In a strategic move to optimize operations and address cost concerns, Paytm, the fintech giant under One97 Communications, has undertaken a series of measures aimed at achieving profitability by 2024. This includes significant headcount reduction, AI-led automation initiatives, and focus on core commercial areas. However, as the company navigates these changes, challenges such as regulatory changes, market dynamics and competitive pressures have emerged, affecting its stock performance.
Staff reductions and AI integration
Paytm’s recent decision to lay off hundreds of employees across various departments, constituting about 10 percent of its workforce, reflects a commitment to optimizing operations and reducing headcount by 10-15 percent in the current fiscal year. The move is rooted in performance concerns, and the company aims to balance cost optimization with continued growth.
To mitigate the impact on its workforce, Paytm is actively incorporating AI-led automation to replace certain roles, especially in areas affected by layoffs. The introduction of AI in operations aims to bring cost efficiency, improve operational efficiency and accelerate product development, reducing the timeline from weeks to days.
Strategic focus areas
While streamlining its workforce, Paytm also plans to strengthen its core payments business by hiring around 15,000 employees in the coming year. The company emphasizes its commitment to developing new products within its wealth management vertical and expanding its presence in the insurance distribution business, anticipating the creation of fresh job opportunities in these strategic areas.
Paytm founder and CEO Vijay Shekhar Sharma has outlined key changes for 2024, including separating the home screen from the Paytm app and Paytm Payments Bank to improve user experience. The company is aggressively expanding its AI capabilities, leveraging tools from Microsoft and Google to drive efficiency, reduce costs and deliver more than expected.
Stock performance and challenges
Paytm shares faced a tumultuous journey in 2022, experiencing a significant decline in market capitalization. However, the year 2023 saw a revival, with an 80% increase through October, driven by improvements in its bottom line, loan-disbursement business and overall growth trajectory. However, the Reserve Bank of India’s (RBI) tightening of norms for unsecured lending led to setbacks, prompting Paytm to scale back its postpaid loan.
Analysts and investors responded cautiously, with concerns about increased competition and a potential slowdown in growth. The decision to scale back small-ticket lending further weighed on the stock, prompting adjustments in brokers’ earnings estimates.
Road to profitability in 2024
Paytm CEO Vijay Shekhar Sharma remains optimistic about the company’s strategic direction. The focus on three key areas – strengthening online wealth management services (Paytm Money), tapping more merchants and doubling down on AI automation to cut staffing costs – reflects the company’s commitment to achieving operational profitability within a year.
However, analysts, including Goldman Sachs and Jefferies, extended the timeline for Paytm’s profitability to FY26, citing challenges and adjustments in revenue estimates. The market sentiment suggests caution, with technical analysts expressing concerns about stock performance unless certain key levels are breached.