Tech Mahindra's attrition rate to ease further, says CP Gurnani
Premium- Tech Mahindra's management said that it aims to hire around 10,000 freshers in FY23, similar to the quantum of hiring it did in FY22.
IT investors have been concerned about the elevated attrition levels that listed Indian technology firms are witnessing amid robust demand. Large cap IT companies Infosys Ltd, Tata Consultancy Services Ltd and HCL Technologies Ltd saw a futher increase in attrition rate in Q1FY23.
Tech Mahindra Ltd was among the exceptions to this trend. The company saw attrition rate, measured on the last 12 months basis come down by 200 basis points (bps) sequentially to 22% in Q1FY23. One basis point is 0.01%. Note that Wipro Ltd also saw its LTM attrition decline in Q1 but the moderation of 50bps was lower than that of Tech Mahindra.
Even though Tech Mahindra's attrition rate is still higher than in Q1FY22 which was at 17%, the company's management is hopeful the situation would improve going ahead, as it continues to hire more freshers.
Speaking to the media, post its June quarter earnings, CEO & MD CP Gurnani said that he expects the company's attrition rate to ease further in the next two-three quarters from now.
Hiring that Tech Mahindra did in tier-II cities of Nagpur and Coimbatore, among others, is now coming upto stream, so attrition in those cities will be relatively lesser, he said "So, delta overall impact will be lesser. The shock stage of attrition running at 23-24% is coming down," Gurnani added.
The company added 6,862 new employees in Q1, with that, its total headcount stood at 158,035. The company's management said that it aims to hire around 10,000 freshers in FY23, similar to the quantum of hiring it did in FY22.
Meanwhile, Tech Mahindra's Q1 earnings were a mixed bag. The company reported a sequential constant currency revenue growth of 3.5%, ahead of consensus estimate of 2.8%. However, Ebit margin at 11%, fell 220 basis points sequentially and were slightly below consensus estimate of 11.4%. Ebit is short for earnings before interest and tax. Further, the total contract value of the company's new deals stood at $802 million, down sequentially and annually.
However, Gurnani remains upbeat on the sector's overall demand environment and added that the company's deal pipeline is strong. Further, the company strives to work on its profitability metric. "We have identified areas where we would focus and in the next few quarters we are determined to work and deliver better profitability," he said.
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"We believe TechM will be the key beneficiary of the medium-term themes such as software defined network (SDN) and telecom IT modernization. However, lower deal wins, utilisation and wage inflation would continue exerting margin pressure going ahead," Mitul Shah, head of research at Reliance Securities said in his first cut earnings analysis note.
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