The 17-Year Trend
Every major Indian IT company has run its annual results calls since at least 2015 with some version of the same promise: automation, AI-led delivery, pyramid optimisation, operating leverage. The cost structure tells a different story. Across TCS, Infosys, Wipro, HCL Tech and Tech Mahindra, employee costs as a percentage of revenue have moved in one direction over the last decade — upward.
CHART
Employee Cost as % of Revenue — FY2008 to FY2026
TTM employee benefits expense ÷ net revenue, standalone filings. Fiscal year ending March.
INSIGHT TCS has moved from 35% in FY2008 to 58% in FY2026. Wipro from 47% to 60%. The “automation decade” delivered the opposite of what was promised on employee leverage.
The sharpest inflection happened between FY2020 and FY2023. The COVID-era demand surge prompted aggressive hiring at premium salaries. Revenue growth has since slowed; headcount hasn’t corrected at the same pace. The result is structural — not cyclical — cost inflation baked into the P&L.
WARNING “Fifteen years of automation talk. Not one company managed to move their employee cost ratio down. The direction has been consistently wrong.”
| COMPANY | EMPLOYEE COST / REVENUE FY2026 | CHANGE |
|---|---|---|
| TCS | 57.9% | +23 pp vs FY2008 |
| Wipro | 60.0% | +13 pp vs FY2014 |
| HCL Tech | 57.0% | +19 pp vs FY2008 |
| Infosys | 53.1% | Flat since FY2013 |
| Tech Mahindra | 54.9% | +21 pp vs FY2021 |
The Hidden Layer: Subcontractor Costs
Employee cost alone understates the true people-intensity of these businesses. Indian IT companies routinely use subcontractors and third-party vendors to scale delivery capacity — costs that flow through the P&L as “subcontracting expense” rather than payroll. For companies that disclose this separately, adding subcontractor cost to employee cost reveals the actual fraction of revenue that goes to people in some form.
Three of the five major companies — Infosys, Wipro, and Tech Mahindra — report subcontractor costs separately in their XBRL filings. TCS and HCL Tech bundle these into cost of services or do not tag them under the standard XBRL element, making a direct comparison impossible without going to their full annual reports.
CHART
Total People Cost: Employee + Subcontractor (FY2026)
Standalone filings, annual. Subcontractor cost shown where disclosed. TCS and HCL Tech show employee cost only — subcontract not separately reported in XBRL filings.
WARNING Tech Mahindra’s subcontractor spend alone runs at 36–40% of revenue — nearly equal to its employee cost. Total people cost exceeds 75% of revenue. This is a staffing aggregator model, not a technology delivery model.
Infosys is the relative standout: total people cost of ~65% is the lowest among those disclosing subcontract data. Wipro sits at 73–77%. Tech Mahindra is the most exposed — its high subcontractor ratio signals that it is acting as a pass-through layer between global clients and third-party vendors. There is limited proprietary delivery happening at that margin structure.
What AI Actually Exposed
The narrative around Indian IT and AI has focused on disruption — whether GenAI will reduce demand for offshore engineers. That framing misses the deeper issue. The cost structure data from 2008 to 2026 shows these companies were never able to achieve operating leverage even in benign conditions. Every automation wave — from robotic process automation in 2015 to cloud migration to DevOps — was promised as the inflection that would break the linear relationship between revenue and headcount. None delivered.
What AI changes is the client’s calculus, not the vendor’s. Global enterprises can now accomplish with fifty senior engineers and a set of AI tools what previously required five hundred junior ones. The demand compression flows directly into revenue. Meanwhile, the cost base — 55–75% of revenue locked in people costs — has limited flex. The model was fragile before AI arrived.
INSIGHT “A software company spends 20–30% of revenue on people. A staffing company spends 70–80%. At 60% and climbing, the distinction between Indian IT and a high-end staffing agency has become definitional, not operational.”
Equity markets still price these companies at 25–35x earnings — a technology multiple. A staffing business with no proprietary IP and 70%+ people cost would typically command 10–15x. The data does not suggest the re-rating has happened yet.
The Market Has Noticed
For nearly a decade, investors gave Indian IT the benefit of the doubt. The COVID demand surge pushed multiples to levels reserved for genuine technology companies — TCS hit 37× in FY2021, Infosys 36× in FY2022. Markets were pricing in an automation dividend the P&L was not delivering.
By FY2026, the re-rating is well underway. TCS trades at 17×. Infosys at 18×. Wipro at 15×. Global peers set the reference: ADP — a genuine payroll SaaS platform with high switching costs — trades at 24×. IBM, with 60% of revenue from software and recurring contracts, sits at 19×. Below 20×, the market is no longer granting IP or platform credit. Below 14×, you are in pure staffing territory: Cognizant at 11×, Capgemini at 10×. Indian IT at 15–18× has already crossed the 20× line and is drifting toward the 14× floor.
And the floor itself is moving. Accenture — the global benchmark for premium IT consulting — has de-rated from a 10-year median of 26× to 13–16× in 2026. If the market is re-classifying Accenture as a staffing business, Indian IT has nowhere to hide behind a consulting premium.
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The Re-Rating: Trailing P/E from Peak to Now
FY2019–FY2026. Price ÷ trailing twelve-month EPS at fiscal year-end. Above 28× is where tech companies trade; below 18× is staffing and BPO territory.
INSIGHT TCS: 37× → 17×. Infosys: 36× → 18×. Wipro: 27× → 15×. All three have crossed below the 20× platform-credit line and are converging on Cognizant (11×) and Capgemini (10×) — their closest global peers by business model.
Methodology & Data Sources
This analysis uses financial data from NSE quarterly and annual results filings, covering FY2008 to FY2026. All figures are from standalone (unconsolidated) financial statements to ensure consistency across the historical series. Consolidated figures for recent periods show similar ratios.
| METRIC | DEFINITION & SOURCE |
|---|---|
| Employee cost % | Employee benefits expense (salaries, PF, gratuity, ESOP) ÷ net revenue from operations. Drawn from NSE results filings. FY2008–FY2026 series for TCS, HCL Tech, Tech Mahindra; FY2013+ for Infosys and Wipro (earlier filings incomplete). |
| Subcontractor cost % | Third-party subcontracting and outsourcing expense ÷ net revenue. Reported as a separate P&L line item for Infosys, Wipro, and Tech Mahindra from FY2022 onwards. |
| Total people cost % | Sum of employee cost % and subcontractor cost % where both are disclosed. |
| TTM basis (trend chart) | Trailing twelve-month figures computed from quarterly results filings, annualised to remove seasonal variation. |
| COMPANY | EMPLOYEE COST HISTORY | SUBCONTRACTOR COST | GAP / NOTE |
|---|---|---|---|
| TCS | FY2008–2026 | Not disclosed | Subcontract bundled into “Cost of Services” — no consistent extractable series. |
| Infosys | FY2012–2026 | FY2022–2026 | Pre-FY2012 filing data incomplete. |
| Wipro | FY2013–2026 | FY2022–2026 | Pre-FY2013 data incomplete. IT segment standalone used throughout. |
| HCL Tech | FY2008–2026 | Not disclosed | Subcontract not reported as a separate P&L line. |
| Tech Mahindra | FY2008–2026 | FY2022–2026 | Reported consistently across filings; annual figures used for the breakdown. |
METHODOLOGY The inability to extract TCS and HCL Tech subcontractor costs from structured data alone is itself informative. Companies that do not separately disclose this line item make it impossible to assess their true people-intensity. The 55–58% employee cost these companies report is a floor, not a ceiling. Source: NSE quarterly and annual results filings (FY2008–FY2026). Standalone financials. Fiscal year ending March 31. This is not investment advice.
Data: AMFI public disclosures. Analysis: Punji Research. Not investment advice.