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Attrition rates have been high across IT companies through the last few quarters as demand for technology talent with digital skills continued to outstrip supply with increasing labor costs. With rising demand, attracting talent, training, and retention gained paramount importance.

India's top Indian IT companies scaled up hiring as both Tata Consultancy Services (TCS) and Infosys hired in record numbers in FY22. 

TCS witnessed highest ever employee additions in a quarter. In Q4, TCS added 35,209 employees on a net basis, the highest ever net addition in a quarter. Employee headcount stood at 592,195, a net addition of 103,546 during the year, another all-time high. Similarly, Infosys added nearly 22,000 employees during the fourth quarter.

“The companies have taken various measures such as offering competitive compensation, improving employee engagement, employee wellbeing, reskilling, and providing better opportunities to acquire and retain talent. Though attrition remained elevated, companies are seeing some moderation in attrition on a quarterly annualized basis," said domestic brokerage and research firm Motilal Oswal in a note.

With attrition moderating, an improvement in pricing, lower dependency on sub-contractors, higher fresher additions, and strong operating leverage, both companies should be able to sustain margins going forward.

“Given the capabilities of TCS and INFO, both companies are in good position to withstand a weakening macro environment. Margin should remain stable, despite the headwinds, on account of moderation in attrition, strong fresher addition, and a positive pricing environment," the brokerage said.

Motilal Oswal remains positive on the IT Services sector on reasonable valuations and good double-digit earnings growth (partially aided by a 300-350 bp impact from the depreciation in the INR v/s the USD) in FY23.

While announcing its Q4FY22 earnings, India's top IT firm TCS said that its IT services attrition continued to climb during the January-March 2022 period, reaching 17.4%. However, incremental attrition has ‘moderated’. Whereas, IT giant Infosys' Voluntary Attrition % for LTM - IT Services rose to 27.7% in Q4FY22 as compared to 25.5% in the previous quarter and 10.9% in the year-ago quarter.

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