TCS vs Infosys vs Wipro: This IT major provided most jobs in Q1FY20
TCS has taken the lead role in providing more jobs in just three months of Q1FY20.
IT sector is one of the major employers across India every year. Among major IT companies where youngsters want to work are Tata Consultancy Services (TCS), Infosys, Wipro, Tech Mahindra, Mindtree and HCL Technologies. The largest three IT service providers - TCS, Wipro and Infosys - have announced their results for the first quarter of fiscal year FY20. The results show that TCS has taken the lead role in providing more jobs in just three months of Q1FY20. In terms of hiring, Infosys and Wipro together are not even half of TCS has done.
Between April 2019 to June 2019, TCS made a net addition of 12,356 employees, which is the highest in the last five years for the company. That said, following robust hiring even the attrition in IT services increased 20 bps QoQ to 11.5% (LTM).TCS has also issued joining letters to over 30,000 fresh graduates. Of these, 40% have already joined TCS in Q1 while remaining are expected to be on board by Q2 end. Such would be near 18,000 new employees addition in Q2 along, which is quite higher. If the net additions continue to rise ahead, then overall TCS hiring FY20 will be massive.
TCS’ employees count stood at 436,641 in Q1FY20 versus 424,285 in Q4FY19.
On TCS’s employment, Devang Bhatt and Deepti Tayal, Research Analyst at ICICI Securities said, "In Q1FY20E, the decline in margins was mainly on account of currency and wage hike (together -230 bps impact) partly offset by operational efficiency. Going forward, sub-contractor costs and no major benefit from currency could keep margins well below the internal target range of 26-28%. Addition of ~30000 freshers in H1FY20E could provide a cushion to margins through employee pyramid optimisation. Consequently, we expect EBIT margin estimates of 25%, 25.3% in FY20E and FY21E, respectively."
The second best hiring was done by Wipro, not Infosys. Wipro recently announced Q1 results. Wipro’s employees count during Q1FY20 stands at 174,850 as against 171,425 recorded in Q4FY19. That means, Wipro hired some 3,425 employees in just three months. The IT-service provider recruited over 6000 graduates globally this quarter.
For Wipro’s job creation, the duo said, “Net utilisation (ex-trainees) declined 40 bps QoQ to 85.0% due to fresher hiring and people on bench due to anticipation of certain projects getting ramped up. Voluntary attrition (TTM) remained flat QoQ at 17.6%. In terms of visa concerns, Wipro has limited onsite risk as 65.4% of its workforce in US are locals."
In the last three months, Infosys has not hired even 1000 employees. In Q1FY20, the employees count at this IT-major was at 2,29,029 which is slightly higher compared to 2,28,123 employees hired in Q4FY19. That means, Infosys’ net addition was just 906 between April - June 2019.
For Infosys’ hiring and its impact ahead, the duo in their research note said, “Margins in Q1FY20E declined 90 bps sequentially to 20.5% on account of currency (-40 bps), wage hike (-60 bps), visa costs (-80 bps), Stater acquisition (-20 bps) partially offset by utilisation (70 bps), realization (20 bps) and new accounting rule (10 bps). Going ahead, with most of its investments complete and presence of levers of utilization, employee pyramid, onsite-offshore mix, we expect margins to see an improving trajectory hereon. Hence, we expect margins to increase to 22.5% in FY20E and 23% in FY21E.”
What is interesting to note is that, with net addition of 906 employees in the quarter, the analysts point out that, higher attrition remains a concern since if this is not controlled it will have an impact on revenue and margins. As on June 2019, Infosys’ attrition (consolidated) and attrition (standalone) both witnessed a jump of 300 basis points and 320 basis points to 23.4% and 21.5%, respectively. Also, utilization (ex-trainees) increased 80 bps to 83.1%.
Hence, TCS steals the show by becoming the most job creator in IT services.