homeeducation NewsICRA expects lower hiring by IT services companies in the near term

ICRA expects lower hiring by IT services companies in the near term

ICRA's recent data says the IT services industry’s revenue growth will likely slow down to 3-5 percent this fiscal (FY24) due to 'persistent macroeconomic uncertainty' and weak demand in the US and Europe.

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By Nishtha Pandey  Aug 30, 2023 5:42:40 PM IST (Published)

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ICRA expects lower hiring by IT services companies in the near term

In response to a deceleration in growth momentum and the "effective utilisation of excess capacity" added in FY2022 and the first half of FY2023, IT services companies have shown a significant reduction in hiring over the past three quarters. According to recent data by Investment Information and Credit Rating Agency (ICRA), the information technology (IT) services industry’s revenue growth will likely slow down to 3-5 percent in this financial year (FY24) due to “persistent macroeconomic uncertainty” and weak demand in the US and Europe.

In the first quarter of FY24, ICRA’s sample set recorded a revenue growth of 3.8 percent on a YoY basis in USD terms, the lowest in the last 10 quarters. In terms of geography-wise trends, the growth in the US witnessed a sharp moderation compared to that in Europe. ICRA estimates that this will also cause a reduction in hiring.


Adding to this trend, a significant moderation in attrition levels has materialised due to a more balanced demand-supply equation.

ICRA Assistant Vice President & Sector Head Deepak Jotwani shed light on the evolving scenario, saying, “ICRA expects lower hiring by the IT services companies in the near term because of the expected slowdown in growth and also estimates attrition to further decline over the next few quarters before stabilising at the long-term average of 13-15 percent,”

Notably, there has been a sizeable reduction in hiring by IT services companies in the last three quarters, given the slowdown in the growth momentum, coupled with utilisation of the considerable excess capacity added in FY2022 and H1 FY2023. Reflecting this transformation, India's top five IT services giants — Tata Consultancy Services (TCS), Infosys, Wipro, HCL Technologies, and Tech Mahindra — collectively witnessed a net reduction of 21,838 employees during the April to June 2023 quarter.

While TCS managed to increase its workforce by a net of 523 employees, the other four players — Infosys, Wipro, HCL Technologies, and Tech Mahindra — implemented substantial cuts, with net reductions of 6,940, 8,812, 2,506, and 4,103 employees, respectively.

The combined employee count of the top four IT firms —TCS, Infosys, HCL Technologies and Wipro — stood at 14.25 lakh at the end of June 2023, marking a sequential drop of 1.2 percent.  

The overall reduction in hiring by the top five companies is nearly four times the number of employees (net) these firms lost in the last quarter. In the March 2023 ended quarter, the five firms had seen a drop of 5,607 staffers.

In an interview in July with CNBC-TV18, TeamLease Services CFO Ramani Dathi  said, as per the trend has been for the past few months, hiring in IT and startups has been seeing a significant drop compared to the last few years while non-IT hiring has been picking up gradually.

“The companies have already reached their full capacity and for any incremental projects, they have to start hiring. So, we are expecting the hiring numbers to pick up from the end of the second or early third quarter, but the first and second quarters will continue to remain the same as what we have seen in the last two quarters,” Dathi explained.

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