Rays of Belief faces up to 36% fit-out write-off exposure

Rays of Belief Limited says up to 36% of the estimated setup cost of a Tier-I learning centre is immovable fit-out that may have to be written off if a leased site closes, moves or is not renewed. The disclosed Tier-I exposure is Rs 6.265 lakh within total estimated capital expenditure of Rs 17.32959 lakh, while centre leases typically last 11 months to three years.

How much of a learning centre’s setup cost could be written off?

Rays of Belief discloses that immovable capital expenditure, or capex, represents 30% to 36% of estimated setup cost for its Company Learning Centres and Company Learning Centres in partnership with Licensed Professionals, depending on city tier. Immovable capex includes interior fit-outs and civil and structural improvements attached to leased premises, rather than assets that can be moved to another centre.

The Tier-I centre model has the largest stated immovable component: Rs 6.265 lakh, or 36%, of total capex of Rs 17.32959 lakh. The source also shows Rs 9.2375 lakh of movable assets, equal to 53%, and Rs 1.82709 lakh of taxes, equal to 11%; the estimates were calculated using an independent architect’s certificate dated February 11, 2026.

The comparison shows that estimated immovable exposure falls by 6 percentage points between Tier-I and Tier-III learning centres, from 36% to 30%. Tier-II has Rs 4.845 lakh of immovable capex within Rs 14.80351 lakh of total capex, compared with Rs 4 lakh within Rs 13.20083 lakh for Tier-III.

School Collaboration Centres have a smaller stated immovable component of Rs 40,500, or 3%, within total estimated capex of Rs 5.08265 lakh. Rays describes the figures as an illustration of assets that can be reutilised compared with assets inherently tied to a leased property, rather than a record of historical write-offs.

Why do Rays of Belief’s short leases create fit-out write-off exposure?

Rays of Belief faces fit-out write-off exposure because centre leases typically run from 11 months to three years, while interiors and structural works remain fixed to the particular premises. The company says immovable capex cannot be transferred to or used at an alternate location, so it may not be recoverable after a lease ends or a centre is moved.

Rays identifies four potential triggers: non-renewal on commercially reasonable terms, landlord termination or non-extension, a required vacancy for operational or regulatory reasons, and a company decision to discontinue a location. In each case, the premises-specific fit-out could be written off, while a replacement centre could require fresh capital expenditure.

The risk differs from movable capex. Furniture, white goods, technology hardware and initial therapy-material inventory are classified as movable assets, and Rays states that all movable assets can be reutilised. The company’s disclosed exposure therefore depends on the portion of a centre’s cost that is fixed to the site, not its entire setup cost.

Any write-off could affect profitability, financial condition and results of operations, according to the disclosure. The cash-flow effect would be larger if a centre also had to be relocated, because Rays could lose the use of the previous fit-out while incurring new expenditure for the replacement premises.

Which parts of Rays of Belief’s network are leased?

Rays of Belief relied on leased premises for 91 of its 136 centres in India as of March 31, 2026, making lease renewal relevant across two-thirds of its domestic network. The company also states that its registered office, corporate office and three centres acquired in the United States in June 2025 are in properties it does not own.

Of 123 Company Learning Centres and Company Learning Centres with Licensed Professionals, 78 were leased as of March 31, 2026. This included 77 centres in premises procured by Rays and one centre operated under a revenue-sharing arrangement; 12 centres operated from spaces provided by Licensed Professionals were not listed as leased centres.

Rays paid Rs 4.661 crore of centre lease amounts through March 31, 2026, compared with Rs 3.482 crore in Fiscal 2025 and Rs 2.326 crore in Fiscal 2024. The Fiscal 2026 amount for Company Learning Centres and centres with Licensed Professionals was Rs 4.169 crore, ahead of Rs 1.60 crore for the Upskilling Academy, Rs 1.29 crore for the Centre of Excellence and Research, and Rs 2.03 lakh for School Collaboration Centres.

The Fiscal 2026 lease amount was Rs 2.335 crore higher than in Fiscal 2024. That increase does not establish the number of fit-outs that may be written off, but it shows that lease costs have risen during the three-fiscal period in which Rays continued to operate through leased locations.

What conditions could turn the exposure into an actual loss?

Rays of Belief’s stated fit-out exposure becomes an actual loss if a centre can no longer use its premises-specific improvements because a lease ends, a landlord does not extend it, or operations cease or move. Continued use at the same location, or renewal on commercially reasonable terms, would be necessary for the relevant fit-out to remain in service.

Many lease and leave-and-licence agreements carry annual rent escalations of 5% to 10%, according to Rays. The company also says landlords may terminate leases under applicable provisions for specified events, including nuisance, waste, injury, certain prohibited trade, or conduct that causes cancellation of the landlord’s insurance policy; remedies after default can include termination, damages and retention of security deposits.

Landlord-controlled approvals are another disclosed factor. Certain landlords are generally responsible for maintaining occupation certificates and fire no-objection certificates, while some approvals applied for by landlords were pending as disclosed on March 31, 2026. A failure to obtain or renew approvals could disrupt operations or force a centre closure, potentially requiring a move and replacement fit-out spending.

Rays also says its growth strategy and the stated objects of the issue include establishing new centres in different geographical areas. That plan requires new lease agreements, and the company says rentals for new centres may be significantly higher than those at current facilities; it also notes possible stamping, registration and landlord-title issues in some lease arrangements.

Conclusion

Rays of Belief’s lease-based operating model leaves a defined portion of centre investment tied to individual properties. The highest disclosed exposure is Rs 6.265 lakh, or 36% of estimated Tier-I centre capex, while the comparable immovable share is 33% for Tier-II and 30% for Tier-III centres; 91 of 136 Indian centres were leased as of March 31, 2026.

The next point to watch is implementation of Rays’ disclosed new-centre expansion plan, which requires additional leases with typical tenures of 11 months to three years. Renewal terms, annual rent escalations of 5% to 10%, landlord approvals and the need for centre relocations will determine whether premises-specific fit-outs continue to be used or must be written off.