High attrition likely to hit Infosys's growth
Attrition in Q1 of FY22 was at 13.9% that increased to 20.1%in Q2, 25.5% in Q3; It was 10% in Q3 of FY21, which rose to 10.9% in Q4
image for illustrative purpose
Bengaluru: Elevated attrition is the likely to be the only challenge for India's second largest ITservicescompany Infosys' growth prospects in FY23 which otherwise has seen abroad-based growth in the current financial year.
Though there are signs of stabilization in terms of attrition, the company is likely tocontinuewith its employee intervention activities in the near to medium term,analysts said. Operating margins, therefore, may have limited upside owing to thesupply side pressure as the company remains at investment mode in terms ofemployee engagement initiatives, they added.
"Elevated attrition is an industry-wide problem which is not limited to any IT firm. So,companies have to manage talent to cash in the robust demand. Given the industry-leading revenue growth figures of Infosys, it seems to be the only challenge that wecan see in its growth prospects in the near-term," said a Mumbai-based analyst.
Brokerage firms have also highlighted the same after the third quarter results of theBengaluru-headquartered firm. "Attrition remains a pain point as it has run up sharply in the last few quarters. Thecompany did mention that attrition on an LTM (last twelve month) basis has goneup, but attrition for the quarter has actually come down QoQ," ICICI Direct wrote in areport. "Sub-contracting costs are also rising as percentage of sales. It was at 11 percent of sales for the quarter (Q3FY22) against 10.3 per cent of sales for the lastquarter," it added.
On LTM basis, attrition stood at 10 per cent in Q3 of FY21, which rose to 10.9 percent in Q4 of FY21. In Q1 of FY22, employee attrition was at 13.9 per cent thatincreased to 20.1 per cent of Q2 of FY22, 25.5 per cent in Q3 of FY22, as per ICICIDirect.
A detailed mail to Infosys remained unanswered at the time of publication of thisstory.
However, the company management in the analyst call has indicated that aggressivehiring of freshers is likely to ease the supply situation in the coming quarters. The ITfirm has been taking up firm measures in terms of employee engagement.
"Thisquarter (in Q3 of FY22), like we mentioned, 80 basis points of our margin was behindthese employee interventions," Nilanjan Roy, chief financial officer at Infosys hassaid. In a recent industry body event, Infosys' CEO, Salil Parekh has said that the ITfirm would be hiring around 55,000 freshers in the next financial year.
In FY22 so far, Infosys has posted robust performance both in terms of revenue andoperating margin. It's revenue growth guidance of 19.5-20 per cent is the highestgrowth forecast among the large IT companies in India.
