According to an analysis of Q2 results of 100 companies by Assocham Eco Pulse (AEP), while the net profit and total income of India Inc. is growing at a rate of 18% and 20% respectively, the staff cost is rising much faster, at 22%.
During Q2, the IT and ITeS sectors witnessed the maximum rise in staff expenses, which went up by 36%, against the net profit growth of 29%, and growth in total income by 30.5%.
Indias largest software company, TCS, registered a striking staff cost growth of 133%, as compared to a topline and bottomline growth of 28% and 60% respectively.
Satyam Computers recorded a staff cost growth of 39.24%, as compared to a net profit growth of 25.7%.
Geometric and Flextronics software recorded a 35% and 29% increase in staff costs, respectively.
President of Assocham Anil K Agarwal said: Salary hikes and increasing head count have made companies incur more expenditure on their employees.
The pharmaceutical sector registered the lowest growth in staff cost at 13%, but its average net profit showed negative growth, at 29%. With increased spending on R&D, the pharma sector is witnessing a rise in expenditure on manpower.
GlaxoSmithKline and Elder Pharma recorded a staff cost growth of 29% and 60% respectively during Q2, 2005.
The only sector which is able to buckle down staff cost growth is automobile.
The automobile sector registered a staff cost growth of 15%, as compared to a 31% growth in net profit.
For example, Bajaj Auto saw a 10% increase in staff cost as compared to a topline and bottomline growth of 28% and 33% respectively.
Financial services and banks also came under huge pressure of increased manpower cost, which went up by 22.4%, as compared to their net profit, which dropped by 2%. Expanding retail business and increased competition led to a high growth in manpower cost.
The magnitude of growth in BFSI can be gauged by figures of LIC Housing and Geojit Financial Services, which registered a growth of 138% and 101% growth in manpower cost, respectively.