According to a report by Financial Express, One97 Communications, the parent company of Paytm, plans to significantly reduce employee costs this fiscal year. The company may cut 15-20 per cent of its workforce to save Rs 400-500 crore, potentially affecting 5,000-6,300 employees.

In FY23, the average cost per employee was Rs 7.87 lakh, with total employee costs for FY24 increasing by 34 per cent year-on-year to Rs 3,124 crore, raising the average cost per employee to Rs 10.6 lakh. The reduction process has reportedly begun, with over 1,000 employees terminated in December to streamline operations and reduce costs.

Despite investments in technology, merchant sales, and financial services, One97 Communications aims to optimize its cost structure by leveraging artificial intelligence and focusing on core business areas. High-performing employees are expected to be promoted to leadership roles as part of this strategy.

Financially, the company has faced challenges, recording 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 same period. These difficulties began when the Reserve Bank of India (RBI) imposed restrictions on Paytm Payments Bank on January 31, preventing it from accepting new deposits and conducting credit transactions, significantly impacting 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. He mentioned that the company faced disruptions in Q4, resulting in a one-time loss of Rs 227 crore due to impairment from investments in Paytm Payments Bank Limited (PPBL). Sharma projected revenue to slip to Rs 1,500 crore to Rs 1,600 crore in the first quarter of FY25, with improvements expected from the second quarter as certain products are reinstated and operating metrics show steady growth.

Despite these challenges, Paytm’s management remains optimistic about achieving profitability soon. The company plans to hire more sales executives to strengthen its merchant ecosystem and improve governance by appointing subject matter experts as advisors or independent directors. Brokerage firm Motilal Oswal Financial Services has adjusted its earnings estimates, expecting 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.

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Source: Business Today