In the face of escalating losses, Paytm’s parent company One97 Communications is taking decisive action to streamline its operations and chart a path towards recovery.
In an effort to mitigate escalating losses, the company’s parent, One97 Communications, is implementing significant cost-cutting measures. These include a potential reduction of 15-20% of its workforce, translating to a loss of 5,000-6,300 employees. This move aims to save approximately Rs 400-500 crore.
The company’s employee costs have risen considerably, with a 34% surge in FY23, reaching Rs 3,124 crore. This increase pushed the average cost per employee to Rs 10.6 lakh, up from Rs 7.87 lakh in the previous year.
The cost-cutting initiative has already begun, with reports indicating that over 1,000 employees were terminated in December 2023. While the exact number of employees to be let go in FY24 remains undisclosed, the company is focusing on streamlining operations and reducing expenditure.
Paytm attributes the rise in employee costs to investments in technology, merchant sales, and financial services. While continuing to invest in these strategic areas, the company aims to optimize its cost structure through AI and by focusing on core business segments. Additionally, high-performing employees will be rewarded with promotions to leadership roles.
Despite the challenges, Paytm remains optimistic about its future in the payment services sector. The company is particularly bullish on the Unified Payments Interface (UPI), along with card processing and EMI payments, viewing them as key drivers for its growth.
UPI transactions have gained significant prominence, accounting for nearly 80-85% of Paytm’s total Gross Merchandise Value (GMV). This highlights the crucial role UPI plays in the company’s business model. Paytm’s revenue stream also benefits from UPI incentives and higher payment processing margins from RuPay credit card transactions, overdrafts, and EMI aggregations.
Also Read: Paytm’s FY25E Revenue Likely to Decline by 24%: Challenges Ahead
While the company experienced regulatory setbacks and a decline in revenue during the previous quarter, it remains focused on its recovery trajectory. Paytm plans to streamline operations, cut costs, and prune non-core businesses.
The company anticipates a strong sales and margin rebound in fiscal 2026, driven by a robust user acquisition funnel and a steady share in the Indian digital payments landscape. Regulatory hurdles are expected to ease, with a new license for payments, leading to margin expansion. Initiatives in loans, insurance, and advertising are also poised to catalyze sales, reinforcing Paytm’s position in the fintech market.
Paytm’s strategic pivot towards UPI and cost-cutting measures demonstrate a proactive approach to navigating the current financial climate. While the company faces challenges, its focus on core business segments and strategic investments in growth areas positions it for a potential rebound in the future.
Read More on: Job cuts, focus on UPI: How Paytm is looking to pivot out of the crisis
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