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Mint
2 days ago
- Business
- Mint
Young workforce shrinks at TCS and Infosys. Is the pyramid model breaking?
India's top two IT companies—Tata Consultancy Services Ltd (TCS) and Infosys Ltd—are seeing a sharp decline in their young workforce, raising concerns over the sustainability of the traditional employee pyramid model. Analysts warn that the shrinking number of employees aged under 30 could indicate automation-led redundancy in entry-level roles and point to broader shifts in the IT services market. Young graduates increasingly prefer startups, captive tech centres of global firms like Google and Microsoft, and product-based tech companies—drawn by better pay, faster growth, and more creative, less mundane work, they added. This assumes significance as it signals cracks in the traditional pyramid model used by Indian IT firms, where a wide base of young workforce supports a narrower band of experienced professionals and management. With fewer young hires, slower hiring, and narrow margins, companies like TCS and Infosys are under pressure to rethink their workforce plans amid weak global tech demand. Also read: TCS, Infosys hop onto Adobe's new platform to sell AI services to clients Falling numbers At TCS, just 47.7% of employees in India were below 30 years of age as of March 2025—down from 59% in FY22. This implies 44,542 fewer young employees at TCS than it had three years earlier. While the company doesn't provide region-wise data, about three-fourths of its global workforce of 607,979 is based in India. Infosys shows a similar pattern. Only 52% of its 323,578 employees were equal to or under 30 years of age at the end of FY25, down from 60% in FY22—a net drop of about 17,609 younger employees. 'It is interesting to note that the percentage of employees in the less-than-30 years' age group is at the lowest level over the past six years across most geographies," said Kotak Institutional Equities analysts Kawaljeet Saluja, Sathishkumar S., and Vamshi Krishna, in a note dated 3 June. Analysts say automation is partly to blame. 'The primary areas of deployment for entry-level employees was managed services where these employees handled customer support roles. With automation tools on offer, there is lesser need for such people which can be another reason for the lowering count of those aged 30 and below," said Ashutosh Sharma, research director at Forrester Research, a Massachusetts-based research and advisory firm. Phil Fersht of HFS Research echoed this view: 'Advances in automation and AI have enabled these firms to deliver traditional services with fewer headcounts. In addition, many clients are demanding lower prices, which is driving providers like TCS and Infosys to deliver with fewer people." Also read: How India's mid-cap IT bested the Big Four in hiring Broken pyramid Analysts are flagging the structural challenge this poses to the pyramid model. 'Significant improvement in the pyramid from the current levels requires healthy revenue growth in the normal course of business, not our base case in FY2026E," said the Kotak analysts. TCS's revenue in FY25 rose only 3.78% to $30.18 billion—its slowest growth in four years. Infosys's revenue growth was similarly sluggish at 3.85%, touching $19.28 billion. India's IT outsourcers saw slower growth last year as global clients cut back on tech spending due to economic uncertainty. 'Improving the employee pyramid will help in structurally better margins," said the Kotak analysts. Hiring entry-level employees increases operating margins of an IT outsourcer as they can be deployed in projects at lower costs compared with executives of higher experience, for whom the client has to shell out a greater amount. TCS and Infosys posted operating margins of 24.3% and 22.1%, respectively, in FY25. A Mumbai-based analyst, speaking on condition of anonymity, noted that slow hiring reflects sluggish demand for IT services. 'IT service providers hire junior employees, most of whom fall under 30, when there is high demand for tech services. This was the case in FY22 when plenty of freshers were added. Now because growth has been a little sluggish, hiring has been low and which is why we see fewer young people." In FY22, TCS and Infosys had added over 157,000 employees combined. In FY25, that number dropped to just 12,771. This also shows up in campus placement data. Engineering colleges across India have reported fewer offers from top-tier IT services companies over the past two years. Many final-year students who would typically receive early offers from TCS and Infosys are now seeking opportunities at product firms, fintech startups, or overseas universities instead, according to placement officers at institutions in Bengaluru and Pune. Also read: TCS vs Infosys vs Wipro: How many freshers are IT majors hiring in FY26? Job outlook for upcoming year explained Ageing abroad TCS faces a more pressing issue abroad: an ageing workforce in key markets. In North America, which contributes over half of TCS's revenue, more than 20% of its workforce is over 50 years old. In Europe, nearly 28% of its employees are above 50. Worryingly, the firms are also losing their appeal among young jobseekers. This shift in demographics isn't just a TCS or Infosys problem—it reflects a broader transformation in the Indian IT services landscape, which has historically relied on a large, young, and inexpensive workforce to deliver cost-effective offshore services to global clients. With that model under strain, the entire sector may be heading for a reset. Infosys received 4.46 million job applications in FY25—a 24% drop from FY22. TCS does not share comparable data. While neither company responded to emails seeking comment, people familiar with internal HR strategies at TCS and Infosys said both firms are exploring re-skilling and AI-integrated training programs to improve employee productivity. Also read: Primer: Is geopolitics to blame for your missing pay hike?
Mint
28-05-2025
- Business
- Mint
Tata Sons feels the heat as TCS shrinks dividend for the first time in 20 years
Bengaluru: Tata Sons received less money from Tata Consultancy Services Ltd in 2024-25 than in the year before, a first year-over-year decline since India's largest information technology services company went public in August 2004. TCS had accounted for about 84% of the Tata Group holding company's total income in 2023-24. Tata Sons earned ₹1,333 crore less in FY25 dividend income from TCS at a time when it needs more money to bankroll its group companies' new but loss-making businesses, including assembling iPhones for Apple Inc. (Tata Electronics Pvt. Ltd), running Air India, and building an e-commerce business under Tata Digital Ltd. TCS returned ₹45,588 crore to shareholders in FY25, representing a 4% decline from the ₹47,445 crore it distributed to shareholders in FY24, according to the company's annual report released on Wednesday. As Tata Sons owns 71.77% of TCS, it received ₹32,718.6 crore as dividend income for FY25, down from ₹34,051.27 crore for FY24. TCS's shareholder payout ratio as a percentage of total free cash flow in FY25 totalled 93.9%—the lowest since FY19, when it was 92.6%. In FY24, the ratio was 101.8%. Also read | Accenture and Infosys have beaten TCS. What is N. Chandrasekaran planning? Mint could not Independently ascertain the reason behind TCS distributing less money to its shareholders in the previous financial year. However, two executives, including a public investor in TCS, said the lower shareholder payout could signal that the Mumbai-headquartered company intends to invest more money in its information technology (IT) services business. 'The management needs to clarify if this decline (shareholder payout) is a one-off or if TCS would pay about 92-95% of free cash flow to shareholders," said the investor on condition of anonymity. 'Long-term investors like us understand that the business needs investments, especially as GenAI (generative artificial intelligence) technologies take centrestage." TCS did not immediately reply to an email seeking an explanation for the company's decision to return less cash to shareholders. TCS's relative resiliency Since going public in 2004, TCS has seen its parent and public shareholders earn more money year after year. The only aberration was when TCS returned ₹10,206 crore to shareholders in FY16 after giving them ₹18,088 crore the previous financial year. This was because TCS had given a special dividend of ₹9,166 crore in FY15 to commemorate 10 years since it went public. Presently, though, TCS's lower shareholder payout comes as the IT services company faces a challenging environment. TCS's revenue improved 3.8% to $30.18 billion in FY25 while net profit rose 2% to $5.74 billion. However, for the first time, TCS failed to fulfil its promise of annual salary hikes to its 607,979 employees. TCS offers a wage hike at the start of a fiscal year; however, in April, the company's management, citing macroeconomic uncertainty, said it would decide on salary increases later in the year. Also read | Will IT get better or worse? TCS points to cautious growth ahead For this reason, some analysts have started voicing concerns. 'TCS managed the 2008-09 recession quite well and gained better market share after the recession compared with peers such as Infosys. We believe relative resiliency versus peers is lower in the current environment," Kotak Institutional Equities analysts Kawaljeet Saluja, Sathishkumar S., and Vamshi Krishna said in a note dated 11 April. 'TCS has not been able to outperform Tier 1 peers on revenue growth in the past couple of years, despite the demand environment being more conducive to cost take-outs, TCS' area of strength. Performance in developed markets in FY2025 has been disappointing. Revenue declined 0.2% in developed markets, significantly lower than our estimates for Infosys and HCLT (HCL Technologies), indicating market share losses for TCS," they added. Also read | Tech's Big Five cautious on salary hikes, hiring TCS: Most generous Tata Sons has earned ₹1,49,127 crore from TCS in dividends and share buybacks since FY21. It earned an additional ₹9,362.3 crore when it sold 0.65% of TCS shares in March last year—adding up to ₹1,58,489.35 crore ($18.5 billion) in five years. This inflow of cash from TCS helped Tata Sons pay off over ₹20,000 crore in debt, enabling the Tata Group holding company to start and run new businesses and utilise some of the money in its other listed companies. Tata Sons owns shares in 26 listed companies, including TCS, Tata Motors Ltd, and Tata Steel Ltd, which cumulatively earned over $165 billion in revenue in FY24. Tata Sons is owned 65.9% by Tata Trusts, 12.87% by half a dozen Tata Group companies, and 18.4% by the Mistry family (of the Shapoorji Pallonji Group). TCS, despite its lower shareholder payout ratio of 93.9% in FY25, is among the most generous of India's Big Five IT services companies. Infosys Ltd's capital allocation policy states that the country's second-largest IT services company will return 85% of its free cash flow to shareholders. HCLTech, India's third-largest IT services firm, has promised to return 75% of its profits to shareholders, while Wipro Ltd has assured investors of 50% of its earnings. Tech Mahindra Ltd has announced that it will distribute all its extra cash in dividends. Also read | Tata Sons goes debt-free as it seeks listing exemption
The Hindu
28-05-2025
- Business
- The Hindu
BSNL posts profits for second consecutive quarter
State-owned telecom operator BSNL posted a ₹280 crore net profit in the quarter ending March 2025, marking two consecutive quarters of positive cash flows. This performance comes on the back of cost cutting and infrastructure leasing revenues since 2021. 'For the first time in 18 years, BSNL has posted consecutive quarterly net profits — not just operating profits or positive EBITDA margins, but actual net profits,' Communications Minister Jyotiraditya Scindia said in a statement. Quarterly profits may not sustain at these levels in the immediate quarters to follow; however, its chairman and managing director Robert J. Ravi indicated, as the telco has undertaken extensive investments into its infrastructure — just last week, it approved a ₹2,903 crore advance purchase order with Tata Consultancy Services Ltd to build out its as yet unlaunched 4G network. While Mr. Ravi said in a statement that 'in the near term, higher depreciation and amortisation arising from recent spectrum acquisitions and heavy capex will weigh on quarterly results despite … solid fundamentals,' he argued that medium- and long-term 'profitability prospects are robust, supported by the nationwide rollout of 4G/5G (use of Atmanirbhar equipment), 5G Network-as-a-Service initiatives, investments in core infrastructure and upgradation of backhaul aging fibres.' In the same quarter last year, BSNL had a loss after tax of ₹849 crore. Its EBITDA stood at ₹5,396 crore in FY 2024–25, compared to ₹2,164 crore in the previous year. Its annual operating revenue has also increased by 7.8% to ₹20,841 crore. Wireless phone services constituted the bulk of its revenue, at ₹7,499 crore, while home broadband and commercial internet services contributed ₹2,923 crore and ₹4,096 crore respectively. 'Our aim is not to chase profits, but to redefine telecom excellence in public service,' Mr. Ravi said.
Economic Times
14-05-2025
- Business
- Economic Times
Stock Radar: TCS in bear grip! This Sensex stock is showing signs of rebound – check target, stop loss for long position
Tata Consultancy Services Ltd (TCS), a key player in India's IT sector, has rebounded after testing the Rs 3,000–3,050 zone in April. However, the stock remains over 20% below its peak, indicating it is still in a bear grip.A "bear grip" refers to a market condition where a stock or index is experiencing sustained downward pressure, typically marked by a decline of 20% or more from recent term traders with a high-risk profile can
Business Standard
13-05-2025
- Business
- Business Standard
Quick Wrap: Nifty IT Index registers a drop of 2.42%, NIFTY Crashes 1.39%
Nifty IT index closed down 2.42% at 37354.6 today. The index has added 14.00% over last one month. Among the constituents, Infosys Ltd fell 3.58%, HCL Technologies Ltd slipped 3.04% and Tata Consultancy Services Ltd dropped 2.91%. The Nifty IT index has increased 13.00% over last one year compared to the 11.19% spike in benchmark Nifty 50 index. In other indices, Nifty Media index increased 1.66% and Nifty Services Sector index is down 1.60% on the day. In broad markets, the Nifty 50 is down 1.39% to close at 24578.35 while the SENSEX has declined 1.55% to close at 81148.22 today.
