Wipro and Infosys have announced salary hikes for their employees. But industry watchers feel that it is not a signal that the times are good.

“In Infosys’ case, the company wants to send a message that all is well, now that N.R. Narayana Murthy, is back at the helm,” said Kamal Karanth, MD of staffing firm Kelly Services India.

However, in the case of Wipro, the rationale seems to be different. “It’s purely a talent retention initiative and there is a lot more of ground for the company to cover,” added Karanth.

In the last fiscal, Suchira Iyer, Wipro’s chief marketing officer, and Manish Dugar, who headed the global operations of Wipro BPO, quit.

Infosys has also seen exits in its senior management and with Murthy coming back, the company wants to improve employee morale. “This is done to boost the morale of the employees and improve their efficiency,” said A.K. Prabhakar, Senior Vice-President - Equity Research, Anand Rathi.

Analysts are concerned that keeping in mind the kind of revenue guidance issued, hikes will put pressure on profit margins of both the companies. It will have a short-term impact, but is good for the long-term as Infosys is in a position to absorb some of the impact, said an IT analyst. Prabhakar added that in the case of Infosys, it has to look at sacrificing margins for revenue growth.

Wage hikes will again negatively impact the operating margins that are already under pressure in the backdrop of a sluggish economic climate in developed markets.

> venkatesh.ganesh@thehindu.co.in

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