TCS announces Rs 2,628 crore mega bonus for employees
India’s largest software services exporter, Tata Consultancy Services (TCS), has taken steps to retain talent by taking a hit on its financials.business Updated: Apr 17, 2015 01:07 IST
India’s largest software services exporter, Tata Consultancy Services (TCS), has taken steps to retain talent by taking a hit on its financials.
The company reported an over 27% year-on-year drop in fourth quarter net profit to Rs 3,858.2 crore, as it announced a one-time bonus of Rs 2,628 crore for employees to mark the tenth anniversary of the company’s initial public offering in 2004.Excluding the one-off reward, the company’s net profit rose 11.5% year-on-year Rs 5,906 crore.
Revenue, however, rose 12% year-on-year to Rs 24,220 crore during the January-March quarter.
Globally, all employees who have completed at least one year of service will be eligible for the special bonus. Each employee will be given a reward equivalent to one week’s salary for every year of service completed at TCS. The company currently has 318,000 employees in 46 countries.
The bonus comes at a time when the company’s attrition is on the rise. The attrition rate stood at 14.9% during the fourth quarter, said Ajoy Mukherjee, head of global HR at TCS.
“We had warned that the cross-currency volatility would be huge and it proved to be very worse. In rupee terms, we lost 2.7% due to cross-currency movements,” said CEO and MD N Chandrasekaran.
Chandrasekaran said the headwinds came in from telecom, insurance and energy sectors globally, apart from weakness in its India business as well, Chandrasekaran said.
“The headwinds in energy, insurance and telecom led to revenue missing estimates,” said Dipen Shah, head, private client group research at Kotak Securities.
Chandrasekaran sounded optimistic about growth prospects in 2015-16, and said TCS hopes revenue growth this fiscal to be ahead of the industry.
“The special reward to employees acknowledges the role they have played in building TCS into one of the most respected and valued technology services companies in the world,” Chandrasekaran said.
The company admitted there was a need to bring down the attrition level.
“Last year we ended at 11.3-11.4%, this year we have gone up to 14.9%. Attrition has been going up each quarter. I have been saying all along, it is in a way related to the whole industry...there are opportunities in the market,” Mukherjee said.
It also announced a 6-10% salary hike for employees offshore and 2-4% raise for onsite staff this year. Last quarter, TCS hired 1,031 people, taking its total staff strength to 318,000 globally.
The company is hiring 35,000 freshers from campuses this year and they will start joining from June, Mukherjee said.
TCS shares closed down 1.5% to Rs 2,585.20 on the Bombay Stock Exchange on Thursday. The earnings were announced after market hours.
“Operationally earnings were marginally below expectations. The weakness in sectors including telecom and insurance, which are now expected to last longer-than-expected is incrementally negative,” said Abhishek Shindadkar, analyst at ICICI Direct.