The Infosys management is taking a series of steps to contain a worrying fall in the margin despite the impressive revenue growth in the first quarter. The IT major's margins fell to 20.5 percent in the last quarter, below its targeted 21-23 percent for the year, and much below the 24-25 percent a few years ago, The Times of India reported. The company is clamping down on all areas of expense.
The Bengaluru-headquartered IT bellwether is also saddled with one of the worst attrition rates in the company's history. The attrition level rose to 23.4 percent in the June quarter, from 20.4 percent in the preceding one, and 23 percent year on year, the report says. The company said in a rare admission that it had a higher percentage of layoffs in the quarter. Infosys recruited 8,000 employees in the June quarter, including about 2,500 freshers.
The company, sources say, has also been discouraging non-essential employee travel. "Earlier, we just needed to inform the manager that we would be travelling. Now, it requires a sanction at a very senior level. Video conferencing is being encouraged," the report quotes an unidentified senior executive as saying. The stress on higher employee utilisation than on hiring, the executive said. There has been a steady increase in the utilisation levels, the source said, and the net employee addition was just about 900 in the last quarter. In comparison, rival TCS reportedly recruited 12,000 employees.
A drastic fall in the company's L-1 visa applications is also cited as an indicator of the bid to cut the costs. (The L-1 visa is a non-immigrant US visa that allows employers to offer intra-company transfer to employees with specialized knowledge from a foreign office to an office in the US.) The company's earnings announcement last week said that visa costs had been rising.
Infosys forged ahead of TCS in growth rate in the last quarter. The latter saw growth slow down to 10.6 percent from 12.7 percent in the previous quarter. Infosys's performance allowed it to raise its revenue growth forecast for the year to 8.5-10 percent from 7.5-9.5 percent. Infosys has clarified that variable pay for employees "continues to be paid in line with what has been done in previous years".
"Similarly, for senior executives, the payout has always been done on a six-monthly basis, and for junior to mid-level employees, it is done on a quarterly basis. There is no change in the performance or payout cycle." But the report cites an unidentified employee as saying that there are times when they are paid almost 60 days after the variable pay period. An Infosys statement said it is committed to driving operational efficiencies as part of its normal business and continue to take measures to strengthen its operating model.