Paytm hints at job cuts, to focus on AI; net loss widens to Rs 550 crore in Q4

Fintech company Paytm on Wednesday (May 22) hinted at job cuts in the future as it said it will rely on capabilities of Artificial intelligence (AI) technology and will focus on its core business.

The company said its loss in the fourth quarter of the financial year 2023-24 has widened to Rs 550 crore following the ban imposed by the Reserve Bank of India (RBI) on transactions related to its payments bank.

Leaner organisation

The company had posted a loss of Rs 167.5 crore in the same period a year ago, the company said in a regulatory filing.

“Our fourth quarter FY24 results were impacted by temporary disruption on account of UPI transition etc. and permanent disruption because of the PPBL embargo. Paytm reported a revenue of Rs 2,267 crore, a modest decline of 3 per cent Y-o-Y (year-on-year). Our contribution margin was 57 per cent including UPI incentives, and 51 per cent excluding UPI incentives,” Paytm said in a statement.

The Reserve Bank of India (RBI) barred Paytm Payments Bank Limited (PPBL) from accepting deposits, credit transactions or top-ups in any customer accounts, wallets, and FASTags, keeping in view the interest of customers, including merchants from March 15 onwards.

The company during the reported quarter wrote off Rs 227 crore investment for a 39 per cent stake in PPBL following future uncertainties associated with the bank's business operations including the uncertainty of any other regulatory development etc.

The company said it is pruning non-core businesses and added that it expected to reduce other employee costs that could save Rs 400 to Rs 500 crore annually.

“We are optimizing our cost structure, leveraging AI capabilities, and focusing on our core business will enable us to achieve significant cost efficiencies. This includes creating a leaner organisation structure and pruning non-core businesses. All recent changes are aligned with pre-approved succession plans discussed with the Board in previous financial years. We will continue to reward our high-performing talent by promoting them into leadership roles and welcome new senior executives who will contribute to the next wave of growth.

“In recent years, our employee costs have increased due to investments primarily in technology, merchant sales, and financial services. 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 ₹400 - ₹500 Cr,” Paytm said.

CEO says 'landmark year' for company

In a letter to the shareholders, Paytm founder and CEO Vijay Shekhar Sharma said “FY 2024 has been a landmark year”.

“FY 2024 has been a landmark year for the company as we achieved our first full year of EBITDA before ESOP profitability (since IPO) of ₹559 Cr. We demonstrated strong revenue momentum (up 25%) and continued our disciplined focus on profitability (EBITDA before ESOP margin up by 8%), in spite of regulatory action on our associate entity, Paytm Payment Bank Ltd. (PPBL), Sharma said.

“We expect near-term financial impact to our revenue and profitability, due to disruptions faced in our business in Q4. This includes steady state impact due to pausing of PPBL wallet. 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,” he added.

With AI technology, Sharma “promised to revolutionise customer and merchant care” and expected “tangible results” with their new initiatives.

“Led by capabilities of AI and focussing on core business, we are also working on significant cost efficiencies including leaner organization structure. Our ongoing experiments and learnings in AI promise to revolutionise customer and merchant care for the financial industry, while also unlocking new avenues for revenue generation and cost savings. We anticipate tangible results from these initiatives in the coming quarters, further bolstering our competitive advantage in the market.

“We are also taking various steps to strengthen the governance framework across our group entities (especially regulated entities) by appointing subject matter experts as advisors or independent directors, reviewing various processes etc. I am ensuring that we have greater regulatory engagement and have higher focus on compliance, in letter and in spirit,” he said in the letter.