Paytm might reduce employment by much to 20%

One97 Communications, the parent company of Paytm, may have to lay off between 15% and 20% of its personnel this fiscal year in order to save on labor expenses.

The corporation employed 32,798 people on average in FY23. 29,503 of them were on active roll. The mean cost per worker was Rs 7.87 lakh. The average employee cost in FY24 is expected to have increased to Rs 10.6 lakh, representing a 34% year-over-year (y-o-y) increase in overall costs to Rs 3,124 crore.

The corporation is going to lay off 5,000–6,300 workers as part of a staff cost-saving strategy of Rs 400–500 crore in response to mounting losses. The headcount reduction is already underway. According to reports, the corporation let go of around 1,000 workers from a variety of departments in December in an effort to simplify operations and save expenses. The number of workers for FY24 is not yet known.

The business said in its investor presentation that “our employee costs have increased in recent years due to investments, primarily in technology, merchant sales, and financial services.” It said, “We anticipate reductions in other employee costs for the upcoming year, while we continue to invest in the merchant sales team, as well as risk and compliance functions.”

The corporation thinks major cost savings may be attained by concentrating on core business, optimizing cost structure, and using artificial intelligence capabilities. However, it will keep rewarding “high-performing talent” by elevating them to positions of leadership and hiring fresh senior executives who will foster expansion.

Due to a decline in sales, the company’s net loss increased to Rs 550 crore in the January-March quarter from Rs 168 crore in the same period last year. In the March quarter, revenue from operations decreased 3% year over year to Rs 2,267 crore.

The fintech startup faced difficulties on January 31, when the Reserve Bank of India (RBI) imposed limitations on Paytm Payments Bank, including preventing the bank from undertaking credit transactions in client accounts and accepting extra deposits and top-ups. The RBI’s restrictions on the payments bank had an effect on the fourth quarter’s profits.

Paytm’s management said on the post-earnings analyst call that the business anticipates being profitable shortly. In an effort to intensify its emphasis on the merchant ecosystem, it intends to recruit more sales executives. Additionally, it wants to improve the governance framework for Paytm and its group companies by designating subject matter experts as advisers or independent directors, with a stronger emphasis on compliance and increased regulatory engagement.

Motilal Oswal Financial Services, a brokerage business, has lowered its profit projections and predicts that Paytm would break even on an EBITDA basis in FY26. According to a study, “We value Paytm based on 15x FY28E Ebitda and discount the same to FY26E at a discount rate of ~15%.”