Things are looking up for India’s IT sector, with the major IT companies posting better earnings than expected, thanks to a healthy deal pipeline across the industry, as well as reduced expenses due to a bevy of reasons, including the lack of travel due to the lockdown. IT companies are also optimistic about the future, after having been cautious for the past two quarters.
Infosys saw a massive 20.5% growth in net profit at Rs 4,845 crore in the July-September quarter, while Mindtree’s profit rose by a whopping 87.9%. HCL Tech too, posted a health net profit growth of 18.5%.
One of the biggest beneficiaries of the IT industry looking up seems to be its employees, with firms rolling out salary hikes, promotions and bonuses as well.
Tata Consultancy Services, Infosys, HCL Technologies, Mindtree and Wipro all announced that they would be rolling out hikes for their employees, after hikes were stopped in the early month of the pandemic.
Companies attributed their success to employees who moved seamlessly to working remotely.
TCS said that the hikes, being rolled out from October 1 would broadly be in line with what the company had done previously. Infosys announced that it will be rolling out salary hikes across all levels from January 2021, as well as giving 100% variable pay and a one-time incentive to junior employees for the quarter.
Wipro will be hiking salaries for junior employees, while Mindtree will roll out pay hikes from January 2021. HCL also announced that it will be hiking salaries from October for junior employees, and from January 2021 for senior employees. After freezing promotions for a few quarters, Wipro will be giving promotions to 80% of all eligible employees in Q3, and Infosys will be rolling out promotions across all levels as well.
Recruitment looking up
IT companies are also expected to hire significantly in the coming quarters, after a lull in the first half of the year. A Times of India report stated that hiring at TCS, Infosys, HCL and Wipro was down between 70-80% each. These top four IT companies reportedly hired only 12,258 people in the first half of FY21, as compared to the same period last year.
However, during Q2 results, all the major IT firms announced hiring plans, including both lateral hires as well as freshers.An ET report showed that in Q1 of FY21, there was a reduction of 9,000, but in Q2, the companies added over 17,000 employees.
“We started onboarding freshers, and increased our recruitment globally in Q2, in anticipation of the growth trajectory we see ahead,” Milind Lakkad, Global Head, Human Resources said in a statement.
Wipro said that in Q2, it hired about 12,000 employees, of which 3,000 are freshers. HCL, on the other hand, is looking to hire “significantly” over the next three months, with Human Resources Officer Apparao VV saying that the company is looking at 12,000 new freshers by March 2021.
Attrition rates also reduced across the board, with TCS at 8.9%, HCL Tech at 12.2%, Infosys at 7.8%, Wipro at 11% and Mindtree at 13.8%.
Optimistic future
Infosys increased its revenue guidance to 2-3% in constant currency terms and margin guidance to 23-24%.
“For example, high-tech is looking strong, life sciences is good, financial service is stable, retail also now starting to see some progress. However, there are furlough impact in Q3 normally. And traditionally, Q4 has always been the soft quarter for Infosys. So, we don't see anything negative in the outlook. And in fact, we've raised our guidance keeping very much in mind the strong demand that you see and the good conversion, large deals that we have in place,” CEO Salil Parekh said.
TCS said that it saw strong growth in the BFSI and retail sectors recording 6.2% and 8.8% respectively. Life Sciences and Healthcare sectors grew 6.9%, Technology & Services grew 3.1%, Manufacturing 1.4% while Communications & Media de-grew by 2.4%.
For the future, TCS CEO Rajesh Gopinathan said that it will have to ride out the short-term volatility. “But in the medium and longer term, we will benefit from the multi-year technology upgradation cycle that is playing out as enterprises embrace the hyperscale platforms and use their native capabilities to fuel their innovation and competitive differentiation,” he said.
For HCL, growth in Q2 was of two types — driven by demand in sectors such as software, high-tech and also medical devices, and some “due to the reversal of some of the work or supply side issues we had during the previous quarter”.
“So those problems were not there during this quarter. So, I would say, by and large, it is demand driven. We continue to see growth in the next few quarters as well,” he said.
HCL CEO C Vijayakumar said that their Q2 pipeline grew by 20% Q-o-Q, and stands at an all-time high, and they have revised their guidance upwards.
Wipro CEO Thierry Delaporte said that Q2 was good, but they are not projecting beyond Q3. “The objective is to resume, to get back to the level of growth of the best of our competitors and we will get there. How many quarters we'll take, future will tell frankly,” it said.
Looking ahead, he said that the consumer sector will grow faster on the back of solid deal wins, and the company is optimistic on financial services.