TCS Q3 results: IT major sees net reduction in workforce; what it could mean

Tata Consultancy Services, India's largest IT services exporter, on Monday reported its December quarter results and the one number that stood out was that during the quarter its overall headcount declined by 2,197 to 6,13,974. This is the first time the net addition has declined in 10 quarters. In the quarter ended September, TCS added 9,840 employees.

Here are a few scenarios that might explain the degrowth in employee addition

1) Despite high attrition, the company might not have filled the positions that have been left vacant.

2) Clients' tightening spending amid a challenging macro-economic environment might have prompted the country's top IT exporter to reduce its workforce.

3) The Mumbai-headquarted company might have slowed the pace of hiring amid fears of an economic recession in major western markets. "We are constructive on the US, cautious on Europe and positive on the UK, but acknowledge it could be volatile. Our posture is positive," said TCS chief executive and managing director Rajesh Gopinathan.

The largest employer in the Indian IT sector said its attrition has dropped to 21.3 per cent from 21.5 per cent -- after six quarters of uptick -- and the quarterly annualised attrition has fallen nearly 6 per cent. The TCS scrip rallied 3.35 per cent to Rs 3,319.70 on the BSE against the 1.41 per cent rally on the benchmark.

TCS saw a contraction in the net addition number previously in Q1FY21, which was when India was in a complete lockdown due to the first wave of the pandemic.

"Improved productivity was achieved by focusing on utilising the excess capacity built up over prior quarters and through investments in organic talent development. In Q3, TCSers clocked 11.4 million learning hours, resulting in the acquisition of 1.3 million competencies. The workforce continues to be very diverse, comprising 153 nationalities and with women making up 35.7% of the base," said TCS in a stock exchange filing.

Milind Lakkad, Chief HR Officer, said: “Our focus over the last few quarters on bringing in fresh talent at scale, training them on new technologies and making them productive is paying off. We are particularly proud of having 125,000 TCSers at middle and senior levels who have been with the company for more than 10 years on average. They have been central to the successful cultural integration of all the fresh talent we have onboarded in the last couple of years, and their contextual knowledge and customer-centricity have been key to the high level of customer satisfaction that TCS is known for."

TCS on Monday reported an 11 per cent jump in the December quarter net profit to Rs 10,846 crore, led by overall growth and forex gains.

The Tata group company had reported a post-tax net profit of Rs 9,769 crore in the year-ago period.

Overall revenue grew 19.1 per cent to Rs 58,229 crore for the reporting quarter from Rs 48,885 crore in the year-ago period, the company said, adding in constant currency, the topline growth is 13.5 per cent, and in the dollar terms, it clipped at 8 per cent. The operating profit margin narrowed by 0.50 per cent to 24.5 per cent for the reporting quarter. 

Gopinathan attributed the strong set of numbers in a seasonally weak quarter to the stellar performance of their cloud services and the continued business momentum in North America and England.

The Mumbai-based company's order book for the October-December period stood at $7.8 billion, down from $8.1 billion in the September quarter.

The order wins reflect demand scenario, said Gopinathan.

"We are constructive on the US, cautious on Europe and positive on the UK, but acknowledge it could be volatile. Our posture is positive," Gopinathan said.

With inputs from agencies