Paytm Lays Off Over 1,000 Employees In Major Cost-Cutting Move; Details Inside

One 97 Communications, the parent company of Paytm, has reportedly laid off over 1,000 employees across multiple units, marking one of the most substantial job cuts by an Indian tech firm this year. This strategic decision comes as Paytm aims to realign its various businesses and cut costs amid changing regulatory dynamics.

According to insiders, the layoffs, which have been unfolding over the past few months, are expected to impact at least 10% of Paytm's overall workforce. The move follows Paytm's recent exit from small-ticket consumer lending and the 'buy now pay later' segment, a response to regulatory constraints imposed by the Reserve Bank of India on unsecured loans.

The layoffs at Paytm add to a broader trend of job cuts in the startup ecosystem. Data from Longhouse Consulting reveals that new economy companies have already let go of more than 28,000 employees in the first three quarters of 2023, reflecting the challenging landscape for loss-making enterprises as funding opportunities dwindle.

A significant portion of the job losses at Paytm is expected to be concentrated in its lending business, which underwent substantial expansion in the past year. Paytm Postpaid, the company's lending arm, disbursed loans under Rs 50,000. However, with regulatory shifts, Paytm is now shifting its focus toward wealth management and insurance broking.

Paytm's stock experienced a 20% drop on December 7, a day after the company announced its withdrawal from Paytm Postpaid and signalled a cautious approach to small-ticket loans. A Paytm spokesperson, while disputing the exact number of job cuts, acknowledged the layoffs, emphasizing the company's goal to save 10-15% of staff costs throughout the fiscal year.

The spokesperson highlighted the company's commitment to leveraging artificial intelligence-led automation to replace most of the impacted roles. The core business of payment, the spokesperson added, may see a manpower increase of 15,000 in the coming year as Paytm focuses on transforming operations with AI-powered automation to enhance efficiency.

Paytm is actively working on new products within its wealth management vertical and is establishing a robust insurance distribution business. While the layoffs affect various departments, the company is concurrently hiring fresh talent for its new business developments, especially in broking (Paytm Money) and the insurance distribution marketplace.

Bhavesh Gupta, recently appointed as the President of Paytm, is spearheading efforts to diversify revenue sources. The company is placing a strong emphasis on Paytm Money, recognizing the potential of wealth management as a lucrative business segment. Currently, around 83% of Paytm's overall revenue is derived from payments and financial services, primarily credit.

Responding to the performance-oriented layoffs, a company spokesperson clarified that, despite the focus on cost reduction, Paytm maintains a healthy financial position, with approximately Rs 8,754 crore in cash balances as of the end of September.

The company aims to achieve its targeted 10-15% reduction in employee costs by the end of the fiscal year. The shift in focus toward automation, new business avenues, and cost-effective measures reflects Paytm's response to evolving regulatory and market conditions.