One97 Communications, the parent company of Paytm, is poised to slash its workforce by 15-20% for the fiscal year 2024-25 following widened losses for the digital firm in the March quarter, as reported by Financial Express.

In response to the escalating losses, Paytm CEO Vijay Shekhar Sharma hinted at reducing operational costs, emphasizing the utilization of artificial intelligence (AI) to optimize the organizational structure. Sharma stated in an exchange filing on May 22, "Led by capabilities of AI and focusing on core business, we are also working on significant cost efficiencies including leaner organisation structure."

During the financial year 2023, the company maintained an average of 32,798 on-roll employees, with 29,503 being active on-roll, and the average cost per employee amounted to Rs 7.87 lakh. However, in FY24, the total cost surged by 34% year-on-year to Rs 3,124 crore, with the average employee cost estimated to have risen to Rs 10.6 lakh.

In a bid to address the mounting losses, the company aims to save Rs 400–500 crore in employee costs, potentially resulting in a reduction of 5,000-6,300 employees. The downsizing process is already in progress, with reports indicating the termination of over 1,000 employees in December to streamline operations and curtail costs.

Acknowledging the escalating employee costs attributed to investments primarily in technology, merchant sales, and financial services, Paytm highlighted its strategy to optimize the cost structure, leverage AI capabilities, and refocus on core business operations to achieve cost efficiencies.

The company outlined plans to create a leaner organizational structure and divest from non-core businesses, aligning recent changes with pre-approved succession plans discussed with the Board in previous financial years. Paytm also expressed commitment to rewarding high-performing talent by promoting them into leadership roles and recruiting new senior executives to contribute to future growth initiatives.

Despite the widened net loss of Rs 550 crore in Q4 FY24 from Rs 168 crore a year ago, Paytm remains optimistic about achieving profitability soon, intending to bolster its focus on the merchant ecosystem by recruiting additional sales executives.

The company's post-earnings analyst call revealed plans to achieve EBITDA breakeven in FY26, with brokerage firm Motilal Oswal Financial Services revising its earnings estimates accordingly.