Oct 03, 2024 03:12 PM IST
Infosys, HCLTech, and others delay wage hikes to Q3 FY25 due to cost management amid weak demand.
Major Indian information technology (IT) companies Infosys, HCLTech, LTIMindtree, and L&T Tech Services shifted wage hikes to the third quarter of FY25, it was reported. The decision was taken in order to manage costs and sustain profitability amidst a sluggish demand environment, Moneycontrol reported. Wage hike is usually implemented earlier in the year but the delay reflects uncertainty in the global demand environment.
Owing to weak discretionary spending, delayed client budgets and macroeconomic uncertainties, IT companies are facing increased pressure pressure as brokerage firm Motilal Oswal Financial Services said in a pre-earnings note, “Most companies have deferred wage hikes to Q3 and beyond, which means H2FY25 margins would see headwinds from the wage front as well as furloughs.”
What brokerages said on IT firms?
As per brokerage firm Jefferies aggregate margins may inch up by 25 basis points (bps) sequentially. HCLTech and Tech Mahindra are expected to report a 20-110 bps margin expansion while Tata Consultancy Services (TCS) and Coforge are likely to report a 30-110 bps margin contraction, the brokerage noted.
Meanwhile, brokerage Nomura expects Infosys’ margin to improve by 10 bps to 21.2 percent quarter-on-quarter (QoQ) and HCLTech to report 120 bps margin improvement to 18.3 percent, sequentially.
Layoffs to come?
Some of these companies are also trying to reduce their workforce to specific experience segments, such as those with 5-10 years or 15-20 years of experience, the report added.