In a strategic move aimed at curbing expenses, Indian digital payments giant Paytm has proposed a significant reduction in the remuneration of its non-executive independent directors. The decision comes as the company faces widening losses and seeks to build a more sustainable and profitable business model. The proposed changes, announced ahead of Paytm’s annual general meeting scheduled for September 12, reflect the company’s efforts to streamline costs while navigating regulatory challenges.
Revised Compensation Structure
Paytm has proposed capping the annual compensation of its non-executive independent directors at ₹48 lakh, a steep reduction from the current figures that run into crores. Under the new framework, the remuneration will consist of a fixed component of ₹20 lakh, with the remaining amount being variable and linked to attendance at board meetings and the chairpersonship or membership in various board committees. This performance-linked structure aims to ensure better governance and align the interests of the board members with the company’s strategic goals.
The revised structure is based on benchmarking done by the company to stay competitive while reducing costs. Shareholder approval is required for the implementation of this new framework, which Paytm believes will help in achieving a long-term sustainable financial model.
Paytm’s Refocused Business Strategy
In a message to shareholders, Vijay Shekhar Sharma, Paytm’s founder and CEO, emphasized the company’s renewed focus on achieving a sustainable and profitable business model. He acknowledged the challenges faced over the past year, particularly the regulatory actions against Paytm Payments Bank Limited, which had a significant impact on the company.
Sharma reiterated Paytm’s commitment to financial inclusion and the digitization of the informal economy, which he believes will yield long-term benefits for both the company and the country. He also highlighted the role of artificial intelligence (AI) in driving cost savings and developing innovative products that cater to small merchants and micro-businesses.
Regulatory Challenges and Strategic Shifts
Paytm’s focus on cost-saving measures is partly driven by the regulatory crackdown on its payments banking unit. Earlier this year, the Reserve Bank of India (RBI) barred Paytm Payments Bank from onboarding new customers, citing lapses in its operations. This regulatory setback forced the company to reassess its business strategies and prioritize compliance and sustainability.
In response to these challenges, Sharma stated that the company is striving to become a consistently free cash-generating entity. He emphasized the importance of instilling a compliance-first approach across the organization, which he sees as crucial for the company’s long-term success.
Shareholder Decisions and Future Outlook
The upcoming annual general meeting will also see shareholders voting on the reappointment of Ravi Chandra Adusumalli, the founder and co-managing partner of Elevation Capital, to Paytm’s board of directors. Elevation Capital, an early investor in Paytm, has played a significant role in the company’s growth.
Paytm’s decision to reduce board members’ salaries is part of a broader strategy to cut costs and improve profitability. The company has previously announced plans to save between ₹4 billion and ₹5 billion in employee costs annually, which it expects will contribute to better financial performance in the coming quarters.
As Paytm navigates through these challenges, the company remains focused on leveraging technology and innovation to maintain its leadership in the digital payments space. With the proposed changes in board remuneration and a renewed focus on compliance and profitability, Paytm aims to build a stronger, more resilient business model for the future.
(With inputs from agencies)
