Paytm CEO expects near-term financial impact due to disruptions in Q4, hints at AI-driven job cuts

The Paytm CEO said the employee costs of the company have risen significantly over the years because of their investments in tech and financial services.

Vijay Shekhar Sharma said while investments will continue, the fintech firm will also take steps to cut employee costs.

He added that these measures could save up to Rs 400-500 crore annually.

“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 Rs 400 – Rs 500 crore,” Sharma said.

He also highlighted that Paytm is using artificial intelligence (AI) to improve its customer care and expects opening up of new sources of revenue generation and cost savings.

“We anticipate tangible results from these initiatives in the coming quarters, further bolstering our competitive advantage in the market,” Sharma said.

Paytm CEO said in the letter that the firm, in addition, is undertaking various steps to solidify its governance framework with the appointment of experts as advisors and independent directors.

"I am ensuring that we have greater regulatory engagement and have a higher focus on compliance, in letter and in spirit," he said.

Sharma said Paytm expects near-term financial impact to revenue and profitability following the “disruptions in the last quarter, which includes impact due to pausing of PPBL [Paytm Payments Bank] 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,” Sharma said.

Earlier on January 31 this year, the Reserve Bank of India (RBI) had asked PPBL to stop offering banking services effective March 15, 2024, citing concerns of non-compliance with regulatory guidelines.

Since the RBI's directives came, Paytm, which powered most of its services via the associate entity, has been aggressively working to communicate with merchants and stakeholders to avoid misinterpretations regarding the impact of the directions, besides forging new partnerships with banks for UPI infrastructure and QR codes, previously powered by PPBL, according to a Moneycontrol report.

However, Paytm believes the full impact of the central bank's actions are likely to be felt in the first quarter results of FY25 as it warned that revenue during the three-month period could slip to Rs 1,500 crore to Rs 1,600 crore.

Moreover, the fintech firm expects improvements from the second quarter of FY25, "based on restarting certain paused products and achieving steady growth in operating metrics", as per reports.

On May 22, Paytm's parent company, One 97 Communications, reported net loss of Rs 550 crore in Q4 of FY24, a 3.2X jump compared to Q4 of FY23, as its margins took a hit post RBI’s crippling ban on its associate company, PPBL in January.

The revenue from operations was down by 2.9 percent year-on-year (YoY) at Rs 2,267 crore, against Rs 2,334 crore in the same period last year, while Paytm's revenue was down by 20 percent, compared to the previous quarter, according to reports.

Meanwhile, the company said it has written off Rs 227.1 crore worth of investment in PPBL, and accounted for it as impairment losses, as reported by Moneycontrol.

"The value of the Company’s investment in PPBL is impaired and, accordingly, has recorded an impairment provision of Rs 227 crore, representing the carrying value of its investment in PPBL and disclosed the same as Impairment of investment in associate," according to the company's financial statement.

Paytm, which holds 49 percent in PPBL, mentioned in its financial statement that there is an "ongoing uncertainty" associated with the business operations of PPBL since the restrictions on January 31, which led to the decision.