2024-11-12 06:00:12 :
US technology services company EPAM Systems is larger than LTIMindtree Ltd and growing faster than Tech Mahindra Ltd for one simple reason: doubling its headcount in India.
Due to the Russian-Ukrainian conflict that began in February 2022, EPAM’s business has almost come to a standstill, as a third of the company’s employees are in the war-torn country. However, the US technology services company has since nearly doubled its headcount in India, making the country its second-largest employee base.
This allowed EPAM to retain its customer base and resume growth.
EPAM’s revenue for the quarter ended September was $1.17 billion, a compound quarterly growth rate of 0.48% for the period December 31, 2021 to September 31, 2024, following the end of its January-December fiscal year, according to Mint’s review .
Tech Mahindra, India’s fifth-largest information technology services provider by revenue, grew 0.32% during the period, with revenue reaching $1.6 billion in the July-September 2024 period. LTIMindtree, India’s sixth largest IT services company, grew at 1.87%, with revenue reaching $1.1 billion at the end of the three months to September 2024.
EPAM’s operating margin also improved, from 15% in December 2021 to 15.2% at the end of September 2024.
Admittedly, Tech Mahindra and LTIMindtree also face their own challenges. Last year, Tech Mahindra reported a decline in full-year revenue even as it appointed former Infosys Ltd. executive Mohit Joshi as chief executive. Joshi unveiled a three-year roadmap aimed at increasing the company’s operating margins from less than 10% at the end of the September quarter to 15% at the end of fiscal 2027.
Also read: Tech Mahindra gradually recovered in Q2, but will this continue?
LTI Mindtree is the result of Larsen & Toubro Infotech Ltd’s merger with Mindtree Ltd in November 2022, which has seen a series of senior management departures and faced cultural challenges that companies tend to encounter during mergers. As a result, the company’s growth rate over the past four quarters has been slower than the growth rate reported before the two companies merged.
Number of employees in India
Founded in 1993 and listed in 2012, EPAM had about 36% of its 58,824 employees in Ukraine and Russia as of December 2021. In India, the company had 4,349 employees, accounting for 7.4% of the total workforce at that time.
As Russia began its invasion of Ukraine on February 24, 2022, a conflict that continues to this day, EPAM management was forced to review its operations, including removing its personnel from the conflict zone.
A week after the war broke out, the share price of EPAM, which was listed on the New York Stock Exchange, plummeted by half to $198 per share. Additionally, the company had to withdraw its revenue guidance for this year.
Since then, its fortunes have changed.
As of the end of December last year, EPAM had 7,050 employees in India, accounting for 13.3% of its 53,150 employees. Ukraine remains the largest labor market, accounting for 17% of its workforce, but the company’s headcount there has dropped to 9,113 from 12,389 at the end of 2021. Two years ago, EPAM had nearly 9,000 employees in Russia, but currently the company has no operations or employees there.
“EPAM has focused on software product development and digital engineering from the beginning, with an emphasis on consulting and building services. Their talent base has deep engineering capabilities, which has traditionally commanded premium prices,” Ramkumar Ramamoorthy, partner at growth consultancy Catalincs in Chennai express.
Analysts at Piper Sandler & Co wrote in an Oct. 23 report that the company’s headcount in India is now close to 15% of its total workforce.
“EPAM has significantly adjusted its workforce since the outbreak of the Ukraine/Russia war. The company has reduced its Ukraine/Belarus and Russia workforce to 27% from approximately 59% at the end of fiscal 2021; while India has increased its workforce to 15 %; Piper Sandler analysts Arvind Ramnani and John Nutt wrote.
Also read: Revenue recovery of IT companies expected to be delayed to FY26
Another area of ​​focus for EPAM over the past few years has been acquisitions. Analysts at Piper Sandler & Co. said the acquisitions of Neoris and First Derivative are expected to bring about 11% of EPAM’s revenue in 2024.
The company is investing in building “a full-service GenAI delivery practice through a network of GenAI labs in rapidly expanding geographic spaces such as Latin America and India,” Ramnani and Nutt wrote. “
The market has responded positively to EPAM’s operational transformation and expansion plans. Although EPAM’s stock price fell to $198 per share shortly after the war began, EPAM’s stock price rebounded 17.6%. Meanwhile, Tech Mahindra’s share price has gained 18% during the period despite the underperformance, while LTIMindtree, which started trading on the Bombay Stock Exchange on November 24, 2022, has gained 39%.
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