Whalesbook
PhysicsWallah is set to debut on the stock exchanges on November 18. While the Grey Market Premium (GMP) has seen an 11% surge, investor sentiment is cautious due to the recent performance of listed IPOs and muted subscription data. Market experts are raising concerns about the company's 'overpriced' valuation, high employee attrition, and the expansion into offline models.
PhysicsWallah's Initial Public Offering (IPO) is scheduled for its stock market debut on November 18. As of November 17, the Grey Market Premium (GMP) indicates a potential slight uptick with an 11% surge. However, this positive signal is tempered by broader market concerns following the subdued performance of recently listed IPOs and the company's own muted subscription figures.
Market veteran Arun Kejriwal has described the IPO as 'overpriced' and cautioned that its long-term viability as a buy will depend on future quarterly results. He highlighted significant concerns regarding the business model, including a high attrition rate, where approximately 50% of revenue is allocated to staff and teacher salaries, making the claimed margins difficult to sustain. Kejriwal also questioned the company's strategic investment in offline, brick-and-mortar classrooms, noting the higher costs compared to online offerings.
Sandip Sabharwal of Asksandipsabharwal.com echoed these sentiments, stating that PhysicsWallah's current valuations are 'significantly high' and that he is not investing at these levels.
Deven Choksey, Managing Director of DRChoksey FinServ, pointed out that the company's unique selling proposition (USP) is technology-enabled but ultimately replaceable. He believes product innovation is not as prominent as claimed in the IPO prospectus. Choksey also raised alarms about valuing the company based on current profitability or losses, emphasizing that revenue-based valuations historically do not sustain post-listing.
Sunny Agrawal, Head of Fundamental Research at SBI Securities, anticipates the IPO to list 'at par.' He identified the offline business expansion as a 'drag on the profitability' and stressed the need for greater clarity on the path to profitability for this segment.
The primary concerns revolve around sustaining profitability, the future of offline classes in an increasingly online-focused environment, and the overall valuation. The performance of recent IPOs further adds to the street's apprehension.
Impact
This news directly impacts potential investors in the PhysicsWallah IPO, influencing their listing-day expectations and long-term investment decisions. The concerns raised by experts could lead to increased volatility or a subdued listing performance. The broader IPO market sentiment might also be affected, especially for other edtech or growth-stage companies. Rating: 7/10
