In a sign of green shoots for employment in the information technology (IT) sector, India's top five IT companies -- Tata Consultancy Services (TCS), Infosys, HCL Tech, Wipro and Tech Mahindra -- have cumulatively hired 57 per cent more employees in the first quarter of the ongoing financial year when compared with the year-ago period, the Economic Times reported on Monday.
However, this development comes at a time when attrition at the country's top IT companies has jumped to a two-year high because of a shortage of digital talent in India and on-site, reported the Times of India. According to the ToI report, while the April-June quarter is traditionally a high-attrition period, the rate has risen sharply at certain companies this year.
According to the ET report, the top five firms have hired over 27,300 employees, compared with a net addition of 17,383 in the same period last year. Among them, TCS emerged as the top recruiter, having hired 12,356 in the first quarter, which was the highest in five years. Meanwhile, Infosys hired only 906 people.
Further, the companies made more campus placement offers this year, said the ET report. This is being done as the companies are looking to build a bench, anticipating a growing demand for digital services from clients globally. TCS, according to the report, has made over 30,000 offers for the entire year and Wipro has made more offers in the quarter than it did in the whole of last year.
According to the ToI report, while Infosys reported an attrition rate of more than 23 per cent in the quarter ended June 2019 — which was an increase of 300 basis points from the preceding quarter -- Tech Mahindra's attrition rate went up to 21 per cent from 19 per cent in the year-ago period. Further, at L&T Infotech, a mid-tier IT firm, the attrition rate of 18.3 per cent was over three percentage points higher than the 15 per cent rate in April-June 2018.
In this quarter, employees traditionally leave for higher studies or collect bonuses and exit. However, industry observers told the daily that the constraint in supply of the right talent in both Indian and US markets was leading to a rising churn at IT firms.
According to the ToI report, which quoted a Kotak Institutional Equities research note, attrition rates had increased 20-400 bps year-on-year in the quarter and were beyond the comfort range for many companies. While IT companies have said that this attrition was not impacting the execution of projects, Saluja said that it was leading to an increased reliance on sub-contractors to fulfil demand.
Apart from demanding more specialed talent, artificial intelligence and automation had cut into the number of jobs the IT sector was once known for providing. These new technologies also led to a turmoil in the sector and impacted profits. However, analysts told ET that the challenging phase for the IT sector seemed to be over now and companies could grow on a quarter-on-quarter basis.
While the situation on the hiring front appears positive, growth at IT firms has remained under pressure.
According to a LiveMint report, global headwinds and the resulting weakness in the financial services sector, which is a large business vertical for IT, weighed on the growth rates of IT companies in the June quarter. At the same time, according to the report, order wins and deal pipelines remained strong, keeping hopes of growth alive.
Apart from Infosys and HCL Tech, revenue growth at most top IT firms lagged the Street's estimates, said the report. Growth at TCS, the country's largest IT company, moderated from the March quarter, while Wipro and Tech Mahindra saw lacklustre performance, it added.
The slowdown, according to the report, had been more pronounced at second-rung companies. When compared with larger peers, high client concentration and slowdown in revenues have adversely impacted the profitability of these firms.