How will attrition impact Infy's Q2 earnings?

The increase in the attrition rates in Infosys last quarter may impact the company’s earnings during the second quarter, despite large deal-wins and rupee depreciation.

“With elevation of attrition rates, Infosys’ efforts to address the same through variable pay, promotions, among others could likely mean lower benefits from the depreciation of the Indian Rupee,” market advisory firm Motilal Oswal said. The company’s attrition in the last quarter spiked up to 20.6%, a historical high.

More disconcerting for the company was elevated attrition in the category of high performers as well, according to Motilal Oswal.

As per the research note published by the advisory, the gains made by the IT major due to the weakening rupee would be used to address the situation.

“Add to that, wage-hikes for (senior-most) 15% of the employees will be effective in 2QFY19. These collectively will play their part in offsetting the gains from the rupee, which we factor in our margin assumptions for the company,” the note said.

In 1QFY19, IT major signed $1.1 billion total contract value (TCV) of deals, including multiple large deals in the US BFS. The company breached the aspired figure of $1 billion after multiple quarters, and cited a strong pipeline that would help their efforts to sustain the same.

The company had sustained the momentum in the second quarter as well, as the company has won $700 million deal from US telecom company, Verizon. Prior to this, the company beat Germany-based IT service provider Arvato to clinch $300 million deal from Microsoft.

In an interview with DH recently, company’s COO UB Pravin Rao had said that the company would be focusing on sustaining the $1 billion deal wins.

Meanwhile, the company's stock dipped by 2.38% at BSE on Wednesday to close at Rs 700.30 per scrip, down Rs 17.05.