Infosys, TCS report net headcount drop in Q3 as client sentiments remain unchanged

Bengaluru: IT bellwethers Tata Consultancy Services and Infosys Ltd on Thursday reported a net decline in their overall workforce for the quarter ended December 31, 2023, even as attrition dropped to around 13% during the period.

While TCS’s net headcount plummeted by 5,680 during the October-December period, Infosys saw its employee base shrink by 6,101, the companies separately revealed in their post-earnings media briefings on Thursday. 

“We had said last quarter that we have a  lot of utilisation headroom still, that led to the 6,000-odd headcount reduction. We are still at 82.7 (utilisation) and our comfort range is between 84-85, so we still have some capacity,” Infosys Chief Financial Officer Nilanjan Roy said. 

This does not augur well for India where IT services companies account for an overwhelming majority of talent intake within the technology sector. Both companies said that they did not witness a significant change in client sentiments during the third quarter, despite a positive commentary by the US Federal Reserve on potential interest rate cuts
in 2024.

Driven by a double digit growth in emerging markets, TCS posted a 4% year-on-year rise in revenue (CC) during the October-December period, at Rs 60,583 crore. The company’s net profit during the quarter grew 8.2% to
Rs 11,735 crore.

The IT conglomerate also announced a dividend of Rs 27 per share, including a special dividend of Rs 18 apiece. Its order book for the quarter stood at at $8.1 billion, with a net margin of 19.4%.

“The impressive financial results and dividend declarations, along with regular buyback announcements contribute to a positive outlook for TCS, reinforcing its strong position in the IT sector,” said Sugandha Sachdeva, founder of WealthWave Insights.

On the other hand, India’s second largest IT firm Infosys reported a 1.3% increase in consolidated revenue at Rs 38,821 crore, but net profit fell 7.3% in the December quarter to Rs 6,106 crore.

The Bengaluru-headquartered firm also tightened its revenue growth guidance for financial year 2023-24 to 1.5-2%, from 1-2.5% stated in October. 

Infosys bagged orders worth $3.2 billion during the quarter, including 1 mega deal and 71% net new wins. The company also announced a definitive agreement to acquire semiconductor design and embedded services provider InSemi for about Rs 280 crore.

“Going forward, a cautious stance is warranted in the short term. The absence of anticipated revenue improvement from the North American region, which contributes significantly to the overall revenue of both companies, raises concerns,” Nirav Karkera, who heads research at financial services firm Fisdom said, adding that there is however a glimmer of optimism stemming from resilient demand in Europe.