Attrition is as hard to predict as death says C P Gurnani after TechM loses profits to wage hikes

• 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%).

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.

High spending towards retaining employees by giving hikes and promotions has aided as Tech Mahindra’s attrition rate has come down to 22% from 24% last quarter. If it’s able to keep up with its predictions, in the next two quarters, it could come down to 18%.

Tech Mahindra’s attrition is still better than peers Infosys which is at 28.4% and that of TCS at 23.3%.

Tech Mahindra’s expenses shot up 30% on year and 7% sequentially in June quarter to ₹8,937 crore and most of it was due to wage hikes, promotions and more.

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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