Attrition is as hard to predict as death says C P Gurnani after TechM loses profits to wage hikes
Jul 25, 2022, 19:37 IST
- One of the top five IT services companies, Tech Mahindra reported a 25% decline in net profit for April-June quarter.
- The management attributed the decline in profitability to rising employee benefits costs, which includes promotions and salary hikes.
- However, high spending towards retaining employees by giving hikes and promotions has paid off the firm’s attrition rate, which has come down to 22% from 24% last quarter.
- Tech Mahindra’s attrition is still better than peers Infosys (28.4%) and TCS (23.3%).
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A fourth of Tech Mahindra’s first quarter revenues were eaten up by employee expenses, pushing its profits down by 25% on a sequential basis. The company’s CEO C P Gurnani says that this wage hike has reduced its attrition by 2% from last quarter, and predicts that it will reduce by another 4% in six months. But when asked for specifics, he said, “Attrition is as hard to predict as death,” at the post-earnings press conference. Its total income grew marginally by around 3% to ₹12,830 crore sequentially. Its constant currency revenue growth stood at 3.5%, the company said in its press release.
“We are confident that we will be presenting to you continuously over the next few quarters industry leading growth. We are also confident that we will have an opportunity to work on the profitability levers,” said Gurnani.
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Tech Mahindra’s attrition is still better than peers Infosys which is at 28.4% and that of TCS at 23.3%.
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Employee benefit expenses | Amount |
Q1 FY23 | ₹3,286 crore |
Q4 FY22 | ₹2,945 crore |
Q1 FY22 | ₹2,601 crore |
“Delivery transformation, cost optimization and cash conversion will be key focus areas, as we continue to offset the strong supply side headwinds in the market. We aim to expand our profitability through operational excellence and improved operating metrics over the course of FY’23,” Rohit Anand, chief financial officer at Tech Mahindra said.
Particulars | Q1 FY23 | Q4 FY22 | Q1 FY22 |
Revenue | ₹12,830 crore | ₹12,436 crore | ₹10,484 crore |
Net profit | ₹1,147 crore | ₹1,545 crore | ₹1,365 crore |
Margin | 14.8% | 17.2% | 18.4% |
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