A host of Indian IT companies have reported their third-quarterly results, with Tech Mahindra having done so this week. While TCS emerged one of the most successful companies throughout the quarter, Tech Mahindra had a minor setback. We also saw companies like TCS increase their patents to close to one patent every day for a whole year. Let’s dive deep and see how these companies fared in Q3 2023. 

Revenue and Attrition 

Barring Tech Mahindra, most Indian IT companies registered a rise in profit growth percentage, owing to many factors including rupee depreciation which lead to a slight increase in the margins for these IT companies. 

While Infosys saw its revenue increasing by 2.4% QoQ and 13.4% YoY, TCS jumped 13.5% YoY and 4% QoQ. In a similar vein, HCL Tech’s revenue growth shot up by 19% YoY and 5.3% QoQ. Tech Mahindra on other hand, saw its revenue increasing by 12.7% YoY and 0.2% QoQ. 

And while most IT companies showed positive growth, the situation was different when it comes to the headcount. Several companies noticed a dwindling headcount, which for investors, is a bad sign as low headcount correlates with slowdown in coming quarters. TCS, for instance, saw a decline in headcount after 10 quarters and in Q3 2023, the company reported a loss of 2,197 employees.

TCS claims that the reason behind low headcount is excessive hiring in the previous quarters. As per Milind Lakkad, chief HR officer, TCS makes significant investment in terms of hiring fresh talents. “We have invested in making our hires productive. That investment is now taking shape, coupled with all the cost-efficiency measures,” says Lakkad.

However, the low headcount coupled with a declining book-to-bill ratio tells another story.

Likewise, Tech Mahindra saw a decline of 4.4% QoQ in total headcount, in Q3 2023. The company reported a loss of 6,844 employees – the highest for an Indian IT company. 

But not all is lost, bucking the trend, companies like Infosys and HCL Tech saw a rise in the headcount. Infosys added 1,627 employees in Q3 2023, while HCL Tech reported an increase of 2,945 employees. 

When it comes to revenue share by geography, almost all the companies saw a major chunk of the revenue pouring in from North America, followed by Europe. HCL Tech’s 63.4% revenue came from North America, and around 28.7% from Europe. TCS on other hand, saw 50.7% coming from North America and around 31.6% from Europe. And Infosys bagged 62% of the revenue from North America and around 25.8% from Europe. 

Tech Mahindra, perhaps, is the only company among IT giants that had less than 50% of the revenues coming from North America. For them, it was 49.7% from North America and 24.4% from Europe. Additionally, it is the only company which had over 25% of the revenue coming from geographies other than North America and Europe (25.9%). 

Revenue Sources

While companies like Infosys, TCS, Tech Mahindra, and HCL Tech claim to be IT companies born in India, are they really “IT” companies? It is a well-established fact that Indian IT companies are essentially service providers for global technology companies, but are they really working in the field of IT? For instance, Tech Mahindra, which even has ‘Tech’ in its name, receives most of its revenue from the media, entertainment & communications sector. A majority of Tech Mahindra’s acquisitions too are from this sector. 

Similarly, Infosys receives most of its revenue from the financial services & retail sector. HCL Tech, too, reported a majority of its revenue share coming from this sector. TCS, one of the largest IT companies coming from India, saw most of its revenue coming from BFSI and retail & CPG sector. 

However, when it comes to actual technology, Tech Mahindra saw a mere 10.3% of the revenue coming in from there. Infosys reported 8.1% of the revenue coming from the tech sector and TCS had 8.7%. HCL Tech perhaps has the largest share coming from technology, i.e, around 14%.

While it’s no surprise that most of these companies provide backend services to the finance, media and other sectors, there should be some push for indigenous development in the field of AI/ML.  When we consider that companies like Infosys were among the first to invest in OpenAI back in 2015, its significance increases. And while IT firms like TCS are exhibiting a little improvement in their patent filing, their research-related revenue is still not very high.