IT firms likely to record muted hiring in Q4. What to expect from TCS, Infosys results? | Mint
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Business News/ Companies / News/  IT firms likely to record muted hiring in Q4. What to expect from TCS, Infosys results?
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IT firms likely to record muted hiring in Q4. What to expect from TCS, Infosys results?

In its IT sector preview report, B&K said that, almost all companies have mentioned that they have either paused the fresher hiring or getting cautious towards the same.

In the IT sector, TCS and Infosys will be the first to announce their Q4 earnings. Read here Premium
In the IT sector, TCS and Infosys will be the first to announce their Q4 earnings. Read here

Major IT companies have lined up to present their fourth quarter earnings for fiscal year FY23, starting with TCS and Infosys later this week. Among many factors, the hiring and attrition rate of these tech biggies will be keenly watched. In Q4, hiring is likely to be muted as IT firms have stated that they are pausing fresh hiring or taking caution towards optimising costs, either of the two.

In its IT sector preview report, B&K said that, almost all companies have mentioned that they have either paused the fresher hiring or getting cautious towards the same.

It added, the companies are now focusing on optimisation of the already hired freshers.

For FY23, B&K expects net addition of over 40,000 in TCS versus an addition of 1 lakh in FY22 and 40,000 in FY21. Net addition in Infosys is seen at over 50,000 in the overall fiscal compared to the addition of 85,000 in FY22 and 21,000 in FY21. Meanwhile, HCL Tech is likely to record a net addition of more than 45,000 employees in overall FY23 versus 23,000 in FY22 and 10,000 in FY21.

Also, Wipro is seen to add over 38,000 employees in FY23 on a net basis, as against 19,000 addition in FY22 and 8,750 in FY21. Lastly, Tech Mahindra is factored to make net addition of 15,000 in FY23 versus 10,000 in FY22 and less than 1,000 in FY21.

From the estimates of B&K, it can be seen that HCL Tech and Wipro are likely to make the highest net addition in FY23 on a year-on-year basis, while Infosys and TCS may see a significant drop in net addition YoY.

Furthermore, travel expenses are likely to not reach per pre-pandemic level, and facility expense might surge slightly ahead. These factors may aid IT companies' margins.

B&K's report explained that facility and travel expenses are expected to increase as companies have increased the adoption of a hybrid work model. For example, TCS has mandated its employees to be in the office for 3 days a week.

With the economy opening up, few clients are more dependent on onshore, hence, leading to an increase in travel costs --- but these costs won't go up to the pre-Covid levels --- and that will aid in margin expansion, as per B&K's report.

Tata Group-backed TCS is the first to announce Q4 results on April 12th in the technology space. Rival Infosys will follow the same on April 13th. Later, in the month, HCL Tech will present financial results on April 20th, followed by Tech Mahindra and Wipro on April 27th.

TCS results:

In Q3FY23, TCS reduced its workforce by 2,197 employees to 613,974 --- compared to the headcount of 616,171 employees in the September 2022 quarter.

Also, the company's IT services attrition rate dipped to 21.3% on an LTM basis in Q3FY23 which is lower than 21.5% in Q2FY23. TCS that time said, the attrition rate "is expected to fall further in the coming quarters."

In regards to Q4 of FY23, B&K expects medium and long-term outlooks to be stable as the company expects the upgradation of secular multi-year technology to continue.

B&K cited TCS management has indicated that Q4FY23 will be impacted by the delay in decision-making in the US and Europe. Also, the company expects moderation in revenue in FY24.

Infosys results:

During December 2022 quarter, Infosys' net addition of employees slowed down drastically on a quarter-on-quarter basis.

The total headcount in Q3FY23 of the company stood at 3,46,845 --- an addition of 1,627 employees compared to 3,45,218 employees posted in Q2 of FY23.

Additionally, Infosys' attrition rate of IT services stood at 24.3% in the December 2022 quarter --- down by a huge 2.8% from 27.1% in September 2022 quarter. During the June 2022 quarter, the attrition rate was 28.4%.

In Q4FY23, B&K's note said, “despite having favourable levers towards margins such as a decrease in sub-con costs (as % of revenue) and decrease in attrition, pricing, and pyramid optimisation among others, and the headwinds such as flattish growth, increase in travel costs (not to pre-Covid levels), investment in sales side is expected to be more pronounced this time, thereby leading to flattish growth in margin on QoQ basis."

 

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Published: 10 Apr 2023, 07:22 PM IST
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