Physicswallah online growth and offline economics support earnings recovery after NEET disruption

Investment View and Target Price

JM Financial Institutional Securities upgraded Physicswallah to BUY in its August 14, 2026 report, while retaining its June 2027 target price of Rs 140. The broker views Q1FY27 as a decent quarter despite revenue disruption caused by the re-conduct of the NEET examination.

The positive view is supported by broadening online growth, improving offline unit economics, cost leverage and Physicswallah’s decision to exit FinZ, which addresses a previous capital-allocation concern. The share price had also corrected by more than 20 per cent from recent highs, improving the risk-reward balance, according to JM Financial.

Q1FY27 Financial Performance

Physicswallah reported consolidated revenue of Rs 10,540 mn in Q1FY27, up 24.4 per cent year-on-year and 14.7 per cent quarter-on-quarter. Revenue was broadly in line with JM Financial’s estimate of Rs 10,659 mn and consensus of Rs 10,690 mn.

The adjusted PAT loss narrowed primarily because of higher-than-expected other income.

Online Business Drives Growth

The online channel was the principal growth driver. Online revenue rose 33.2 per cent year-on-year to Rs 5,488 mn, representing about 52 per cent of consolidated revenue and exceeding JM Financial’s estimate by 5.3 per cent.

Online pre-Ind AS EBITDA increased 2.7 times year-on-year to Rs 670 mn, while the margin expanded 614 basis points to 12.2 per cent. However, the margin remained below the broker’s 15 per cent expectation.

Growth extended beyond JEE and NEET. K-12 and Early Learning revenue and enrolments grew 88 per cent and 41 per cent, respectively. Curious Junior enrolments and collections rose 67 per cent and 145 per cent, respectively. Average course price per user increased 10 per cent to Rs 4,312, aided by greater attachment of value-added offerings.

Online NEET collections fell 28 per cent in Q1 because of the delayed examination cycle, but rebounded 51 per cent year-on-year between July 1 and August 13. JM Financial expects online revenue to grow 31 per cent in FY27E and online pre-Ind AS EBITDA to reach Rs 7,200 mn, implying a 27.5 per cent margin.

Offline Economics Show Gradual Improvement

Offline revenue grew 14.5 per cent year-on-year to Rs 4,899 mn, with the network expanding to 366 centres from 353 in Q4FY26. The pre-Ind AS EBITDA loss narrowed to Rs 1,060 mn from Rs 1,130 mn, and the margin improved 477 basis points to negative 21.6 per cent. However, performance remained below JM Financial’s estimates.

Delayed NEET enrolments were down 19 per cent year-on-year through June, but increased 82 per cent year-on-year from July. Management indicated that offline revenue growth would have been 20 to 25 per cent without the timing shift.

Offline average revenue per user rose 7 per cent. Centres opened during 2022-24 were EBITDA-positive in FY26, while centres opened in 2025 remained loss-making at single-digit margins. JM Financial forecasts 27.7 per cent offline revenue growth and a reduced pre-Ind AS EBITDA loss of Rs 588 mn in FY27E.

Management Outlook and New Initiatives

Management reiterated its FY27 consolidated revenue growth guidance of about 30 per cent and its guidance to double pre-Ind AS EBITDA. It expects the delayed enrolment cycle to normalise during H1.

• Physicswallah has signed a term sheet with an RBI-registered partner to transfer FinZ’s loan portfolio.
• Mature JEE, NEET, CA and MBA categories remain highly profitable.
• Foundation, GATE, UPSC and State Boards are profitable.
• Curious Junior is expected to break even in FY27.
• PW Books launched its paid offering on July 11 and received more than 23,000 paid orders in its first 10 days across more than 150 titles.
• The Socratic AI Tutor was in beta, with a rollout expected in the following quarter.

Estimates and Valuation

JM Financial raised its FY27E-FY29E consolidated pre-Ind AS EBITDA estimates by 7 to 9 per cent and adjusted PAT estimates by 4 to 12 per cent. The revisions were mainly driven by lower expected losses in Others following the FinZ closure.

The Rs 140 target price remains unchanged because the upgrades arise in a segment to which the broker assigns no valuation. JM Financial’s sum-of-the-parts valuation applies 32 times EV/EBITDA to the online business and 15 times to the offline business, using June 2028 estimates, and values cash at book value.

Key Risks

• Slower offline profitability resulting from aggressive expansion.
• Saturation and competition in JEE and NEET.
• Regulatory changes.
• Elevated investment in newer initiatives or K-12, which could pressure margins and returns.