Paytm parent One97 Communications, which is looking to reduce employee costs, may have to cut around 15-20% of its workforce this fiscal.
In FY23, the company had an average of 32,798 on-roll employees. Of these, 29,503 were active on-roll. Its average cost per employee was Rs 7.87 lakh. In FY24, the total cost has gone up by 34% year-on-year (y-o-y) to Rs 3,124 crore, and the average employee cost is estimated to have risen to Rs 10.6 lakh.
With the company embarking on an employee cost saving plan of Rs 400-500 crore due to burgeoning losses, the number of employees that could be reduced is likely to be 5,000-6,300. The process of reducing headcount is already on. In December, the company reportedly terminated over 1,000 employees from various departments to streamline businesses and reduce costs. The number of employees in FY24 has not been declared.
“In recent years, our employee costs have increased due to investments, primarily in technology, merchant sales, and financial services,” the company said in its investor presentation. “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,” it said.
The company believes that optimising cost structure, leveraging artificial intelligence capabilities, and focusing on core business will help achieve significant cost efficiencies. Nevertheless, it will continue to reward “high-performing talent” by promoting them into leadership roles and bring in new senior executives who will contribute to growth.
The company’s net loss widened to Rs 550 crore in the January-March quarter from Rs 168 crore a year ago due to a fall in its revenue. Revenue from operations fell 3% y-o-y 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) prohibited Paytm Payments Bank from accepting additional deposits and top-ups, and from 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 said the company expects to turn profitable soon. It plans to hire more sales executives in furtherance of its focus on the merchant ecosystem. It is also looking to enhance the governance structure across Paytm and its group entities by appointing subject matter experts as advisors or independent directors, with greater regulatory engagement and higher focus on compliance.
Brokerage firm Motilal Oswal Financial Services has cut its earnings estimates and projects 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.