One quick thing: Infosys defers pay hikes for employees

In today's newsletter:

• TCS Q1 inline, HCL Tech disappoints
• Dunzo delivers salary caps in June
• Skill-based gaming platforms reel under GST shocker

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Two of the country’s largest IT services firms Tata Consultancy Services (TCS) and HCLTech reported their earnings for the quarter ended June 30. 

• Q1 is a seasonally strong quarter for the IT services industry, barring HCLTech which had a slow quarter. 

However, the current macroeconomic uncertainties weighed on the numbers of both players, where TCS numbers were inline with expectations of a muted quarter, and HCLTech saw a softer-than-anticipated quarter and missed estimates by a big margin. 

TCS reported a mixed bag of numbers, missing out on operating margins, while revenue growth came in line with analyst estimates, growing at flat 0.4% QoQ in constant currency terms. Net profit grew at 16.8% YoY

Highlights:

• TCS played up its Generative AI trump card, said 100 deals in discussion
• Around 100,000 TCSers will be trained in AI skills soon
• Management expects softness in overall demand in near-term, but remain bullish on the long-term prospects

Hiring and onboarding delays

TCS has been engulfed by controversies on the people front, first by the staffing firm bribery controversy and again for pushing the onboarding dates of lateral hires. On the latter, TCS said that hold-ups are due to project budgets, and that all offers it has made will be honoured.

• Attrition rate down to 17.8% from 20.1% sequentially
• Net addition for the quarter at 523 

The company continued to see softness in verticals such as BFSI, technology, and communications. Communications even saw a degrowth during the quarter.

HCLTech’s profits slipped to negative on a quarterly basis even though it reported an 8% increase in net profit YoY in Q1FY24. Rupee revenue too was a slight miss as against analyst estimates.

• HCLTech’s operating margins slipped to 16.9%, around 100 bps below estimates
• Order book dropped to $1.56 billion from $2.07 billion QoQ
• Headcount reduced sequentially by 2,506 
• Attrition rates fell by 320 bps

Dunzo may have managed to deliver orders quickly in the past but over the last few days it has only been delivering terrible news to its employees.

Grocery delivery app Dunzo has now capped the salaries for all its employees at Rs 75,000 for the month of June, a strange move by a startup to cut costs. 

• This essentially meant that no one would get more than the fixed amount, even if they have a higher package.
• People earning lesser salaries were paid in full. 

The salaries of as many as 500 employees were deferred in June because Dunzo had an urgent business requirement to handle, we heard. All this cash crunch even as the company raised $75 million just three months ago. 

• Top management has however promised to clear all dues by July 20

Meanwhile, a top Swiggy executive predicted more pain for quick commerce companies in India

“There are probably only three or four players which are meaningful in the quick-commerce space right now. That's the lay of the land,”  Rohit Kapoor, CEO of food delivery at Swiggy told us in an interview.

Kapoor said that Swiggy is also continuing its focus on scaling operations and is unbothered by the valuation markdowns over the past 3-4 months. 

Read the interview

India's real money gaming companies are in a state of shock after the GST Council's decision yesterday to introduce a new 28% tax slab for the sector.

• They are now ringing alarm bells over this move which they say will 'wipe out the entire industry'

 Since the beginning of this year, the Indian government has been delivering short pitch balls to real-money gaming startups, be it with MeitY's new rules or the TDS-related changes to the Income Tax Act.

• However, on July 11, it delivered a jaw-breaking bouncer.

This caught the industry by surprise. While everyone was expecting a GST levy on the platform fee earned by these companies, the GST Council said it will instead levy GST on the entire entry fee. 

• At this rate, companies will be paying more in taxes than they will be earning in revenue, say industry executives. As a result, online gaming stocks crashed on the stock exchange.

Nazara Technologies, which indicated that the revenue impact will be minimal, saw a recovery in its stock price after an initial slide in the morning.

Internet and Mobile Association of India (IAMAI), an industry body that represents India's top tech companies, said this levy will result in around 1,000% increase in GST on the industry

• It could potentially make the entire Indian real-money gaming sector an 'unviable business model', the industry body said. As it happens, Dream Sports chief Harsh Jain is now IAMAI's chairman

Also read: 28% GST levy will upend the economics of real-money gaming sector, says Nazara's Nitish Mittersain 

Industry associations including IAMAI and AIGF have urged the GST Council and the central government to rethink this decision and bring a stable and progressive regime, which will aid the industry’s growth.

• Meanwhile, the revenue secretary Sanjay Malhotra is hopeful of implementing these changes in the Monsoon Session of Parliament, beginning on July 20.

Are you mulling on what to gift your friend for his/her birthday? How about a kilogram of precious tomatoes!

No kidding. Tomatoes are literally gone missing from burgers and salad plates that we buy today. With the price of tomatoes skyrocketing to a record high of Rs 100-Rs 120 per kg in the retail market, many people are either rationing their tomato usage or relying on packaged tomato puree/paste.

• Bengaluru's popular Darshinis (small eateries) are feeling the heat already and to add to that experts predict that these high prices will continue for a few more weeks.

This means dishes and products made with tomatoes are unlikely to make a swift return to food menus or households anytime soon.

Go deeper

July 12 marks the 169th birth anniversary of George Eastman, one of the most important figures in the history of photography. He was the founder of the Eastman-Kodak Company.

Eastman's vision was to make photography accessible to everyone and was able to achieve that through the release of an easy-to-use Kodak camera in 1888. Eastman also played a key role in helping roll film gain mainstream adoption.

(Image courtesy: Wikimedia)

• Anthropic, a safety-focused AI startup, is trying to compete with ChatGPT while aiming to prevent an AI apocalypse

• Wipro plans to invest $1 billion in AI capabilities over the next three years to train all 2.5 lakh employees on the technology

“There is an infinite difference between a Robespierre who occurs only once in history and a Robespierre who eternally returns, chopping off French heads”

Ideas like this from Milan Kundera's magnum opus The Unbearable Lightness of Being will eternally return to haunt its readers. It merits saying this today, more than any time in the over 50 years of Kundera's writing career, as the venerable Czech author is no more. He was 94.

Here are 6 must-read books written by him