Tech Mahindra's attrition rate is nearly twice that of TCS

• IT company Tech Mahindra has reported a muted September quarter earnings as profit declined marginally by 1%.
• While talent shortage remains a concern for the entire IT industry, Tech Mahindra is into a bigger problem with the highest attrition rate in the industry so far.
• The company has announced a special dividend of ₹15 per share.

At a time when information technology (IT) companies are enjoying overwhelming demand for digital transformation across sectors, talent crunch is one big issue hurting their margins and expenses.

Pune-based IT firm Tech Mahindra is no different from other IT companies in terms of high attrition rate. In fact, it is into a worse problem with attrition rate at 21% almost double to IT giant TCS for the July-September quarter.

Tech Mahindra faces highest attrition rate in the industry

To mitigate the high number of employees leaving the organisation, Tech Mahindra has deployed measures such as broad-based hikes, promotions and retention incentives to stem the attrition.

A survey done by Tech Mahindra on its employees found that employees who were leaving the organisation were from Tier-I cities.

“Attrition in some of India's bigger cities is high whether it is Bangalore, Hyderabad, or Pune. We have also done an analysis to know that the attrition is much much lower when it comes to Bhubaneswar and Nagpur...We anticipate a certain amount of attrition, hence plan for hiring or reskilling or upskilling a little ahead of time,” said C.P. Gurnani, chief executive officer and managing director of Tech Mahindra at a press conference after the earnings release.

Tech Mahindra added 14,930 employees between July and September, taking the total employee count to 1.41 lakh.

The company reported a fall in profit in the last three months. However, investors seem to have already factored in poor profit growth as shares of the company were trading lower in the early hours of trade on October 25, ahead of earnings release.

The information technology (IT) firm’s second quarter profit fell marginally by 1% to ₹1,339 crore.

Analysts had expected the profit growth to remain flat with a reportedly marginal rise of 2% quarter-on-quarter due to the impact of higher employee costs on margins.

The company has announced a special dividend of ₹15 per share in the earnings release.

Also, the IT firm announced the acquisition of California-headquartered Infostar (Lodestone) for which it will pay a total consideration of up to $105 million.

Lodestone is a digital engineering quality assurance provider for new-age digital companies.

The acquisition will bolster Tech Mahindra’s digital engineering capabilities to effectively utilise data strategy and address machine learning challenges, said the company.

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