A second round of layoffs has been announced by Bengaluru-based Buy Now Pay Later (BNPL) business Simpl. The layoffs would affect about fifty people in several areas, including mid-senior management. This move highlights the difficulties the company is facing as it deals with high cash burn and decreasing new user acquisitions. It was made less than a month after a major reduction.
Credits: Business Standard
Layoffs and Resignations: A Deep Dive
About fifty people have been impacted by the most recent wave of layoffs, while the corporation has stated that the real figure is closer to thirty. This downsizing comes after 160 people were let go, most of them from high-paying positions like product development and engineering. These layoffs are a component of a larger plan to boost productivity and lead the business toward profitability.
Four Vice Presidents, Anoop Saurabh, Vatsal Jain, Ramkumar Narayanan, and Ashwini Ravindranath, have tendered their resignations, adding to the turmoil. The company’s executive structure has undergone substantial changes as a result of these well-publicized departures.
The Economic Context: Elevated Cash Burn and Slowing Growth
Simpl’s need to control a high monthly cash burn rate in the face of a slowdown in new user acquisitions is what motivated the company to reduce its workforce. The company’s net loss increased by 147% to ₹356.6 crore in FY23, even though operating revenue increased by 176% to ₹87.3 crore. Tight cost-cutting efforts are a result of this financial burden.
According to a person with knowledge of the situation, the founder called department heads on June 6 to advise them of the decision, at which point the layoff process got underway. For a two-month notice period, the impacted employees will receive a fixed wage in addition to supplemental compensation equal to 15 days of income for every year of service.
The Strategic Shift: From Expansion to Consolidation
Simpl’s challenges can be traced back to post-pandemic overexpansion. The company had aggressively expanded its checkout network business into the direct-to-consumer (D2C) segment, but this segment has remained stagnant since last year. This overexpansion has led to overstaffing, which the company is now addressing through layoffs.
“This is technically their third round of layoffs, as a group of employees were already let go at the end of March and the beginning of April after performance reviews, followed by over 160 employees in May,” a mid-senior executive commented.
Industry-Wide Pressures and Regulatory Challenges
Simpl’s problems are not unique; they are a reflection of larger difficulties in the BNPL sector, particularly in India. The Reserve Bank of India (RBI) has tightened controls on BNPL enterprises and is closely monitoring the sector. It has become difficult for startups to function and grow as a result of these rules.
ZestMoney, another BNPL venture, is a prime illustration of this pressure; it stopped down operations in December 2023 due to regulatory uncertainty and an unsuccessful attempt to turn the company around under new management. The closing of ZestMoney led to over 150 employees being laid off.
The Path Forward: Leaner Operations and Focused Growth
Simpl’s leadership maintains that these layoffs are part of routine business reviews aimed at improving efficiencies and driving sustainable growth. “As an organisation, we routinely review our businesses to improve efficiencies and become more agile and leaner to drive consistent growth,” said Ashish Kulshrestha, Head of Communications at Simpl.
The company’s strategy moving forward involves focusing on core business areas and optimizing operations. Simpl, founded in 2016, currently has around 26,000 merchants on its platform, including prominent names like Zomato, Makemytrip, Big Basket, 1MG, and Crocs. Simpl approaches BNPL as a checkout option, providing partner merchants the capability to extend a pay-later mode to customers. Additionally, the company offers a product called pay-in-3, allowing customers to pay their bills in three tranches.
Conclusion: Navigating a Challenging Landscape
The recent rounds of layoffs and resignations at Simpl demonstrate the unrest that exists in India’s BNPL industry. The company’s goal is to come out of these obstacles as a leaner, more productive business ready for long-term expansion. The company’s future course will be largely determined by its capacity to adjust to market conditions and regulatory constraints. Simpl’s strategic focus on operational efficiency and core business capabilities may open the door for a more secure and lucrative future, despite the difficult path ahead.
