Paytm parent company One97 Communications is looking to significantly reduce its employee costs this fiscal year, according to a report by Financial Express. The company might cut around 15-20 per cent of its workforce, the report says. To manage its growing losses, One97 Communications aims to save Rs 400-500 crore by reducing its workforce by 5,000-6,300 employees.
In FY23, the company had an average of 32,798 employees on payroll, with 29,503 actively working, and an average cost per employee of Rs 7.87 lakh. For FY24, total employee costs increased by 34 per cent year-on-year to Rs 3,124 crore, raising the average cost per employee to Rs 10.6 lakh.
The report suggests that the reduction process has already begun, with over 1,000 employees terminated in December to streamline operations and cut costs. The exact number of employees for FY24 has not been disclosed yet.
In an investor presentation, the company noted that employee costs have risen due to investments in technology, merchant sales, and financial services. Moving forward, while continuing to invest in these areas, the company plans to cut costs in other departments. It aims to optimise its cost structure by leveraging artificial intelligence, focusing on core business areas, and rewarding high-performing employees by promoting them to leadership roles.
The company’s financial performance has been challenging, with a net loss of Rs 550 crore in the January-March quarter, compared to Rs 168 crore the previous year. Revenue from operations fell by 3 per cent year-on-year to Rs 2,267 crore in the March quarter. The company’s difficulties began on January 31, when the Reserve Bank of India (RBI) imposed restrictions on Paytm Payments Bank, preventing it from accepting new deposits and conducting credit transactions. These restrictions significantly impacted the company’s fourth-quarter results.
In a letter to shareholders, Paytm’s Vijay Shekhar Sharma acknowledged the near-term impact on revenue and profitability from the RBI’s regulatory actions earlier this year. He noted that the company faced disruptions in Q4, resulting in a one-time loss of Rs 227 crore as impairment from investments in Paytm Payments Bank Limited (PPBL). Sharma mentioned that the company expects the full impact of RBI’s actions to be felt in the first quarter results of FY25, with projected revenue during this period to slip to Rs 1,500 crore to Rs 1,600 crore. However, improvements are expected from the second quarter of FY25, as certain paused products are restarted and operating metrics show steady growth.
Despite these challenges, Paytm’s management remains optimistic about turning profitable soon. The company plans to hire more sales executives to strengthen its merchant ecosystem and improve governance across its entities by appointing subject matter experts as advisors or independent directors. Brokerage firm Motilal Oswal Financial Services has adjusted its earnings estimates and expects Paytm to achieve EBITDA breakeven by FY26, valuing the company based on 15x FY28E EBITDA and discounting it to FY26E at a rate of approximately 15 per cent.
