Slowdown in hiring by IT companies to continue at least till March 2024

• Recovery in hiring activity by leading IT services companies unlikely to return before FY25.
• Info Edge's management has expressed concerns about the slowdown in IT hiring, which poses a risk to the revenue contribution of their Naukri business.
• While volume growth in most IT companies has been impacted, salaries for IT employees have increased by approximately 15%, providing some support.
  

India’s technology services sector, which has been the engine of white collar jobs in India, is slowing down sharply. This is already evident from the net hiring by majors like Infosys and Wipro in the September quarter of the current fiscal year. However, the tide is unlikely to turn anytime soon. In a post earnings management call with analysts, Info Edge, which runs job portal Naukri, has said that IT services companies are experiencing a significant slowdown in hiring. This trend is expected to continue throughout the fiscal year, with experts predicting a decline in hiring by major IT companies. The impact of this slowdown on the overall job market is a cause for concern.

Info Edge's management has expressed concerns about the slowdown in IT hiring, which poses a risk to the revenue contribution of their Naukri business. While non-IT sectors have been performing well, they have only partially offset the adverse impact of the slowdown in IT hiring. To cater to the demand from smaller towns, Info Edge is expanding its branch network, which is seen as a positive move. However, the company expects a decline in billings for FY24 due to the high base of the previous year, resulting in single-digit growth for both FY24 and FY25, says Motilal Oswal Securities in a report.

The caution in hiring for IT services continues, and the hiring outlook remains weak. While volume growth in most IT companies has been impacted, salaries for IT employees have increased by approximately 15%, providing some support. On the other hand, non-IT hiring is experiencing growth, particularly in smaller towns. Info Edge plans to expand its branch network to cater to the needs of these towns, as the customers there are not as tech-savvy. However, the overall growth of Info Edge is expected to be slow due to the adverse impact of lower IT demand.

According to staffing firm Xpheno, top IT services firms are projected to hire between 50,000 and 100,000 employees during fiscal year 2024. This represents a significant decline from the net hiring of over 250,000 in the previous year. The drop in hiring by leading IT services companies is evident, with the exception of TCS, which reported a modest increase in net headcount addition. TeamLease, another expert in the field, expects a 40% drop in hiring by IT majors in the current fiscal year, as the focus shifts towards increasing utilization.

The slowdown in hiring by IT companies raises concerns for the job market, as it significantly impacts the overall employment scenario. Info Edge's cautionary stance on IT hiring, along with the decline in net hiring by major IT services firms, indicates a challenging period ahead. While the company is taking measures to tap into non-IT hiring and expand its reach in smaller towns, the recovery in IT services demand is expected to be gradual. The impact of this slowdown on the job market will require close monitoring in the coming months.