TCS headcount reduces for first time in 10 quarters; experts say indicator of slowdown

The headcount of IT services company TCS has gone down for the first time in 10 quarters as per the company's Q3 FY23 results announced on Monday. Experts believe that this is indicative of the end of hypergrowth phase in the IT sector.

The Chief Human Resource Officer of the company, Milind Lakkad, said during the earnings call, "Last year, our net hiring was significantly ahead of our revenue growth. Our focus this year has been on utilizing all that excess capacity and looking over newest employees productive. Between that and elevated attrition, we had a net reduction of headcount and our workforce strength as of December 31 stood at 6,13,974."

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The headcount of TCS at the end of September ended quarter of FY23 was 6,16,171 and at the end of December ended quarter was 6,13,974. The reduction in headcount is 2,197. This is contrary to the trend set by TCS over the past 10 quarters where the workforce expanded every quarter.

Experts say that the reduction in headcount is indicative of the end of hypergrowth phase.

An expert tracking the IT sector told Business Today, "The reduction in headcount is indicative of the end of hypergrowth phase for IT companies. Last five years were a phase of rapid growth for the IT sector due to the rapid digitisation across all industries. But it seems to have reached its saturation point. But still, with the ongoing volatility, we need to observe this for a few more quarters."

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The reduction in headcount can be attributed to slowdown in hiring and voluntary attrition at the company, said the company's CHRO. The attrition at the company stood at 21.3 per cent, marginally lower than the previous quarter.

Lakkad said during the earnings call, "LTM attrition in IT Services was at 21.3%, slightly down quarter-on-quarter, but still very elevated as it reflects the high levels of churn in the prior quarters."

Overall, the IT services company's 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.

Furthermore, the operating profit margin narrowed by 0.50 per cent to 24.5 per cent for the reporting quarter. 

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