TCS' employees count goes down. What the management says

Apart from missing estimates in terms of profitability, IT giant Tata Consultancy Services (TCS) surprisingly also reduced its employees' headcount for the third quarter ending December 31, 2022 (Q3FY23) period. TCS total workforce stood at 613,974 employees -- a reduction of 2,197 employees sequentially. TCS Chief Human Resources Officer, Milind Lakkad in the press conference indicated that in Q4 hiring may be muted or plus by a couple of thousands.

As per the regulatory filing, the Tata Group-backed company's workforce stood at 613,974 by end of the December 2022 quarter. This would be a net reduction of 2,197 employees compared to a headcount of 616,171 employees in the September 2022 quarter.

During the September 2022 quarter, TCS made the second highest hiring among its peers after Infosys with a net addition of 9,840 employees compared to the June 2022 quarter where headcount stood at 606,331 employees.

In the press conference, Lakkad said, "We are aware that we made a significant investment in hiring fresh talents last year as well as the last two quarters of this year. And also, significant investment in the talent development of these people to make them productive now. And that investment is now paying off. But that does not indicate anything on the demand side."

During the Q&A round in the press conference, Lakkad stated that the company has added close to 40,000 trainees and fresh campers so far and he thinks that number will remain. However, he also signalled that TCS may add a few thousand here and there going forward in terms of headcount.

Lakkad revealed that the company has been invested in hiring fresh talent and training them for good 6-9 months and that investment is paying off. He said the company will continue to optimize it going forward as well.

Further, Samir Seksaria, Chief Financial Officer also explained that on the margins, the company started the current year at 23.4% after giving a full cycle of increments. And then the company made good incremental progress during the last two quarters. They are ending Q3 at 24.5% and are very focused on exiting the year at the same margin that they exited last year at 25%.

In regards to wages, Sameer pointed out that the supply-side challenges are abating. He added, "It is definitely helping out because more so on the elevated expectations of salaries and the backfilling retention expenses that having come down is definitely helping on the margin side."

Also, Lakkad stated that the company hasn't stopped lateral hiring at all. He added that the company is adding laterals as the business demand every quarter.

While briefing about the Q3 earnings, CEO and MD Rajesh Gopinathan said, "The growth has been led by our significant investment in talent development through the year. As you know, we have been hiring significantly in the last year, and that has been the bases of our growth. We have been able to leverage that investment and our net headcount addition is about 57,000 year-on-year basis bringing our total associate count to slightly under 6.14 lakh. Our attrition as we had called out earlier has peaked and I am happy to report that on an LTM basis now we have started taking down slightly lower than last quarter at 21.3%"

Further, Gopinathan said, "we are quite confident of this trend continuing and more significant reductions in the quarters ahead. Our focus on innovation continues to be very strong."

During the quarter, the company's IT services attrition dropped marginally to 21.3% on an LTM basis which is lower than 21.5% in Q2FY23. TCS said, the attrition rate "is expected to fall further in the coming quarters."

In the audit report, Lakkad said, "Our focus over the last few quarters on bringing in fresh talent at scale, training them on new technologies, and making them productive is paying off."

The Chief HR also said, "Lakkad added, "We are particularly proud of having 125,000 TCSers at middle and senior levels who have been with the company for more than 10 years on average. They have been central to the successful cultural integration of all the fresh talent we have onboarded in the last couple of years, and their contextual knowledge and customer-centricity have been key to the high level of customer satisfaction that TCS is known for."

For the fourth quarter, Lakkad said the company may go for a few thousand plus in terms of headcount or may be muted.

In December 2022 quarter, TCS garnered a consolidated net profit of ₹10,846 crore attributable to shareholders rising by 11.02% YoY and 3.98% QoQ. Consolidated revenue from operations came in at ₹58,229 crore increasing by 19.11% YoY and 5.28% QoQ. In terms of constant currency, the revenue growth was at 13.5% YoY driven by business in North America and the UK.