PhysicsWallah’s official statement on revising lending strategy
Edtech startup PhysicsWallah reversed course on Thursday and told investors it would stick to lending via third-party non-banking financial companies (NBFCs). This marks a complete reversal from its previous plan to extend loans to students through its NBFC subsidiary, FinZ Finance.
Why the sudden change of tune? In a stock exchange filing on June 4, PhysicsWallah said it was revising its lending strategy, under which the company would partner with several third-party NBFCs to facilitate student lending.
“This decision reverses the company’s earlier approach and is intended to materially reduce balance sheet and credit related risks for the company,” it said.
The statement comes days after PhysicsWallah’s management said during a post-earnings call, that it would invest Rs 120 crore in its NBFC subsidiary, FinZ Finance, which would, in turn, provide small-ticket loans to students. The subsidiary received an NBFC licence from the Reserve Bank of India in September last year and commenced an in-house lending operations in March 2026.
In its latest regulatory disclosure, however, the edtech startup said it would take a call on the strategic direction of FinZ Finance in the near future, subject to board and other regulatory approvals.
“We received feedback from our partners that our core strength lies in building communities and our online business. Our lending business is best left to regulated third-party NBFCs who have created robust underwriting capabilities,” said Prateek Maheshwari, co-founder of PhysicsWallah, explaining the company’s pullback.
Why investors are jittery about education financing: When an edtech company lends money to students from its own balance sheet, it assumes significant credit risk. If students default on their loans due to poor job placements or other reasons, the company suffers direct financial losses that can also affect its core education business.
While PhysicsWallah’s management claimed that FinZ Finance had extended loans worth Rs 200 crore over the last two years, with a non-performing asset (NPA) ratio of less than 1%, its foray into direct student financing put the stock under heavy selling pressure. Between May 26 and June 4, PhysicsWallah’s shares declined nearly 18%, according to BSE data. The company had announced its Rs 120 crore investment in FinZ Finance on May 27.
Further, there is growing investor unrest over the sustainability of student-lending business models. The edtech sector, in particular, has a history of running into regulatory trouble over student loans. The most cited example of this is BYJU’S. During its rapid expansion phase, the company aggressively pushed its sales teams to sell expensive educational courses to families, sometimes manipulating them into taking loans. In the past, “predatory practices” of BYJU’S and other edtech companies have also been raised in the Parliament. As regulatory scrutiny intensified and financial losses mounted, operational instability further eroded customer confidence, and BYJU’S was unable to recover.
Financial snapshot: PhysicsWallah reported a consolidated net loss of Rs 69.14 crore in the quarter ended March 2026, as against a profit of Rs 99.91 crore in the preceding December quarter. Revenue from operations declined sequentially to Rs 983.58 crore in Q4 FY26 from Rs 1,146.93 crore.
PhysicsWallah’s dark pattern practices: Notably, the Central Consumer Protection Authority, earlier this week, imposed a fine of Rs 5 lakh on PhysicsWallah for deploying dark patterns on its pw.live and PW apps. A pre-ticked “Donate for PW Foundation” checkbox added Rs 10 to each transaction unless users manually unticked it, a practice classified as the dark pattern known as basket sneaking. Additionally, courses advertised as “free” required users to provide their mobile number and email address to gain access, an example of the dark pattern known as forced action. Both practices are prohibited under the 2023 Dark Patterns Guidelines.
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