Table of Contents
Introduction
In a recent analyst meet on December 6, Paytm announced its strategic decision to decelerate small-ticket Postpaid loans while eyeing expansion in high-ticket personal loans and merchant loans. Despite a projected 50 percent reduction in Postpaid loans, Paytm assured stakeholders that this move would have minimal impact on margins and revenue. The company emphasized that Postpaid loans, with the lowest take rate, would now constitute a smaller segment of its loan distribution business.
Portfolio Recalibration
Attributing the recalibration to macro developments and regulatory guidance, Paytm stated that loans below ₹50,000, particularly the postpaid loan product, would now play a diminished role in its loan distribution. The company expressed its commitment to maintaining a healthy portfolio amidst these changes.
User Complaints and Platform Adjustments
Following the slowdown in postpaid loan products from December 1, users took to social media, expressing concerns about accounts being blocked despite timely repayments. Paytm responded, stating the temporary suspension was part of an upgrade for an enhanced user experience and improved security measures. Users were assured that services would resume soon.
Lending Partnerships and Regulatory Impact
Paytm collaborates with lending partners, including Aditya Birla Finance Limited (ABFL), Piramal Finance, Shriram Capital, and Tata Capital. The tightening of norms for unsecured consumer loans by the Reserve Bank of India (RBI) has led to some lending partners fully or partially suspending facilities on Paytm, impacting a quarter of the company’s revenues.
Workforce Reduction and Business Realignment
The parent company, One97 Communications, has reportedly terminated over 1,000 employees across various departments, accounting for more than 10 percent of Paytm’s workforce. This significant reduction aligns with Paytm’s broader efforts to streamline its businesses and cut costs. Recent developments, such as the withdrawal of small-ticket consumer lending and the cessation of “buy now pay later” lending, contribute to the restructuring.
Transition to Wealth Management
Paytm Postpaid, initially known for loans below ₹50,000, is shifting its focus towards wealth management. The company’s stock experienced a 20 percent decline on December 7 following the discontinuation of the Paytm Postpaid loan plan.
Industry Layoff Trends
Paytm’s layoffs are part of a broader trend in Indian startups, with over 28,000 job cuts reported by new companies in the past six months. This surge in layoff rates has been ongoing since 2022, impacting both startups and global tech giants. Other startups, including PhysicsWallah, Udaan, Third Wave Coffee, and Bizongo, have witnessed substantial layoffs. Flipkart and Byjus, among industry giants, have opted not to provide appraisals to top performers, signaling evolving dynamics within India’s tech ecosystem.
Conclusion
In the face of industry challenges and regulatory changes, Paytm’s strategic adjustments aim to ensure a resilient and adaptive business model. The company anticipates further cost-cutting measures as it navigates through shifts in operational structures and focuses on emerging opportunities, such as wealth management.