The annual wage hike announced by Infosys on Thursday would impact the company’s operating profit margin for the fiscal by around 150 basis points (bps), but it is likely to be offset by currency movements, according to brokerages.
Infosys has announced an average wage increase of 8% for employees based in India and 3% for employees in other geographies, effective July 1. The global sales team will see an average increase of 8% effective May 1.
?The announcement will have an impact on Ebitda margin of 150 bps. However, the same will be more than offset should the currency stay at current levels,? said a report from Motilal Oswal Securities. The brokerage said its projection was based on a revised currency exchange rate assumption of R56 to the $ as against R54 to the $ earlier.
?We see an impact of about 160 bps due to the wage hike in Q2FY14 and about 40 bps in Q1FY14. Overall, we have tweaked our currency assumption,? said Shashi Bhusan, analyst with Prabhudas Lilladher, in a report. The brokerage house said that Infosys’ salary hike was at the top end of the industry, which has given an average wage hike of about 7% to employees in India. “We see the industry-leading wage hike helping the company regain the losing confidence of employees. Moreover, it would help them retain and attract good talent,? the Prabhudas Lilladher report said.
The $108-billion Indian IT industry has for long enjoyed double-digit salary increases year after year, sometimes even multiple hikes, but ever since the 2008 financial crisis, things have not been the same. Since then, employees have either seen single-digit hikes or none at all.
In FY13, the sector broadly gave salary increases of 6-8% and industry experts projected a similar trend this year. Last year, Infosys took the drastic step of withholding wage hikes till it gained more clarity on its business ? an announcement that met much criticism.
Infosys wins $49.5-m outsourcing deal in US
Infosys on Friday bagged a $49.5-million (around R290 crore) outsourcing deal from the US District of Columbia. The one-year contract was awarded to Infosys? US subsidiary, Infosys Public Services, to develop a new health benefit exchange, a component of the Affordable Care Act. According to a company statement, this will bring benefits to nearly one-quarter million District residents who can purchase healthcare coverage through an online marketplace.
Fe Bureau