India’s second-largest IT services company Infosys expects moderation in attrition levels over the coming quarters, as its efforts around employee engagement, training and salary hikes are starting to yield results, said CEO Salil Parekh.
The comment of Infosys top honcho assumes significance as soaring level of attrition, leading to higher employee costs, is denting the profitability of IT players.
While the high level of attrition at large IT companies, including Infosys, has alarmed analysts, Parekh stressed that attrition measured on a quarterly basis has already started showing notable signs of improvement for the Bengaluru-headquartered firm.
It is a matter of time before the same reflects on an annualised basis measured as ‘Last Twelve Months (LTM)’, he asserted.
With each passing quarter, the company feels “things are becoming more and more within control”, Parekh told PTI.
Record hiring
Infosys’ attrition rose to 28.4 per cent in June 2022 quarter (computed on last twelve months basis) from 27.7 per cent in the previous sequential quarter. Infosys clinched record hiring of 21,000 in the just concluded quarter.
LTM or trailing twelve months refers to a metrics capturing timeframe of preceding 12 months, while quarterly metrics measures it for a shorter three-month cycle.
“The trend in quarterly attrition rates is still looking good for us. The LTM (metrics) will catch up. Quarterly (attrition number) is a trend which gives us a good indication of how each immediate quarter will come,” Parekh said.
The company took various initiatives, including employee engagement, increased training and skilling, and three cycles of salary increases over 18 months.
Infosys, he assured, is seeing steady impact of all the initiatives it put in place.
“We believe, all of these factors combined, in addition to the tremendous employee engagement during Covid, will help us to reduce attrition. And… not that it is completely addressed, but it is on a path that we feel is more controllable, more predictable… which will come back to normalised pre-Covid levels over a period of time,” he said.
Notably, attrition levels for Infosys pre-Covid hovered around 15-16 per cent.
In contrast, for the three months ended June 2022, the attrition calculated even on a quarterly basis was about 26 per cent, but Parekh said this has started showing ‘improvement’ since last quarter of fiscal 2021-22.
Parekh highlighted that the quarterly attrition numbers have started moving “in a good direction” for the company and “starting to come down”.
“For us, as the trend starts to come down, we feel already that this in a good position, but by end of fiscal year it will be in a better position,” he said.
Parekh said attrition level will revert to pre-Covid levels over a period of time, but did not specify a timeframe.
“We think it’s getting to stage where it will get back to pre-Covid levels, over time. We can see steady impact of all the initiatives that we put in place,” he observed.
He added: “It is not like there’s a fixed number of days or months, but we can see quarter by quarter things are becoming more and more within our control.” At the same time, the attrition has not impacted client deliveries or outcomes, he emphasised.
“In all this time, whenever the attrition was high or not, our delivery with clients has always been at the highest level. So the delivery of the company, working with its clients has always remained good, notwithstanding attrition,” said the top executive.
Financials
Infosys — which competes with Tata Consultancy Services, Wipro and others in the IT services market — reported a net profit of ₹5,360 crore, or ₹12.78 a share in the first three months of current fiscal, compared with ₹5,195 crore, or ₹12.24 per share a year ago.
Higher employee benefit expenses, sub-contracting charges and travel expenses pushed up overall costs for Infosys in just-ended quarter. Sequentially, the profit declined 5.7 per cent from ₹5,686 crore in January-March quarter.
Operating margin was lower at 20.1 per cent for Infosys, against full year margin guidance of 21-23 per cent.
The company, however, surprised the market by raising its full-year revenue growth outlook to 14-16 per cent citing strong demand and robust deal pipeline.
Infosys’ revenue or turnover stood at ₹34,470 crore in the first quarter of current fiscal, which was 23.6 per cent higher than a year ago.
The company had said it continues to optimise various cost levers to drive efficiency in operations. Compensation hikes impacted margins by 160 basis points, and utilisation dipped due to impact of new freshers coming in.
Infosys emphasised that these were more in the nature of “investments” given the robust demand scenario, and assured it will be looking at cost-optimising levers such as better utilisation and more automation. Pricing is another such lever and those discussions are on.
Published on
August 10, 2022
