Paytm’s parent company, One97 Communications, is reportedly planning substantial layoffs, aiming to cut 5,000-6,300 jobs to manage costs better. This move comes as the company grapples with financial and regulatory challenges that have significantly impacted its revenue and profitability.
Scope of Layoffs
The layoffs, accounting for 15-20% of the workforce, could result in a reduction of 5,000-6,300 employees. This step is part of One97 Communications’ broader strategy to reduce employee costs by ₹400-500 crore in the current fiscal year. In FY23, the company had an average of 32,798 employees on payroll, with 29,503 actively working. The total employee costs rose by 34% year-on-year to ₹3,124 crore in FY24, making workforce reduction a critical measure for cost control.
Financial Struggles and Regulatory Challenges
Paytm reported a net loss of ₹550 crore for the January-March quarter, a significant increase from the ₹168 crore loss in the previous year. The company’s revenue from operations fell by 3% year-on-year to ₹2,267 crore during the same period. This downturn is largely attributed to the Reserve Bank of India’s (RBI) regulatory actions, which imposed restrictions on Paytm Payments Bank, adversely affecting the company’s financial health.
Initial Layoff Phase
The process of workforce reduction has already commenced. Over 1,000 employees were terminated in December as part of the company’s efforts to streamline operations and cut costs. This initial phase indicates the company’s urgency in addressing its financial challenges and reducing overheads.
Vijay Shekhar Sharma’s Response
Paytm’s founder and CEO, Vijay Shekhar Sharma, acknowledged the significant impact of the RBI’s regulatory actions on the company’s revenue and profitability. Sharma emphasized that the company has learned valuable lessons from these challenges and is committed to becoming more resilient. He assured stakeholders that Paytm is dedicated to full compliance with regulatory expectations in both letter and spirit.
Looking Forward
Despite the current financial and regulatory hurdles, Sharma expressed optimism about Paytm’s future. He highlighted the company’s resolve to improve operational efficiency and meet regulatory standards, which he believes will help the company navigate through its current crisis and emerge stronger.
Conclusion
The significant workforce reductions at Paytm underscore the severe financial and regulatory challenges the company is facing. By cutting costs and streamlining operations, Paytm aims to stabilize its financial situation and position itself for future growth. However, these layoffs highlight the broader impact of regulatory actions and market conditions on large tech companies.
