How Variable Pay Cuts Could Impact Indian IT companies

How variable pay cuts could impact Indian IT companies

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[{"selector":"#anim-8aaa49d4-a162-4e9a-a9f6-75dca380bcf7","keyframes":[{"transform":"scale(1)","offset":0},{"transform":"scale(1.15)","offset":0.33},{"transform":"scale(0.985)","offset":0.66},{"transform":"scale(1)","offset":1}],"delay":0,"duration":1500,"easing":"ease-in-out","fill":"both","iterations":1}] India’s IT industry has been in the news recently for re-evaluating employee cost.

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[{"selector":"#anim-d3d3f580-087d-4cd5-a3ce-fab32433b21b","keyframes":[{"transform":"scale(1)","offset":0},{"transform":"scale(1.15)","offset":0.33},{"transform":"scale(0.985)","offset":0.66},{"transform":"scale(1)","offset":1}],"delay":0,"duration":1500,"easing":"ease-in-out","fill":"both","iterations":1}] "This modus operandi is a marked shift from the past operating margin defense strategies, which were anchored on operational efficiency, pricing improvement, and employee pyramid correction."

[{"selector":"#anim-c7c064b4-25bf-4459-9f0b-4c2f3806fd52","keyframes":[{"transform":"scale(1)","offset":0},{"transform":"scale(1.15)","offset":0.33},{"transform":"scale(0.985)","offset":0.66},{"transform":"scale(1)","offset":1}],"delay":0,"duration":1500,"easing":"ease-in-out","fill":"both","iterations":1}] "It is still up for debate whether this strategic change is in response to either falling demand momentum or easing off of supply and attrition, " said brokerage and research firm Elara Capital

[{"selector":"#anim-9b766545-7caa-4b35-83ea-c49e7bc07e49","keyframes":[{"transform":"scale(1)","offset":0},{"transform":"scale(1.15)","offset":0.33},{"transform":"scale(0.985)","offset":0.66},{"transform":"scale(1)","offset":1}],"delay":0,"duration":1500,"easing":"ease-in-out","fill":"both","iterations":1}] As per our scenario analysis, variable pay cut can translate into an operating margin support of 220 bp to 400 bp for Infosys and Wipro.

[{"selector":"#anim-55799193-ef0f-463a-b5e7-334bf9fe2b87","keyframes":[{"transform":"scale(1)","offset":0},{"transform":"scale(1.15)","offset":0.33},{"transform":"scale(0.985)","offset":0.66},{"transform":"scale(1)","offset":1}],"delay":0,"duration":1500,"easing":"ease-in-out","fill":"both","iterations":1}] The Nifty IT Index is down 30% CY22 YTD on revenue growth, led by a weak macroeconomic narrative.

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[{"selector":"#anim-01158cec-7165-4a61-ba5a-bb2bd7d11458","keyframes":[{"transform":"scale(1)","offset":0},{"transform":"scale(1.15)","offset":0.33},{"transform":"scale(0.985)","offset":0.66},{"transform":"scale(1)","offset":1}],"delay":0,"duration":1500,"easing":"ease-in-out","fill":"both","iterations":1}] Consensus already factors in operating margin improvement and consensus EPS downgrade cycle set in motion by economic concerns in the West has more legs, in the brokerage's view.