Industry
Odds are stacked against engineering Class of 2024
Summary
Infosys and Wipro have said they don’t plan to go to the campuses this year
MUMBAI : The Bengaluru twins Infosys Ltd and Wipro Ltd, which together hired 208,000 engineering graduates in the past three years, have said they don’t plan to go to the campuses this year. This implies that Tata Consultancy Services (TCS) Ltd and HCL Technologies Ltd, which hired 55% of the half a million engineering graduates between 1 April 2020 and 31 March 2023, will be the only ones among the top four IT companies to hire from colleges this year.
According to two analysts, this split in campus hiring strategies among the country’s Big Four IT services firms—a first in more than two decades—could serve as a pointer to investors looking to separate the leaders from the laggards.
The last time the country’s largest technology services companies shied away from campuses was during the global financial crisis of 2008.
Fifteen years later, only TCS and HCL have reaffirmed their intention to recruit from campuses, where placements start from October until April.
One possible explanation is the growth of these companies. During the first six months of the current fiscal year, TCS has clocked the fastest growth, with dollar revenue growing 5.7% compared to the year-ago period, followed by the 5.2% growth at HCL Technologies. Infosys has managed a 3.7% growth in the period, while Wipro has seen its revenue shrink by 1.5%.
TCS does not give revenue guidance, while Infosys expects to grow between 1 and 2.5% in constant currency terms this year. Constant currency does not include currency fluctuations. HCL Technologies expects to grow between 5 and 6%, while Wipro, which only gives quarterly guidance, expects revenue to fall up to 3.5% sequentially in the December quarter.
“Given our demand environment, we have people who we have offered but not onboarded yet. So right now, there will not be any campus, but we will look at it (later)," Wipro’s chief human resources officer Saurabh Govil said.
Govil’s comments underscore the challenges faced by some IT firms over the last year as fears of looming recession in the US and Europe have made homegrown IT firms delay the joining of graduates who were offered jobs in the past.
To be sure, this pause in hiring was in the works for some time. In April 2022, HCL and Wipro expected to hire 30,000 and 38,000 graduates, respectively, in 2022-23. Eventually, both HCL and Wipro missed their targets as they ended up hiring 26,734 and 22,000 graduates in 2022-23.
Infosys ended the year by hiring 51,000 as against its target of 50,000, while TCS recruited 44,000 graduates against the target of 40,000.
“The firms that have deals that are short term will not aim for campus this year since their focus will be to work with freshers that are already on the bench and improve their utilization," said Sunil Chemmankotil, CEO of staffing firm TeamLease Digital. “Also, if a larger number of deals is coming in from the US, the firms will not want to increase their base size of campus recruits in India."
This pause in graduate hiring also marks a return to the pre-pandemic era. Graduates hired as a percentage of the total workforce at Infosys and Wipro totalled 8% and 4.5%, respectively, in 2020-21, according to an analysis by Mint. Last year, engineering graduates comprised 15% and 8.6% of total workforce of Infosys and Wipro, respectively. For TCS, fresher hiring as a percentage of the total workforce has declined from 8.1% in 2020-21 to 7.1% last year, while at HCL Technologies, it inched up from 8.6% to 11.8%.
“The near-term demand environment remains challenging as the clients remain cautious regarding the evolving macroeconomic situation, especially in the US and Europe; and consequently, we expect muted revenue performance in the near term," said Yes Securities for Wipro.
Beyond serving as a growth indicator, graduates hiring for IT firms also serve as an important lever to improve their profitability. At an entry-level salary of ₹4-5 lakh, the firms have managed to have a respectable operating margin despite most of their offerings, including app development work and tech infrastructure management work, getting commoditized.
The attrition rates for all the companies are now almost the same. At the end of the September, TCS, Infosys, HCL, and Wipro’s attrition rates stood at 14.9%, 14.6%, 15.5%, and 14.2%, respectively.
On returning to campus, Infosys, like Wipro, has said it will decide on the road ahead depending on the demand outlook. “Last year, we hired about 50,000 freshers. In a way, we hired them ahead of the demand that we predicted to see...We’ll monitor this every quarter, looking at our future projections, and then decide on when to go back," Nilanjan Roy, chief financial officer of Infosys, said during the latest quarterly results.
