In a recent move echoing the broader trend of layoffs in 2023, One 97 Communications, the parent company of Paytm, has decided to terminate over 1,000 employees across various departments as part of a comprehensive cost-cutting strategy.
This development comes in the wake of Vijay Shekhar Sharma, the CEO and founder of Paytm, sharing his New Year’s to-do list, which included seeking suggestions from users for enhancing the fintech app. One notable change mentioned by Sharma was the revamp of the Paytm app’s Home Screen. The update involves a clear separation of Paytm Payments Bank and other group entities’ offerings, providing the app with a cleaner and more user-friendly look.
Amidst these changes, Paytm is actively working on building an India-scale AI system. The system aims to assist various financial institutions in identifying potential risks and frauds while safeguarding them from emerging threats due to advancements in AI. Simultaneously, the company is streamlining its workforce by leveraging AI to eliminate repetitive tasks, urging employees to adapt to these technological shifts.
What Paytm has to say
A spokesperson from Paytm stated, “We are transforming our operations with AI-powered automation to drive efficiency, eliminating repetitive tasks and roles to drive efficiency across growth and costs, resulting in a slight reduction in our workforce in operations and marketing. We will be able to save 10-15% in employee costs as AI has delivered more than we expected it to. Additionally, we constantly evaluate cases of non-performance throughout the year,” as quoted by ANI.
This wave of job cuts at Paytm now positions it among the tech firms in India with one of the most substantial workforce reductions. However, the spokesperson emphasized that the core business of payment may witness a manpower increase by 15,000 in the coming year, highlighting Paytm’s dominance in the payments platform and a proven profitable business model.
Despite the recent layoffs, Paytm reported operating profitability in early 2023 and is now aiming for EBITDA-level profitability. In Q2FY24, Paytm’s revenue from operations saw a growth of 32% YoY to Rs2,519 Cr, and its EBITDA before ESOP cost improved to Rs153 Cr, compared to Rs84 Cr in Q1FY24 (excluding UPI incentives), according to ANI.
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There has been a broader trend of layoffs in the Indian startup ecosystem in 2023. Over 15,000 employees were laid off across approximately 100 startups earlier in the year, reflecting the challenges posed by a prolonged funding winter. Notable instances include Byju’s terminating 2,500 employees due to financial constraints, and Mohalla Tech Pvt Ltd, the company behind ShareChat and Moj, laying off around 20% of its workforce citing “external macro factors” impacting capital costs.
Furthermore, Paytm’s stock experienced a significant decline of around 20% on December 7, following the company’s announcement of discontinuing the Paytm Postpaid loan plan. The majority of job cuts at Paytm are expected to come from its lending business, which has seen significant growth in the past year. Paytm Postpaid, known for granting loans smaller than ₹50,000, is undergoing a transition towards wealth management.
In conclusion, the trend of layoffs extends beyond Paytm, encompassing newer tech startups as well. Dunzo, an on-demand delivery service, also announced a 30% reduction in its workforce, resulting in almost 300 layoffs. This broader scenario underscores the challenges faced by Indian startups in navigating external factors impacting capital availability and cost.
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