PhysicsWallah’s ₹1,031 crore Classroom Business Has a Rent Problem

The most revealing number in PhysicsWallah’s AI pitch is ₹131 crore. That’s what its offline business paid on leases in the six months to September. You can generate a practice paper faster, use software to grade the answers and get a machine to write much of your code. The lease payment still comes due.

PhysicsWallah had good news to share on its November 4 earnings call. Quarterly revenue rose 18% to ₹1,242 crore and the shareholder letter put profit after tax at ₹142 crore, up from ₹70 crore. The first half swung to a ₹55 crore profit from a ₹57 crore loss. And the online business, which grew revenue 29% in the first half, made ₹312 crore on the company’s preferred operating profit measure. The offline business booked ₹1,031 crore in revenue and lost ₹108 crore on that same measure.

The rent is in the reconciliation

There are two numbers for those classrooms in the shareholder letter. One says the offline business generated ₹41 crore in segment EBITDA, a measure of earnings before interest, taxes, depreciation and amortisation. The company then allocates ₹45 crore of shared costs to the segment, adds back ₹27 crore in employee stock compensation and subtracts ₹131 crore of lease payments. That takes the result to a ₹108 crore loss on what PhysicsWallah calls pre-Ind AS EBITDA. The same calculation leaves the online business with ₹312 crore in earnings after ₹13 crore in lease payments.

The classroom business has improved. Its first-half loss narrowed from ₹120 crore a year earlier, and its margin improved from minus 13% to minus 10.5%. But take the September quarter on its own. Offline revenue rose 9% to ₹541 crore while the loss on that measure edged from about ₹7 crore to about ₹8 crore. More revenue helped the group post a record quarter.

The classrooms still had a bill their revenue couldn’t cover on that measure.

Management has a case for why the second half could be better. It says the third quarter is seasonally strong, it will open new Vidyapeeth centres more slowly, and fewer openings mean fewer teachers hired ahead of admissions and fewer leases signed before classes begin. It says Vidyapeeth can break even or make money this year. Vidyapeeth brought in ₹682 crore, about two-thirds of first-half offline revenue. Even so, the wider offline operation entered the second half ₹108 crore short of full-year breakeven on the company’s preferred measure. That is the gap the rest of the year has to close, or nearly close, for management’s guidance to hold.

The expansion figures explain the caution.

PhysicsWallah had 167 Vidyapeeth centres at the end of September, up from 117 a year earlier. First-half enrolments at that brand rose from 2.19 lakh to 2.53 lakh. The centre count grew 43% and enrolments grew 16%. Those are network figures, with new and established centres in the same tally. To see how the rollout is paying off, investors need to know how many students a new site needs to fill its classrooms and how long it usually takes to get there.

PhysicsWallah Added 84 Salaried Teachers

On the call, an analyst asked about a fall in employees and faculty from June to September. The filings show total employees fell from 19,567 to 19,104, a net decline of 463. Total faculty fell by 151. That second number hides the better detail. PhysicsWallah had 84 more teachers on payroll at the end of September and 235 fewer faculty consultants. Its total employee count was still higher than a year earlier.

Management pointed to AI efficiencies in writing learning material, checking content, setting tests and grading written answers. The filings show where the headcounts moved. They give no breakdown of how many people were laid off, resigned or came to the end of a contract, or how much of the change was attributable to AI.

The salary bill offers a second reality check. PhysicsWallah’s employee benefits expense excluding stock compensation rose from ₹432 crore to ₹482 crore in the quarter. In the first half it rose from ₹847 crore to ₹969 crore. What fell was the bill as a share of revenue. In the September quarter, it came down from about 41% to about 39%. Revenue grew faster than staff costs, which is good for the margin. Those figures give no rupee estimate of what automation saved.

A ₹17 tutor still needs a price tag

PhysicsWallah’s first-half technology spending rose from ₹70 crore to ₹104 crore. That is the company’s wider tech bill, which includes work on AI. Its shareholder letter puts the delivery cost of AI Tuto, its voice tutor, at roughly ₹17 an hour and compares it with the ₹300 to ₹1,000 an hour a private home tutor can charge.

One figure is what PhysicsWallah says it costs to deliver a service. The other is what a family pays for one. On the call, management said it was still working out Tuto’s price and expected little revenue from it this financial year.

The pitch for families is easy to see. A student can ask for help whenever they get stuck, using a tutor built with material from PhysicsWallah’s own teachers. The company’s first test described in the letter was a two-week pilot with Class 8 students in October. At Investor Day, a live demo can show whether it can explain a difficult question. Evidence on how much students learn, how often they come back and what families will pay would tell us whether there’s a business.

PhysicsWallah Is Shopping for Growth

PhysicsWallah is looking to spend roughly $20 million or less on a set of potential deals for fully online education businesses. That would draw on the ₹300 crore it set aside from the IPO for acquisitions it hadn’t identified at the time. The talks were advanced at the time of the call, and management said its 30% FY27 revenue growth guidance includes planned acquisitions. The company grew 21% in the first half. On last year’s revenue base, getting to 30% for the full year implies roughly 39% growth in the second half. Some of that could come from deals, and management is counting on crash courses and collections spilling into later quarters as well.

November 18 is the first anniversary of PhysicsWallah’s listing and the date of its first Investor Day. The company plans to show off Tuto. It should also show what it costs to fill a classroom, how much money a mature centre makes after paying for the premises, and how much of the second-half growth it can deliver with the businesses it owns today.