India’s largest software exporters TCS, Infosys, Wipro, and HCL Tech together added 28,836 employees in the second quarter ended September, a significant drop of 45 percent compared to the 52,842 they added in the previous quarter.
A lower net addition number, in what is typically a strong hiring quarter for IT companies, signifies caution, analysts said, as the environment turns challenging in their major markets such as North America, the United Kingdom, and Europe.
TCS’s net addition during the quarter was 9,840 employees, down from 14,136 in Q1. For TCS, this was an eight-quarter low in terms of net addition.
During the company’s call with analysts, Chief Executive Officer Rajesh Gopinathan said that the company has been investing in headcount addition all of last year and that the company has taken a call to significantly expand employee onboarding, especially entry-level employees.
“We had hired close to 1,20,000 freshers last year and invested into that pool, given the longer-term visibility that we see on the demand. We will complete our employee model on an ongoing basis, looking at the demand. So that is a reasonable expectation, but our overall hiring model is predicated on a much longer cycle than short-term quarter-on-quarter adjustments,” he said.
Wipro’s net addition saw a steep fall in the July-Sept quarter, adding just 605 employees as opposed to the previous quarter’s 15,446. When asked about the decrease in net headcount addition, Wipro CEO Thierry Delaporte said they had an exceptional volume of hiring in Q1 due to the demand. He added that the company knew it would take a while before the talent is utilised, and in the second quarter as well, they followed their strategy of onboarding freshers. This, he said, will continue going forward too.
Infosys on the other hand saw its net addition halve — from 21,171 in Q1 to 10,032 in Q2. Speaking to Moneycontrol, CEO Salil Parekh said the company had hired over 80,000 college graduates last year and over 20,000 people last quarter, which was a strong addition cumulatively.
“We want to make sure that all of these employees are going through the training and getting deployed on these programs. Our view is we will continue to look at this situation keeping in mind our large deals, our growth, and what we see in the macro, and make decisions as the macro evolves depending on what the stimulants are,” he said.
HCL Tech was the outlier in this case, with its net addition going from 2,046 to 8,359 — a 4x increase sequentially. HCL CEO C Vijayakumar said in Q3 and Q4 of FY22, the company had a net addition of around 10,000; in Q1 FY23 it was down, as, at the time, the capacity they had built up was getting utilised. “Now we’ve reached a certain scale on that and we’ve again started hiring,” he said, on the company’s jump on net addition.
Fresher addition and attrition
However, even as net additions have dropped, fresher hiring continues across companies amid elevated attrition and freshers alleging that offers have been delayed for months.
TCS has said it has honoured all job offers it has made, and Wipro CEO Thierry Delaporte said all offers made will be honoured.
HCL Tech added 10,339 freshers during the quarter, the most it has ever added in a single quarter. Its target is to add about 30,000 freshers this fiscal. CEO Vijayakumar said that the September quarter is when the maximum number of freshers join, which is why the fresher addition number peaked.
TCS onboarded 20,000 freshers in Q2, and expects to add 10-12,000 more freshers in FY23.
Infosys said the company has hired 40,000 in the first half of the fiscal year and may revise its target of 50,000 for the full FY upwards.
Wipro hired around 4,000 freshers during the quarter, and 14,000 in the first half of the fiscal year.
Attrition, however, continues to elevate, even as companies have started seeing a decline. TCS’ attrition went from 19.7 percent to 21.5 percent, Wipro’s declined from 23.3 percent to 23 percent, Infosys’ also declined from 28.4 percent to 27.1 percent and HCLTech’s remained at 23.8 percent on a sequential basis.
Moderation in demand
Ramkumar Ramamoorthy, a partner at tech advisory firm Catalincs and former Chairman and MD at Cognizant India, told Moneycontrol that the quarter ending September is usually the best quarter for Indian IT, both in terms of revenue and headcount growth.
“The full impact of client technology budgets is usually seen in this quarter, and likewise, the largest number of freshers from campus are onboarded this quarter,” he said,
This year, however, he added that while revenue growth during this quarter was largely robust, net headcount addition has been ‘quite anaemic’ for two reasons.
“One, there is caution in the air with respect to the sustainability of robust demand. Two, there has been an unusually significant front-loading of capacity in the December 2021 and March 2022 quarters in anticipation of strong demand,” he said.
Apurva Prasad, Vice-President Institutional Research, at HDFC Securities, said that net addition numbers this quarter have to do with the fresher intakes as well as the elevated attrition on an LTM (last-twelve-month) basis.
He added that Q2 is usually a strong quarter for addition, and companies like Infosys have still done well in terms of addition.
The net addition, he added, is “also an indication of demand ahead, which is also reflected in TCV (total contract value) numbers. There is moderation in demand, it’s a linear model.”
Mitul Shah, Head of Research at Reliance Securities said there is an element of caution which is visible in the slowdown in hiring, and hiring numbers aren’t likely to be revised in the immediate quarters.
This also comes at a time when the active job openings in the IT sector for the month of September were the lowest in 17 months, according to data from staffing firm Xpheno. As per the report, the IT sector’s share of active job openings has dropped to 58 percent, from an 80 percent-plus range in the previous year.
“Certain key talent sectors that saw hyper-action during the buoyant quarters of the previous fiscal are dealing with a saturation effect. The macroeconomic slowdown has given a breather for enterprises to take stock and calibrate their hiring plans,” Xpheno co-founder Anil Ethanur said. Moneycontrol