One97 communications, the parent company of Paytm, is expected to reduce its workforce by 15-20% for the financial year 2024-25 after the digital firm's losses widened for its March quarter, reported Financial Express.
The Paytm CEO had hinted at reducing operational costs, which included leveraging AI for a more efficient organisational structure.
Vijay Shekhar Sharma, in an exchange filing on May 22, said, "Led by capabilities of AI and focusing on core business, we are also working on significant cost efficiencies including leaner organisation structure."
In the financial year 2023, the company had an average of 32,798 on-roll employees, with 29,503 active on-roll. The average cost per employee stood at Rs 7.87 lakh.
However, in FY24, the total cost rose by 34% year-on-year to Rs 3,124 crore, with the average employee cost estimated to have increased to Rs 10.6 lakh.
In response to its increasing losses, the company aims to save Rs 400–500 crore in employee costs, which could potentially lead to a reduction of 5,000-6,300 employees.
The process of downsizing is already underway, with over 1,000 employees reportedly terminated in December to streamline operations and cut costs.
"In recent years, our employee costs have increased due to investments, primarily in technology, merchant sales, and financial services. For the coming year, while we continue to invest in the merchant sales team, as well as risk and compliance functions, we expect reductions in other employee costs," said the company in its exchange filing.
Paytm highlighted its optimisation of cost structure, utilisation of AI capabilities, and focus on core business to achieve cost efficiencies.
It mentioned creating a leaner organisational structure and pruning non-core businesses. The company assured that recent changes align with pre-approved succession plans discussed with the Board in previous financial years.
"This includes creating a leaner organization structure and pruning non-core businesses. All recent changes are aligned with pre-approved succession plans discussed with the Board in previous financial years. We will continue to reward our high-performing talent by promoting them into leadership roles and welcome new senior executives who will contribute to the next wave of growth," said Paytm.
The net loss for Paytm widened to Rs 550 crore in Q4 FY24 from Rs 168 crore a year ago, attributed to a decline in revenue. Revenue from operations fell 3% year-on-year to Rs 2,267 crore in the March quarter.
Trouble for the fintech company began on January 31 when the Reserve Bank of India (RBI) imposed restrictions on Paytm Payments Bank, barring it from accepting additional deposits and conducting credit transactions in customer accounts, among other restrictions.
The fourth-quarter results were impacted by RBI's curbs on the payments bank.
In the post-earnings analyst call, Paytm’s management expressed optimism about turning profitable soon.
It plans to recruit more sales executives to bolster its focus on the merchant ecosystem.
Brokerage firm Motilal Oswal Financial Services has revised its earnings estimates and forecasts Paytm to achieve EBITDA breakeven in FY26.
“We value Paytm based on 15x FY28E EBITDA and discount the same to FY26E at a discount rate of ~15%,” it said in a report.
