Tech Mahindra Salary Hike: After postponing it till this financial year 2025, IT company Tech Mahindra finally announced the plan to increase the salary in the March quarter. However, the management also revealed that due to this hike, the company’s operating margin will be hit by about 1-1.5 percent. The market was eyeing the results as well as its salary hike plans. The main reason for delay in decision on hike in IT sector is weak macroeconomic environment and earnings pressure. However, when demand started improving, companies started implementing the pending decision to hike.
What is the condition of other big IT companies?
Tech Mahindra has decided to implement the salary hike from the fourth quarter of the current financial year 2024-25 i.e. January-March 2025. Talking about other companies in the IT sector, salary hike in Infosys is also happening in this quarter. Both of them lagged far behind the rest of the companies in the sector in terms of salary hikes as TCS implemented it in the first quarter, HCL Tech in the September quarter and Wipro in the December quarter. Talking about Infosys, it is to be implemented in a phased manner first from January 1 and then from April 1.
A matter of concern for Tech Mahindra investors?
The management has expressed fear of a blow to the margins due to the decision of salary hike. However, the management also believes that the cost optimization initiative Project Fortius is progressing well. Under this project, the company plans to focus on organic growth instead of acquisitions and aims to be among the top-6 or top-7 IT companies in revenue growth by FY 2027. This project was announced in April last year and under this, a target of 15 percent operating margin in three years has been set. Management says the impact on margins from salary hikes will be mitigated by giving more priority to securing deals along with this project.
Talking about the December quarter results, the company’s net profit fell by 21.4 percent on a quarterly basis to Rs 983 crore, but the EBIT increased by 5.4 percent to Rs 1350 crore during this period. The margin increased from 9.6 percent to 10.2 percent. Talking about revenue, it increased by only 0.20 percent on quarterly basis to Rs 13,286 crore.
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