JOBS-CAREER
As the July-September earning season kicks off on Thursday with Tata Consultancy Services announcing its results, analysts said that one of the key metrics to be watched in the case of IT companies, will be their utilisation rates, linked to which will be their hiring plans for the fiscal. The reason being that in FY24 utilisation rates was being used a lever for improving margins, but may no longer be a sustainable strategy for many firms going by the commentary by several brokerage firms. “Traditional levers such as peak utilisation and reducing subcontracting have largely been maximised, indicating limited further room for margin expansion using these strategies,” JM Financial said in a report. When central banks in the US and Europe raised interest rates post the COVID-19 pandemic, industries cut down their discretionary spending, which also led to IT companies to cut back on hiring. During this period, attrition rates increased, and firms relied on bench strength rather than fresh hiring to as strategy to keep their margins stable and improve. However, this lever is now largely depleted, and with IT services demand rebound still on the horizon, companies need to look for different strategies. Pareekh Jain, founder of Pareekh Consulting and EIIR Trend, said, “They (IT companies) over-hired during the great boom after COVID, and after that, when the low-growth environment emerged, they didn’t hire as much and started focusing more on utilisation and margins”. Infosys , Wipro, and LTIMindtree, along with mid-tier firms, reported multi-year high utilisation rates in their June quarterly results. Infosys’s utilisation rate improved significantly from 82.0% in Q4 of FY24 to 83.9% in Q1 of FY25. Wipro also saw an increase, with its utilisation rate rising to 87.7% in Q1 of FY25 from 86.9% in the previous quarter. Similarly, LTIMindtree’s utilisation rate increased to 88.3% from 86.9% over the same period, and Persistent Systems recorded an increase from 80% to 82.1%. Phillip Capital said that Wipro’s margin levers, such as utilisation and offshore strategies, are largely optimised, making it challenging for the company to expand margins amidst subdued growth. Saurabh Govil, chief human resources officer at Wipro, said in a press conference after Q1 earnings, “We have seen the utilisation going up every quarter. We believe this is the right time for us to look at the supply side so that we can have much better conditions”. Major IT firms have already announced substantial hiring plans for FY25. Infosys plans to recruit between 15,000 to 20,000 freshers through both on-campus and off-campus initiatives. TCS aims to hire approximately 40,000 freshers, having already onboarded 11,000 in the June quarter. HCLTech has set a target of hiring 10,000 freshers, while LTIMindtree also plans to hire. “While we haven’t seen a large-scale surge in hiring, major IT firms have exhibited steady growth of around 5-7%, primarily driven by ongoing digital transformation initiatives and the stabilisation of global demand,” Krishna Vij, business head at TeamLease Digital, had told FE. Further, the hiring trajectory for FY25 suggests a continued positive outlook. “IT hiring remains on a positive trajectory, with an overall increase of 12-15% forecasted this financial year, buoyed by sustained demand, particularly for tech talent involved in R&D, AI, and advanced cloud projects,” Vij added. As a result, utilisation rates are expected to stabilise gradually with new hiring being largely of freshers, and could also positively impact margins in the medium term. “Since fresher salaries are lower, the overall cost per employee goes down, which can improve margins. However, utilisation rates may decrease slightly as a result of increased hiring,” Jain said. None
What’s New
Spotlight
Advertisement
Featured News
Latest From This Week
Popular News
