InvestorQ : Is it true that TCS is finally seeing a reduction in the attrition rate?
Rutuja Nigam made post

Is it true that TCS is finally seeing a reduction in the attrition rate?

4 weeks ago

That is absolutely true that TCS has recently witnessed tapering of its attrition rates after touching record levels in the March quarter. Things had changed in the last few months in the form of talent crunch. As demand for talent became digital, companies were doing away with people who did not fit the bill while the right people were also moving over to greener pastures. The result was a spike in attrition, which can be approximately defined as a case of too many people leaving the organization.

If you look at the March 2022 quarter, TCS saw attrition rate cross 17%, a level rarely seen at TCS. What has changed that TCS is confident that the attrition levels should come down? Firstly, TCS expects a lot of tech talent to enter from start-ups. Currently, start-ups are aggressively laying off staff to reduce cash burn. TCS believes that traditional IT players may end up becoming the big beneficiary of this trend. These people bring to the table a smart start-up culture and a lot of fresh digital talent.

Hence, TCS expects staff departures to fall sharply and the demand for its services to rise. Things could get worse for digital players as central banks withdraw stimulus. Accessing big money from PE funds and the VCs could just get more tough. Much of this talent is likely to flow into the Indian IT sector. In March 2022, the rate of attrition at TCS had increased from 15.1% to 17.4%, a spike of 230 bps. The good news is that since India has a brain reserve of talent, attrition should gradually come down to more moderate levels.

Regarding its own outlook, TCS believes it is very unlikely that companies which went digital during the pandemic would significantly reduce tech spending. There could be negative impact on the margins but demand scenario is likely to remain robust. A number of fresh employees are looking to also build a much better long term association with the company. The fresh talent program of TCS is also likely to work wonders for them.