Paytm CEO hints at layoffs, expects near-term financial impact due to disruptions in Q4

Fintech company Paytm will focus on its core businesses and improve cost efficiencies to create a leaner organization, CEO Vijay Shekhar Sharma said in a letter to shareholders on May 22, hinting at the likelihood of layoffs in the future.

Sharma said the employee costs of the firm have risen significantly over the years because of their investments in tech and financial services. While investments will continue, the firm will also take steps to cut employee costs, Sharma said, adding that these measures could save up to Rs 400-500 crore annually.

“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. We expect annualized people cost savings of Rs 400 – Rs 500 crore.”

Also read: Paytm writes off Rs 227 crore investment in Payments Bank

Sharma also pointed out that the company is using artificial intelligence to improve its customer care and expects opening up of new source of revenue generation and cost savings.

“We anticipate tangible results from these initiatives in the coming quarters, further bolstering our competitive advantage in the market,” the founder said.

In addition, the company is undertaking various steps to solidify its governance framework with the appointment of experts as advisors and independent directors. “I am ensuring that we have greater regulatory
engagement and have higher focus on compliance, in letter and in spirit.”

Moreover, Sharma said the company expects near-term financial impact to revenue and profitability following the “disruptions in the last quarter, which includes impact due to pausing of PPBL wallet”.

Paytm Q4 Results: Net loss widens to Rs 550 crore, revenue down 2.9% YoY to Rs 2,267.10 cr

“We had also paused a few other payments and loan products to our customers during the last quarter, and I am happy to share that many such products have been restarted or in the process of starting soon.”

The central bank, on January 31, 2024, had asked PPBL to stop offering banking services effective March 15, 2024, citing concerns of non-compliance with regulatory guidelines.

Since then, Paytm, which powered most of its services via the associate entity, has been aggressively working to communicate with merchants and stakeholders to avoid misinterpretations regarding the impact of the directions, besides forging new partnerships with banks for UPI infrastructure and QR codes, previously powered by PPBL.

Also read: Paytm CBOs Bipin Kaul, Ajay Singh step down amid ongoing restructuring

However, the company believes the full impact of RBI’s actions are likely be felt in the first quarter results of FY25 as it warned that revenue during the 3-month period could slip to Rs 1,500 crore to Rs 1,600 crore. The fintech firm expects improvements from the second quarter of FY25, “based on restarting certain paused products and achieving steady growth in operating metrics”.

One 97 Communications, which runs Paytm, on May 22 reported net loss of Rs 550 crore in Q4FY24, a 3.2X jump compared to Q4FY23, as its margins took a hit post RBI’s crippling ban on its associate company, Paytm Payments Bank (PPBL) on January 31.

Also read: Paytm’s market share in bill payments drops by 3 percentage points in 2 months

The revenue from operations was down by 2.9 percent year on year (YoY) at Rs 2,267 crore, against Rs 2,334 crore in the same period last year.

Compared to the previous quarter, the company’s revenue was down by 20 percent.

Meanwhile, Paytm said it has written off Rs 227.1 crore worth of investment in PPBL, and accounted for it as impairment losses.

“The value of the Company’s investment in PPBL is impaired and, accordingly, has recorded an impairment provision of Rs 227 crore, representing the carrying value of its investment in PPBL and disclosed the same as Impairment of investment in associate,” it financial statement mentions.

The company, which holds 49 percent in PPBL, said there is an “ongoing uncertainty” associated with the business operations of PPBL since the restrictions on January 31, 2024, which led to the decision.