Tech3 | Indian IT earnings season begins on a mixed note; Dunzo delivers salary caps in June; and more

One quick thing: Infosys defers pay hikes for employees

In today’s newsletter:

• TCS Q1 inline, HCL Tech disappoints
• Dunzo delivers salary caps in June
• Skill-based gaming platforms reel under GST shocker

TCS Q1 inline, HCL Tech disappoints

Two of the country’s largest IT services firms Tata Consultancy Services (TCS) and HCLTech reported their earnings for the quarter ended June 30.?

• Q1 is a seasonally strong quarter for the IT services industry, barring HCLTech which had a slow quarter.?

However, the current macroeconomic uncertainties weighed on the numbers of both players, where TCS numbers were inline with expectations of a muted quarter, and HCLTech saw a softer-than-anticipated quarter and missed estimates by a big margin.?

How did TCS fare?

TCS reported a mixed bag of numbers, missing out on operating margins, while revenue growth came in line with analyst estimates, growing at flat 0.4% QoQ in constant currency terms. Net profit grew at 16.8% YoY

Highlights:

• TCS played up its Generative AI trump card, said 100 deals in discussion
• Around 100,000 TCSers will be trained in AI skills soon
• Management expects softness in overall demand in near-term, but remain bullish on the long-term prospects

Hiring and onboarding delays

TCS has been engulfed by controversies on the people front, first by the staffing firm bribery controversy and again for pushing the onboarding dates of lateral hires. On the latter, TCS said that hold-ups are due to project budgets, and that all offers it has made will be honoured.

• Attrition rate down to 17.8% from 20.1% sequentially
• Net addition for the quarter at 523?

The company continued to see softness in verticals such as BFSI, technology, and communications. Communications even saw a degrowth during the quarter

Meanwhile at HCLTech

HCLTech’s profits slipped to negative on a quarterly basis even though it reported an 8% increase in net profit year-on-year in Q1FY24. Rupee revenue too was a slight miss as against analyst estimates.

• HCLTech’s operating margins slipped to 16.9%, around 100 bps below estimates
• Order book dropped to $1.56 billion from $2.07 billion QoQ
• Headcount reduced sequentially by 2,506?
• Attrition rates fell by 320 bps

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