Paytm AI Plan Signals Potential Workforce Contraction
In response to the increasing integration of artificial intelligence (AI) across its operations, fintech giant Paytm has announced plans to continue bolstering its technological capabilities, aiming for a more streamlined workforce.
During an earnings call, Paytm’s CEO, Vijay Shekhar Sharma, revealed the company’s strategic shift towards leveraging machine and system capabilities on its platform, reducing the linear workforce demand.
Having recently implemented cutbacks in small-ticket loans, Paytm made headlines by terminating hundreds of jobs, citing the escalating use of AI-led automation as the primary reason.
Sources within the company revealed that Paytm, under Sharma’s leadership, has been actively incorporating AI to enhance efficiency, leading to the restructuring.
According to insiders, the ongoing appraisal cycle at Paytm has also affected employee layoffs, affecting those who failed to meet performance standards.
Madhur Deora, President and Group CFO of Paytm emphasized the company’s focus on operational efficiency in the last two quarters. Notably, there are no plans to expand the salesforce on the ground.
The integration of AI technology has already yielded significant efficiency improvements, reducing the need for manual processes in sales and operations.
While Paytm experienced moderate workforce expansion in Q2 due to the festive season, the company plans to remain tightly focused on controlling people costs, especially at the ground level, constituting a substantial portion of overall expenses.
In Q3 FY24, Paytm reported a 43% reduction in net losses, narrowing down to INR 222 crore from INR 392 crore in the same period the previous fiscal year.
Operating revenue saw a 38% surge to INR 2,850 crore, attributed to increased revenue from payment services to merchants.
Paytm’s management expressed optimism about sustaining positive momentum in future quarters, expecting the fintech’s Profit After Tax (PAT) to turn positive soon.
Brokerage firm CLSA upgraded One 97 Communications Ltd., Paytm’s parent company, to a “buy” rating from its previous “outperform” rating following the release of quarterly results. CLSA also raised the stock’s price target to INR 960 from INR 925.
Acknowledging Paytm’s diversification efforts, especially within lending, CLSA highlighted the company’s exploration of insurance broking as a potential new revenue stream, focusing on customized business insurance plans for merchants.
Despite recognizing growth potential in stock broking and Mutual Fund (MF) distribution, CLSA noted that these segments will contribute modestly to revenue if Paytm achieves significant success in derivatives trading. As a result, CLSA increased its adjusted EBITDA estimates by 3%.
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