantly from ₹1,131 crore to ₹243 crore.
The identification of risks by Zerodha could serve as a reminder for educational institutions to prioritize student safety and reputation management as they grow in the competitive landscape of online education. As Physics Wallah prepares for its IPO, stakeholders will be watching closely to see how it navigates these unique challenges.
