How India’s leading IT companies Infosys and TCS are fighting churn

Attrition rates have been high across IT companies in recent quarters as demand for tech talent with digital skills has continued to outstrip supply as labor costs rise. With the increase in demand, attracting talent, training and retention have taken on paramount importance.

India’s leading IT companies increased their hiring, with Tata Consultancy Services (TCS) and Infosys hiring record numbers in FY22.

TCS experienced the highest employee additions ever in a quarter. In the fourth quarter, TCS added 35,209 employees on a net basis, the highest net addition ever in a quarter. Membership 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.

“Companies have taken various measures such as offering competitive compensation, improving employee engagement, employee well-being, reskilling and providing better opportunities to acquire and retain talent. Although attrition has remained high, companies are seeing some moderation in attrition on an annualized quarterly basis,” national brokerage and research firm Motilal Oswal said in a note.

With moderating attrition, improving pricing, less reliance on contractors, more recent additions and strong operating leverage, both companies should be able to maintain margins at the future.

“Given the capabilities of TCS and INFO, both companies are well positioned to weather a weakening macroeconomic environment. Margin is expected to remain flat, despite headwinds, due to moderating attrition, a more recent 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 helped by a 300-350 bps impact from INR depreciation against USD) during FY23.

In announcing its FY22 fourth quarter results, India’s leading IT company TCS said attrition from its IT departments continued to rise in the January-March 2022 period, reaching 17 .4%. However, the gradual attrition has “moderated”. While IT giant Infosys’ voluntary attrition percentage for LTM – IT Services increased to 27.7% in Q4FY22 from 25.5% in the prior quarter and 10.9% in the prior year quarter.

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About Dianne Stinson

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