TCS says hiring plans on track despite fears of global recession
Premium- TCS Q1 results: The IT major reported net headcount addition of 14,136 employees
A top executive of Tata Consultancy Services or TCS today said that the IT major is on track to hire 40,000 this year. “On the hiring perspective, 40,000 remains (the target) and we are on track," said Shamir Sectarian, chief financial officer. TCS employs over 6 lakh around the world, the bulk of them in India. During the quarter, there was a net headcount addition of 14,136 employees.
TCS today announced its first quarter results, missing analyst estimates for June-quarter profit by a wide margin, as India's top IT exporter battled cost challenges despite strong deal momentum. The IT major reported net income of ₹9480 crore, versus analyst expectations of ₹9,904 crore. Revenue rose 16% to ₹52,760 crore. Total expenses rose 20% to ₹40,771 crore from a year ago.
Operating margin for the quarter dropped to 23.1%, down from 25.5% year ago, mainly due to impact of annual salary increase, elevated cost of managing the talent churn and gradually normalizing travel expenses, the company said.
“It has been a challenging quarter from a cost management perspective. Our Q1 operating margin of 23.1% reflects the impact of our annual salary increase, the elevated cost of managing the talent churn and gradually normalizing travel expenses. However, our longer-term cost structures and relative competitiveness remain unchanged, and position us well to continue on our profitable growth trajectory," said CFO Samir Seksaria, Chief Financial Officer.
TCS and other IT companies face the prospect of shrinking IT budgets as corporations around the world gauge the potential for a recession. European companies in particular may pull back more than in the US, given the war in Ukraine as well as heightened inflation across the region, according to analysts.
Rajesh Gopinathan, Chief Executive Officer and Managing Director, in a press conference said that the IT major is yet to see a footprint of recession on demand for IT services but is watchful of the demand scenario. Europe accounts for about a third of TCS’s revenue.
On last 12-month basis, TCS reported attrition rate of 19.7% in IT services. CEO Gopinathan said that he expects the attrition to ease in the second half of this fiscal year. “The current attrition is a transient phenomena and it happened due to demand spike last year. It will ease as supply and demand balance out," he said.