Tech Mahindra to deliver wage hikes in Q4, adverse margin impact likely

Tech Mahindra has announced plans to roll out wage hikes in the January-March quarter after delaying them for most of the fiscal year. The rollout of wage hikes will also have a negative bearing of around 1-1.5 percent on the company's operating margins in Q4, the management revealed in the post-earnings call.

“As we look at our journey toward improving operating margins, as demonstrated in the last quarter, we are encouraged by the programs we are running across the organisation and remain confident of continued expansion in future quarters,” said Mohit Joshi, CEO of Tech Mahindra, during the call.

The market had been closely monitoring Tech Mahindra’s wage hike plans ahead of its results announcement. With the rollout now scheduled for Q4, the company aligns with peers like Infosys, which delayed wage hikes the most in the sector. In comparison, Tata Consultancy Services implemented its wage hike in Q1, followed by HCLTech in September. Wipro followed suit in Q3, while Infosys opted for a phased approach, with hikes on January 1 and April 1.

The delay in wage hikes across the IT sector in FY25 was largely attributed to a weak macroeconomic environment and earnings pressure. However, as demand conditions improved throughout the year, companies began implementing their delayed hikes.