India’s top 3 IT firms see headcount drop by over 16,000 in Q2

Across companies, HR heads have attributed the decline in headcount to the talent they have already hired.

India’s top three IT companies have reported a significant reduction in headcount in the second quarter of FY24 as they battle demand slowdown by not backfilling most attrition and stepping up utilisation of already hired fresher talent.

The trend is expected to play out for other companies as well.

Tata Consultancy Services, Infosys and HCLTech cumulatively saw their headcount drop by 16,162 in Q2.

TCS saw its headcount reduce by 6,333, the steepest fall at least in the last five years while Infosys saw its steepest-ever headcount decline in a quarter at 7,530 employees, and HCLTech saw a headcount decline of 2,299.

Across companies, HR heads say they are looking to utilise the talent they have already hired. All three companies have also said they are not backfilling most attrition, which is in the 14-percent range on an LTM (last 12 months) basis for them.

Tata Consultancy Services

TCS Chief Human Resources Officer Milind Lakkad said this is a part of the company’s strategy to hire freshers and deploy them. “Our strategy of proactively hiring bright freshers and investing in training them with the right skills is paying off. With that talent coming on stream and with reduced attrition, we were able to recalibrate our gross additions, keeping it below the departures during the quarter, driving up productivity and enhancing project outcomes,” he said.

He told analysts that they have been investing in fresh talent for nearly a year-and-a-half and that investment is now paying off.

Lakkad told analysts that he expects the headcount shrinkage to continue in the coming quarters, albeit the numbers may not be this high.

Infosys

At Infosys, Chief Financial Officer Nilanjan Roy said the utilisation excluding trainees has improved, but there is room for further optimisation. India’s second-largest IT company declined 2.2 percent from last quarter. Roy said the company hired ahead of demand and with the latter now slowing down, they saw their utilisation dip.

Now, while utilisation is beginning to inch upward, Infosys still has a significant fresher bench waiting to be onboarded. Thanks to this, the company isn’t going to campuses either.

“At the moment we are not going to the campuses as yet. We will monitor this every quarter, looking at our future predictions and then finally decide when we do go back,” he said.

HCLTech

At HCLTech, CEO C Vijayakumar told analysts that a lot of attrition has been backfilled with freshers who were already trained. Additionally, new work was also being done by fulfilling those roles internally. “Our investments over the last few years on freshers have really started showing results, and that's visible in this quarter's profitability numbers,” he said. The company’s management said that the lot freshers they hired over the last 18 months are now trained and deployed on projects in the last quarter.

“We have hired so many freshers and they are all ready and eager to get into projects and deliver. We have just not backfilled all of the attrition that continues to happen. Some of it has been sort of not backfilled because we have these freshers coming in,” CFO Prateek Aggarwal told analysts.

HCLTech said that it hired about 5,200 freshers in the first half of the fiscal year, and expects to close out the year by hiring about 10,000 freshers.

Analysts at Kotak Institutional Equities said that employee headcount at HCLTech would witness an increase in H2FY24, “driven by the onboarding of employees as part of the Verizon deal and a gradual step-up in hiring, as the demand situation improves”.

Hiring drops

A note by Emkay Global, citing Naukri’s JobSpeak Index, said the hiring index for IT-Software/Services has now declined, on a YoY basis, in all nine months of this year.

The note said that moderation in demand and uncertainty in the macro environment has resulted in moderation in attrition over the last few quarters.

“Muted demand has also resulted in weaker net headcount addition during this period, with some companies even reporting a decline in headcount. Recent commentary from the management suggests that the situation has remained largely stable on the demand front, with no material improvement or deterioration. Consequently, hiring trends and attrition will likely remain range-bound, with a downward bias in the near term, in our view,” it said.